Unemployment patchwork

And missing the two critical patches of expectations and flexibility.

SWELLENDAM – Employment statistics are becoming a recurring nightmare. The latest figures (see Stats SA report here) have again recorded a decline in employment in the non-agricultural formal sector of some 15 000 jobs, and Forbes Magazine has listed South Africa’s official unemployment rate of 25.5% at the end of last year, as the highest in the world.

All of this is not intended to remind you of the bad dream, nor can it serve as soothing platitudes that things will be fine once we emerge from all of the events that have disturbed our serene slumber – such as the global recession, the collapse of commodity markets and demand for our primary exports, job cutting technology and a host of other developments out of our control. Not so helpful either are the constant flagellations by a number of experts and their media bullhorns on what can be done specifically, or “holistically” to stop the nightmare.

The latter is a much overused word implying that there is indeed some or other magic potion that can give us a restful night. Unemployment, and with it the other triplet siblings of poverty and inequality, is such a multi-faceted phenomenon that it does need many treatments aimed at both symptoms and causes. To be sure it is a patchwork approach, but short of an “unemployment state of emergency” mooted by Ryk van Niekerk among others recently, is perhaps the only option available.

In that approach, one has to try and ensure that the eventual quilt has some coherent and attractive whole, not from an original rigid design but from a careful selection and fitting of individual patches. This should be the underpinning of the current growth and employment dialogue between the key role-players of government, labour and the private sector under Nedlac auspices. They will achieve little if they do not have some consistent quilt in mind – a task that will require much more than simple trade-offs and compromises between conflicting interests that create clashing patches.

But a good quilt always has one attention drawing centrepiece: a large patch that draws and connects all the other pieces together to a coherent whole. And, with a corny mixing of analogies, that centre piece may have to address the question whether our nightmare has not been induced primarily by a polluted economic environment, nor by a very toxic diet of laws, restrictions, bad government, corruption, maladministration, belligerent unions and other lumps of sugar; but by simply sleeping on the wrong bed!

That is the inconvenient truth of our parlous state. It is the absence of a centrepiece that not only catches everyone’s attention, but that everyone can, without huge sacrifice and disruption to their lives, align with and support in their daily lives. Of course, some event organiser or passionate crusader may jump on this idea and set about planning another grand hoop-la-la parade, or dedicated day or week. They seldom work, and are even less effective than the intense institutional soul-searching we have been having for some time now.

I have on many occasions argued that the centrepiece has to be a firm focus on wealth creation itself and a shift away from the obsession with wealth distribution, let alone the expedient populist calls for redistribution. Remember Boetcker’s “You cannot help the poor by destroying the rich”?

This becomes starkly clear when you examine the dynamic of maximum wealth creation and optimal distribution at a company level. It is a good place to start and perhaps even follow because the biggest challenge in unemployment is not the creation of new jobs but the retention of those that exist. Without that emphasis we are simply trying to balance a see-saw where the fulcrum post constantly shifts.

Capture Jerry

The three pillars of maximum wealth creation are an inevitable condensation of any strategic exercise, and a highly effective mantra to get common purpose support by all stakeholders. One simply has to unpack the contributory actions, behaviours, metrics, remits and accountabilities (including all of the “sustainability” prescriptions), at a corporate, team, and individual level as individual patches to a value-adding/wealth creation quilt.

Wealth distribution has become the real impairment – not only because of our narrow obsession with it and illogically prioritising it over wealth creation itself, but because the two pillars of “meeting legitimate expectations” and “encouraging continued contribution” have become highly subjective, often arbitrary and delinked from valid market informed criteria. These are:

  • For the State: international norms of prudent government expenditure to GDP;
  • For labour: the supply and demand for skills and qualifications;
  • And for shareholders or owners: the cost of capital.

Instead, each tries to maximise benefit to the point of open conflict and where trade-offs overwhelm the agenda in soul-searching at an institutional level.

The two greatest threats to optimal wealth distribution, which in turn threaten wealth creation itself and therefore economic growth, job retention and job creation are unrealistic expectations and inflexibility. They are inextricably linked and mutually encouraging. The lower your expectations are, the more flexible you become and vice versa. These spill over into the national arena where battle lines are drawn at a societal, political and institutional level, often resulting in laws and prescriptions that inhibit flexibility.

For a company, strategy has to address in a tangible way the tempering of expectations through enhancing awareness and understanding of the business, and regularly communicating its performance and the company figures. These steps will also encourage flexibility through involving staff in the destiny of the enterprise, especially if they are then linked to rewards through some fortune-sharing mechanism.

But owners too are not innocent of inflexibility in the manner in which they drive profit maximisation, also often to the point of threatening longer term sustainable wealth creation. A simple shift to pegging profit expectations to a cost of capital criterion and viewing anything over that as discretionary surpluses that can even involve staff in determining its disbursement, will enhance overall flexibility.

