The one reason there won’t be many jobs created in SA soon

Businesses need to be able to take a long-term view with a high degree of certainty.
Politicians cannot create jobs, not even if they genuinely want to, says the author. Image: Shutterstock

Like many South Africans I did a double-take last week when I read the headlines: Thulas Nxesi wants to create two million jobs before the elections in 2024.

It didn’t help that I was sitting in the dark at the time, but the minister of employment and labour’s target did occupy my mind a lot in the coming days.

The state of the nation at the moment is quite dire; a sharply increased cost of living coupled with a sharply lower standard of living. Life in Mzansi is not nice, and no amount of Aromat is going to change that.

As an entrepreneur I’m led to believe that I somehow am different to employed people because we take decisions that do not make sense to many. We have this supposed ability to endure hardship and we’re prepared to make sacrifices that others aren’t prepared to make. But somehow I find myself having the exact same fears and anxieties as my more gainfully employed counterparts.

Several weeks ago I had coffee with a client who is also an entrepreneur. His words still echo in my mind. “I’m calling it bru, we’re shutting down the business …”

This is a 100% black-owned business run by highly skilled and experienced partners.

“I cannot keep it going without getting deep into debt, staying open is essentially us taking a bet that the country will improve dramatically in a few months … I can’t take that bet again,” he said.

His company will no longer take on new work, and the 300-plus black workers who have come to rely on it will join the unemployment queues a few weeks from now.

Having worked abroad extensively and being highly qualified and skilled, he himself can go and work in any country and command a decent income and quality of life.

Read:

I drove from Johannesburg to Durban on the N3 at the end of May. It was a journey I have made hundreds of times having moved from Durban to Johannesburg in 1992. The one thing I noticed that even my kids (aged nine and 11) commented on – there are so many trucks on the road!

This was before we got to Mooi River. We then drove past a line of trucks back to back over a distance of more than 15km.

On the downhill between Hilton and Pietermaritzburg there is a section where trucks have to drive in the left lane only, and also make a compulsory stop. This would previously create a backup of two, maybe three kilometres. The next evening there was an accident between a truck and a taxi that claimed 16 lives on that same stretch of road. Two weeks later there was another horror crash there, involving several trucks.

My brother drove up for a weekend visit at the end of June – the back-up of traffic stretched from Hilton to Mooi River – over 50km. His trip back home to Durban took over 10 hours primarily due to truck-infested roads.

The increased number of trucks on several highways around the country is directly related to the collapse of Transnet and the rail system.

As other government and quasi-government institutions collapse, the impact will become as visible and as obvious as with Eskom and Transnet.

Read or listen: Private sector to revitalise SA rail freight transport

A recent comment from another client who runs a successful business: “Even if Ramaphosa gets another term, what comes after him? I can’t invest any more capital to grow my business further. We’ll be increasing the dividend payouts and investing those funds offshore, hence today’s conversation.”

That’s somewhat good for my business, but bad for the country as other business people do the same.

As an entrepreneur looking for opportunities to grow, it is becoming increasingly difficult to find opportunities that make sense. The one hurdle that we and other entrepreneurs are facing is that we can no longer take a long-term view on South Africa. The ability to take a long-term view is what sits at the very foundation of starting (and growing) a business.

When we started our business in 2008, our business plans had projections and forecasts that spanned more than 10 years.

An inherent, unspoken assumption was that there would be a viable economy in and beyond 10 years to justify the sacrifices and support the confidence that entrepreneurs need to start. That ability to take a long-term view is fast disappearing.

The reality is that politicians cannot create jobs, even if they genuinely wanted to.

Recent attempts have seen the creation of 100 black-owned industrial businesses that now do not have access to reliable or affordable electricity supply. These industrialists are being celebrated this week at a conference in Sandton. In countries where there are jobs aplenty, politicians are not the ones creating those jobs. Politicians create the environment in which businesses can thrive, in which entrepreneurs can take a long-term view with a high degree of certainty. Functional municipalities can create jobs, but those are few and far between in SA.

Read: Where was the ANC when the Guptas took control of Transnet, Eskom and Denel?

The inability to take a long-term perspective is also dawning on many employed individuals.

Saving for retirement in SA is inherently a bet on the long-term stability of SA. Buying a property in SA is inherently a bet on the long-term stability of SA. These activities generate an enormous amount of economic activity.

As people stop buying property to let as part of their retirement planning, as they stop investing in long-term financial products, as capital leaks out of businesses to offshore destinations, jobs are lost. No political speech changes that.

