Featured Titan

Featured Titan
"Listen Attentively, Think Critically, Act Decisively!"

Sunday, October 9, 2011

www.kaello.com

I am now blogging at www.kaello.com/blogs.php

Facebook: www.facebook.com/kaellodotcom
Twitter: www.twitter.com/kaellodotcom
YouTube: www.youtube.com/kaellodotcom

Looking forward to catching up with you more regularly now...

Thursday, June 16, 2011

Joblessness

Over the course of the next few months, we will treat the problem of joblessness. The idea is to thouroughly immerse ourselves in the problem and as such, begin to understand its nature, its causes and its effects.

Many people, professional and not so professional, have had a stab at the problem. For the most part, pundits don't seem to have a solid understanding of this plague. Where they do, their proposals are inappropriate and lack the necessary depth of sound remedial strategies.

For this reason, it is we who are going to demystify and unpack the complex issues surrounding unemployment, the steriotypes that persist, the knowledge gaps, the causes as well as potential solutions.

Our very first article will be about the problem of unemployment, its history and its future.

We look forward to your opinions on these 800 word pieces and hope they somehow add value to whatever it is that you do.

Happy Reading

Tshepo Phakathi

Tuesday, May 3, 2011

https://www.kaello.com

Please keep your eye on this URL... launching portal on 10 September 2011.

Another bold step forward towards changing the world for the better!

Further details coming soon.

TREATISE: Part I

This is an excerpt from Chapter 1 of my Treatise (August 2010):

"Building an Entrepreneurial Ecosystem for Southern Africa"


Current Context


Job creation and poverty alleviation remain the basis for incessant discussions along the corridors of economic debate. Meanwhile the economy continues to shed jobs at a rate faster than they can be created (1.2 million job losses since 2009) with no end in sight, causing unspeakable damage to families, communities and the nation. This is the proverbial paradox of ‘pursuing macroeconomic prudence’ at, what some may argue, the expense of the domestic economy.

Let me state outright that there is no single definitive solution to achieving sustained job-intensive economic development. The challenges are many and they are profoundly complex. Anything professed to be an epiphanic solution is likely to fall short as idealistic at best and an oversimplification at worst. What is needed now is critical unconventional thinking and resolute implementation; fully cognisant of both the nature and scale of the challenges, yet dealing with them in self-contained silos.

Job creation is the pivot on which the success or failure of an economy can both be attributed and measured. Suffice to say with jobs people can feed their families, pay medical bills, live longer, lessen their susceptibility to diseases, pay taxes for developmental needs, cause less crime and create an upward vortex of perpetual growth – creating more jobs. Put differently, if we can create jobs, we will reduce poverty, crime, HIV/AIDS and the dependence on social welfare while improving education, infrastructure development and service delivery.

Notwithstanding our knowledge of this economic hypothesis we remain completely emboweled in the industrial age wisdom of job creation. It is irrational to me to think of a new growth path in which five million jobs can be created without radically changing the much lauded economic policies of our yesteryears, which by the way have failed to create the runaway job intensive economic growth conspicuous among our peers and much needed by our country. I dare say that all our alternatives represent hard choices and necessarily demand the courage to venture into unpopular economic policy terrain in pursuit of lasting solutions.

Conveniently, the global credit crisis has been sold by many as an acceptable pretext for our pitiable wasted labour force capacity. However, narrow unemployment has been basking in the twenties well before the bubble-burst of 2007 – 2009 fame. Instead we have managed to build a “pretentiously” fiscally prudent economy, which would have 14 million living off social grants to the cost of R90bn per annum and expanding rapidly. Yet, there’re increasing calls, rightly or not, to expand the social net more comprehensively to include the national health insurance, a basic income grant and guaranteed state employment, all at the expense of the arguably, already overtaxed population.

COSATU posits the suggestion that the state has to play a key role as employer of last resort (ELR) for full employment to be achieved. This proposition sells the notion that everyone of working age, willing and able to work will be employed under the ELR scenario. This employment will be based predominantly in the maintenance of social and economic infrastructure and in return, workers receive a minimum real wage set by the state based on individual dexterity and skill. Problem solved.