At an individual, societal, national and political level, the toxic behaviour traits of unrealistic expectations and inflexibility have gripped the nation for decades, from parenting to politicking and electioneering. They may have been tempered by the bad times we are going through, but most likely not nearly enough or permanent enough to have a lasting positive impact on our economic destiny. For that we need a permanent shift in the national psyche to one where aspirations exceed by far our expectations.

Until then it will be the same bed and the same nightmares.

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I see no solution for the unemployment problem. Even if the labour laws were completely relaxed and minimum wages were eliminated what kind of jobs could be created for the 10 million badly educated unemployed? 100 years ago large infrastructure projects would have needed large number of manual labourers but today using a few machines one can eliminate thousand workers who 100 years ago were shovelling and pushing wheelbarrows. Even if the government compelled the companies doing infrastructure projects to use labour intensive methods where would the money come from? I saw some ideas to increase the employment in the IT field but it is even worse. You can not teach everybody to become a useful programmer. Programming requires a special mindset. If one looks at the aptitude tests IT companies use to select people for training it shows heavy bias towards maths and logic which is the biggest problem in the education system. Education can not be sorted out without good teachers and by all account most of the current bunch is useless. It would require a new set of teachers which means the current school going kids can not expect too many job opportunities.

Another article for the people who don’t need to read it, to read and those who should won’t.
As for unrealistic expectations, the political and union elite have made careers out of unrealistic promises. Who’s now going to stand up and say actually all you capable of is pushing wheelbarrows and sorry for the lies!!!

I’ve posted a few ideas before and their practicality was questioned but hey I’m always keen to have a thought exercise like this. My ideas rest on the basis that the right people for a job are employed in that position, the work ethic of all South Africans are at the absolute highest standard, corruption is kept to a minimum (zero is my minimum) and that the country as a whole move away slowly from consumerism to a value added base instead. (Those are all four things SA will not have in the right amounts in the near, middle or distant future imo however).

First off: bring back conscription. One year basic training which includes border and anti-poaching patrolling as well as high crime area patrolling. Then one year skills training and public works. This would imply providing the conscripted with practical skills based training ranging from welding to bridge building. There are numerous areas of the country that could do with the engineering corps coming through and fixing stuff.
If you have a spot at varsity you only do the first year. Some will stay on of course and that should also be encouraged.

Second: Do away with BEE/AA requirements, instead incentivise businesses with how many jobs they are creating and how many of these individuals with the required skills they take on. A small one-man show plumbing business in Zeerust should get a 0.5% income tax deduction for example for every young person he employs post service.
Larger businesses should be encouraged/incentivised to provide basic services in their immediate communities in the form of educational programs, medical facilities, old age facilities etc instead of having a useless certificate and old Cyril on the Board for millions of Rands each year.

Schooling needs an over-haul yes, but that is pretty simple to fix. Call back every retired/retrenched/expat teacher you can find and have them act as mentors and guides to the current teachers. Yes ego’s will have to be managed but so what. Retirement is a ridiculous idea. Rather encourage people to continue providing/sharing their knowledge and experience for as long as possible. I’m not saying work them to death, rather learn from them.
Same is true of civil service. The type of learnings in schools should be more current as well. Memorizing what the inside of a frog looks like is all good and well but explaining compound interest and the pitfalls of debt would be better.

Encourage FDI by way of inviting big corporations to come settle here and extend the same directive to them, ie serve the community you function/work in. So Tesla for eg come open a solar farm factory here please. And in doing so ensure your community has renewable energy and a trade development centre that will enable young men and women to learn skills. This can start from the age of 14. Not everyone has to be book smart. Learning a trade would serve many of our unemployed better than having the watered down piece of toilet paper that is a matric certificate today.

There should be initiatives driven by either government or business to create urban farms. Many pieces of unused land, as well as building space that could accommodate vegetable or fruit growing. Nothing standing in the way of that now except that the food might be stolen or the land squatted on.

Couple of thoughts. Nothing too dramatic.

Jerry. Here we go again. In any production management system we have what is termed constraints. Constraints are the factors the impede the productivity of a system. For example if the bottling machine can only fill 200 bottles per hour then the plant will only produce 4800 bottles per day unless the machine is upgraded or another purchased. Of course, there could be another constraint (e.g. requisite labour) elsewhere so production could be even less.

Actually I agree with a lot you say. Its all about wealth production. I seem armies of government ‘worker’ mandarins consuming wealth but not producing it. This is a big problem brought about by statism that makes us all poorer.

However in order to produce wealth one needs incentives (entrepreneurs), capital, labour and land.

In South Africa we are capital starved and skilled labour has been exiled owing to ethnic cleansing in the workplace. Capital is being driven overseas by the ANC. Capital and skilled labour are expensive simply because they are scarce. These two factors are the main constraints in the wealth generation production line.

Capital does not demand returns like labour. Capital gravitates to the places where risk and return are optimised. In doing so it drives returns down allowing capital to flow elsewhere once that place has has it’s fill. If South Africa is not a desirable destination then it is because the risk is too hgih for the returns. Only responsible government can fix this. This is not spelled ANC. It is time to dispense of the diabolical regime with extreme prejudice before it destroys everything that is good.

End of comments.

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