Entrepreneurs should be the biggest employers, not the government

Woman leaning against coffee shop sign
Woman leaning against coffee shop sign

In his statement to the governing party during the week, the Minister of Finance Nhlanhla Nene sketched a bleak picture in terms of the country’s lower economic growth of 3% being the “new normal.” His major concern is that there is a tendency by the government to focus the country’s expenditure towards paying of increasing salaries for government employees and this will result in diverting funds from the implementation of key infrastructure projects.

In the same week that the Minister of Finance made these pronouncements, the job numbers came out and unemployment dropped to a surprisingly 25% from 26.4% in the first quarter. When we look closer at these numbers, the bulk of the new jobs created were from the informal sector.

To be precise:The formal sector added 39,000 jobs to 10.8-million in the second quarter while the informal sector created 177,000 jobs to 2.7-million. The formal sector has contracted and is no longer creating new jobs in big numbers as it used to.

Again, in the same week, the Anglo American CEO Mark Cutifani responded to the SG of the governing party’s comments regarding the announcement that Anglo American will be cutting jobs. The mining industry is shedding jobs in large numbers, Lonmin said it would shut five platinum mines and deepen its job losses to 6,000 from 3,500. The SG of the governing party is the view that mining companies are taking the easy route out by cutting jobs.

The following are some of my analysis based on the three events:

– Balance needs to be struck between the payment of healthy and living salaries to civil servants (especially if we are to attract and retain talented skills), but caution needs to be exercised so that the country doesn’t end up with over 60% of its expenditure being allocated to salaries (especially if this done at the expense of funds dedicated towards capital programs).

The ratio between how much the country pays for salaries and how much the staff generates in terms of revenue for the country is crucial. Pay people what their due is, but the people must also generate what is adequately due to the country. The return on investment on salaries and revenue generated by such salaries should be clearly articulated and justifiable.

The funding of capital projects is important in the development of infrastructure for the country. A country with an efficient infrastructure is able to increase the ease of doing business and resulting in increased entrepreneurship activity, creating more jobs and reducing poverty and inequality.

–  If there is anything to learn from the Greece debt crisis is that if a country spends most of its budget funding salaries (at the expense of developing the country and generating revenue), there is a risk that that country’s economy will not be sustainable to generate sufficient revenue to fund such salaries.

This will result in two predicaments: Reduce the salaries or look for other ways of funding for such high salaries which means using debt.

More debt and less income generation will lead to bankruptcy. 

– The job numbers as highlighted in “Unemployment rate drops from 26.4% to 25% in second quarter” continues to confirm that the future of job creation in the country lies in the informal sector. Entrepreneurship continues to be the backbone of job creation in South Africa (and in any country). It is important that entrepreneurs are looked after, supported and nurtured.

– I wrote a blog a few months ago titled “How about a Ministry of Entrepreneurship (MOE)” in which I suggested that if we take entrepreneurship development seriously as a country, over a longer time we see less people relying on the government for jobs and social grants.

The impact of a high entrepreneurship activity will mean that the government will have to employ less people, which will be good news for Minister Nene in that it will mean less money will be spent on salaries for civil servants, less money on social grant expenditure, and more entrepreneurs means more taxes paid which will mean more funds dedicated to building infrastructure and developing more entrepreneurs.

– Instead of the government trying to create 500,000 jobs, how about we create 5000 entrepreneurs who (if well supported) will create 500,000 jobs, I think this is better than the government creating 500,000 jobs using taxes. More over, those 500,000 will be sustainable. This will result in less salary bill for the government and more taxes from these entrepreneurs.

The government should be not be the biggest employer, entrepreneurs should be. When entrepreneurs are the biggest employers, it benefits everyone.

– The relationship and partnership between the government and the private sector is critical. If the relationship between these two is non-existant, the following are the consequences:

* The government will not be flexible in relaxing the labour laws, because the government does not trust the private sector that it will not exploit labour (by paying them less than minimum wage)

* The private sector will withhold their reserves and not reinvested them into the economy in terms of expansion projects and job creation. There is about  R1,2 trillion is sitting idle in the Reserve Bank and is not invested in the economy. There are many reasons for this, but one of the reasons is that this is the private sector’s show of no confidence in the way the economy is regulated by the government (especially the inflexible labour laws).

