Opinion: Getting YES wrong
MONEYWEB / 25 MARCH 2019 - 00:45 / TASHMIA ISMAIL-SAVILLE
B-BBEE commentator, Paul Janisch, recently published an opinion piece on various media with views on the Youth Employment Service (YES) initiative. In his piece he supports his arguments with references to an article published by the Institute for Race Relations (IRR), which slates YES among various topics.
This response from YES is intended to address inaccuracies in the IRR opinion piece in which people are encouraged to “Take a Stand with the IRR”. Before taking this stand, we encourage readers to review the facts about YES, and provide an opportunity for South Africans to consider an alternate view on our country’s important path towards equality.
The Youth Employment Service, launched by President Cyril Ramaphosa in 2018, is a business-led partnership with government, labour and civil society that aims to empower one million young South Africans over the next three years. Picture: Moneyweb
One of the misconceptions permeated by the IRR is that YES has been a “gimmick” or “failure” since being announced by President Cyril Ramaphosa in March 2018. In reality, the legal framework governing YES was only promulgated with the practice note from the Department of Trade and Industry at the end of October 2018.
The YES initiative has therefore only been officially in operation for just 17 weeks. In this time, the initiative has registered over 11 446 work opportunities with more than 378 companies participating and a minimum of That is an average of more than 670 work opportunities committed per week since start date in November 2018. In current economic conditions and with low business confidence, we believe the YES initiative can instead be seen as successful, and should be supported, as its work is in the interest of all stakeholders across political lines.
Furthermore YES is a not-for-profit, which seeks only to address the employability of youth with the tools it has at its disposal, one of which is the B-BBEE Gazette Amendment which rewards businesses for this much-needed investment in youth futures.
The income generated by just these initial 11 446 jobs will have a major impact on the economic development of the communities in which the youth are being placed. Income into households and communities from jobs registered in YES since November 2018 alone will drive more than R449 million into local economies in the next 12 months.
There is a variety of research that shows how wages paid and spent in these communities have amplified effects on economic growth. This is an important multiplier for communities. One of the biggest challenges South Africa faces is spatial inequality, making this impact at local community level an important variable in the programme.
A continuing stream of economic migrants move into Gauteng in the hope of finding work, only to find little demand for entry level workers. Skilled positions are required by an economy in which jobs growth and GDP growth have decoupled. While economic growth would be great for jobs, South Africa would arguably need growth rates in excess of 6% to start seeing impact on youth employment. We are far from reaching growth figures of that magnitude.
There is also an argument that a country with such large numbers of unemployed people, locked out of the economy structurally, will struggle to reach those growth rates. You cannot grow an economy with such high levels of inequality and with a small slice of the population attempting to carry economic activity within their closed networks.
YES moves work opportunities and skills into communities via training and infrastructure to support these jobs. Spillovers include deeper local knowledge, improved competitiveness of local businesses, and formal and informal linkages being built. This results in better circulation and growth of money inside of communities. Evidence of this effect can be seen with the design of the YES Hub in Tembisa and the soon-to-be-opened Alex Hub, where capital, ideas and investment in local opportunities are crowded in via a collaboration of partners.
The details of the programme are ignored in the commentary by Janisch and the IRR. Yet these details are critical to understanding the success of YES, and warrant mention as they illustrate the desire to go beyond high level number counting and into the sustainable implementation of the initiative.
A factor that wasn’t touched on in the article is that YES youth will be equipped with a smartphone that includes valuable content such as CV writing skills, digitally delivered work-readiness content, personal development and financial literacy modules.
This is one of the differentiators in our initiative where we can use technology to democratise the access to skills and work.
When appraising the success or failure of YES, it is important to interrogate the details that have material impact and multiplier effects on future jobs growth, and prospects for youth in their communities.
The shape of the SME economy in South Africa
Recent data released by the International Finance Corporation (IFC) helps explain why it is impossible to look at black-owned businesses in isolation when considering how small to medium-sized enterprises (SME) create and absorb youth jobs.
According to IFC data, only 28% of the 2.3 million micro-SME businesses in South Africa are classified as participating in the formal economy.
A further investigation using Stats SA, FinScope and IFC data suggests that 76% of micro SMEs in South Africa are black-owned, with 16% being white-owned. However, when looking at businesses with turnover of between R5 million and R20 million, the percentage of white-owned businesses rises to 46%, and black-owned businesses comprise only 31%.
This shift in numbers can largely be attributed to deeper social and economic capital and networks for the white population.
While there is significant debate around the actual size of the SME ecosystem due to the number of micro enterprises that fall outside of the formal economy and tax nets, it does highlight the importance of skills transfer. It is not sustainable to have the SME business economy not scaling and operating at subsistence.
The capital, privilege of better exposure and schooling, and networks of resourced contacts white businesses have enjoyed, must be compensated for. The numbers tell us clearly that the field is far from level.
Examining businesses who pay no Vat or corporate income tax (1.37 million according to the IFC) compared to 143 000 who are not Vat registered but pay corporate income tax, we can see just how underdeveloped the SME ecosystem is.
Business not the enemy
At the end of 2018, leading South African economist Mike Schüssler made the point that business was tired of being treated like the enemy of labour, and we share this view at YES. We believe that one of the reasons YES has enjoyed such success in the early part of 2019 is the collaborative and engaged approach with business, and this has made the private sector more receptive to coming together to tackle the youth unemployment challenge.
With another 25 000 unemployed youth expected to be placed by the end of June 2019, YES is on a trajectory to be one of the highest impact initiatives not funded by government in SA. We look forward to engaging all stakeholders going forward.
We firmly believe that small businesses will embrace the opportunity to contribute to a healthier business environment by offering youth a chance at work. Even if each small or medium enterprise were to open their doors and transfer their knowledge to a single young person, we will have a scaled impact to take us forward.
While the B-BBEE benefit is a springboard for YES, our experience has been that South Africans in business have a wider and more embracing view on their communities, which goes beyond point scoring. The employability of youth is a business concern across the spectrum, regardless of racial ownership.
We look forward to sharing our success stories with the business community going forward.
Tashmia Ismail-Saville is CEO of the Youth Employment Service (YES).
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER