Capitec CEO’s claims of 10% unemployment is smoke and mirrors - Simon Mantell

Key topics:

• Capitec CEO downplays SA job crisis, citing informal sector activity

• True youth unemployment nears 66%, with many graduates jobless

• Informal jobs seen as survivalist, not real entrepreneurial growth

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By Simon Mantell*

It is unfortunate that outgoing Capitec CEO Gerrie Fourie’s recent observation that the “true” SA unemployment sits at between 10% and 12% has muddied the water in the sense that it has emboldened senior ranking ANC officials to jump on this bandwagon that unemployment is not really as bad as it seems when in fact it should be declared a state emergency.

Fourie’s figures must be juxtaposed with those Stats SA where give or take, the official unemployment rate sits at 33% and increases to 44% after taking into account those who have given up looking for work.  Equally concerning is the unemployment rate for the 18 to 34-year cohort which sits at 66% and where 25% of university graduates cannot find employment.

Fourie’s unemployment number proposition is no doubt supported by the data extracted from the more than 24 million Capitec account holders confirming financial activity and, on this basis, it appears that he has reached a conclusion that extensive “entrepreneurial” activity in the informal sector mitigates the unemployment crisis.

Any individual running a small business for his or her personal account, whether it be running food delivery bikes; cutting hair and selling weaves; washing and repairing cars and motorbikes; selling fruit, veg and confectionary; renting out rooms; or operating a small tuckshop or shebeen is to be respected and admired. 

But for Fourie to describe their activities as “entrepreneurial” is a bridge too far for the simple reason that they replicate one another’s businesses and generally operate hand to mouth in a fashion no different to that of subsistence farmers.

Furthermore, and through no fault of their own, they are unable to grow their businesses beyond a handful of employees because they do not have the basic education, training and financial literacy to allow them to implement the necessary administrative functions in a growing more complex business.

Are we to set the bar so low that we accept that a third of potentially economically active citizens must be consigned to little more than subsistence and off-the-grid employment, or is it more desirable to ensure participation wherever possible in the mainstream economy? 

It would be useful for SARS to provide numbers of so-called “entrepreneurs” in the informal sector who are registered and submitting regular VAT and monthly EMP 201 PAYE returns including UIF and SDL contributions – I suspect that these numbers will show that almost all Fourie’s “entrepreneurs” are operating in this parallel off-the-grid economy.

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Whilst the informal economy is vital in ensuring that as many people as possible do not go hungry, the fact remains that vibrant township trading does not provide a path for millions to access the primary economy for the simple reason that the vast majority do not have the necessary education, literacy and numeracy for mainstream employment.

The harsh realities 

• Failed ANC primary and secondary education policies have produced cohorts of between 750 000 and 900 000 marginalised school leavers each year who are functionally illiterate, innumerate and unemployable.

• In the absence of decisive and urgent interventions, the vast majority of school leavers will remain unemployed for the vast majority of their lifetimes and destined to become hewers of wood and drawers of water with little in the way of attractive employment prospects.

• “Job creation” is a misnomer. Jobs are not created. Rather, policy certainty and good infrastructure and rule of law which is attractive to investors provides an environment conducive for businesses to grow and depending on the nature of the business, they may or may not require larger workforces.

• Even in a booming economy, the nature of blue-collar work has changed and owing to the lack of education and skills of those who are unemployed, there is a complete mismatch with business requirements and these unemployed are unlikely to be re-absorbed into the economy unless in the form of expanded public / private works programmes as labourers.

• The township economy is in the main subsistence and off-the-grid contributing little or no income tax, PAYE, UIF and SDL and VAT to SARS / the fiscus.

• There is insufficient financial and administrative competence or incentive for these business operators to formalise their businesses in the event that they are able to grow.

• Government has neither the capacity nor the competence to provide quality education for the masses and that all the complex moving parts of education need to be outsourced to the private sector to execute on behalf of government.

Conclusion

Employers who have frequent exposure to uneducated and unskilled fellow South Africans seeking employment fully comprehend the massive disadvantages they face and how unhinged the assumptions of economists and politicians are with respect to the notions of job creation and how the misguided it is to believe that a rising tide in the form of a vibrant economy will soak up unemployment.

Highly successful business leaders like Fourie do the unemployed illiterate and innumerate a disservice when they provide the ANC with a get out of jail free card by arguing that unemployment is between 10% and 12% when they know full well that the informal sector is nothing more than subsistence employment. 

Motivation, the right mindset and creative thinking can turn things around and rather than paper of the unemployment crisis with misguided claims, should business leaders not put their heads above the parapet and apply the blowtorch to government for the purposes of effecting real practical change which can turn our young population into productive citizens who can look forward to a future with hope and meaning?

*Simon Mantell runs a biscuit factory in Cape Town.