No matter the merits or not of their positions, maintaining the status-quo will stifle the development and economic growth of the country.

We need leadership that will see beyond the narrow self interest of the government and private sector individually. We need leadership with a vision that is of the greater good of the country. At the moment, it seems like we have self-interest trumping national interest. This needs to change.

You are at the top when…

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– You clearly understand that failure is an event, not a person; that yesterday ended last night, and today is your brand-new day.

– You have made friends with your past, are focused on the present, and optimistic about your future.

– You know that success (a win) does not make you, and failure (a loss) does not break you.

– You are filled with faith, hope, and love; and live without anger, greed, guilt, envy, or thoughts of revenge.

– You are mature enough to delay gratification and shift your focus from your rights to your responsibilities.

– You know that failure to stand for what is morally right is the prelude to being the victim of what is criminally wrong.

– You are secure in who you are.

– You have made friends of adversaries, and have gained the love and respect of those who know you best.

– You understand that others can give you pleasure, but genuine happiness comes when you do things for others.

– You are pleasant to the grumpy, courteous to the rude, and generous to the needy.

– You love the unlovable, give hope to the hopeless, friendship to the friendless, and encouragement to the discouraged.

– You can look back in forgiveness, forward in hope, down in compassion, and up with gratitude.

– You know that “he who would be greatest among you must become the servant of all.”

– You recognise, confess, develop, and use your God-given physical, mental, and spiritual abilities to the glory of God and for the benefit of mankind.

– You stand in front of the Creator of the universe, and He says to you, “Well done, thou good and faithful servant.

See you at the top.

That’s the way we do things around here

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The tried and true is beyond reproach. It’s been tried, and of course, it’s true. True because it worked.

In times of change, though, most of the tried is in fact, false. False because what used to work, doesn’t, at least not any longer.

Sure, it might be what you’ve always done. But that doesn’t make it true, or right, or best. It just means that you already tried it.

The nature of revolutions is that they destroy the perfect and enable the impossible. Seeking out the tried and true is the wrong direction for crazy times.

“That’s the way we do things around here” is obsolete in revolutionary times.

Replaced by: “That’s the way we (used to) do things around here”

Send In The Clowns: Clowns are not very nice to each other

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Circus clowns are most famous for willfully inflicting harm upon their fellow clowns. The easiest way to get a big laugh is with a pair of pliers, it appears. If you can’t find pliers, a bottle of seltzer will have to do.

Why is it so unusual to find a company where the boss cares for his employees? Why is it even more unusual still to find a workforce where teamwork just naturally overcomes selfishness? Why do we focus on hostile takeover wars, high-profile firings, and attack-dog politics instead of the gradual, inexorable progress that happens when people with a shared goal work together to accomplish it?

If clownhood is our natural state (and I think it must be), then the alternative must be the anti-clown. Success lies in rejecting your inner clown and adopting a long-range view of the world (even if it’s just five minutes longer than your peers’).

I think we ought to issue little red foam-rubber noses to everyone who reads this blog. They compress easily, so you can keep one in your wallet. Then, whenever you are in a meeting and someone starts acting like a real clown, silently whip out the nose and put it on.

Imagine the impact of 5 or 10 incompetent board members confronting a CEO with rubber red noses firmly in place. Imagine 20 parliamentarians fighting against the findings of a credible corruption report all wearing their red noses.

What would the famous clown do? Figure out the behavior of a real clown and do the opposite.

Why mess up a blank canvas?

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At the last townhouse I stayed in, everything was white on white when I arrived. White walls, counters, table, furniture, and carpet.

So I took it one step further, bought five blank canvases, and hung them around the apartment. Especially one big one, right at the entrance.

Visitors would get upset, saying, “You have got to put something there! You can’t just leave it blank! It needs color!”

I would say, “Good point. Like what. What do you imagine?”

They would say, “You know, like some bold splashes of dark red, but not too heavy. Something with clean lines.”

