ANALYSIS | Business profitability depends on the socio-economic climate, and that depends on alleviating youth unemployment

This article (and an event being planned by BEE Novation) argues that we’ll need the business sector to leverage legislation like B-BBEE, Employment Equity as well as the Youth Employment Service Initiative to achieve inclusive economic growth. 

 

When scientists started talking about climate change seven decades ago, it was a fringe topic. Today, it’s an industry as well as the most popular explanation for the fivefold increase in the frequency of natural disasters.

 

Seven years ago, BEE Novation started describing South Africa as a ticking time-bomb that could be neutralised by inclusive economic growth. We were rebuked for speaking on this, despite the fact that transformation is a political talking point, and transformation legislation is often used as a fig leaf for corruption disguised as “radical economic transformation”. In the words of Eskom board chair Jabu Mabuza, “The name is corruption, but the game is procurement.”

 

With its enterprises, government is South Africa’s biggest procurer of goods and services. It sets the tone of the B-BBEE implementation climate. Inasmuch as businesses monitor the environmental impact of their operations, BEE Novation argued that domestic businesses, though non-political, had to implement BEE with an awareness that the private sector is often labeled as “white monopoly capital” and scapegoated for youth unemployment. We openly advised business bodies and chambers to take the wind out of the anti-business politicians’ sails by proactively addressing the unemployment crisis using B-BBEE before the scapegoating reached a crescendo. In July 2021, when youth unemployment was over 75%, many South Africans — mostly those with little to no stake in the formal economy, and with limited direct knowledge of the ways they were being used as pawns — were weaponised against retail businesses, logistics networks, medical facilities and spaza shops.

 

Could businesses have prevented this assault? Could the costs of that preventative measure have been manageable? The answer to both questions is YES — as in, the Youth Employment Service, which was conceptualised by the CEO Initiative in 2016. Notice how smart businesses saw it would be in its own interests to safeguard the socioeconomic bigger picture by looking beyond their immediate interests. And so the formative conversation went something like this:

 

Private Sector: “This youth unemployment crisis is a ticking time-bomb.”

Government: “It probably is, but these issues are complicated…”

Private Sector: “We know, we know, there’s factionalism in the ruling party. Give us a two-level increase on our BEE in exchange for hiring black youth, and we’ll be incentivised to play a bigger role in mitigating the problem.” 

Government: “…That can be done.”

Private sector: “But please get a non-partisan Non-Profit Organisation to run the program in a way that makes claiming the points easy.”

 

Those businesses that understood the potential benefit inundated YES with pre-launch sign-ups. They would get stronger BEE benefits in exchange for employing black unemployed South African youth. This addressed the dilemma where prospective employees need experience to get a job and a job to get experience. But is BEE itself good business practice, or does that fact get lost in the climate of its implementation? 

 

“BEE is good business practice,” says Dr. Tashmia Ismail-Saville, the former CEO of YES who explains that B-BBEE ecosystems can strengthen supply chains, talent pools and customer loyalty. Like many who understand how it could be implemented, she sees it as something that can help ensure a return on investors’ money. At a webinar hosted by BEE Novation, she admitted she’s not a “not a fan of the entire BEE scorecard or model”, critiquing its structural tendency to create “legacy issues” (like shares given to people who happen to be black and politically-connected but don’t create value). 

 

But she explained that BEE still had enough tools in it for an implementer who understands the country’s needs to leverage it for inclusive economic growth. This was echoed by former Absa Group CEO Maria Ramos who, at Daily Maverick’s 2020 Gathering, was asked whether BEE could support business and economic growth. “It can, if it’s used non-opportunistically,” she answered, leaving unsaid the obvious: B-BBEE is often used opportunistically or as a box-tick exercise because not many people understand how the climate of its implementation works. But in the words of the GIBS Business School Dean, Professor Nick Benedell, “You can’t have a company without a country.” 

 

For these reasons, it’s important that businesses not narrow their focus on the technicalities of YES or BEE. As we have seen, technically-correct implementation can still betray even the most BEE-compliant businesses when the climate of BEE brings the equivalent of floods and heatwaves. Focusing on the microcosm without the macrocosm (or vice-versa) is box-ticking and it makes South Africa a ticking time-bomb. Now, we care about the technicalities of implementing YES: we’ve hosted events, with YES, where we explored the technical aspects’ innumerable permutations. We were the first consultancy to have a nation-wide roadshow with YES. But that information should ideally be given in response to an analysis of compliance needs and business growth goals, not as a copy-and-paste solution for a quick fee. 

 

But why now? Well, election season is a good time to think about how your role in the economy offsets your “scapegoatability”. (Incidentally, it’s also Employment Equity season, which, for almost all businesses, is a prerequisite for complying with B-BBEE sufficiently to benefit from YES. We also assist with EE). 

 

How your organisation showcases your awareness of these socioeconomic and political dynamics is something only you can decide, but there exist politicians who are already telling a story about it for you. In this story, they’ve tried engaging you, but you didn’t cooperate so they need the people’s votes to implement policy that’ll compel you to fulfil their political promises. You may already be doing it but in politics, perception trumps reality; that’s why our analysis includes seeing how to align your BEE strategy with the rest of what your business and industry must be seen to be doing through good PR. 

 

Election season is also when labour unions take political sides because they’re businesses too. They grow by endorsing the above-mentioned politicians in exchange for labour policies that align with their offerings. It’s obviously not all politicians or all labour unions, but the point is when you implement YES you likely align with the policy champions who are beneficial for your business. You also pull a critical mass of youth towards the policy position that favours your business’s existence — whether you realise it or not. With every step in BEE implementation, you go from being surrounded to doing more of the surrounding.  

 

But as BEE Novation, we can’t protect your business by ourselves: as we mentioned in our panel discussion titled Where Is Your Industry Going?, moderated by the CEO of the country’s second-largest chamber of business, we need you to tell your associates in your industry that your collective safety lies in supporting efforts like ours. 

 

We search for, and are ready to serve, clients who understand the need to focus on both the technical aspects of implementing YES, as well as the larger environment in which they alleviate youth unemployment through BEE. If you are committed to profitable transformation, contact us today. If you would like more information about upcoming events on Employment Equity or our YES projects, sign up for updates. Lastly, if you know someone whose thinking resonates with this, forward this article to them. 

 

The economic climate may be changing, but you aren’t powerless to influence it in your favour.