The national unemployment rate remains around 29%, according to Statistics South Africa’s Quarterly Labour Force Survey. Even more concerning is the the unemployment rate of young people between the ages of 15 and 34 years, at 56%.
However, while South Africa is far from realising the employment goals set out in the National Development Plan 2030, there are pockets of progress being made in creating jobs for young people.
Barriers keeping young people out of work
The primary barrier to employability is education.
Among young people, university graduate qualifications clearly improve the chances of being employed, with 33% of young graduates unemployed. While still shockingly high, this is less than the average 15- to 24-year-old rate of 56%.
For those who make it to tertiary level, access to university education is not only impeded by financial restrictions. Most young people in South Africa do not even have university education as a prospect.
Despite the country spending more than 6% of its GDP on education (more detailed information can be found here), about half of learners drop out before completing high school. Fewer than 5% who start primary school end up with a university qualification, according to the International Monetary Fund 2019 Working Paper, Struggling to Make the Grade: Weak Outcomes of South Africa’s Education System.
Access to finance
Having access to some form of finance positively impacts future labour market outcomes. According to the Harambee Youth Employment Accelerator’s November 2018 Breaking Barriers Quarterly Enrolment Report: "Access to any household income improves the probability of long-lasting employment by almost 50% because there is funding for the high costs of work-seeking."
Work-seeking costs include internet access, printing and transport costs that entry-level recruitment company, Lulaway, estimates to start at around R550 per month.
Access to networks
Young work seekers from under-resourced communities also rarely have access to the social networks and contacts that can assist with job leads and provide career advice and professional mentorship.
According to data from Lulaway, 30% of new young employees were likely to leave their jobs within three months if there was no support or mentoring in the workplace. The recruitment company advises companies to provide regular feedback, engagement and a clear indication of career growth.
To assist with the integration of young people who are new to the world of work, some companies are introducing mentorship programmes.
Investec, for example, facilitates mentorship between staff and recipients of the company’s bursary programme, while Aurecon pairs young employees who are new to the company with a mentor to help guide professional and personal development.
Harambee advises that companies also offer financial literacy and wellness programmes, particularly to entry-level employees.
Interventions – and how they are working
The Public-Private Growth Initiative (PPGI), initially positioned in the Presidency in 2018, is a five-year collaboration between government and the private sector.
Between December 2018 and June 2019, government met with representatives from 21 business sectors to discuss how the two could work together. Forty-three private sector projects were identified as having the potential to create 155 000 jobs and inject R840 billion into the economy over the next five years.
Projects include the expansion of an abattoir, the establishment of automotive parts manufacturers, forestry plantations and paper processing plants, and an agricultural development agency.
In his 2019 State of the Nation Address, President Cyril Ramaphosa referred to the success of the PPGI. The initiative has facilitated commitments to 43 private projects in 19 sectors of the economy over the next five years.
The Presidential Jobs Summit, convened by the National Economic Development and Labour Council (Nedlac) in October 2018, engaged government, business, labour and community to discuss how jobs could be retained and created.
A total of 77 commitments were made, ranging from investment in job creation, small and medium enterprise (SME) development, education and skills development, to create at least 275 000 jobs over the next year.
Banks also committed to targeted loans and investments for black-owned enterprises, to the value of R100 billion over five years. Reporting in August 2019 on progress made, minister of employment and labour, Thulas Nxesi, said that the most serious constraints to job creation since the summit have been the issue of electricity supply; bureaucratic government processes, including the difficulty for businesses to obtain water licences; and the visa issues that impacted the tourism industry. Nxesi committed to more robust implementation moving forward and said that stakeholders in the process would meet monthly, rather than quarterly.
The Youth Employment Service (YES), launched in early 2018, aims to create one million work experiences in five years. This business-led collaboration with government and labour aims to stimulate demand-driven job creation through company investment and by leveraging existing government initiatives such as the Employment Tax Incentive and Broad-Based Black Economic Empowerment (BBBEE) Codes.
YES aims to place unemployed youth in minimum 12-month work experiences and training opportunities; develop critical skills, particularly in digital, business administration and innovation; and develop SMEs in townships, through YES Community Hubs. Work-seeking youth register for employment opportunities on the YES website and, once selected, are invited to attend interviews.
