A warm welcome to everybody on this cool morning.
Viola, I am very pleased that the Cape Chamber of Commerce and Industry takes up challenging and uncomfortable questions. That is what leads to progress — Ideas and debates. You know I had a discussion with you about the topic to get what you mean and I have extracted what I mean by it and so I will be talking about that.
Let me start by setting out the parameters on how I think this debate should proceed. First of all let’s look at the things that everybody agrees on. I think we all agree that poverty is South Africa’s greatest crisis. Across the board, among people of all sectors and all backgrounds, there is agreement that South Africa’s number one problem is poverty, the scale and the extent of it. And I think most people agree that it is so entrenched because so many people are unemployed.
Unemployment, therefore, becomes the biggest issue that we need to tackle.
And I think it’s really important, that, if we all agree that South Africa’s greatest crisis is the lack of sufficient jobs, to move on to a point that Peter Bruce made in his column this week, (and indeed it is a point made repeatedly by Clem Sunter and others) that before you can have a employee you need to have an employer.
Clem Sunter has often said that while we often talk about the need to create 5 million jobs, we often fail to understand that this implies the need to create the context for one million new businesses. If each employs an average of five people, it totals 5-million jobs. So, if we can create a climate in which 1 million new businesses will be formed then the issue of 5 million jobs will take care of itself.
We do a lot of focus groups and a lot of research and analysis of the economy and peoples’ perception of how an economy grows and how jobs are created. And it is very telling how little people in general understand about the economy. Large numbers of people still think that government creates jobs. I think we must all accept, as a point of departure that government creates a context in which the private sector can create jobs; that is a context in which people with capital and skills decides to invest and take a risk and start a business in a particular place rather than in another place.
And in today’s global village, people who have skills and people who have capital and specifically anyone who has a combination of skills and capital or access to capital, is very mobile.
They are in demand everywhere in the world, and if they’ve got a good entrepreneurial idea, they can make a decision on where in the world it would be best to establish a business around that idea and take a risk on it.
They are under no obligation to choose our city, province or country. And that is what we have to understand when we approach this issue: how do we make our location people’s first choice to start new businesses, and contribute to the one million new businesses that South Africa needs. We need to create a climate conducive to investment, to “employer” creation so that we can drive employee creation and the jobs that come with it.
So I in government have spent a lot of time together with Alan Winde, the Provincial Minister of Economic Development, specifically thinking about how we can make the Western Cape an investment destination of choice. Now competition is a good thing because while people are competing against every region in the world they improve their services and they become better. We want the Western Cape to succeed because we want South Africa to succeed.
And I think it’s a very good thing that we have a provincial sphere of government that should have as much scope as possible to implement different approaches so we can test and weigh the different policy approaches against each other, and see what works. And so, in order to try and attract more investment, we spend a lot of time trying to look at why people don’t make the decision to invest here or grow their businesses here and what would make them more likely to do so.
Of course one of the biggest blockages to starting a business is the red tape. I started my own business in 1989 and I remember what a huge struggle it was. Being the leader of the Democratic Alliance and the Premier of the Western Cape is easier (both together) than it was to start a small business.
The red tape problem is one of the major problems why Alan Winde has started the Red Tape Reduction Unit. In which we try to track start-ups from the beginning to try and remove all the unnecessary red tape we possibly can. And I am often appalled by the approach of officials to this whole matter. Many officials have this notion that business people have to invest here and have to start a business here and that there is somehow, something sinful in trying to do that and therefore they must be made to pay and suffer. That is the point of departure.
I was dealing with one such instance recently, which amazed me. As you know we have many, many tiny start up business across the city and they are known as spaza shops. And spaza shops really eke out at subsistence level. But the big challenge is how we can get these tiny start up businesses to become successful so that they can employ more people. If a spaza shop can go from employing just the spaza shop owner to two or three people because it is a viable business then so much the better. And one real entrepreneur, the kind of person who is gold to any community in any society, came up with the idea that if spaza shop owners were able to sell electricity and air time they would be far more attractive to the surrounding community who would then have a reason to get their feet across the threshold and buy other goods. And so this person quite ingeniously invented something that could be attached to a cell phone to print out a receipt with your electricity units or your airtime and this really made many spaza shops viable and they started the pilot in Delft. This became a very good entrepreneurial venture that changed a subsistence living to a viable living not for one person but for two or three in many of the spaza shop. They expanded their range and they could reduce their prices and attract customers and employ more people.
But one day they made an appointment to come see me and they told me that some official in the City of Cape Town had decided they weren’t allowed to sell electricity anymore and I said why and they couldn’t answer. They had come to me for that answer.
