Creating a million jobs isn’t necessarily easy, but it isn’t rocket science either. It just takes a lot of courage on the part of our government, which has spoken much better than done when it comes to our economy.
President Cyril Ramaphosa delivered a positive state of the nation address (Sona). It took many of us by surprise, especially those of us who have a vested interest in seeing the success of the small, micro and medium enterprise (SMME) sector, which to be fair should be everyone because it holds the greatest hope for sustained economic growth and job creation.
The government gave SMEs an important job when drafting the National Development Plan, setting a target of 90% new jobs created by the sector by 2030. Although many years were wasted and then made worse by the Covid-19 pandemic, Sona 2022 signaled what appears to be a sea change in government sentiment, from a state-led mindset to a pro-business tone.
The President alluded to the elimination of red tape, he mentioned a new support program for SMEs which would include non-bank lenders – and therefore would not exclude most micro-enterprises – and promised us that the spectrum allocation would be imminent. He signaled renewed vigor to fix the biggest threat to our economy, Eskom, as well as major infrastructure projects. Perhaps more importantly, he shifted the national narrative from “it’s the government that creates jobs” to “it’s the private sector that creates jobs”.
There was the expected backlash from business-unfriendly segments of the country, but on the whole, those who understand how the economy works welcomed the statement.
So with all of this in mind, how do you create a million jobs or more? Let’s start with the government’s own statistics.
The Small Business Development Agency (Seda) is a function of the Small Business Department. According to the most recent research report available on their website, SMME Quarterly Update 1st Quarter 2021: “The number of SMMEs in South Africa decreased by 11% (or 289,000) year-on-year, falling from 2.61 million to 2.33 million in the first quarter of 2021. The decline in the number of formal and informal establishments was of the same order, indicating sustained pressure on the sector despite the broader economic recovery.
“While the contraction in employment in SMEs has been deep, it has recovered by 633,000 during the first quarter of 2021. This partly reflects rising unemployment in the rest of the economy, but also reflects some resilience of the sector Total employment provided by SMEs was 9.8 million (64% of economy-wide employment), down 6.2% from Q1 2020 . »
According to the report, out of the total number of SMEs, 667,111 were classified as “formal enterprises”. In other words, registered entities officially operating in the South African economy. That’s down from more than 750,000 a year earlier, largely due to the pandemic.
Seda goes on to write, “It appears that it has been particularly younger SME owners, those with lower levels of education and lower skills (disproportionately represented by the black population group) who have been the more vulnerable to the impact of the pandemic. Support policies should recognize the informal nature of the SME sector; marketing and financial support also remain essential in the current economic climate.
At the risk of becoming a broken record again like we were before the President’s Sona, that’s exactly what we’ve been saying for years.
Another government agency, Statistics SA, wrote in its quarterly labor force survey of November 30, 2021: 2021 at 14.3 million. The number of unemployed fell by 183,000 to 7.6 million compared to the second quarter of 2021. The number of discouraged job seekers increased by 545,000 (16.4%) and the number of people who were not economically active for reasons other than discouragement increased by 443,000 (3.3%) between the two quarters resulting in a net increase of 988,000 in the inactive population.
Read together, these two sets of numbers tell the well-known story of an unemployment crisis and a problem where the SME sector, which creates 64% of the country’s jobs, is shrinking, not growing. It also tells the story of the economic potential if informal SMEs can be formalized with reduced bureaucracy, tax breaks, incentives and digitalization.
And so it becomes patently clear how one creates a million jobs in the country. The private sector creates them, and this needs to be led by the SME sector. When Finance Minister Enoch Godongwana takes to the podium to present the budget, he must present concrete, clear and coherent strategies to deliver on President Sona’s promises, including a support package to secure financing for small businesses. businesses that need it most.
Beyond that, the government needs to step up its efforts to reduce bureaucracy and it needs to be brave enough to review labor laws, especially when it comes to hiring. But perhaps the most important ingredient is tracking. Despite the noise, the politics, the accusations of a super-presidency, she must follow through on her intention to create an environment conducive to running a small business. If every SME in this country had the ability to hire just two more people with accessible support and a friendly environment, that would be 1.2 million jobs – and that’s just for formal businesses. As they grow, their need to hire more and more people will also increase.
The potential defined in the National Development Plan is still there. The good sounds come from the government. The Minister of Finance has a golden opportunity to set big plans in motion. What we need, as South Africans desperate to see sustained economic growth and job creation, is pragmatic and corruption-free implementation. And a little less talk and a lot more action.