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If South Africa could succeed in attracting small and medium enterprises (SMEs) from overseas, many more jobs would be created, experts said during a panel discussion on South Africa’s prospects as a destination for direct foreign investment.
Tashmia Ismail-Saville, CEO of Youth Employment Service (YES), said SMEs in the EU contribute about 91% to GDP and employment, with each business employing between one and eight employees.
In South Africa, the figure is less than 50%.
Ismail-Saville was one of the speakers at the event, hosted by YES at the Gordon Institute of Business Science in Illovo, Johannesburg.
A research report on the contribution of EU investment to inclusive growth and job creation in South Africa, quotes European Commission figures indicating that SMEs created 85% of new employment opportunities in the EU over the past five years.
SMEs were also responsible for about 66% of the private sector’s total employment.
Read: Is SA’s youth unemployment ‘among the highest in the world’?
The research was conducted between March and November last year, and funded by the SA-EU Dialogue Facility, supported by the Black Management Forum and the department of trade and industry.
Colin Coleman, CEO of Goldman Sachs in sub-Saharan Africa, and co-convener of the YES programme, which aims to increase employment among the youth, said during the panel discussion that South Africa would not be able to resolve youth unemployment without economic growth and foreign investment.
Multinational corporations, and foreign and institutional investors now want to see a clean, competent and talented Cabinet being appointed, which does not tend towards patronage, but puts the country first, he said.
Leon Ayo, adviser to the board of the British Chamber of Business in South Africa, who was also part of the panel, said other challenges for investors in South Africa include the those multinational corporations face when trying to obtain work visas for executive managers they want to deploy in the country.
People’s physical safety and political stability is important, he said.
The workforce also needs to be mobilised and prepared for the 21st century.
Ayo said South Africa should look at ways in which young people could be trained to be ready to enter the workplace within 12 months, rather than having everyone spend years at university.
The research report said some of the challenges foreign SMEs face when coming to South Africa included complicated administrative and regulatory regimes; policy uncertainty; violence, which sometimes accompanies labour action and can lead to destruction of property; and certain aspects of legislation relating to BEE.
Many European SMEs are family businesses, which cannot cede ownership to black partners in order to comply with BEE.
The report estimates that the more than 2 000 EU companies doing business in South Africa create between 350 000 and 500 000 posts.
Up to 85% of the employment opportunities created for South Africans in EU corporations are permanent.
The Yes initiative
The YES initiative, which aims to create 1 million new employment opportunities for youth over the next three years, has placed 17 000 young people as interns for a year, said Ismail-Saville.
Coleman said that once the programme is fully up and running, it could add R16 billion to the economy.
Businesses pay the salaries of the young people, which amount to about R55 000 per year, per intern.
According to the employment tax incentive of the SA Revenue Service (Sars), a portion thereof can be reclaimed from Sars.
As part of government’s contribution to YES, business enterprises that achieve the YES targets and meet the registration criteria can improve their BEE scores for creating youth employment.
More than 240 business have already registered for the programme. These include Volkswagen, Adcock Ingram, Sanlam, various banks, Woolworths, Shoprite, MTN, Sasol and Netcare.