Technological advancements are shown to be the main driver of long-term economic growth in any country. Those take time, and require skills and funding.

Data from the United Nations Educational, Scientific and Cultural Organisation (Unesco) for 2016 shows that South Africa spends 0.8% of GDP on research and development (R&D). Countries like Korea and Israel are near the top end at around 4.3% of GDP.

Read: SA can only recover in a post-ANC world

The tax incentive for R&D (Section 11D of the Income Tax Act) has been under review for a few years and a sunset clause is expected to be introduced in September 2022. The number of applications for tax relief in terms of the S11D has halved from 305 in 2012/2013 to 153 in 2016/2017. The number of multi-year projects has also reduced significantly over the same period.

What is a long-term perspective? A long-term perspective refers to how far you project into the future when making decisions today!

Take away the ability for people to project far enough into the future, and they do not start job-creating businesses today, they do not invest in long-term new technology projects today. They draw out their capital and invest it in other countries today, they close down their businesses today – and they lay off 300-plus workers.

Craig Gradidge CFP® is co-founder of Gradidge-Mahura Investments – a black-owned FPI Approved Professional Practice™.

COMMENTS   11

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

South Africa has the highest unemployment rate in the world because that is government policy. Unemployment is the logical consequence of the policies of redistribution and a developmental state. Over the longer term, every law that attempts to deliver material equality will fail and have the opposite effect.

The state desperately clings to its central planning dogma in a futile attempt to re-engineer society and keep control of the patronage network. The ANC basically handicaps, punishes and demotivates business activity with a myriad of redistributive taxes. A local business has to pay all the taxes that are the international norm, plus abnormal taxes like BEE, the cost of failed government monopolies like Eskom, the cost of redistributive municipal rates and taxes, the cost of legalized extortion from militant labor unions, the cost of cadre deployment and government incompetence, and the cost of failing infrastructure.

A tax is supposed to be a transaction, not a donation. These redistributive taxes give nothing in return. It is in fact, the expropriation without compensation of economically active people. A tax is a form of legalized plunder in a redistributive socialist regime.

The money that builds the factory that employs people is someone’s savings. Only capital savings can create jobs. Only after-tax profits can create capital savings. The South African government, with its short-sighted socialist redistributive tax regime, expropriates the major part of profits and a major part of the capital savings that could have created jobs. The government uses that legally confiscated money to bribe voters with grants and inflated salaries for public sector workers, and they steal the rest.

The point is that the job-creating capital savings are redistributed to people who use them to finance their consumption habits. The effect of consumption invariably ends up in either the waste dump or the sewage plant.

It is clear that ANC policies have turned jobs into sewage. A new government will be able to reverse the process and create 2 million jobs in 2 months by simply shutting down this socialist factory that turns capital formation into unemployment.

If you add the 10 million odd illegal immigrants, then the real unemployment rate is much higher.

Capital is colour blind, and you can cajole with race based policies but eventually unless capital chases value enhancing projects, the capital investment dries up.

So, the ANC need to stop the corruption, stop the race based policies and stop with the destabilising polices and uncertainty and allow the simple time honoured logic to take hold.

SA has an ANC problem.

A great article – says what most tax and ratepayers feel – thank you.

Had a conversation yesterday, with a slightly more educated, and better informed young man from our local township.
He said clearly that a very large part of the locals will never vote anything else than ANC. They not only think that it has brought them freedom and democracy, but most of all social grants. They are not just misled, but indoctrinated that only the ANC can give them social security grants.
In early 2014, CR was filmed telling people in Limpopo, while campaigning, that the DA will bring back apartheid. The masses simply don’t have the true grasp of macroeconomics to see how horribly misguided and disingenuous the politicians are in SA. One cannot blame so much the voters, but surely the current crop of leaders in SA.

One can always value the opinion of someone who describes someone else as “slightly more educated, and better informed” than himself. The opinion of such an individual is not distorted by ego issues. This is the personality type we need in senior political positions.

A good article BUT once again only focusing on one side of the “Supply and demand” factor in the equation, the other side being overpopulation!

No doubt it is political taboo to do so given the culture of the majority, but it needs to be addressed urgently, and I believe that if Mandela had had the foresight, and made this a priority through education this problem would never have got to this dire situation.

A numbers game, and without getting this right SA is onto a hiding to nothing in the unemployment stakes imo!

The reason is simple….too many takers and too few taxpayers. This plus The ANC’ s BEE policies, theft and mismanagement has destroyed the possibility of a healthy economic environment with job opportunities for all. In my opinion!

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: