Economic growth in South Africa is expected to come in at 0.1% this year, lower than any other predictions in terms of GDP gains, if the International Monetary Fund’s (IMF) expectations are correct. The economy has already contracted, with a 1.3% decline in the last quarter of 2022, and economists are pointing to a recession within the next 12 months.
These are worrying times. Much of the economic decline is being caused by Eskom, with companies having no choice but to spend billions on installing alternative energy sources.
Between 2015 and last year, 266 days were lost due to rolling blackouts, data from popular blackout warning app ESP shows. Bloomberg calculations show there have been at least 100 consecutive days of load-shedding this year. The South African Reserve Bank (SARB) believes the country loses as much as R900bn each day on stage 6.
Smaller businesses too are battling and may not be able to afford alternative power. In some cases, even if they have the capital, it won’t keep heavy machinery running. This blight on our economy, Eskom has admitted, is likely to last until 2027.
This is untenable, but steps are being taken to right this dinosaur of a power supplier, with electricity minister Kgosientsho Ramokgopa visiting power stations around the country. While he may disagree with former Eskom CEO André de Ruyter about the cause of the crisis — lack of skills vs corruption — in statements that pretty much toe the government line, at least something is happening.
South Africans across the spectrum are battling with higher interest rates and further increases could be devastating, not only to consumers but also companies carrying debt.
Times are tough. However, there have been periods in our history when things have been more difficult. In 1998, for example, the cost of financing was a whopping 24%, even though inflation was only 6.88%. People lost their houses and couldn’t afford to eat in many cases.
Small businesses are the way to go, as they already account for 34% of GDP. When we upskill entrepreneurs to start companies, providing services that fill a niche in the economy, many more people can be employed as these small businesses grow
With economic growth as low as it is, South Africa battles to create jobs and unemployment may go higher than the official rate of 32.7%. This figure is not the broader definition of how many people don’t have jobs because there are many who have become discouraged from seeking work. There are many South Africans too who have started their own companies on the side. Half of all citizens live in poverty.
Education is also in dire straits and we simply must reach a point where those who leave school or university have the opportunity to enter the world of work. I recently asked a primary school child how she had done in her first term. She was happy with her result, a pass. I found it sad she was aiming for just a pass as she has the potential to achieve more. By teaching her study skills, I hope to help her achieve more and develop her a love for learning.
Only 51% of those who start school matriculate. This despite 98% of all school-going-age children attending school. Higher education too is an issue. Of those who pass matric, only 12% go to university and of that, six out of 100 receive a degree.
The private sector has, in many ways, stepped in to help in terms of education and other socioeconomic needs. However, apart from focusing some corporate social investment into our schooling system, there are other ways we can help. One of our clients, for example, places a high emphasis on rehabilitating schools in underprivileged areas, especially rebuilding classrooms and providing books and stationery. Another is building computer labs in townships to get young people geared up for 5IR when it becomes a reality.
Corporates also help by transferring skills. The days of apprenticeships are, unfortunately, long gone. However, companies like ours do their best to live this philosophy by imparting skills across the board and promoting from within. We hire those with a range of skills, from communication experts to former journalists, which helps us cross-pollinate expertise.
We give those who have just finished their tertiary education an opportunity wherever we can. We over-employ. Even if those coming in don’t earn a lot, they’re able to learn, upskill and have a good period of employment on their CVs. That makes entry into a new career that much easier. There is no good reason every small business can’t do the same and make a sizeable dent in unemployment.
We also support small businesses through enterprise development, spending the one percent of net profit after tax wisely by, for example, helping a small company in the IT field grow from a start-up with one client to a company with several, giving it the potential to expand through employing and skilling others.
Small businesses are the way to go, as they already account for 34% of GDP. When we upskill entrepreneurs to start companies, providing services that fill a niche in the economy, many more people can be employed as these small businesses grow.
We believe everyone in the private sector can play a role, no matter their size, to grow our economy in this way. In truth, there is no other way to turn around this ship.
• Mawson is account director at Corporate Image
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