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Why the private sector needs to step in to manage the social development crisis

It’s not cynical to say that South Africa’s social problems present an economic crisis. It’s cynical to say that there’s nothing we can do about it. 

However, there’s a paradox. The need for urgent action means that we need to pause and reflect to ensure our actions actually make a difference. 

That means, in part, thinking carefully about what an efficient allocation of resources looks like. And how B-BBEE creates a framework for collective action that helps us take effective, practical, targeted action that produces genuine social benefit. 

The roots of the current crisis

Covid worsened an already serious unemployment situation and many businesses took strain. Smaller businesses, in particular, struggled to adapt to the challenging conditions. The situation came to a head with the violent looting in KwaZulu-Natal and Gauteng.

The root causes of social disruption are complex, but it is clear that unequal distribution of resources plays a central role.

And while there are no easy conclusions about what causes violent disruptions, it felt like South Africa had reached an inflection point.   

We simply cannot be complacent about the depth and scale of the social crisis. Certainly, entrepreneurship cannot thrive without a reasonable degree of certainty and stability.

Just like there are no easy conclusions about the causes of our country’s problems, there are no quick fixes. But there are effective solutions that, while they don’t solve everything, provide effective and efficient benefits where it’s most needed.  

Limits of government spending

The South African government budgets considerable amounts for welfare and social uplift. That spending has built-in inefficiencies.

As research by Haroon Bhorat shows, after transfer payments, wage bills, and debt service costs, only 18% of allocated funds remain for goods and services and capital spending.

Achieving social goals then cannot be quantitated in terms of how much money is set aside for social uplift, but what is actually achieved. That is, what is the return on investment in social terms.

And, of course, it is precisely here that the private sector excels. Firms are experts at driving results, producing cost savings, and responding quickly and nimbly when results aren’t effectively achieved. In other words, the private sector is highly efficient. But efficiency without a strategy counts for little. 

Addressing inequality through training

As any manager knows, in order to allocate resources, we need to identify the right targets. A number of relevant areas have been identified by experts; not least, by policymakers, who have shaped and updated the B-BBEE codes in response to urgent social issues. 

Unemployment and skills development is one of the most urgent. As the Centre for Development and Enterprise (CDE) points out, “the opportunistic looting we saw in KwaZulu-Natal and Gauteng clearly reflected young people’s rising frustration and desperation.”

The problem is not simply the high unemployment rate. Young people are not even learning skills that could help them enter the workforce. 

As the CDE explains,  “almost half of the 20-million South Africans who are 15-34 years old are NEETs  – ‘not in education, employment, or training.”

Clearly, there are not enough jobs for the number of people who need them. But the problem has systemic roots. Young South Africans lack the skills, training and access to mentorship that allows them to productively enter the workforce in the first place. The dire skills shortage in turn has an effect on economic growth, exacerbating the unemployment problem.

Creating an environment for success

To short circuit the negative feedback loop, the B-BBEE codes contain a number of measures that help businesses equip young people with precisely the skills and experience the private sector needs. 

Take the Skills Development element of the B-BBEE scorecard. Our economy cannot thrive without a skilled workforce. However, more needs to be done to equip job seekers with skills. Indeed, as we see above, too many young South Africans have even given up searching for a job as they lack the credentials and networks to contribute to the modern workforce. 

An effective Skills Development initiative enables private sector businesses to directly equip young South Africans with the hard skills they need to make a productive contribution to the economy. And in the process of helping turn job seekers into productive employees, businesses can enhance their scorecards. Indeed, the government has identified Skills Development as such a priority that businesses need to meet a sub-minimum level of compliance or risk discounting a full B-BBEE level.  

Hard skills are only part of the employment equation. For many young South Africans, entering the workplace is daunting, even alienating. And that’s if you’re lucky enough to get your foot in the door in the first place. 

The Youth Employment Service (YES) secures as much as two levels on a company’s B-BBEE Scorecard by providing quality work experiences for young job seekers. Again, the B-BBEE regulations set clear goals that need to be realised, helping to ensure the initiative produces measurable benefits. 

Social development starts at the grassroots level

Of course, economic growth, skills development and training take place within a larger social context. 

With that in mind, the B-BBEE framework contains a  Socio-Economic Development (SED) element. SED facilitates grassroots initiatives that directly benefit communities and individuals.

With the understanding that skills development critically depends on a solid foundation of education, the BEE123 Schools Capacitation Initiative, SED123, is a program that provides schools that need it the most with high-quality textbooks and learning materials. 

SED123 is just one example of the kinds of SED initiatives available to businesses. The critical point is that these initiatives operate within a structured framework that involves benchmarks designed for tangible social impact. In other words, at their best, these initiatives harness the ingenuity, efficiency, and flexibility of the private sector to create enduring social impact that benefits everyone. 

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