Op-Ed: Smart growth and jobs for the army of unemployed youth must be 2019 priorities | Sunday Times

17 Oct 2017, by Ann Bernstein

In South Africa 7.5 million people between the ages of 15 and 34 are NEETs — not in employment, education or training. The significance of this crisis and such enormous numbers is hard to grasp without comparisons. The number of people in this category is twice the number employed in the economy’s largest sector community and social services, and nearly six times as large as the number employed in mining and agriculture combined.

South Africa’s economy as presently structured cannot generate the needed jobs without profound structural transformation. Yet few people grasp the crucial challenge of scale.

The Centre for Development Enterprise recently completed a project that took us to 20 youth unemployment hotspots, from Msunduzi to Alexandra to Bushbuckridge.

In workshops with politicians, officials, business, NGOs and young people in cities, towns and townships, most proposals we heard fell into one of four categories. Many are well-intentioned but none is likely to make more than a marginal contribution to resolving youth unemployment.

The first set of proposals argues for dramatically increasing the number of young people in higher education.

Obviously, the CDE supports this. However, some facts may inject some realism. Between 1995 and 2011 South Africa doubled the number of adults with a degree or diploma. But given the challenges of quality, throughput and affordability, trying significantly to increase the size of the higher education system rapidly is likely to yield diminished returns.

The school system is still failing most learners: of the 1.1 million children in Grade 2 in 2005, only 350 000 passed matric with marks high enough to be eligible for university or college.

We also heard proposals for increased public sector employment. South Africa is already heavily invested in this approach and we cannot expect much more from it. Between 2008 and 2016, employment in community and social services increased by 32%, while employment in the rest of the economy grew by 4%.

A third set of interventions relates to youth entrepreneurship. We have desperately low levels of entrepreneurship, so creating a more entrepreneurial economy is vitally important.

However, most young unemployed people have had very poor education, come from homes where few work, and have no experience of work. Therefore, very few young unemployed people are likely to start new firms successfully. The best training to be an entrepreneur is to work for one and the idea that special courses or subsidised finance can substitute for the knowhow is not plausible.

The last category of recommendations involves helping young unemployed people to find jobs, and employers to find the right recruits. However, helping some people find work more efficiently is not an approach that will expand employment significantly. Moving some people to the front of the queue does not shorten it.

A serious strategy for dealing with youth unemployment begins with a realistic growth strategy that addresses the ways in which bad leadership and poor policy choices prevent growth.

Policymakers have failed to appreciate that economic growth is driven by a dynamic private sector. An effective growth and employment strategy has to be built on a crucial principle: companies are the best, most sustainable “projects” for creating mass employment.

Growth will only return when policymakers realise how increasingly onerous regulations, failing state institutions and policy uncertainty strangle growth.

We need investment that creates jobs for the workforce we have, not the highly skilled one we wish we had. This requires labour market reforms. We have to expand labour-intensive sectors and attract the factories that Ethiopia is showing will come to Africa.

Large cities have better growth and job prospects than elsewhere in the country. The government should support urbanisation and more urban investment. Managing the big metros for faster growth, jobs and the inclusion of young workseekers requires a new mind-set and bold policy reform.

We need a new kind of economy that’s fast-growing, more labour-intensive, more open to new firms and innovation. Growth has to be urban-led, private sector-driven, enabled by a smart, competent state and targeted at mass employment. We should all work to make youth unemployment a top issue for the 2019 elections. Growth and jobs need to trump all other priorities.

Bernstein is head of the CDE. This article is based on a new series of CDE reports, Youth Unemployment: an agenda for action.

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