EHANCING JOB CREATION AND YOUTH EMPLOYABILITY IN GAUTENG

1. EHANCING JOB CREATION AND YOUTH EMPLOYABILITY IN GAUTENG MEC M. XAYIYA SMS CONFERENCE-BIRCHWOOD 14 NOVEMBER 2013

2. Problem statement • South Africa and Gauteng has been experiencing high levels of unemployment, which has been on average 25% since the global recession in 2008. • The figure reflects a narrow definition of unemployment, that is only those who have been actively seeking employment. • With the broader definition, which includes discourage work seekers, unemployment figure rises to 36%. • The youth cohort (18-24 years) are worse affected, as close to 48% of youth are unemployed nationally. • The youth unemployment rate rises to a staggering 54% when taking into account those who have lost hope of finding employment. • Of the nation’s 9 million young people aged between 15 and 34, about 3.2 million are unemployed and looking for work. • Gauteng’s situation is compounded by in-migration from other provinces and the rest of the world. • The problem of youth unemployment is a global norm, with the European Union on average 24%, and its members such as Greece, Italy, Portugal and Spain have above average of 45%

3. Trends in youth unemployment, 2002-2010 (extrapolated for 2012) • The Unemployment; youth male (% of male labor force ages 15-24) in South Africa was 44.60 • The Unemployment; youth female (% of female labor force ages 15-24) in South Africa was 52.50 in 2009 Youth unemployment exhibit a trend (declining) over a period of 10 years (2002-2012). The decline over the years can be attributed to programmes introduced to reduce unemployment around 2005. According to the World Bank report (Corroborating Statistics SA), youth male unemployment in South Africais 45% while that of female is 55%.

4. Causes of Youth unemployment • Youth unemployment is part of overall unemployment in the economy, which is on average 25% for the last five years. • Skills mismatch resulting from inadequate skills planning (no synergy between industries, academia and government). • Private sector not committing, forcing the government to redirect funding from other priorities to youth subsidy and wage guarantee programmes. • More young people outside learning institutions resulting in high unemployment those who just past matric • In contrast to Europe, Japan and other advanced economies where incentives keep youth longer in post-matric education.

5. Benchmarking solutions to youth unemployment • Countries have embarked on the following programmes to reduce youth unemployment: • Strong linkage between curriculums (from school levels and beyond) with industry requirements (Germany) • Incentivize youth to stay longer in learning institutions beyond matric-universal access to bursaries and scholarships (Organisation for Economic Cooperation and Development - OECD). • Youth wage subsidy, which makes it cheaper to employ the youth cohort (Scandinavia) • Employment guaranteed scheme, in which companies and the private sector is forced to employ the youth cohort (EU) • Support for R&D outputs to encourage commercialisation of idea (OECD) • Ring-fencing enterprise funding for youth groups (OECD) • Creation of two-tier labour market, in which the Labour Law regime is flexible in the youth tier.

6. Increasing Youth employability in Gauteng and South Africa • The following are the proposed solutions to increase youth employability: • Reduce the number of matriculants looking for work-encouraging youth to embark on higher education and/ or post-matric technical vocation training. • Incentivizing commercialisation of R&D - increase funding for venture capitals – enterprise development • Promulgation of the Employment Tax Amendment Bill - Youth Wage subsidy • Enforcement of Joint skills planning between government, Academia, Training authorities in a consortia format as it increases absorption after training • Enforcement of employment guarantee scheme beyond the state institutions-PRIVATE SECTOR MUST PLAY PART to ensure that youth in Gauteng and RSA have experiential training/on-the-job-training. • Strategic procurement by the state to support industries to procure locally – incentivise manufacturing

7. Overall Questions • Youth employment is also intricately tied to the creating of jobs on massive scale • Without this, we might be resolving one problem and creating a new one (substitution) • This is one of the problems associated with the Youth Wage subsidy where its been implemented in other parts of the world. It has no direct link with the expansion of productive industries and creating new ones • The nature of economic growth and investment is also important for job creation • Labour intensive industries like manufacturing are very important. We have to restore the sector’s competitiveness in Gauteng and SA generally • The tertiary sector (finance and services), which is increasingly becoming a dominant sector of the GP economy, is not particularly renowned for creating jobs on a massive scale, especially in developing countries with low skills base. • Enterprise Development is also linked to the existence of a domestic market – which means we must think more carefully about the relationship between growth and wages or consumer buying power and aggregate demand

8. Examples of Practical Steps pursued by GPG • Research & Development – The Innovation Hub has a range of programmes supporting young people to enter the science and technology space • The Coachlab programme prepared ICT post graduate students to enter the job market as industry ready workers • TIH has sourced funding from the Jobs Fund to absorb 100 unemployed graduates and 50 matriculants, who will receive on the job training • Enterprise Development and Support – a range of programmes are targeted at small businesses, especially those targeting young people • These include : • The GEP Start-Up Fund for new businesses • Township Business Renewal Programme • Captive and Micro-Finance Funds – business loans for small businesses • Improving the competitiveness of local industries through among others using public procurement as a pillar of support for local industries • The Private Sector has an important role – Youth Placements in the private sector, training for apprenticeship. • Incubating small businesses by established corporates to train them to meet industry standards while giving them access to reliable markets. The automotive sector is a good case in point.

9. -THE END- Thank you 9