We will only effectively address SA’s triple burden of poverty, unemployment and inequality if we improve people’s ability to earn an income

“Transformative, long-term investments are required to address unemployment,” says Dipalesa Mpye, Head of Social Impact at Tshikululu Social Investments. To better align to the social impact urgently needed within this space, Tshikululu says that social investors need to prioritise ways in which more South Africans can meaningfully contribute to the economy.

Reacting to the latest unemployment stats, with 7.9 million people unemployed as at the first three months of 2022, Social Investment Specialist, Riyaadh Ebrahim, says that there are a number of systemic issues driving South Africa’s mammoth unemployment. These include weak access to quality education, specifically education that is ‘fit for purpose’ in terms of South Africa’s economic needs. “Challenges within the Higher Education sector range from high attrition rates at universities; outdated curricula; low throughput rates in Technical and Vocational Education and Training institutions as well as wide variation in quality and control within the Sector Education and Training Authorities,” Ebrahim says.

Supporting Start-ups

Added to the challenges within the education space, is the high failure rate of start-ups.

“The National Development Plan aims for Micro, Small and Medium Enterprises  (MSMEs) to create 90% of 11 million new jobs by 2030. The prospects for success in this regard are low as South Africa has one of the highest failure rates of start-ups globally according to the Global Entrepreneurship Monitor,” says Ebrahim

While MSMEs employ around 50-60% of the workforce and contribute about 34% of SA’s GDP, there are serious challenges that are preventing the rapid growth of small businesses. “Arguably the single largest challenge that MSMEs face in South Africa is access to finance, with other factors including the prevailing economic conditions, our power crisis and skills shortages,” Ebrahim says.

The legacy of apartheid

At a Serious Social Investment conference held last year hosted by Tshikululu Social Investments, the question was posed about how economic and social investment policy might best be positioned to better transform townships and rural areas into places of production.  At the time, development economist Ayabonga Cawe said that to address unemployment and poverty at a systemic level, our economic policy and investments have to focus on long-term interventions that meaningfully address the vulnerability of township and rural economies.

“We know thatApartheid spatial planning and policy meant that townships and rural areas were never set up as places of production, and this dynamic unfortunately persists today,” Mpye says. She adds that to address unemployment and poverty, the conditions for community-level innovation need to be created.

The formal skills mismatch

While a major traditional pathway into the economy is through formal employment, South Africa is faced with a problem of a major skills mismatch. According to global management consulting firm, the Boston Consulting Group, South Africa potentially has one of world’s worst skills mismatches with an estimated 53% of skills mismatched. This is further being exacerbated by the rapid evolution of the 4IR and the new higher-skilled professionals that jobs of the future are demanding.

Role of social investment

Given all these challenges, what role can social investment play in creating more pathways into the economy?

When it comes to the MSME sector, social investors can play a role in helping to seed, support and grow MSMEs across the economy, through a combination of grants and technical support to improve and strengthen their ability to access finance.

The World Economic Forums’ Future of Work report, published in 2020, estimates that there will be a displacement of 75 million jobs and the emergence of 133 million new jobs by the end of this year, resulting in a net gain of 58 million jobs. The bulk of these jobs will be in Data, AI and the Care Economy.

“Social investors have a critical role to play in helping to bridge some of these skills mismatches, by helping to invest in skills development programmes that focus on the future of work and what companies actually need in future,” Mpye says.

Agriculture is another vital pathway into the economy that can have a tremendous impact

“New technologies within agriculture, increased efficiencies in the food chain and the fact that South Africa has significant arable land, a robust infrastructure and seven biozones present this sector as crucial for employment creation.” says Ebrahim. “New agriculture is going to require new skills and businesses, which social investors can help to promote and support”.

When it comes to the Gig Economy, many jobs will be created in the future, and it will increasingly become a viable pathway into the economy for many youth. Social investors can support research into this space, help build platforms to connect workers to opportunities and/or advocate for the protection of gig workers’ rights.

“We will only be able to effectively address South Africa’s triple burden of poverty, unemployment and inequality if we can dramatically improve people’s ability to earn an income and support their livelihood in a sustainable way,” says Mpye.

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