Chronically high unemployment in our country, among the highest levels in the world; unemployed graduates of tertiary education, while employers struggle to fill skilled positions – what is wrong with this picture?
We have a youthful, and growing, population, but they are not being sufficiently absorbed into the workforce – over 50% of Eastern Cape youth (aged 25-34) are unemployed.
This points to a deep gap between the skills available in the local economy and the skills actually required by business. The extent of South Africa’s skills mismatch was estimated in 2019 at 50% – in other words, half of prospective employees don’t have the skills needed in the job market.
The skills gap was starkly captured in the 2023 Global Talent Competitiveness Index, which measures countries’ capacity to develop, attract and retain relevant skills. South Africa ranked 68th overall out of 134 countries, but even more worryingly, came in 131st on the metric of employability of local technical and vocational skills, as rated by employers.
The index highlights the country’s weak pool of technical and vocational skills (we rate 115th on “ease of finding skilled employees”) and notes that, in order to improve our overall competitiveness, South Africa “must make the education system more relevant to the economy” (currently ranked 100/134).
This is deeply concerning for our economic growth prospects, as the availability of an appropriately skilled talent pool is a key factor for new investors.
Skills shortages hamper productivity and the ability of a business to take up expansion opportunities, and limit capacity for the innovation that drives global competitiveness.
The wide skills gap is a key contributor to unacceptably high unemployment and sluggish economic growth, and in turn to our country’s high levels of poverty and inequality.
Unpacking the detail in the Stats SA Quarterly Labour Force Surveys (QLFS) reveals not only the importance of education and training in general for improving individuals’ employment prospects, but also the importance of matching post-school qualifications and skills development to where the job opportunities are.
Unemployment rates for graduates with degrees and other tertiary qualifications are relatively low, 10% and 20% respectively, but they are a very small part of the population. Three-quarters of South African adults have only matric or lower levels of education, and at a matric level, it is concerning to note the low overall percentage pass rates and the extent to which students are substituting “real” mathematics for maths literacy. Businesses who are for example looking to hire operators on a production line, as an entry requirement seek “real” mathematics at a matric level.
Pointing to the importance of technical skills in the job market, the “technician” occupational category was a key driver of gains in employment in the Q2: 2024 QLFS, with the number of people employed growing by 20% over the past year. Meanwhile, the categories of sales and services, professional, and clerical jobs recorded the greatest losses.
The shortage of technical skills is also clear in the Critical Skills List published by Home Affairs, which lists the occupational categories most in demand and is used to assess applications by foreign workers for work visas.
The list is dominated by high-level technical skills, including engineers and engineering technologists across all disciplines, various types of ICT specialists from multimedia designers to programmers, analysts and developers, specialist technicians and mechanics, and scientists.
In the Nelson Mandela Bay economy, anchored by manufacturing, advanced technical skills and qualifications are critically important as manufacturing becomes increasingly sophisticated, digital and technology-driven.
The Bay is also home to two of the country’s biggest industrial automation and software specialists, Jendamark and S4 Integration, servicing global customers and requiring highly technical skills such as engineers and programmers.
To realise our vision of the Bay of Opportunity, to grow our manufacturing sector and complete globally in the digitally-driven economy of the future, in turn driving investment and job creation, we must take action to close the skills gap, and focus particularly on growing our pool of technical skills.
As a key intervention to put our Bay of Opportunity vision into action, the Business Chamber is establishing a Skills Development Desk, with the support of the Eastern Cape Development Corporation and Harambee Youth Employment Accelerator.
The first step, to be undertaken in the last quarter of this year into early 2025, is to undertake an audit of local industry’s current and future skills requirements and gaps, and then to develop and implement targeted interventions to bridge the divide.
The Desk will work closely with local industry, education institutions, business organisations, technology incubators and agencies in skills development and youth development to develop collaborative solutions and strengthen each other’s efforts.
We also foresee equipping unemployed youth and graduates so that they can be matched with opportunities in industry.
The Desk will integrate with the Chamber’s other action arms such as the Trade and Investment Desk and the Entrepreneurship Desk, supporting skills development that will enable businesses to take advantage of market opportunities and grow localisation of manufacturing.
The ties in with the work of our Local Economy Reinvention Think Tank that focuses on developing viable opportunities to take advantage of our manufacturing strengths in the green and digital future economy.
If we are to leverage our strengths and build a stronger, diversified economy that employs more people and builds greater prosperity for all, developing the skills that industry needs to grow is a critical component.
Denise van Huyssteen is Chief Executive Officer of the Nelson Mandela Bay Business Chamber.