So I went along to find out and found there was absolutely no valid reason for this arbitrary rule. Because spaza shops had not sold electricity before, the official reckoned they could not do so now. So with one stroke of a bureaucratic pen, he undermined a whole range of new businesses — despite the fact that our number one priority is economic growth and job creation.
Now of course we reversed it. But this tells you a lot about the official approach to the requirements of the private sector when it comes to job creation.
And so we have to change an entire mind set about job creation and making it easier to invest, and attract capital and skills. But not only attract capital and skills, it is about creating capital and skills through our institutions and also critically, retaining capital and skills. If this guy who thought up how to print a receipt off a cell phone had emigrated to some other part of the world ten years ago that insight presumably wouldn’t have been available here and many, many people wouldn’t have turned subsistence businesses into viable businesses.
So red tape reduction is an absolute priority and not putting unnecessary obstacles in people’s way when they have a good idea. Rather say to people “great we will be more supportive in your taking that idea to the market place than any other location in the world, because we recognise what a valuable contribution you are making and how important it is”.
And the other big barrier is to investment and business creation, as Viola said earlier, is skills. People want to start businesses, and to do so they look for the skills they need to run their businesses, and if they can’t find those skills they usually conclude it is not worth the effort of starting the business here. Now I have been very interested in looking at a sector that is growing very significantly and has attracted some of the very biggest brands in the world to the Western Cape and Cape Town, and that is business process outsourcing (BPO). Now somehow we have the skills in that field. One of my colleagues suggested that it’s because South Africans have the gift of the gab maybe that is true, but whatever we have we are attracting investment in that area from Amazon to Lufthansa, to Google. They want their BPO offices and call centres here, and the time zones seem to be correct and many things work in our favour.
What they are battling with in expanding BPO and call centres is skills required for “middle management”.
And everywhere we are going – from the Green Economy, to the whole ICT revolution in Broadband, which is now coming on stream — skills are becoming a huge bottleneck and that is the topic of this colloquium today.
And the more skills we develop and align skills in a demand driven economy, the more we will create those crucial jobs and opportunities for new jobs to be created in our economy.
Now what is government’s role in this regard? I am really glad that the Chamber of Commerce and Industry have recognised that the government also has a critical role. And our role, our hope, will be fulfilled in a significant way through our Skills Development Forum. The purpose of that Forum is primarily to look at which sectors of the economy are growing, or likely to grow, in order to see where the potential lies and then to try and make sure, in partnership with other actors, that we don’t have a skills constraint that blocks the growth of that sector.
Now you don’t have to be a genius to know that the Green Economy is going to create many potential jobs in the future if we get it right. Now currently there are so many regulations about what you can and cannot do that quite frankly it’s a major challenge but despite all of that because of our resources are so plentiful and because the potential is so great, many domestic and international players want access to the green economy in South Africa. There is a huge demand potential.
The questions is can we ensure the skills like wind technicians and solar panel technicians and all of the other skills are going to be available when these factories come on stream. And so the job of the Skills Development Forum will be to identify those growing sectors, (which is not to say that we as the state will pick those winners and tell the economy in what sectors it has to grow, it never works that way.)
Our role is to understand where the economy is growing and to ensure that in those spaces we get all the partner institutions together and say how can we make sure that when these factories come on stream we don’t have a situation where there is a skill shortage in that area. And so for example, in the area of wind technicians, we have a partnership going with CPUT and they are going to run specific courses to train technicians so that they are there are business come on stream because they have gotten part of the REBID.
And at the same time we have to work very hard with national government to remove all the regulatory tape in this space, the same applies to Broadband.
We have the next Skills Development Forum Meeting on 17 July where I hope all the players will be coming together because we will be talking about skills demand and skills supply in the areas of Broadband, the Green Economy, Artisans and Entrepreneurs. We will talk about how we bridge the skills gap so that we attract more job creators, investors, employers and thereby create opportunities for people to have the skills they require to get the jobs that emerge.
I would like to mention another area that has been enormously successful, and it’s not an area of economic need or economic demand but an area of social need and social demand. We have a serious substance abuse problem in the Western Cape, alcohol and drugs. And in some areas it is at a level where I am amazed that there is any social cohesion at all and I pay tribute to individuals who are trying to hold communities and families together within that context.
Curbing the extent of substance abuse is obviously a priority of our Government and we wanted to do many things one of which was to start treatment and rehabilitation centres, which we’ve done based on the matrix model, which is a very good model based on one used in the United States and which is used with specifically with tik or methamphetamines addiction, which is a crisis and a pandemic in the Western Cape. We wanted to start these centres but we didn’t have the right staff to work at them because addiction management is a highly qualified area, and we just could not locate the necessary skills in this field. And to our absolute amazement within this pool of need there were very few courses or training programmes to develop the skills we needed to staff our rehabilitation centres. And so we partnered with the University of Cape Town, Stellenbosch and the Western Cape at different levels to develop undergraduate and post graduate courses in a variety of areas in addiction management and the first of those graduates are coming out now and will be in a much better position to deal with the crisis.