The major protestation to this suggestion resides in cost implications, for which they argue that the programme will cost less than 3% of GDP based on their modelling; and will in effect be self-funding since the multiplier effect will be set in motion creating more demand and higher tax collections, accordingly paying for itself. They further argue that the state has abdicated to tender administrator as the delivery of public goods has increasingly vested with the private sector. Consequently, Public Infrastructure Expenditure, which could have been used for employment creation purposes, has fallen into the hands of “capitalists” who have exploited labour, failed to deliver and maximised profits at the expense of job creation.

While I find plausibility in many of COSATU’s policy proposals, I must confess that this idea makes my stomach churn ceaselessly as I consider the absurdity of an economy in which a barely functioning state takes on the challenge of such mega proportion. 95% of all unemployed people scarcely have post Grade 12 education, 75% of them are below 35 yrs in age and at-least 60% of them have no labour mar-ket experience. The most pragmatic way out of this, according to many pundits, is through a cohort of improved education, higher skills development, entrepreneurship and international competitiveness.

Perhaps the question doesn’t end with how to create jobs but also, what types of jobs to create, where to create these jobs and in what quantities? This is clearly as much a qualitative as it is a quantitative question – broadening the quantum and complexity of possible alternatives. These are all very daunting questions which require the skilful command of political, macroeconomic and social expertise for our political leaders and captains of industries alike.

Almost all recent economic growth in South Africa has been rooted on strong commodity prices and short-term capital inflows. This is an incredibly porous situation, which may rapidly require intervention lest capital takes flight again led by a strengthening dollar and falling precious metal prices. Such has been the character of South Africa’s economic growth where her stability has not been underpinned by growing production capacity, increasing productivity levels and strong domestic de-mand by a rapidly expanding middle class but rather such capital that lusts after her high interest rates and shiny metals.

The rudimental precept upon which most economic theory is based postulates that sustained economic growth is preceded by value adding in labour absorptive economic activities. It is little wonder then that South Africa, a commodity driven economy with little primary sector activity – relative to the labour force – is severely hamstrung by this dichotomy of low growth and high joblessness. This is further evidenced by the fact that Trade and Finance employ more than 35% of the employed, whereas Mining, Manufacturing and Agriculture account only for 15% of all jobs, a sharp contrast to similar economies, particularly BRIC nations.

BUSA, in their discussion document on an inclusive higher job-rich growth path for SA by 2025, are on the mark when they assert that “... it is not useful to make grand assumptions about the number of jobs that will be created in future sectors or industries...” this without considering that we function in a rapidly changing global economy where the nature of jobs is changing as fast as technology and business models are evolving. King Louis XV said it best when he said “après moi, le deluge” indeed it is the next generation who will bear the brunt of the folly of today’s politicking.

Further to that, BUSA compares South Africa to five similar economies, likened primarily by their policies on macroeconomic stability. In this contrast, BUSA suggests that perhaps we should look to the Malaysian Growth Path for emulation which advocates building a strong knowledge base and infrastructure, strengthening the Public Sector and creating an internationally competitive domestic economy among other things. Where most experts agree, including BUSA and COSATU, is that education remains a cornerstone for our employment growth aspirations, this is especially true in South Africa where vacancies are abounded but incumbents are amiss, no thanks to poor education levels prevalent throughout the country.

Although much wherewithal has been waged in the quest to find illusive solutions to South Africa’s job creation and growth related problems, there’s been very little respite in this regard. Instead, abject poverty and youth unemployment have continued to rubbish Extended Public Works Programmes intended to contain the effects of joblessness. Having said that, it would be disingenuous not to concede that these mitigating programmes have had somewhat of an alleviation element, albeit un-measurable and negligible.

