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AND GROWTH IN SOUTH AFRICA, 24 MARCH 1997

Senior representatives from Government, employer organisations and trade unions, members of the National Training Board, Industry Training Boards and NEDLAC, representatives from foreign embassies, members of the press, colleagues, comrades and friends.

I am delighted to welcome you t the launch of the Green Paper on "A Skills Development Strategy for Employment and Growth in South Africa".

Few of you here today need to be persuaded that South Africa has a skills problem which we must urgently address if we want to meet our aim of growth, job creation and real, improvements in the quality of life of all our people.

People are our country's most improtant asset. If all South Africans are going to play a meaningful role in economic and social development and improvements in their own lives, then they need to have the basic abilities to read and write, communicate and solve problems.

But our people also need competence in skills demanded of our more complex, rapdily changing economy. In a world where workplace tasks are changing quickly, people's ability to adapt the skills they have to new demands and opportunities is fundamental to employment, income security and growth.

But apatheid has left us the legacy of a highly divided skills profile, where only the few enjoy the benefits of high skills and high wages. The continued skills shortage among the majority of our people drives up wages of the few and aggravates the large differences between the haves and those trapped in the vice-grip of poverty.

The formal sector of our economy has not generated any new jobs in ten years. And it is the labour intensive sectors, generally low-paid and low-skilled, which have been worst hit.

Hundreds of thousands of jobs have been lost in mining and agriculrutre. The restructuring of state assets has led to a massive down-sizing of the parastatals - resulting in job losses and also cuts in skills training for the labour market.

Growth in the informal or self employed sector has contributed to incomes, but at low levels, for millions unable to access formal employement. Yet the sustainability of many of these ventures is severely constrained by a lack of skills and assets.

Land reform and housing programmes aim to begin to redress asset inequalities, but for poor people, their labour is their major asset. And their skill level is a major part of the value of their labour to the labour market.

In manufacturing firms there are centres of excellence but among most there is a culture of non investment in skills development. This lack of investment in skill development has direct implications for productivity and competitiveness.

Most concerning are the many school leavers who are unable to find work and who may be forced to seek alterntives in anti-social ways of surviving.

Those new jobs, such as they are, tend to be concentrated in areas which generally require much higher levels of skills, reflecting the international trend.

Skills on their own do not create jobs. But Human Resource Development is an integral and necessary part of a more comprehensive package of measures for economic and employment growth outlined in the RDP and GEAR.

This point was made by my colleague Minister Trevor Manuel in his recent budget speech when he noted: "The RDP is the embodiment of the commitment of this government to the elimination of poverty in a rapdily growing economcy and in the context of an open, peaceful and democratic society. For this vision to materialise, policies must be oriented towards the provision of basic needs, the development of human resources, and a growing economy capable of creating sustainable jobs[LH1]". He added that "The success of the RDP is inherently bound by our ability to generate this developmental and redistributive thrust within a sound fiscal and macro-economic environment."

This recognition of the importance of human resources development is not a p[henomenon peculiar to South Africa.

The World Bank, in a recent study focused on the lessons of East Asia noted:
"None of the East Asian economies succeeded unless it had three attributes: outward orientation, macro-economic stability, and investment in people. These economies were not always blesses with this traid. They developed the institutions and policies that delivered it[LH2]."GEAR has recommended strategies to achieve growth: tariff reform; supply-side industrial support measures; strategic links between industrial policy and infrastructure development and provision and the integration of industrial strategy with labour market and institutional transformation strategies[LH3].Initiatives have already begun to address human resources development in formal education, health and welfare. But attention has yet to turn to skills development - that learning which is closely linked to the world of work. This new strategy on training which is being presented to you today aims to fill this gap.

The Comprehensive Labour Market Commission also recommended the alignment of labour market, industry policy and macro-economic measures. The Commission argued that this alignment required trade offs between business' need for competitivenss and adequate profitability, labour's need for secure and reasonably-paid employement, and society's need for rapid employment creation.

They proposed that "An Accord for Employment and Growth" be negotiated between government, business and labour to achieve an optimal result. All the Commissioners supported the idea of a broad national social agreement in principle and I have accepted their recommendation. I plan to make announcements in this regard shortly.

While I do not intend to close the Accord discussion, it is interesting that investment into skills development seems to be the one area that business agrees it could make a contribution.

For many years, trade unions have included demands for training on the collective bargaining demand list and as we have seen Government also identify this area as a priority.

So it seems investment into training is the one issue on which everyone apparently agrees.

Skills are necessary if we want ot implement productivity improving measures. So, they contribute to rising competitivenss for employers.

Nationally recognised, portable skills improve workers' bargaining position, make them less vulnerable to technological and market changes and improve their prospects for meaningful career paths.

Government sees skills development as a necessary part of the policy menu to improve employability and self-sustainability for unemployed people and lowering the cost of new entrants into the labour market.

So, everyone agrees on the improtance of skills development. Until the debate turns to who should pay.

Well, it is time for us to bite this bullet together. Unless we increase the resources we allocate to skills development, developing skills will remain the Cinderella of economic and employment policy. But without skills development it is likely that growth will be hindered by critical skills shortages.