So putting together the demand and the supply is a critical facilitative area that government must undertake.
And herewith I came to the theme of this colloquium: equity and inclusion and overcoming the legacy of the past, especially the legacy of the apartheid past. This is a crucial component.
Now with all of the generalisations that fly around, I wish to emphasise that I don’t believe in any form of generalisation especially not about a geographical location but we have to face some hard facts. Black people and white people were not in the Western Cape over 300 years ago. As black people were migrating down the east coast, white people were arriving in ships down the west coast. And you know about what followed: the border wars (along the Fish River) and the subsequent attempts by successive colonial administrations, to keep black people out of the Western Cape. We all know that it is part of our tragic history. We also know about the coloured labour preference policy and all of the other things like influx control. We have to face these tragic features of our history honestly. But one of the consequences of that past is that today we have a very small black middle class comparatively speaking in Cape Town and the Western Cape and that means by extension we have a very limited skills base amongst black people in the Western Cape, and that we need to change urgently. I am using black in a more narrow sense than Viola used it. And we need to change that by creating opportunity rather than manipulating outcomes. Now I was very pleased that Viola used the concept of opportunity. Because the spirit of the Constitution and the spirit of equity in the Constitution is one about expanding opportunity and not manipulating outcomes. Unfortunately the problem lies with the way this has been interpreted. BBEE (which became BBBEE) has been used as a fig leaf to cover the notion of manipulating outcomes for politically connected people under the pretence of promoting equity and this has had a very negative outcome.
One of the reason for what is described in the ANC’s own policy documents as an “impotent state” has been the abuse of BBEEE to manipulate outcomes for politically connected people. And that is really not what we are talking about, and the focus to correct the history I am talking about must be on ensuring we correct the opportunity side of the equation. And grow a middle class here, as middle class are sustainably grown everywhere, which is through good education, skills development and excellent opportunities in the context of economic growth. And that is the only way we are going to do it, there are really no short cuts to these things.
And so we have put an extraordinary focus on education. We aim to have no underperforming schools by 2014 in the Western Cape, which is an enormously tall order and we are putting a massive amount of energy, resources and effort behind that. And equally we have to diversify the curriculum after the basic education and training phase so that we develop more artisans more vocations and FET colleges become enormously important.
Unfortunately we have just had to hand over the FET colleges to National Government and that makes me heart sore because whatever good intentions they might express there is always a slip twixt cup and lip, I am afraid. So FET colleges are a critical drivers of supply and unless we keep them top notch and improve their quality and enable them to spot the gaps and work with the Skills Development Forum to see which areas they have to be developing curricula in then we are going to have lost a critical component in our skills development process.
So, we first have to get all our schools to function really well and then we have to ensure that when people can read, write and calculate there are curriculum choices that will give them the skills they need to have a good fit with the sectors of the economy that are growing. And within that context government has a crucial role to play (a) in fixing up schools, (b) in diversifying the curricula so people have opportunities after the basic education and training phase and (c) those courses link comfortably with the demand driven side of the economy, which is where the growth is, and we must put particular emphasis on the most disadvantaged, which we are doing. And I was delighted to see that UCT is focusing on identifying and mentoring children in disadvantaged areas (specifically in Khayelitsha) so that they can compete equally for positions at the university where the entrance requirements are so challenging.
I was also about a school in Kwa-Zulu Natal for the most disadvantaged children that regularly produce learners with seven distinctions because of their particular approach to education. It is a boarding school fortunately, but we can learn from schools producing outstanding results within the poorest contexts.
There is no alternative to building a strong, stable middle class than to do it by means of education, skills development and opportunity in a growing economy. And it is a process, not an event. And while one can work very hard towards that, with focus, there is no shortcut to achieving those kinds of outcomes. One has to move one step forward every single day, week, month, year because over time that makes a massive difference as long as one is going backwards over time.
And that brings me to another complex issue, which I am going to mention here. Many people who are used to getting where they are on their political connections, or who they know, don’t feel comfortable in the Western Cape because we discourage that kind of approach. But on the other hand it’s hugely encouraging to people who don’t have political connections but who have spent a lot of time building up their skills and made themselves marketable in a growing economy. They find opportunities here that they would not find elsewhere, where political connections are required.
And so often when people come here and have spoken to me and expect me to miraculously produce a job for them which will pay them the money they prefer, I say we don’t work like that, we work in a different way, we don’t create units for various people that will leave them unconstrained but well paid, we don’t function in that way, we function in a way of extending opportunity, not manipulating outcomes for politically connected people.