To date, over 32 000 work experiences have been facilitated. In his recent State of the Nation Address, Ramaphosa announced that YES would be expanded, and would work with TVET colleges and the private sector to give more students practical workplace experience.
The CEO Initiative, launched in 2016 as a collaboration between business, labour and government, received an initial R1.5 billion investment from corporates for the development of SMEs, with the ultimate goal of creating new jobs. In 2019 the SA SME Fund, established by members of the CEO Initiative, received R1.4 billion from the Public Investment Corporation (R500 million) and 50 local companies.
According to the SA SME Fund 2020 Review, the goal over the next five years is to invest in and help scale 200 sustainable black SMEs, five world-class black entrepreneurs and 10 significant black-owned businesses. "To this end, the Fund’s capital will be fully deployed by the end of the 2020 financial year, divided between venture and growth (equity and debt) capital," says Fund Chairman Adrian Gore. The Review states that the Fund "has made significant progress in its investment strategy and deployment of funds", and that to date it has committed R925 million to growth and venture capital investments, R400 million to growth investments and R525 million to venture capital.
The Employment Tax Incentive (ETI), previously known as the Youth Wage Subsidy, was introduced in 2014 to incentivise the employment of inexperienced and untested young workers. A tax subsidy is paid to eligible employers for the first two years that a new and qualifying candidate below 30 years is employed, with the size of the subsidy dependent on the worker’s earnings. In 2015, Treasury stated that 270 000 young people had been employed by 29 000 companies under the scheme in its first year. However, an ETI report also found that companies were underclaiming significantly. The ETI was originally planned to run until December 2016 but was extended until February 2019 and then again until February 2029.
The Jobs Fund, an initiative of the National Treasury, was launched in 2011 with the target of creating 150 000 permanent jobs. Initially, an amount of R9 billion was set aside by the South African government to co-finance projects through a combination of grant and match funding by public, private and non-governmental organisations that significantly contribute to job creation.
The Jobs Fund offers funding in four categories: enterprise development, infrastructure, support for work seekers, and institutional capacity building.
By December 2018, 170 000 permanent jobs, 55 000 short-term jobs and 20 000 internships had been created, and 220 000 beneficiaries had been trained. The Fund supported 126 projects and allocated R6.7 billion in grant funding, which leveraged co-financing of R9.5 billion towards job creation.
Harambee Youth Employment Accelerator works with employers from various sectors to promote inclusive hiring practices that focus on young people.
The organisation sources, trains and places unemployed young people from under-resourced backgrounds into first-time jobs.
Harambee identifies candidates where existing corporate recruitment networks do not reach, and assesses and trains the youth through bridging programmes. Newly trained youth are then placed in jobs that match their skills.
To date, Harambee has supported over 700 000 work seekers, placed young people in 160 000 jobs and work experiences and partnered with 500 companies.
Bonds4Jobs is an innovative impact bond incubated by Yellowwoods and Harambee, together with the Gauteng Provincial Government and the private sector, including The Standard Bank Tutuwa Community Foundation.
Impact or pay-for-performance bonds are a funding model in which investors provide working capital that is returned with interest when results are delivered.
In this instance, funding is provided to organisations that upskill excluded youth and place them into jobs in growth sectors.
The Gauteng Provincial Government has committed to repaying investors when results are delivered, using the Tshepo 1 Million youth skills empowerment initiative. Tshepo 1 Million targets unemployed residents from Gauteng, aged between 18 and 34 years old, with at least a grade ten education. Furthermore, the individuals must be first-time work seekers with no more than 12 months’ work experience. Bonds4Jobs aimed to achieve 600 youth job placements in its first year of the four-year pilot study. This was achieved after nine months and all the investors had their money paid back with interest.
The National Business Initiative (NBI) is a membership-based organisation of companies from different sectors.
One of its focus areas is skills development, particularly supporting company partnerships with technical and vocational education and training (TVET) colleges.
For example, the Construction Industry Partnership, launched by the NBI in 2006, facilitated partnerships between TVET colleges and construction companies to improve the colleges’ responsiveness to the industry’s skills needs, with the Department of Higher Education and Training as a strategic partner.
This is the first of a 2-part series on youth unemployment by Zyaan Davids Anter, content manager at Trialogue and editor of the Trialogue Business in Society Handbook. Views expressed are the author's .
The full version of this article was first published in the Trialogue Business in Society Handbook 2019, available for download from https://trialogue.co.za/