South Africa is in trouble – here’s how we can fix it

The B-BBEE Codes need to change to protect and enable SME growth

South Africa is in trouble. Before Covid-19, the economy was already teetering at the edge of a fiscal cliff with two consecutive quarters of negative GDP growth and the expanded unemployment rate at a frightening 42%. Then Covid turned South Africa and the world on its head, fast-tracking an unprecedented global slow-down that infiltrated every crevice of economic activity.

The harsh reality is that South Africa was dealt a severe blow – and it’s going to take years to restore our struggling economy and reduce our national debt burden.

But Rajan Naidoo, the Managing Director of EduPower Skills Academy, believes there is hope. He says the tenets of B-BBEE are a catalyst that can be used to guide and co-ordinate South Africa’s economic recovery.

“Government cannot legislate our economy out of the recession but through B-BBEE it can create conditions that allow for growth to occur in the private sector,” Rajan explains. “The solution lies with the large corporates that have within their power and resources huge reserves in their balance sheets, some of which now needs to be invested in stimulating small businesses and essential job creation.”

Much of this SME development is already being facilitated by B-BBEE through mechanisms such as Preferential Procurement, but Rajan says that efforts need to be multiplied exponentially:

 

“Prior to Covid, SMEs accounted for 98% of the businesses in South Africa providing 25% of all jobs and contributing 39% of the national GDP. But 40% of these businesses have been forced to close their doors and many people have lost their jobs as a result,” he says.

 

“Boosting SMEs is a crucial step towards growing the South African economy. Corporate human solidarity should instinctively and voluntarily drive the private sector to support smaller businesses, assisting the nation to rise out of this economic quagmire and in doing so, strengthen our market and economy.”

The natural starting point for this recovery begins with another B-BBEE priority element, Skills Development. South Africa’s extended youth unemployment rate is over 65% but most of these 18 to 34 year olds have stopped looking for jobs as they don’t have skills the market requires. Rajan’s believes the solution for upskilling the youth is learnerships.

“Job creation starts with skills development so let’s get as many unemployed youth into learnerships as soon as possible so that we can start building the skills our country needs,” Rajan explains. “These learnerships can culminate in options for absorption into long term employment. This is something that we are already doing at EduPower and we have a proven model that works. As a nation, we just need to start applying this on a much wider basis.”

EduPower’s innovative absorption model ensures that when unemployed learners complete their qualification, they are placed into permanent jobs in small companies. Instead of adding this salary burden for the SME though, these jobs are funded in the short-term by large companies through their enterprise or supplier development budgets.

“This is a great example of a co-ordinated process that culminates in permanent empowerment and thus delivers on the true intent of B-BBEE,” says Rajan. “The learners receive long term employment (and experience); the SME owner gains a skilled labour force that helps his business grow so that he can hire even more unemployed learners; and the corporates gain invaluable points for their B-BBEE scorecard.”

Rolling this out exponentially on a nationwide basis would be straightforward as the mechanisms are already in place. Rajan believes the economy could benefit even more if industry specific strategies were applied as the impact of Covid has been different across market sectors.

Rajan concludes with a call to action:

“The stimulation of the private sector and the declaration of certain supply chains as national strategic imperatives will force and support development of the sectors of the economy that will provide jobs and growth. This development needs to happen immediately, and it starts with skills development and absorption. Let’s use B-BBEE to get our nation and our economy working.”

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