We are frequently told there is a “skills shortage”, and it’s
one of the reasons for South Africa’s poor economic growth. No evidence is provided, and none is needed.
It’s an article of faith, or one of our origin tales. Like a doubting Thomas, I always questioned it.
Two years ago DA cadre Tim Harris, then newly appointed
chief executive of Wesgro, and Western Cape Economic Development MEC Alan Winde,
each on different occasions, stated the “skills shortage is a threat to the
economic potential of the province”. And
visas must be granted to foreigners to make up the deficit.
I asked them, UCT's Saldru and Cape Chamber of Commerce for evidence, and which sectors were
affected, but none replied. This evidence does not appear to exist.
(Note despite the alleged shortage, in 2014 199 applications
were received for the vacancy of Wesgro CEO, an excellent number for the highly
skilled post. Harris was the successful
candidate. There was no need to import.)
SA’s average post-1994 economic growth is 3%, below the 6%-plus
required to create jobs and development.
Projected growth for 2016 is 0.6%.
Unemployment is 26.6% (narrow definition) – in 2015 it was the
8th highest in the world at 25%.
In 1994 it was 20%.
Manufacturing, a traditional job-creator particularly in engineering and
the trades, declined from 21% in 1994 to 13% GDP in 2015.
Sometime over the past year growth fell below population
growth (0.9%), indicating the economy is in serious trouble. Inequality and human development indices,
which also worsened since 1994, make for bleak reading. Government has no answers. It’s not an exaggeration the country is in
slow decline.
Business et al say, despite unfavourable
conditions throughout the last 20 years, a skills shortage exists that they are
having "sleepless nights" over. But where is this
economic activity, this surge of output in manufacturing, mining, retail and
services they say is creating demand for skilled job-seekers and university
graduates, never mind other job-seekers?
This contradiction was never
satisfactorily explained.
The first piece of evidence that confirmed my intuitive
belief the tale is exaggerated or false was when University of Pretoria
researcher Dr Amaleya Goneos-Malka published the findings of a two-year study
that showed at South Africa’s top 350 companies PhDs account for only 0.07% of 1.4
million employees, far below the global average. They struggle to find work because employers
consider them “overqualified”, overpaid and frustrated in jobs deemed beneath
them.
In an email I asked if the findings applied to master’s
graduates too. She replied that while
she had not investigated them, their situation would be similar. (I confirm that from personal experience.)
PhDs are the crème de la crème of intellectual endeavour. They produce rigorous original research, and
are specialist in their fields. They are
the basis of university departments, research laboratories and the technological
advances we take for granted. But in SA
they are deemed surplus to requirements, which may partially account for the
country’s lack of innovation and growth.
Last year I put the question of skills to development
economist, columnist and author Gavin Chait.
He stated the country has
sufficient skills to meet the demands of the existing economy. But while skills are essential, they are
not sufficient for growth.
The Quarterly
Labour Force Survey indicates for the first quarter of 2016, of the 27%
unemployed, there is minimal unemployment among black (1.4%) and “coloured” (0%)
graduates. For whites and Indians/Asians
it’s 8% and 8.7% respectively. The
average unemployment rate for all graduates is 4.5%. If we accept some labour market fluctuation,
it’s near full employment. In 2015
graduate unemployment was 1.6%.
This analysis excludes
skilled people – managers, professionals and technicians – who are unemployed,
retrenched or on early retirement.
According to
Chait, the economy is “precisely the right size for the skilled employees
available for hire. There is no skills
shortage.”
Graduation rates
across science, engineering and technology, business and management, education
and humanities grew by 9% a year for 2013, and dropped to 2.2% for 2014 (Department
of Higher Education and Training’s report for 2012-2014. I’ve updated Chait’s assessment with latest available
statistics).
University
enrolment was 969 155 in 2014, and government intends it to be 1.6 million by
2030. At the start of the funding
troubles last year, Chait argued that providing millions with a tertiary
education, while a worthy objective, will not change the economic fundamentals
or reduce unemployment.
The top of the skilled and graduate totem pole – PhDs and
master’s – and undergraduates are facing increasing “grim job prospects”, as
Goneos-Malka stated, in an economy that is unable to absorb them.
A university
education is perceived as the only way to get a job and into middle-class. But with graduate growth exceeding economic
growth, many will remain unemployed, reducing the value of the degree, as
unemployable PhDs have already found.
Where does this leave raucous students who shut universities
over funding of their expensive, and in many instances, worthless
qualifications? Has anyone told them
their dreams of a better life are just that, dreams?
And what does it say about government’s strategic plan to
almost double enrolments by 2030, overburdening an underfunded higher education
system it cannot afford? And what about
an economy that cannot accommodate graduates, school leavers and other
unemployed people now?
Do skills create economic growth? Or must macroeconomic conditions for growth
exist to enable production and employment of all types of labour? Those who maintain the former – business,
government and some economists/analysts – are playing a shell game.
The entrepreneur, or capitalist, brings productive elements
together. But conditions for investment must
exist before production may proceed. Over
time a growing economy creates the need for more material and labour, and so
wealth and prosperity is created and spread around.
An economy that has surplus capacity, or not investing and
producing – like SA’s almost 0% growth – needs few inputs of material and
labour – skilled and unskilled.
However, business et
al states (falsely): skills (labour) first, then growth. Therefore, society/universities/labour
is the villain for not producing appropriate skills. (And correctly, labour is
unproductive and costly.)
Commentators, including Chait, at the time presciently said
student protests, although ostensibly about fees, were bringing SA’s economic
fault lines into focus.
I previously wrote we inherited an economic system –
monopolistic/oligarchic, uncompetitive, high fees/cost, high barriers to entry,
etc – from transition circa 1994. Giant
corporations made a deal with the ANC to ensure they would continue operating
in the new SA as under the old. But greed
and stupidity checkmated the economy, and with it our precarious society that
hangs by a thread.
The
Franken-economy eventually turned, so to speak, on its creators, and populace.
Business found
itself constrained by a closed and restricted economy that has the limiting characteristics
I list above and more. It was not
expanding fast enough to produce more customers, and trade and investment
policy was anti-business. So they moved
headquarters abroad, shifted investment and funds from South Africa to Africa
and elsewhere and withheld investment (they have a cash pile of R725bn).
Government introduced “populism, patronage and economic
nationalism, rather than reforms that will expand the economy; patronage
politics of the past, with elections added”, Greg Mills and Jeffrey Herbst wrote
in Africa’s Third Liberation.
But business and government refuse to understand the built-in
kill-switch, the obsolescence, they
inserted into the design of our economic system, activated now less than a
generation later.
We are at a dead-end, a situation of their making. But the best can do is a pathetic R1.5bn –
0.2% of business’ available cash – small and medium enterprise fund at one
minute before midnight, and probable junk rating.
It’s a typical South African response to crises – belatedly throw
some money at it and, hopefully, the problem goes away. Analyst Ralph Mathekga called it a “public
relations exercise”. He asked why business
lacked confidence in the economy to not individually invest substantial amounts. Like with the National Youth Development
Agency fund, aka Umsobomvu
Youth Fund, there is no
strategy for how the fund is supposed to create short, never mind long-term
growth. It’s another business-government
con.
South Africans were told a story: if you study and obtained
a skill, you will find a job and become prosperous. That everything will be alright in the
end. We believed because we had no
choice, but mostly we allowed ourselves to be led. Almost 0% growth and the ratings downgrade
shock, which seems inevitable, have exposed the tale for the lie it is.
And the story tellers – well, like all good conmen they have
already made the kill, insulated themselves, or have fled.
This article was previously published on Politicsweb.
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