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.