In this Green Paper on a Skills Development Strategy for Employment and Growth in South Africa we are proposing the introduction of a national levy grant system.

The grant side of the equation is easy to motivate. South Africa desperately needs to give major priority to skills development. This will not occur through market forces alone.

Our strategy proposes a range of processes to identify national, industry and enterprise and community priority areas for skills development delivery. Once the priority areas are identified at national, industry and enterprise areas, grants are the incentives to encourage reaching the targets in these priority skills areas.

General tax incentives have been found to be too blunt an instrument for strategic resource allocation. Grants can be used to:
provide incentives for enterprises to improve the level and effectiveness of their human resource development,
support programmes for would-be entrants into the labour market to acquire relevant high quality skills,
provide special measures for those that need this - such as small enterprises requiring skill development,
implement social plan measures in the face of large scale retrenchments, and
implement new programmes which integrate learning and work experience and so support the unemployed and new entrants to enter the labout market.

The problem is how to finance the grant. Companies enjoy direct benefits from investments in training. So, it is appropriate as well as desirable that they should contribute to financing the grant.

The green Paper proposed that employer contributions be made through a one to one and a half percent of payroll levy, collected nationally and disbursed through sectoral and national channels.

The levy has several benefits over other revenue collecting instruments. Most notably, it spreads the cost of training across all firms. Firms which do not train contribute to the costs of training carried out by others. And this is as it should be because these firms benefit indirectly when they recruit skilled labour from the labour market.

Firms tend to train in the priority areas in order to reclaim some of their levy contributions. This levers higher levels of training and promotes strategic training which brings higher returns.

The decline of the apprenticeship system and the relative weakness of training systems in the current environment persuaded us that the voluntary collection of leviews, as is now in operation, is inadequate for the challenges which our country faces regarding skills development.

But the case for a private sector levy contribution does not preclude the need for Government to also contribute to revenue for grant payments. Government understands that for the levy grant system to be successfully implemented it will be necessary for it to make a fiscal contribution.

Government also understands that the introduction of a national levy will have to be phased in, and that it will have to be designed in a way which is ultimately consistent with the reform of the overall tax system, currently under review by the Katz Commission.

Shared contributions to the revenue needed to finance the grant mechanism will require some shared control over the disbursement of the funds.

The Green Paper proposes that the National Training Board be restructured to provide high level advice and guidance to the Minister of Labour on the procedures and priorities to be adopted.

It also recommends that Industry Training Boards be restructured to play a more strategic and proactive role in promoting and supporting a new skills development approach within sectors and to assist new entrants into the sector.

To allay the concerns of those who fear that Government may raid this fund to meet other obligations, it is proposed that the new Act clearly earmark funds for training and prohibit their use for other pruposes.

Some also fear that the proposed Sector Education and Training Organisations (SETOs) are Bargaining Councils through the back door. This is not the case. The two institutions are designed for different purposes.

But where there is a bargainign council, a clear relationship to one or more SETOs will assist the allocation of rewards to sill formation. This will clearly be desirable as one way of promoting skilling.

This Green Paper aims to provide the framewrk within which consensus can be achieved. Given the degree of agreement on the importance of skills development, we hope that agreement on a new training strategy can be found quickly so that the revolution on skills development can begin. It is a revolution which aims to enhance co-operation between the social partners and support economic and employment growth.

What our President said in the 1996 Human Development Report4 is relevant here:
"In the history of nations generations have made their mark through their acumen in appreciating critical turning points and, with determination and creativity, seizing the moment. A new and better life will be achieved only if we shed the temptation to proceed casually along the road - only if we fully take the opportunities that beckon ...
The potential for economic growth and development is better that it has been for many decades. But let us be brutally frank.
Despite the welcome growth, very few jobs have been created. In fact, against the backdrop of new entrants into the job market, there has been a shrinkage in opportunities. We need a national vision to lift us out of this quagmire.
If we do not act together in the public and private sectors to develop and implement such a national strategic vision, the danger is that even the modest growth we have attained will peter out in a matter of a few years, as the strains of limited capacity, skill shortages and ... other constraints start to gather momentum, and as increasing unemployment and accelerating poverty bear down on our society.
The task of government is to harness the energies of the people into a material farce for growth and development. What is required is a partnership, among communities, government and the private sector."

I conclude by thanking the many people who have already responded to the call and actively participated in the development of the policy proposals which are tabled here today.

In particular, I wuld like to thank the members of the National Training Board and the many individual managers and members of Industry Training Boards.

I would also like to thank the many countries which have already indicated their support for the development and piloting of this Strategy - Germany, Ireland, Austria, Sweden, the Netherlands and Denmark both individually and under the umbrella of the European Union, as well as Australia, the World Bank, Chile for technical expertise and Korea for promises of future help. Your support in the early stages of designing and piloting a system which has to be self-sustaining in the longer term is greatly appreciated.

I would like to thank everyone for attending this launch today and I invite you all to study this Green Paper, to make it more dynamic and effective.

I also urge that you become actively involved in making the proposals for a new strategy a vehicle for reaching our goal of a skills development system which promotes economic and employment growth and social development.

Thank you.

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