Ramaphosa’s project shifts BEE targets from ownership to jobs
The Youth Employment Service (YES) launched this week significantly shifts the weighting of black empowerment from a narrow focus on ownership to a broad focus on employment.
Companies that spend 1.5% or more of net profit after tax on employing young interns can go up a BEE level and substantially improve their black empowerment rating, which is an increasingly important measure for doing business in South Africa.
YES has been incubated by Investec but is aimed at the 250 blue-chip company leaders who form the CEO Initiative. To go up a BEE notch, Investec would, for example, have to hire 1 250 interns and FirstRand would have to take on 5 500 young people.
Over three years, YES aims to place a million interns, calculating that 60% of them will enter the labour market in this way. Such an outcome would make a sizeable dent in youth unemployment.
Tashmia Ismail-Saville of YES acknowledges that this won’t change the structural impediments to unemployment but it will make a significant shift if it works, because it is a demand-side stimulus.
Each intern will earn R3 500 a month, which is the same as the mooted minimum wage. Almost six in 10 young people try to enter the job market without a matric, which shuts them out. YES is an effort to get them on board via training and opportunity.
Duma Gqubule, director of the Centre for Economic Development and Transformation, is less than impressed.
“The YES initiative is a waste of time. It is a band-aid solution to South Africa’s unemployment crisis. My view is that companies will either not implement or fudge the numbers and count existing learnerships that they already have to get BEE points.”
Ismail-Saville says: “The ask from a business is big but the problem is also big.” There is no way that companies can simply redirect their BEE spending to get a bump up the empowerment ladder. “It has to be an additional commitment,” she says.
Moreover, businesses that employ young people under the scheme will also benefit from the Treasury’s employment tax incentive, implemented two years ago. “If companies do it properly, then it can be implemented by a PAYE reduction rather than a refund from SARS,” says Ismail-Saville.
The launch of YES this week is one of President Cyril Ramaphosa’s signature legacy projects and he has given it a lot of personal time. Since September last year, Ramaphosa has met three times with employment service architects and he has pushed to increase the target but the team has finally arrived at a figure of a million interns over three years.
If companies cannot absorb the total number of interns they commit to, young people can be placed in small and mediumsized enterprises, which sign up to YES for a small membership fee. They get interns at a cost carried by a big corporate sponsor but gain skills and labour.
YES is mapping a complete database of small and medium-sized enterprises because there isn’t one in South Africa. Interns will be placed close to where they live.
Another option is for businesses to support micro-enterprises run by young people who will be trained at township hubs — over three years, these should number 200 000. Research shows that such micro-enterprises are likely to be internet cafés, micro-franchises and start-ups in hospitality, catering, tourism, coding, marketing and research, in addition to call centres.
Each YES intern will get a smartphone through which short courses will be delivered — the mobile companies have provided zero-rated data. The data from the phones will help Ismail-Saville and her team to finetune the programme. Employers will provide feedback three times a year to create an audit trail that will enable regular tweaking.
It is an iterative process, says Ismail-Saville, who adds: “What I love about this job is it allows me to do something on a big scale — it’s grand and ambitious. If you don’t set the bar high, you won’t get very far.”
Gqubule remains unconvinced. He says: “The point is that job-creation has got zero to do with business confidence, policy certainty, labour laws or any other supply-side issues such as business regulations and the cost of labour. It has to do with GDP growth or sales. Nobody hires unless sales [or aggregate demand] are increasing.”
If he were president, Gqubule would not focus on youth unemployment. Instead, he would suspend the inflation target in order to focus on growth and employment. The Public Investment Corporation should write off R600-billion in government and stateowned-enterprise debt and fund a R500-billion fiscal stimulus over three years.
Back in November 2014, SAB Miller, before being bought out by AB In Bev, Coca-Cola and the successful Gutsche family, announced it had agreed to combine the non-alcoholic, ready-to-drink bottling operations in Southern and East Africa to form Coca-Cola Beverages Africa. This also created the company’s South African operations, which would trade as Coca-Cola Beverages South Africa, or CCBSA.
Like similar transactions, the deal required regulatory approval by competition authorities and the government.
This week, I attended the launch of the R400-million-strong Mintirho Foundation, established by CCBSA to support black farmers. As I listened to hard-working Economic Development Minister Ebrahim Patel, and CCBSA MD Velaphi “Bra V” Ratshefola, I appreciated the energy in the room as a welcome, though overdue, signal that perhaps we were starting to dispel the myth that the government and business are inherent enemies.
“In the relationship between government and business, we need two things. We need government to protect the public interest. To do so robustly, consistently, and ensure that all South Africans benefit. But we also need government to work with business to see to it that business, whilst it has to pursue the interests of shareholders and its broader stakeholders, it remains a critical engine through which our public objectives can be met,” said Patel.
Often, when something is repeated enough, we start believing it. For years we have been told that business interests are narrow and only about shareholder returns, and government interests are also narrow and only about the wellbeing of citizens. The two only converge when it makes sense, and few and far between are the times this happens.
This is nonsense. There would be no businesses if there were no customers who live healthy lives, in safe communities, and who have jobs and dignity. Coca-Cola would be nowhere if citizens were unable to consume its products.
This week, President Cyril Ramaphosa launched the progressive Youth Employment Service, which is meant to see the private sector create 330 000 jobs for young people. Some opposition parties have slammed it as too friendly to corporate South Africa, which is to blame for not creating enough jobs in the first place. How this helps the situation, I have no idea.
We should take a leaf from the Coca-Cola book and that of Department of Economic Development on the creation of the country’s largest bottling company, with conditions of public interest that business not only accepted, but outperformed.
“Because it is private businesses that employ the largest numbers of South Africans. It is capital that is at the heart of innovation. It is business that creates the kind of logistical systems that we as government can piggy-back on. It is business that creates the demand for skilled labour, for the professions, for research and development at universities. And therefore a deep partnership between business and government is not at the expense of government standing up for the public interest. You can and you ought to achieve both,” Patel concluded .
When the Competition Commission approved the creation of CCBSA in 2016, it imposed a number of public-interest conditions, including establishing a fund for enterprise development of the agricultural value chain and contributing R400-million towards it — hence the setting up of the Mintirho Foundation.
The fund will support the development of the agricultural value chain and particularly historically disadvantaged farmers and small suppliers for CCBSA’s and Appletiser’s value chain, and provide training. The foundation has been set up to continue the company’s supplier transformation initiatives well beyond 2021, when the final instalment will have been made.
The foundation must understand the pressure points that previously disadvantaged farmers and small suppliers of inputs to the agricultural value chain have to face. Any business needs to be well thought out, which requires resources and skills that an emerging black farmer might not have access to.
We have been lied to. Business and government are not enemies. Their interests are linked. They are essentially two sides of the same coin. Embracing this fact will go a long way towards eradicating unemployment, inequality and poverty.
✼ Khumalo is chief operating officer of MSG Afrika