Firms ‘should help train’ youth service intake
Can the Curros, Netcares and Mediclinics of the world become more active in providing skills?
THE construction and banking sectors and business organisations should be encouraged to participate in artisanal and other training for the National Youth Service, Colin Coleman, MD of Goldman Sachs South Africa, argued this week.
Goldman Sachs recommends that the government roll out a National Youth Service initiative using the South African National Defence Force to recruit 60 000 unemployed young people between 18 and 34 annually over five years. At a cost of R62-billion, representing 0.8% of the national budget for 2015-16, the recruits will be trained, accommodated and paid a monthly stipend. They will receive artisanal and basic military training and do community service in uniform.
South Africa’s high youth unemployment was “by all measures the widest among emerging-market countries” and, with racial inequality, constituted the two main structural rigidities in South Africa, Coleman said.
An environment of low growth has kept South Africa from halving unemployment. The National Development Plan required 5% annual growth to achieve this.
“Growth has not yet translated into a dent in unemployment . . . But we need to be smart with our interventions,” he said.
Initiatives such as the skills development levy, a compulsory levy scheme for business to fund education and programmes through corporate social investment, are in place. But, Coleman said: “It would be highly constructive for relations with government if business was to get involved with practically training unemployed youth who are recruited into the defence force in basic skills like plumbing and engineering.”
Kevin Lings, Stanlib chief economist, said this week: “Since the global financial market crisis in 2009, the rate of economic growth in South Africa has not been robust enough to lead to widespread job creation in the formal private sector.”
Fiscal stimulus for 300 000 new small enterprises through a conditional grant to unemployed people who want to start businesses and create at least 10 jobs could spur economic growth.
“To the extent that those businesses started and were operating and continued to operate, those subsidies would continue,” Coleman said.
Lings said that elevated debt levels were also constraining fiscal stimulus through government spending.
An addendum to this idea is that the business sector could combine with the government to support and mentor small and micro enterprises, help these businesses fit into procurement programmes and use the National Youth Service initiative as a breeding ground for entrepreneurs.
Yet, although the state could provide grants through a small business-development entity, Coleman cautioned that the government should not raise the debt-to-GDP ratio under any circumstances.
Other initiatives to boost economic growth in a depreciating rand environment were tourism, value-added manufacturing, particularly through innovation and beneficiation in core areas where South Africa could compete. These areas included exporting education and health services into sub-Saharan Africa. South Africa had successfully exported telecommunications and financial services.
The question is — can the Curros, Netcares and Mediclinics of the world effectively become more active in providing skills and capital in Africa, thereby driving up earnings?
Mining and manufacturing have been the bedrock of the South African economy.
But a cycle of sustained, global low commodity prices and a contraction of 1.9% in the third quarter in manufacturing capacity were a concern. “We can’t afford the mining and manufacturing sector to deindustrialise and not be successful,” Coleman said.