I would say, “Hmm…. I’m not sure what you mean. Can you describe it more?”

They would stare at the blank canvas a bit, and go into more detail about what should be on it.

Eventually I would say, “Nah. Not going to do it.”

“Why not?!?”

“The reason I love the blank canvas is because it makes everyone day-dream.

The process of imagining what should be there is much more fun than if something was already there.

There have been a hundred paintings imagined onto that canvas. It’s got unlimited potential. It would be a shame to mess up that with a bunch of paint.”

There is nothing more wonderful than a blank piece of paper and pencil or pen in hand with which to express something to yourself or others.

It is one of life’s great joys that is probably reducing as people jump straight onto a digital screen.

The blank page starts with unlimited potential.

Beautiful thoughts and dreaming are fantastic. Realising is even more satisfying, but we can never realise unless we dream.

Same thing with that business idea you have had forever.

Or that beautiful person you haven’t spoken with.

So maybe you should just leave them in your imagination, where they are at their best.

Or…

Maybe…

The one thing that would be even better is if you…

Send In The Clowns: Clowns Don’t Plan Ahead

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Clowns get big laughs from slamming into a brick wall or running to catch up with a car that left without them.

Of course, squirrels and sea monkeys don’t plan ahead, either.

The only species that regularly demonstrates foresight is humans, but we manage to do this only on occasion. People are happy to spend themselves into credit card debt to enjoy today (instead of tomorrow and the next 30 years), and they work hard to maintain the illusion that everything is just fine, until it’s not.

Just look at the folks who are running their countries into endless debts that they fail to repay on time or people who overspend on projects. That’s lack of planning and diligence, that’s the stuff clowns do.

Plan ahead for your business, don’t take unnecessary debt, don’t let your business limp from one debt crisis to another.

Send In The Clowns: Clowns Ignore Science

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A couple of weeks ago, I took my daughters to the circus. The first few acts were about lions and gymnasts. Out of the blue, came out of the clown. The clown’s duty is to make people laugh with his jokes, funny clothes, red nose and big shoes. Every time the clown comes out, its jokes and laughter all the way.

However getting called a clown is rarely a compliment. Unless you want to join the circus, it’s not much of a career goal, either. In addition to the obvious, bad makeup and ill-fitting shoes, all clowns have a surprising amount in common. This is because of a simple truth: Clowns are based on us. They embody what’s wrong with human nature, just magnified a bit.

Are you a clown? Do you work with clowns? I break down clownhood into common traits.

Clowns ignore science.Whether it’s the magic of fitting 16 full-sized clowns into a VW Beetle or the constant arguments between clowns and gravity, the fruitless conflict between what’s real and what a clown desires is a fixture in a clown’s act.

Organisations (and politicians) tend to believe that science is optional. It’s not. If you run adverts and they don’t work, it doesn’t matter how you spin it; they didn’t work.

If your industry is changing because of a technological breakthrough, it doesn’t matter whether you “believe” in the breakthrough; it’s still true. We may have all sorts of business and theological reasons to challenge a piece of science, but denying the reality of a tested universe never leads to a positive outcome.

Kodak, for example, spent years denying, ignoring, or evading the reality of digital photography and its inevitable impact on the film business. And eventually it was forced to retrench one-fifth of its already-decimated workforce, you couldn’t help but holler, “You clowns! Did it just now dawn on you that digital cameras were going to catch on?”

Clowns refuse to measure their results, because measurement implies that they accept the reality of the outside world. Wishful thinking is not a replacement for the real world. Only clowns can get away with that.

Its important that entrepreneurs take the changes in their industry very seriously. When Steve Jobs warned music executives about the impact itunes will have on the music industry. Those who refused to embrace the winds of change were left behind and were clowns.

Uber is challenging the cab industry, who will be the clowns? The jury is still out on this one.

When the pace of change on the outside is faster than the pace of change in the inside, the end is near.

Don’t ignore your industry.

Ps: I do have much respect for clowns who take their craft very seriously. I’m aware that clowns spend hundreds of hours practicing and perfecting their craft for the amusement of others.