The bug in South Africa’s economy hindering job creation and prosperity for all

As South Africa’s GDP is the largest, but with more unemployment than some countries with a lesser GDP and with more people. Who then is enjoying a bigger chunk of the GDP? It is foreign investors and elite locals.

The question could be, how then to liberate our GDP so that it’s enjoyed by a deeper percentage of the population.

One could say through intensifying affirmative action especially in the business sector. But that would be missing the point why we aren’t creating jobs.

Our affirmative programs are good thus far, of course not complied to effectively. But they do not solve the pinnacle of why we are not creating jobs in the country.

It is not that blacks need jobs over whites; it is that all South Africans need jobs. And currently our economy is not producing jobs to cover all. Even if affirmative programs where applied well, there would still be unemployment, and that is a problem.

From apartheid

What apartheid meant was that participation in economic activities was segregated in such a way that the minority where the only with freedom to participate in entrepreneurial and innovative economic activities; and they were entitled to the best jobs. The majority were the slaves allocated labour intensive chores.

It meant, for example, if the country’s GDP was R100, the minority were entitled R30, the majority R10 and owners of firms (part of the local minority plus foreign investors) R60.

In numbers it meant (example): if the economy had 104 people, 90 were the majority (blacks) and 10 were the minority (whites). Six were elite firm owners and foreign investors. Two of the 6 were local firm owners and four (of the 6) were foreign investors. The 2 out of 6 were also part of the minority of 10.

**Share of GDP: Minority – 10 share R30, majority – 90 share R10 and local firm owners + foreign investors – 6 share R60.

When freedom came through finally, affirmative programmes were put in place, now everyone (minority and majority) was now entitled to an equal share of the R30 plus R10. The ratio now determined by racial numbers, each race to a ratio equal to its population. But owners of firms still enjoyed the R60.

Given affirmative action, it didn’t mean white people (minority) were to be fired immediately and blacks installed in their places. Placing of blacks in vacancies through affirmative action was to happen gradually.

Through BEE, firm owners and foreign investors were lured to give a share of their equity to blacks to be able to do business with government.

 

Problem still not solved

The unemployment figures are high today, and there seems to be slow or little movement in our economic growth.

So how are we going to liberate our GDP so it benefits all? It is true that affirmative action hasn’t been well welcomed in corporate South Africa. The numbers are shocking.

The solution which I’m to highlight in this post is not affirmative action. Affirmative programs don’t increase economic value but distribute economic participation to intended areas. This solution doesn’t depend on white people; it depends on all ambitious and aspiring South Africans.

It’s more important for blacks to participate in this solution. It is one thing to be let down by affirmative action, but its another to continue being a victim of it (we got to hustle brothers).

Economic value not affirmative programs

We have Apple, Samsung, Nike, Elizabeth Arden, McDonalds and countless foreign brands doing business in the country, and killing it at that. That’s were the money is. That is where our money goes.

If we follow the trail of our GDP, it follows value owners. Currently this trail leads to foreign investors and elite SA firm owners. If we are to liberate and increase our GDP, we need to create a trail that leads to us, but now us as owners of value (CIPC owners of products).

Therefore we need to create value to challenge foreign investors and elite SA firm owners in order to liberate this ‘Africa’s biggest GDP’ of ours. The more new South Africans create and own value (as registered owners of products), the more the majority’s lives will improve.

You often hear people say China killed South Africa’s manufacturing industry. Maybe true, but China offered a better value to the world, the world followed that value trail. We are only kidding ourselves if we want to challenge China by offering not real economic value.

The world is driven by value. You buy an iPhone over a Nokia phone because of the use and/or perception an iPhone has. For Nokia to win over Apple, it has to offer better value. So do us if we are to compete for the same money that they are chasing.

When some South Africans buy ebooks, maybe they use of Amazon over Kalahari or Packard Bell computers over Sahara computers (haha). And that’s how South Africa is losing money.

On the other hand, this is an opportunity. The magnitude of foreign brands in South Africa means that we are developed. This development is a big opportunity for us to exploit but on an ownership level.

For South African to create jobs and good jobs, it has to foster creation of owned economic value.

To challenge to liberate the R60 enjoyed by foreign investors and elite local firm owners, we need to accelerate entrepreneurs with innovative products that can compete internationally. And there are such entrepreneurs.

For South African to increase its GDP from R100 to R200, it needs to create products that are competitive to an extent that even people in other countries would want to consume. The tricky part of this is that its not big entities that need such cultivation, but small entities.

The beauty of economics is that, when those products are good, foreign investors would want to invest, so to expand and distribute in other worlds.

Creating real competitive economic value

More and more accelerator programs are needed, but ran by experienced entrepreneurs, not only academics and civil servants. The greatest challenge for an entrepreneur is not funding, it is maneuvering to the next level given the ‘always limited resources’. Experienced entrepreneurs always have ways of creating bigger value out of no funds or limited funds and new profitable ways away from conventions.

 

Limit to creating of jobs.

The proven model of funding is working against us. Proven concept means someone in the outside world has already created such a product. More and more bridges need to be build in order to cross this ‘proven concept’ phenomenon. Pioneers earn license revenues on their innovations patents, this country needs such. I acknowledge The Innovation Hub, TIA.org.za and others. But more is needed in this regard, and intensively so.

It’s true that young entrepreneurs don’t have collateral to secure funding. It’s also true that the young ones are the innovative. More bridges also needed in this regard.

Consumer goods constitute one of the ways foreign investors are making a lot of money from the country. Incubation mechanisms funded by government, but led by experienced entrepreneurs are needed to accelerate young entrepreneurs in the consumable market as owners of products. For me, at an early stage, country of production doesn’t matter. What matters is, owning brands that are going successful. Brand owners make more money than manufacturers, thus quick employment for the country: IT, security, accounting, legal, banking, property etc.

It’s hard to sustain a manufacturing sector in a country when its customers are big entities and non-locals. Multinationals and big local companies can afford to change countries of production in an instant, whereas SMME’s cannot. When we have small consumer goods SMME’s in numbers it means our local manufacturing industry is balanced to survive and grow. Support needs to be given to the next Edgarses.

Conventions are to be broken if progress is to be achieved.

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