Here’s how to create not only jobs but small businesses
Companies must deal with employees as businesses. If you’re the driver of a delivery vehicle, say ...
Our unemployment figures are horrible, we all know that, and we all know it’s getting worse. The latest figures show that the official unemployment rate is 27.2%. If you include people who have stopped looking for work then that figure jumps to 37.2%. Add to that the number of people supported by social grants, and the dependants they provide for, and a bleak and unsustainable picture of the extent of cross-subsidy emerges.
There are only 16.3-million people, out of a population of 57.4 million, who are defined as being employed. 28.5% of the population simply cannot support themselves as well as the other 71.5% of the population. That much must surely be obvious to everyone, let alone the huge discrepancy of incomes within the employed community.We need to start thinking about being employed differently. It can’t simply be about whether you can apply for and get a job at a formal corporate employer.
Economic cycles dictate from time to time what cost capacity major corporate employers can bear. Inevitably there is over-employment in the good times and retrenchment in the bad times. We’re in the bad times now, that’s for sure.
There are only so many people who are natural born entrepreneurs, people who thrive on a much higher risk-return level. The system takes care of those of us who prefer a steady job, with a predictable salary. The cost of benefits such as medical aid and pension just get sorted out. The behaviour of the group determines the cost for the individual and, if everyone behaves, on average, as they should, healthy funds are built up to pay for individual contingencies as and when they happen. It is a highly regulated industry, and it all works. But you must keep your job, and it’s better if you keep the same job.
Jobs need to be taken “off balance sheet”.
Corporations must create entrepreneurs. This concept is not new. I recall SAB being a pioneer in the owner-driver schemes they launched, way back when. A truck, as it turns out, is a business. It is time to embrace that model again.
One of the major problems has always been funding. Employees don’t typically have surplus assets; we live from month to month on our take home pay.
Bank borrowings aren’t going to be the solution. Off-take (or more generally, supply) agreements, are. Companies need to start dealing with their employees as businesses.If you’re the driver of a delivery vehicle, that is employed exclusively by a specific company, then when demand for those products declines, your bakkie starts running at below capacity. Eventually the fixed cost-variable cost relationship gets out of kilter and that delivery vehicle is running at a loss. Both the trucks and the drivers get downsized, often at a time when it’s close to the turning point, but always at a time when other drivers are also being let go, flooding the market, messing with the price, creating unemployment.
If that truck load could be optimised it would make money. An owner-driver will go out into the market to find those pools of product that will fill the load. The economics of capacity utilisation take over from here – not only for the entrepreneur, but for the now multiple users of the delivery service, who are all going to benefit from marginal cost pricing which improves as the truck fills. This diverse source of loads ensures more predictable cash flows, and that track record is bankable.
The virtuous circle between the supply agreement and access to funding is complete. All the elements – experience, incentive, flexibility, adaptability – are already in place to form a foundation for a prosperous new, growing business.
I also expect to see more and more competent professional service providers operating outside the restraints of major corporate overheads, such as accountants and lawyers.
The financial impact will be felt throughout the economy. Bloated cost structures will give way to agile economic units, scrambling about in search of business growth opportunities that go right through to their own, personal, bottom line, driving prices down competitively as they go.
But the real impact is the mindset change. A transition from dependency to independence. A direct, tangible correlation between energy and reward, and ultimately, the prospect of economic dignity for all.
This is how we could finance the economic transformation and bridge the divide between the haves and have-nots. This is the structural solution to funding SMMEs, at the right cost of capital.
Mark Barnes is CEO of the Post Office