Youth in SA can cross the chasm to employment but they need bridges

Better links between education and work are part of the solution, but there are spatial barriers to overcome too

The Eastern Cape is home to two coastal cities with wellestablished port facilities and industrial infrastructure. Yet it has one of the highest unemployment rates in the country, and economic growth has lagged behind other regions. What would it take to turn the Eastern Cape’s economic potential into income-generating opportunities for its people? Part of the answer is in improved linkages between schooling, training and work.

Mbali Sokude, 24, from KwaZulu-Natal, is one of about 500 young people being trained at the Mercedes-Benz academy in East London to operate and fix the machines on the new C-Class assembly line. She attended a technikon from grade 10, graduating in electrical and mechanical engineering, and is now training to be a millwright at the academy.

“If there are problems [with the robots], then I’m the one who’s fixing those problems.”

The academy, established with support from the National Treasury’s Jobs Fund, bridges a gap between college courses and factory skills requirements that is wider than it should be. More needs to be done to align SA’s education and training with the needs of the workplace.

But this is not enough. High-skilled manufacturing is an important part of a growth strategy, but the policy environment also has to shift in order to open up agriculture, small business opportunities, labour-intensive activities and the informal sector. The jobs summit, which kicks off on Thursday bringing together a range of labour, business and civil society organisations, is an opportunity to move the discourse towards those left behind by weaknesses in the education system and those whose livelihoods are stunted by the absence of work opportunities.

“Few countries have as serious an unemployment problem as SA,” write economists Philippe Burger and Frederick Fourie in a paper for the Treasury’s research project on employment, income distribution and inclusive growth (Redi3x3). There was progress in reducing unemployment between 2000 and 2008, when the economy recorded its strongest growth in decades. But in the decade since the recession, growth has remained slow and policymaking has been fragmentary and inconsistent.

For young people, the outlook is especially dire. Youth unemployment is double the adult unemployment rate, reaching about 50% if discouraged work-seekers are included.

Redi3x3 researchers Cecil Mlatsheni and Vimal Ranchhod have shown that finding a job depends in large part on education and location. Those who move from rural to urban areas are more likely to find work, and even though females stay in school slightly longer than males, men still have a better chance at employment.

Education is the biggest single item of expenditure in the budget but it has not had as transformative an effect on society as the postapartheid government had clearly hoped. Our unequal outcomes in education, says University of Stellenbosch economist Servaas van der Berg, have been “the central source of inequality in SA”.

The labour market is most hostile to those who do not complete secondary schooling. And as average years of schooling have increased, the threshold required for entry into the formal workplace has risen. As Redi3x3 director Murray Leibbrandt has shown, educational progress has not altered the inequality of outcomes that result from the structure of the labour market.

So greater progress in education and training is needed, but there also has to be structural change towards labour-absorbing sectors and greater ease of establishing and growing businesses.

Perhaps the most alarming economic term is “Neet”, which stands for –“not in education, employment or training”. Stats SA estimated that Neets comprised 31% of 15- to 24-year-olds in the second quarter of 2018.

Many studies have pointed to a vicious cycle associated with the gap between schooling and work that affects so many young people. Failure to find work, depression, dysfunctional behaviour and negative employer perceptions are interrelated. Redi3x3 researchers have also shown the high degree of churn in the youth labour market. As hard as it is to find a first job, it is also difficult to keep it.

There have been other major barriers to employment. One is an industrial policy, championed principally during the Mbeki years, that supported large, capital-intensive projects, predicated on the then low price of electricity.

University of Cape Town (UCT) economist Anthony Black argues that the playing field in manufacturing has been tilted against labour. Since the 1990s, manufacturing has declined as a proportion of GDP, and employment has also declined. At the same time, he says, the sector is unusually capital intensive in comparison with similar countries.

Other key barriers are the spatial disparities that are legacies of apartheid, and markets that tend to be closed and concentrated. Even when those from rural areas migrate to cities to find work, transport costs from townships and informal settlements absorb a hefty proportion of available income. UCT economist Andrew Kerr estimates the financial burden of commuting costs for working black South Africans is 40% of their income. Imagine the risks one takes in this sort of expenditure if one is looking for work.

“Rigidities in the labour market have often firms there is”some evidence that collective been blamed for high unemployment but our research finds this is not uniformly true. In smaller bargaining agreements reduce employment. There is also evidence that a higher minimum wage in the agricultural sector has reduced employment. But then, as Ruth Hall pointed out a few years ago, many farmworkers were struggling to meet their families’ nutritional needs on the minimum wage.

So what can be done to dismantle some of these barriers to employment? In the longer term, education needs to be profoundly transformed: the “cliff” in grade 9 that sees nearly half the school cohort disappear needs to be tackled through programmes that allow a proper schoolto-work transition.

Sokude, the millwright apprentice, is a good example: from grade 10 she went to a trade school and then a technikon. She will soon be a highly qualified technician able to work in any motor or automotive component plant.

The spatial barrier is harder to overcome but there are several agencies — some supported by the Jobs Fund — that have set up internet cafes and career advice centres in townships close to where people live. While programmes are put in place, the work of reorganising our urban space must proceed. The government could start by getting public transport to operate safely and efficiently.

The youth employment tax incentive has contributed to opportunities for young work seekers, especially in small firms. But it has to be extended as a general incentive to labourintensive industries if it is to have an impact on the structure of job creation in the economy.

There is a need for urgent policy attention to the informal sector. Fourie and others have shown that it now employs more people than the ailing mining sector. Yet official policies towards it are at best vague, at worst hostile.

At a Jobs Fund summit in Midrand earlier this year, GG Alcock, an advocate for informal traders, cited the case of a woman (trading legally) in downtown Johannesburg who made R2,500 a day from selling vetkoek. Her biggest problem? The City of Johannesburg, “because they keep coming and confiscating my stuff. If they did not, I would have better pots and a better table.” The jobs summit should attend to her constraints, too.

Donaldson, a former deputy director-general at the Treasury, is a researcher at the University of Cape Town’s Southern Africa Labour and Development Research Unit. Green is a journalist who works for Redi3x3.