Empower Local SMEs and You’ll Start Solving SA’s Unemployment Crisis
Last week, Statistics South Africa reported that the country’s unemployment rate rose to 27.6% in the first quarter of 2019, making the jobless rate the highest level it’s been in 15 years.
What this means is that there are now officially 16.3 million employed people and 6.2 million unemployed people between the ages of 15 and 64 years in South Africa.
It’s a staggering figure and South Africa has fast developed a reputation for being the most unequal nation on earth. Just this month, Time Magazine featured South Africa on its cover highlighting this very fact. Meanwhile, other major international media outlets such as CNN have also focused heavily on South Africa’s inequality problem.
But despite the negativity around South Africa’s unemployment woes, all hope isn’t lost as the tide can be turned.
What this will take, though, is the realisation that Small to Medium Enterprises (SMEs) are ultimately the primary engine of growth in a developing country, and that business can be a force for greater good.
The World Bank states that “formal SMEs contribute up to 60% of total employment and up to 40% of national income (GDP) in emerging economies” and that “these numbers are significantly higher when informal SMEs are included”.
To help jumpstart SMEs in South Africa, two issues should be top of mind: we need better training and development for small to medium businesses, and we need a more level playing field when it comes to competition.
TRAINING AND DEVELOPMENT
When it comes to training and development there are excellent initiatives that exist, right here, in South Africa. One such example is that of the Stanford Seed programme, which my company, Autoboys, has recently embarked upon.
Affiliated with the prestigious Stanford Graduate Business School (GBS), the Stanford Seed programme has been significantly subsidised by philanthropic contributions and it focuses on helping entrepreneurs in developing economies build thriving enterprises that transform lives and create jobs.
The programme – which is open to applicants in Southern Africa – includes twelve months of immersive management training designed specifically for business owners and their teams. It costs a fraction of a Stanford MBA at $5000 and is led by the Stanford GSB faculty, other practitioners, and supported by trained local facilitators.
As Autoboys, we were only one of three companies in South Africa who took part in Stanford Seed programme last year and our entire executive team benefited from it.
At its core, we learnt how to better scale our business while improving our understanding of fundamental concepts such as finance, marketing and human resources. The programme also taught us the importance of investing in our people and putting the right structures in place.
Stanford Seed further provides businesses with a roadmap and they measure key metrics ranging from profitability to how many jobs you create. You can even apply for Stanford consultants to help you solve certain problems or tasks.
It’s an incredible programme that brings the highly relevant power and prestige of a top US-based business school to ordinary SMEs in the developing world.
A MORE LEVEL PLAYING FIELD
Apart from obtaining the right kind of training and development, another key challenge facing SMEs in South Africa is the country’s high level of economic concentration and entrenched monopolies.
Here again, the World Bank in a previous report highlighted how South Africa suffers from high concentration in sectors ranging from manufacturing to telecommunications, to just name a few.
In the automotive industry, we as Autoboys have seen economic concentration first-hand and have moved to help open up our market.
We are a supporter of the Right to Repair South Africa, which is a Section 21, non-profit company founded by the Motor Industry Workshop Association (MIWA) that represents 2 500 independent workshops and automotive aftermarket distributors and parts manufacturers.
R2RSA wants to achieve fair competition in the automotive repair supply chain by ensuring that consumers have freedom of choice when it comes to maintaining and repairing parts on their vehicle without being forced into uncompetitive and expensive embedded motor plans and warranties.
By empowering consumers with the right to repair, they will have access to more competitive pricing. But by doing this, South Africa will also be giving independent workshops the opportunity to compete and create more jobs.
It’s matters such as these which will go a long way in unlocking greater economic opportunities in the country and helping to drive inclusive growth. The future prospects of the SME sector will be key in driving down the country’s jobless rate and ensuring a better life for all.