Upskilling the informal sector to drive job creation

How we can leverage existing industries to create employment and entrepreneurial growth

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South Africa’s biggest challenge is unemployment. While this has always been high, the Covid-19 lockdown has exacerbated unemployment and today, over 11 million people are out of work. Rajan Naidoo, the Managing Director of EduPower Skills Academy, believes this situation can be reversed by leveraging existing industries to create employment and entrepreneurial growth.

“There are a multitude of traders and vendors who operate on the margins of our economy. They lack skills and wide market recognition but if we provide training, access to finance and grants and the resources to help these small businesses grow, they have massive potential to create jobs,” Rajan explains. 

He says that developing the informal economy begins with a two-step process. “These SMEs need to be formalised through business registration as this will provide better recognition within industry supply chains and open up procurement pathways,” Rajan explains. “Step two is to provide skills development, building industry-specific knowledge and business acumen.”

To illustrate how employment can take place, Rajan explores the opportunities for development in four sectors:

1. Construction

Due to the huge housing shortfall, there is scope for a potential boom in our construction sector. While projects need high-level skills such as engineers, surveyors and architects, they also require vocational skills from plumbers, painters, electricians, bricklayers and many more.

These skills are readily available: if you go to any hardware store, there are queues of people offering their services, but they lack formal skills and business recognition, so they continue to eke out a living. Learnerships or short courses combined with formalised business support would make a world of difference to these would-be professional artisans. They can work and earn an income while upgrading their skills and in turn, become entrepreneurs and employ others.

2. Business Processing Services

For years, South Africa has been internationally competitive in the Business Processing Services (Call Centre) industry. Running both foreign and local campaigns, it’s an entry-level job creator where a Grade 12, a learnership and good communication skills set individuals up for success, with strong career prospects.

Growth and employment potential in this sector are still on the rise but we need to encourage more black ownership. Since most corporates use call centres – either insourced or outsourced – they have the opportunity to use their B-BBEE obligations to support smaller black-owned call centres with outsourced work using an integrated B-BBEE solution combining Skills, Enterprise, Supplier and Socio-Economic Development.

3. Micro Retail Sector

The micro-retail sector (SPAZA) has been trading for decades and it remains a viable source of job creation and entrepreneurship. This sector however requires investment and skills to organise, formalise and develop.

Skills development for consumer retail, stock control, marketing and business knowledge can be taught through learnerships while the business is operational, and the learner earns while they learn. Large consumer goods suppliers have the opportunity via their B-BBEE scorecards to invest in these distribution channels by funding skills and entrepreneurial development. And this is not an act of charity but rather a way of improving their access to the consumer market whilst building social capital.

4. Mobile Food Production

Mobile food production caters for several markets including township, commercial and industrial sectors and it’s an excellent entrepreneurship vehicle. To encourage this, vocational skills in food production, food hygiene, inventory management and small business skills would provide a boost for operators and learnerships can be completed without business disruption. Through their B-BBEE mechanisms, food manufacturers and suppliers can drive this development, building relationships that will ultimately also promote their products.

Rajan points out that these sectors are a few examples where jobs can be created through vocational skills, industries that have been crying out for formalisation so they are able to access finances, resources, skills and collective negotiating power.

“Many corporates have established links to development sectors, they should hone their B-BBEE strategy through Skills, Enterprise, Supplier and Socio-Economic Development to continue building these mutually beneficial relationships. Many more projects are needed to drive the exponential growth that will alleviate the national unemployment crisis.”