A friend recently gave up job-hunting after months of unemployment and set up a vehicle servicing and repair workshop in Wynberg, Cape Town.
Before he could open his doors, he had to pay almost R3 000 in compliance fees and industry licenses. In addition, he needs a landline, but Telkom can’t help him for a month.
My friend’s business is what is known as a SMME — a small, medium and micro-enterprise.
There are about 2,5-million informal or micro-businesses like his that give employment to about 2,7-million people, a third of the working population.
At much the same time as I heard this sorry tale, two other friends one a successful businessperson, the other an academic and management consultant — announced that they had bought property overseas for their retirement in 10 years.
If anything places these two unrelated anecdotes in context, it is the 2005 Transformation Audit: Conflict in Governance, which was conducted by the Institute for Justice and Reconciliation.
Central to the audit is a theme about the way that poor education, unskilled youth, and detrimental employment and industrial policies all combine to trap a majority of South Africans in poverty.
Add to this municipal incompetence in service delivery, particularly to the desperately poor — 135 out of 284 municipalities are malfunctioning — and the result is ”crowds in the street, missiles in the air, temperatures rising”, as the economists at the Organisation Development Africa, Martin Nicol and Zenobia Africa, so graphically put it in the audit.
”At the crux of our dilemma,” says Servaas van der Berg, professor of economics at the University of Stellenbosch, ”is the tragic fact that educational quality in historically black schools — which constitute 80% of enrolment and are absolutely central to national educational progress — has not yet improved significantly.”
Only those at the best 20% of schools in South Africa are at the same level as the best worldwide.
On top of this comes a statistic that 82% of students enrolling at tertiary institutions are functionally illiterate, with a literacy level below that of grade eight, according to Cecil Mlatsheni of the University of Cape Town’s economics department, also in the Transformation Audit.
The problem starts early. Mlatsheni’s article on youth unemployment quotes a Western Cape survey showing that ”a mere 32% of grade three pupils can read at the level set in the national curriculum, while only 37% meet the numeracy expectations”. These learners are trapped in catch-up mode for most or all of their schooling.
The good news is that attention is now being focused on primary education. But it needs to go further, according to Jonathan Jansen, dean of education at the University of Pretoria.
The poor quality of our teachers, he believes, ”is perhaps the single most important inhibitor of change in education quality”.
Time spent by teachers actually in the classroom is a critical management issue: 15 hours a week in black schools on average, more than 25% less than middle-class white schools. Money does matter, and so does redress, says Jansen.
If this somewhat parlous state is then fed into the audit’s analysis of the youth sector where unemployment could be as high as 60% and anyone with less than a tertiary education has a poor chance of gaining employment — 54%, compared to 86% with post-matric qualifications — then the country’s future looks far from rosy.
Yet the audit highlights a decline in unskilled employment as changes within the labour market favour those with tertiary education. Of those employed, 88% are unskilled or semi-skilled, and it is in these categories that jobs are declining. Though black graduates suffer more unemployment than others, graduate unemployment dropped across the board. But youth unemployment is rising: 71% of those between the ages of 16 and 24 are unemployed, and 45% of those between 25 and 34.
John Orford, an independent econo-mist, and Eric Wood, an associate professor at UCT’s Graduate School of Business, point out that ”improving growth and reducing poverty depends critically on unleashing entrepreneurial potential among private individuals”.
Unfortunately, South Africans do not fare well as entrepreneurs when measured against international standards. The South African entrepreneurial activity index, according to Orford and Wood, stood at 5,4% in 2004, reflecting the percentage of adults starting or running a new business. Equivalent developed country levels were 6,4%, and developing countries 21,3% — we lag far behind.
Entrepreneurial activity among most black South Africans is motivated by necessity and hampered by historical disadvantages. Black micro-businesses are most usually a case of one woman battling to survive. Or, when they are larger, they face a higher failure rate than would a white, Indian or coloured SMME because the entrepreneurs lack skills, experience or networks. The informal sector employs nearly a quarter of the workforce, yet very few grow out of it, or expand from one-person operations.
Mike Nicol is an author and journalist based in Cape Town