Disc Dem

Disc Dem

Saturday, 20 May 2017

Time for Work

In my last post I promised to share some ideas on how the plight of the unemployed might be addressed, emphasising that education and skills training can play a vital role in easing this rapidly escalating problem.  The urgency of our need to find solutions cannot be overstated, particularly in light of the recent explosion in violence against women. Read any report on the issue of gender based violence perpetrated by men and you will find low self-esteem, caused by lack of education or low income, features among the primary causes. There are, of course, other social factors that contribute to our particular problem, but addressing the self-esteem issue by offering higher earnings potential through improved access to education will be a big step forward.

So where has it all gone wrong? After an initial obvious conclusion that the ANC have allowed SADTU to systematically reduce South African basic education to farcical levels of incompetence and ineptitude, it would seem there are other insurmountable obstacles awaiting those who manage to overcome this educational deficiency. Why, after making it this far, do so many students not take advantage of more advanced educational opportunities? There are Universities, Technical and Vocational Education and Training (TVET) Colleges, and also industry-based opportunities facilitated by Sector Education and Training Authorities (SETA’s), yet the numbers of unqualified and unemployable people keeps growing. It appears that all the fancy names in the world cannot overcome the fundamental handbrake to progress - money, or rather the apparent lack of it.

You are all well-enough acquainted with the financial issues facing university students emanating from 2016 #FeesMustFall movement, but are you as acutely aware of the costs students have to bear to attend TVET Colleges? While less than university fees, costs for TVET courses are still high enough to exclude many otherwise deserving students. This keeps us on track to substantiate the next “obvious” conclusion: that a lack of sufficient funding is the main exclusionary factor for many people who simply cannot afford to further their academic education or practical skills training.

SETA’s, though, function quite differently and are the exception that proves the rule - but perhaps not in a way you might think. Operationally, the South African Revenue Service (SARS) conveniently collects a 1% Skills Development Levy (SDL) from employers based on the total amount paid in salaries to employees (including overtime payments, leave pay, bonuses, commissions and lump sum payments). These levies are then distributed to the various Sector Authorities, who are tasked with allocating education and training grants to qualifying businesses within their predefined business sectors. There are 21 such Authorities, starting with the Agricultural SETA, and ending with the Wholesale & Retail SETA.  Of these, 2 (Culture/Arts/Tourism/Hospitality & Sports, and scarily, Safety & Security) were so dysfunctional they were under administration for the 2015/16 financial year. Of the remaining 19, 3 received qualified audit opinions, and a further 11 had material misstatements in their performance reports. Excluding the 2 under administration, the other 19 each had its own Board of Directors, with its own Executive Management team, and a variety of other operational duplications costing over R1.63 billion.

Apart from lifting the lid on a ridiculous structure that requires over 300 Board Members, multiple CEO’s, CFO’s and COO’s to provide what should be a nationally integrated education and training solution, the really interesting outcome of my basic research is bottom-line SETA economics.

If the amount of R14.1 billion doesn’t immediately grab your attention, then let me throw in another R13.85 billion. The first amount of R14.1 billion is the combined annual revenue of 21 SETA’s for the 2015/16 financial year.  The second amount of R13.85 billion represents their combined reserves – in other words, money they have accumulated but not spent. Their only mission-critical task is to promote and nurture education and skills development, so why have they failed to spend all of the money allocated to them? The short answer is that a combination of over-regulation of labour markets, coupled with a distressed economy, has served to deter corporate investment in employee recruitment and training. As a result, ever diminishing numbers of grant applications were received from businesses where the costs associated with employee recruitment and training exceeded the value of the applicable grant.  Whatever the reasons, the facts remain that these Sector Education and Training Authorities are not fulfilling their mandate, have outlived their useful lives, and are sitting on a substantial amount of money lying unused in their investment accounts.

Keeping the Skills Development Levy in place while disbanding SETA’s in order to create a National Education and Training Authority is a much NETA solution (sorry about that, just couldn’t resist the pun). It then becomes a question of how to allocate the revenues generated, and how best to employ the capital sum accruing from liquidated reserves. This will require some serious critical and creative thinking.

As we cannot simply ignore the existing pool of unemployed people, perhaps some of the money can be used to establish “mature student” facilities within each municipality, where 25-40 year olds can be taught some skills that will provide them with self-employment opportunities. I am fairly certain there is a pool of retired people, or people who just want to give something back to the community, who will be prepared to volunteer their skills as trainers, so the cost of staffing these facilities will be minimal. The only issue this raises is that a level of deregulation will be required.

Why not also set aside an amount from the R13.85bn reserves for the purpose of making “Impact Investments” - low or no interest repayable loans of typically no more than say R1,000 to kick-start micro-businesses.

The balance of reserves could be used to improve the existing TVET network of colleges, with revenues perhaps being used to provide additional relief to university undergraduates, taking the form of loans that are automatically converted to grants on passing each year’s curriculum. Failure requires repayment of the loan.

Will these ideas work? Are they creative? I am sure there are many people out there with lots of creative ideas on how we might alleviate the unemployment tragedy, so let’s start putting them on the table. Your start point is R13.85bn capital, and R14.1bn in annual revenues. An absolute certainty is that we have to stop spinning on the hamster-wheel of political inactivity and rhetoric, and jump onto the roller coaster ride of rapid job creation, so let’s get working on it.