Help Start-Ups to Employ People
Updated: Apr 29, 2019
Earlier this week, I attended the launch of Simodisa's entrepreneurship industry report. The organisation was started by South African entrepreneurs as an industry-led initiative to specifically address and, in many ways, find what ought to be done to overcome the barriers that entrepreneurs face.
When the organisation was launched in 2014, it developed a list of seven policy recommendations, mainly aimed at government, that could enhance the South African entrepreneurship ecosystem.
These were seen to deal with the major constraints to the proliferation of high-growth start-ups in our country.
Featured on the list were exchange control regulations, improvement of the S12J incentive, public funding of venture capital and SMME funding, a business visa, and my personal favourite, a review of labour legislation to better support entrepreneurs.
The report launched this week is a review of progress made on the recommendations made five years ago, and a dipstick as to how entrepreneurs and broader participants feel about the ecosystem.
The general feedback was that, though there were some pockets of success such as the increased engagements of S12J regulations, there was very little progress in the more critical of the recommendations. Respondents to the research were asked to rate the seven recommendations from the most important to the least important intervention.
Unsurprisingly, the review of the "improvement of the labour market to respond to the skills requirements of start-ups and SMMEs" was top of the list.
"Start-ups and SMMEs are looked at as future providers of employment opportunities. However, evidence from the review and inputs from stakeholders clearly articulate that the opposite is true in SA, as the local labour market is not at all conducive to incentivise sustained employment opportunities by start-ups," notes the report.
This discussion is not new. There is no way we can expect labour legislation that applies to a multibillion-rand national business such as Pick 'n Pay to also apply to the local spaza. It just doesn't work.
I recall a few years ago how Herman Mashaba, then entrepreneur and chairman of the Free Market Foundation, took the then labour minister to court in an attempt to force her to amend section 32 of the Labour Relations Act - which essentially gives her the powers to extend collective bargaining agreements to nonparties.
The foundation argued that the law threatened small business and caused unemployment, as it stifled businesses that could not afford wage agreements that were reached in councils to which the businesses were not affiliated. The foundation lost. The government, 47 collective bargaining councils and the unions won.
It's important for all the role players in the entrepreneurship ecosystem to agree on the problem we are trying to solve.
All entrepreneurs want to solve customer problems, build great businesses and make lots of money. The truth is we don't wake up in the morning thinking about how we will create jobs.
In order to do that sustainably, though, we need great talent and people who can support the vision and help us build value. This is why, all over the world, employment is largely created and sustained by small businesses, not large corporations.
I suspect the problem we are trying to solve is economic inequality. For us to do that we need to find ways to get as many South Africans as possible to be economically active - either as entrepreneurs or employees.
So if small businesses are the leading creators of jobs the world over, does it not make sense to create legislation that incentivises entrepreneurs to employ more people - as and when they need them and to pay them as much as they can afford to - especially in a country where more than half of the people live below the poverty line and four out of 10 have no work and have stopped looking for it?
An overwhelming amount of research has proved the direct and causal relationship between work and dignity. Arguably the biggest social asset that apartheid stole from the majority of South Africans is generational dignity and self-worth. Making it easier to create economic opportunity for the unemployed and indigent gives us all a chance of regaining that lost virtue.
This article first appeared in The Business Times, Sunday Times on Sunday, 3 February 2019