Understandably, concerned economists point to precedence in their proposals, moulded by fear of tinkering with historically successful formulae, lest people continue losing their livelihood at an accelerating rate. However, it was John Maynard Keynes who wisely said: “the difficulty lays not so much in developing new ideas as in escaping from old ones”. Alas, the path to complete Armageddon is paved with good intentions and rosy ideologies.

To that end, I must register my disdain with the nature and course of the discourse thus far. To me, it is irrational to try and expand industrialised jobs in obsolescent or uncompetitive sectors, rather, and without adding to confounding philosophies, I would contend that it is sager to invest more of our efforts in the creation of an entrepreneurial society. Somebody must accentuate the scarcely mooted scenario of an entrepreneurial economy predicated primarily on self-employment rather than employment seeking.

Tuesday, February 1, 2011

Business Day Dialogues

So BusinessDay has started a series of Dialogues aimed mainly at influencing the South African discourse on employment and policy creation. I watched the first instalment of videos as well as read through the short transcript available on their website from the first Dialogue hosted on Friday 28/01/2011.

I must confess, I found the discussion quite intriguing and was able to validate a common notion I came across as an economics student back in 2001; that economics is not a perfect science and economists get it wrong more times than they get it right.

The debate, although it touched on numerous things, deservedly centred around employment creation and how a redistributive tax system as well as higher levels of quality education could contribute towards this discourse. For the most part I agreed with most of what was said, particularly with Chris Malikane, Edward Kieswetter and Jean-Francois Mercier on the soundness and pragmatism of their views. I must say however, that the conspicuous neglect of the role that entrepreneurship could play in the creation of jobs was frighteningly worrying, it just goes to prove that the South African society, economists alike, remains trapped in Keynesian and neo-liberal economics of the 1930s. Furthermore, I find it interesting that in most (if not all) economic debate, the youth who represent the unemployed and who are likely to inherit the country in whatever form or nature are blatantly excluded.

In the South African context, 6 million are unemployed – expended definition, 75% are 34 years old or younger, as many as 60% - 70% have no labour market experience and 95% are effectively uneducated. In this backdrop, there is just no pragmatic way in which all of these people can be absorbed by the labour market. The construct of our economy is biased towards non-primary sector activities with most available jobs requiring skills that are far beyond those offered by the market. Even the Keynesians should understand that oversupply of labour will dampen short-term wages, which in turn will cause long-run structural problems of weak domestic demand, lower real GDP, higher/wider taxes, and all sorts of delivery constraints.

The only real remedies are the promotion, support and incentivisation of self-employment and Great Depression type Government induced domestic demand. This will mean higher short-term fiscal deficits, higher sovereign debts and long-run inflation. However, as seen in the example of post World War II America, this can mean more meaningful higher per capita incomes (reducing inequality), full employment and sustained domestic demand. Both taxes and inflation may be muted as Government expenditure recedes making way for domestic demand and the tax base widens reducing per capital tax obligations to reduce Public Sector debt. Better have fixed capital formation driven Government debt than a growing Social Security obligation as this will increase real long-run taxes.

Overall, the reality is that the private sector has so far been embarrassingly inefficient in job creation, which necessitates that future Government expenditure should be directed towards labour absorptive activities, even if this means allocative inefficiency. Macroeconomic prudence becomes a fallacy and a big fuss in a society in which 5 million tax payers are expected to subsidies a inflatable social grant system (R90bn), which may soon include a Basic Income Grant, National Health Insurance and a Wage Subsidy.

In my opinion, you need to deemphasise the role of big business in the economy and provide overarching support in the promotion and empowerment of small businesses. After all in the industrial world Small businesses employ, on average, more than 80% of the labour force whereas in South Africa this is well below 50%. Trying to solve youth unemployment without involving the youth in charting a growth path for their own generation is tantamount to having a Men only debate about comfortable corsets!

Friday, January 7, 2011

BLOOD, SWEAT & TEARS

“My generation watered the tree of liberation with blood and your generation will have to water the tree of liberation with sweat and tears.” These were the hard-hitting words spat at me by Seth Mazibuko, one of the highly decorated leaders of the 1976 students uprising in Soweto. We met in a chance encounter at a small business awards ceremony held in Soweto almost a year ago and have not had any contact since, but, his pearls of wisdom have haunted my conscience ever since.

