Rewind

Finweek English Edition - - INSIGHT - Marc Ash­ton

Ear­lier this week it was an­nounced that the In­dus­trial De­vel­op­ment Cor­po­ra­tion ( IDC) had lent R16bn in the last fis­cal and in the process cre­ated 19 000 jobs. This is a good ef­fort and, in fact, should be ap­plauded.

The of­fi­cial num­bers from the IDC in­di­cate the cre­ation of 18 922 di­rect jobs and the sav­ing of 3 950 ex­ist­ing jobs.

Ini­tially when the IDC fi­nan­cial re­sults were re­leased, I did the nat­u­ral sum of tak­ing the amount lent and di­vid­ing it by the num­ber of jobs cre­ated. This back-of-am­atch­box cal­cu­la­tion gets you to around R842 000 per job cre­ated.

That doesn’t sound par­tic­u­larly im­pres­sive at all.

How­ever, Janine Weibach, an in­dus­trial an­a­lyst at Thebe Stock­broking, was quick to point out that the IDC had saved 626 jobs at con­struc­tion group Wearne, with em­ployee num­bers in­creas­ing 6.6% in 2013. This was the first op­er­at­ing profit Wearne had made since 2009 and this had been fa­cil­i­tated by the IDC fund­ing.

Weibach is spot on – the cost of cre­at­ing jobs through or­gan­i­sa­tions such as the IDC is an ex­pen­sive process. WHICH ONCE AGAIN BRINGS US BACK TO THE NOW-IN­FA­MOUS LU­MI­NANCE DEAL The Fin­week po­si­tion on the Lu­mi­nance deal is sim­ple: it in­volved an ex­pe­ri­enced en­tre­pre­neur with a growth busi­ness and in our view rep­re­sents the kind of loan that the National Em­pow­er­ment Fund (NEF) should be mak­ing on a reg­u­lar ba­sis.

We took a bit of a hit in so­cial me­dia for this po­si­tion, with some ar­gu­ing that if they were given R32m they would cre­ate “thou­sands” of jobs. We ar­gue that R32m would prob­a­bly trans­late into 15 to 20 em­ploy­ees on very ba­sic salaries, if the goal is to help them build a sus­tain­able en­ter­prise. THE RE­AL­ITY IS THAT CRE­AT­ING SUS

is an ex­pen­sive ex­er­cise TAIN­ABLE JOBS and we need to start hav­ing an ap­pre­ci­a­tion of just how much money is re­quired to grow ca­pac­ity in South Africa. We also need to start tak­ing long-term views on the in­dus­tries and busi­nesses that we back to en­sure that they get through the booms and busts as­so­ci­ated with the eco­nomic cy­cle.

While the IDC has been an easy tar­get for cyn­ics over the last few years, this set of f inan­cial re­sults shows an or­gan­i­sa­tion which is ful­fill­ing its man­date in the South African econ­omy… and most im­por­tantly, it is do­ing it prof­itably, hav­ing gen­er­ated a re­turn of R2bn for SA tax­pay­ers.

What this does how­ever show is how des­per­ately SA needs co­or­di­nated ef­forts to stim­u­late the econ­omy. We can­not have a cost per job of R842 000.

We need to lower the bar­ri­ers to en­try for small busi­ness, pro­tect busi­ness own­ers who are nur­tur­ing their busi­nesses through the early stages of their en­ter­prise and we need to ad­dress the labour is­sues that have plagued the coun­try in the last few years.

Ku­dos to the IDC for tak­ing ini­tia­tive, but we still need to see a lot more de­ci­sive steps from pol­i­cy­mak­ers be­fore we se­ri­ously start to build sus­tain­able en­ter­prises in the coun­try.

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