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Foreign Investment and Skills to Fuel the Presidential Employment Stimulus

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Oct 25, 2021

In the communication, President Cyril Ramaphosa explains that South Africa has progressed to the second phase of the Presidential Employment Stimulus.

This initiative was established in 2020 and aimed to create massive employment opportunities in a short space of time. The use of digital platforms aided immensely in facilitating job applications by simplifying and expediting the recruitment processes. As a result, nearly half a million people have benefitted from the first phase.

THE LINK BETWEEN FOREIGN DIRECT INVEST AND THE UNEMPLOYMENT RATE

According to the Quarterly Labour Force Survey of the 1st quarter of 2021, South Africa had an official unemployment rate of 32,6%. Young people aged 15 – 34 were the hardest hit, with an estimated unemployment rate for South African youth hanging at a shocking 46,3%.

In stark contrast, the official Nigerian unemployment rate soared to 8% in 2019 just before the pandemic, which sent a ripple through government departments. Nigeria announced that it was calling on all foreign investors to consider Nigeria as a prime investment location, stating that the only way to reduce their high unemployment rate, was to create an enabling environment for foreigners so that they would come in and produce locally. They further said that Foreign Direct Investment (FDI) would help develop the agricultural value chain. This would lead to an industrialisation, which is another step towards improving unemployment.

Numerous studies have been conducted about the effects of FDI on unemployment figures in countries like the USA, Macedonia, Saudi Arabia and Malaysia. They all concluded that FDI could stimulate job creation, boost economic growth, provide global resource allocation, and improve the host-country’s Gross Domestic Product while enhancing their finance ability. The only drawback is that it was a long-run relationship that had to be maintained.

A World Economic Forum study detailed the link between unemployment and FDI in Japan. The study reported that “foreign direct investment usually initiates increases in the production of final goods in foreign countries, which positively affects the production of intermediate inputs in the home country, resulting in the maintenance of, or an increase in, the demand for domestic labour.”

According to Marisa Jacobs, Director from Xpatweb, this finding is best illustrated by the example of foreign companies who developed the South African Contact Centre Industry. “At first, there was an uproar from locals because the call centres had to employ foreign agents to facilitate customer service calls in foreign languages. What everyone failed to recognise was how it led to the subsequent three-fold employment of South Africans across each company’s internal departments, such as finance, marketing, software development, human resources, IT infrastructure, business intelligence, and many more,” explained Jacobs.

INTEGRATION AND SKILL-SHARING IN THE WORKPLACE

The points mentioned in the President’s letter is a promising start towards rectifying a sad statistic. However, Jacobs warns that there is no way to stop the valuable skillsets and qualified professionals currently leaving South Africa in droves.

“National employment drives and initiatives generally serve to create new opportunities for a younger workforce. While that prepares the next generation of skilled workers, it doesn’t address the present need for certain skills. No amount of novice job creation can fill skills gaps.”

DEPARTMENT OF HOME AFFAIRS AND DEPARTMENT OF LABOUR AS ENABLERS TO CREATING EMPLOYMENT OPPORTUNITIES

With the launch of the second phase of the Employment Stimulus, comes news from the Department of Home Affairs (DHA) that it may no longer be able to process work permit applications for foreign nationals by waiving the required Department of Labour (DOL) certification. These waivers were previously accepted to expedite applications for foreign nationals who were urgently sought to fill positions left vacant by South Africans, especially those positions that are highly specialised and scarce but do not appear on the Critical Skills List.

Going forward, it appears the DHA will process General Work Visa applications but would need the requirements to have been met through the DOL first. This could intensify the disconnect that already exists between the two departments.

Not only is the DOL notoriously slow with the aforementioned application process, but they have been mandated to protect and create South African jobs, whereas the DHA has been mandated to enable business to attract and bring in foreign talent to fill skills gaps. This puts the two Departments at odds when it comes to combatting unemployment. While the employment stimulus rightly seeks to favour South Africans before employees abroad, this noble pursuit towards shrinking unemployment figures could retard the allocation of foreign nationals who can do the job right away.

The benefits to securing international talent with the necessary skills can be plentiful when considering how it can influence the local workforce through skills development and concession planning initiatives.

Adds Jacobs, “Hindering or delaying the foreign skills on offer can directly impact the rate at which the local workforce can engage with those skills. It is therefore essential that work permits or visas for skilled migrants be simplified for employers, so that the employment stimulus could enjoy the fruits of skill-sharing.”

The President can use the Employment Stimulus to drive cooperation between the Ministers of both Departments on the converging point where foreign skills and investments can be used to create domestic jobs, and in so doing, strike a balance at the juncture to enable the economy to propel forward.

ALSO READ: Skilled Foreign Nationals in South Africa: 5 Areas to Reassess Before Starting Work

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