Unbeknown to him, I was busy at the time preparing an article on how his generation’s indifference failed my generation’s ambition and perhaps its rite of passage to a new socioeconomic reality. You see, the Nelson Mandela generation had but a single uniting vision to pursue and achieve – liberation from political dominion – and for this many were prepared to and did indeed die. The Thabo Mbeki generation was handed the baton to lead the armed struggle and later on to usher in a new era of democratic rule where all were at liberty to pursue their full measure of success without fear or inhibition.

The generation of 1976, comprised mainly of fed-up high school pupils, was determined to raise the bar in the liberation process as it related to their then context. In 1976, the atmosphere was still mired by political liberation and students impatiently wanting in on the action decided to mobilize and enter the foray by partaking in their own form of demonstrations. Contrary to popular belief, the 1976 uprising was well thought out and at the time became a huge uniting factor for that entire generation, note that many in that generation went on to study overseas and/or in universities outside the then Witwatersrand viz. in KwaZulu Natal, strengthening their connectedness.

Then along came my generation – the pre-democracy generation or the lost generation – as some would prefer upon us. We had absolutely no part in the struggle, born between 1979 and 1989, too young to mix with the 76ers and too old to mix with the “born-frees” who are largely our older/younger siblings and in some cases our parents/children. We had no political mandate, no clear vision uniting us and in many instance we compete toe-to-toe with the 76ers for livelihood, resources and recognition. Many in my generation are well educated, wield quite a bit of brainpower, carry little political baggage and can box with the best of them in any boardroom situation.

Why is it then that many among my peers feel so distant to and disillusioned by the two generations past? During the Napoleonic wars, Gen. Napoleon Bonaparte, easily the greatest military mind that has ever lived, would field his youngest, strongest, fearless forces front and centre to win battles. The strategy was always simple; no-retreat no-surrender, plan A was always to annihilate the enemy and plan B was to reinforce plan A at any and all costs. The most experienced generals were always leading the troops and using their knowledge to dictate the direction of the war, not to run amok showing-off their horse ridding and spear jostling skills to the forces.

It is an indictment upon generations past that the brightest and most talented amongst us have stopped jumping up and down seeking to be fielded; rather, we are focussing on individually reinventing the game so that we may get a chance to participate. Very little inter-generational guidance and mentorship has taken place, instead, a nauseating game of everyman for himself seems to be the order of the day. Almost all successful black businessmen in this country belong to this old boys club, perhaps grouping by identity, trying to break in can be exhausting and many that eventually do seldom share in their newly found banquet of knowledge.

Sad as it may be, it has to be said that black-man, you’re on your own. The gatekeepers have discovered a fortress, it is like many have stumbled upon a minefield and you are certainly uninvited. A generation that has largely had to fend very hard for itself ought to know that they have a collective moral responsibility to keep the doors open and generously share in their acquired wisdom, skills and political capital. After-all, some of the ills of my generation have been inherited from generations past viz. illegal guns, shebeens, parentless-ness, etcetera. I readily concede that economic liberation may very well be a legitimate expectation but it is clearly not a legal right. That said, it is little wonder then why 75% of all unemployed belong to my generation.

It was with this in mind that I took Seth Mazibuko’s words to heart. There is little value in crying foul when the power has been put in your hands. Perhaps my generation is supposed to pursue and indeed die for socioeconomic liberation. It is incumbent upon my peers to foster some sort of unity, conjure up an informal mandate and drip in sweat so as to reign in the plight of the poor among our people. We need to find inventive solutions around job-creation and to triumph over our own piece of the struggle, a new struggle; the economic struggle.

I have seen enough pain and tears as I watched many in my generation succumb to the reality of widespread unemployment, abject poverty and hopelessness. I am convinced that unless something is done, very soon, 1976 may seem like a walk in the park.