Human capital development for growth

Very often in training relating to the improvement of regional and local economies we stumble onto the topic of the importance of human capital for productivity and economic growth. This results in three arguments emerging between participants. Firstly, some participants are upset about human capital development, as this often implies a higher level of learning that involves the application of technology or other advanced topics. This is seen as benefiting too few people, especially in Africa where countries are generally suffering from high unemployment and large numbers of under-educated people that are mostly trained into low-technology low-skill (and low wage) jobs. The second argument is about the role of technology in economic growth. Again, people tend to shy away from technological development that is capital (or technology) intensive towards creating jobs for large numbers of people. The third argument is that productivity improvement is not important for growth, as it only benefits the owners of firms and it is according to some people counter-productive for employment creation, as it leads to job losses.

During these arguments it is important to remain calm and clear headed, and to not fall into ideological debates. I will not try to address all three these arguments now except to say that the importance of human capital development is increasingly been promoted by organisations like the Worldbank, the OECD and others (for a great recent report on this click here). This after the topic of tertiary education has received very little attention in global programmes like the Millennium Development Goals and other programmes, with more basic education programmes like universal primary school access receiving more attention. I am relieved that the big guns are now more supportive of tertiary education and its role in human capital development. While I agree that we have to increase employment for large numbers of low-skilled people, we should not behave as if we have endless resources and management capacity available in many developing countries. This means that while we have to create jobs, we also have to be mindfull to constantly work at increasing productivity in order to carefully maximise (or allocate) the resources of the society. I am always amazed at how our politicians in South Africa want to create hundreds of thousands of jobs when we are short managers at almost every level of our society. This means that we may have to settle for less jobs (because we cant manage all these people), and that we better make sure that all the people are in sustainable and productive jobs, within competitive firms in competitive industries. We can not disconnect these different things. In fact, I think we should be calling for far more technology intensive jobs in order to optimise the skills and our resources at our disposal, while not neglecting trying to find ways to get more people with lower skills into the job market.

The times have changed, and being loyal to a country or being comfortable in a society is no longer sticky enough to hold back the increasingly mobile creative talent people of the world. People with talent (or developed human capital) can now work almost anywhere in the world, and then be paid handsomly for the sacrifices of moving. These people do not always leave countries because they are negative about the challenges facing developing countries, although this certainly makes it easier to go and live between a different and often strange cultural group (no offence intended).

I propose that we raise the importance of tertiary education, human capital development and use technological advancement to achieve progress in our developing countries. This will lay important foundations for future economic growth and for the necessary increases in productivity to optimise the resources available to societies.

What do you make of this?

On the ground in Soweto

Early in May  I had the privilage of working with the international NGO Worldvision on a Local Economic Development in Soweto. The objective of the assignment was to assist Worldvision to focus its support activities in Orlando East. Zini Godden assisted me as the co-facilitator, and the method we applied was the PACA (Participatory Appraisal of Competitive Advantage) methodology.

Firstly, family and friends were all very worried about me working in Soweto. This was rather odd, as I have been working in predominately black areas since 2002. It shows that there are still some very large judgements about Soweto. For those that want to know, we stayed in a great guest house in the centre of Orlando East. And we had great food. Actually, there is a whole group of guesthouses in Soweto that are quite busy accommodating international tourists.

Secondly, Orlando East is very busy. It is busy on the surface, with people constantly moving about in the region. But it is also busy under the surface. The tavern that we used as our base during our workshops had a credit card terminal. This may sound odd to my foreign readers, but for a business in South Africa to keep a credit card terminal the business must process at least 3000 euro (R30,000) per month. That is a lot of spending power! At the same time, the new Maponya shopping mall in Kliptown is a must see!!!

Thirdly, there are many committed people working in Orlando East. We refer to them as champions, and they go out of their way to make sure the community functions. I have actually not witnessed this level of community involvement ANYWHERE where I have worked before. Some of these people are ward councillors (yeah, they do actually work in some places), community development workers, social workers and many others. The business people gave a lot of their time during several days of workshops, meetings and brainstorming.

Lastly, there are many untapped business opportunities in Orlando East. Unfortunately, there is also low local savings, which means that there is poor formation of investment capital in the region. At the same time, there is a lack of office space for businesses to start, and most investment is taking place in small spaza shops.

On the topic of spaza shops, I witnessed something really sad while working there. While the economic development unit of the City of Johannesburg was working with community structures and the hawkers to formalise and train the hawkers, the Metro police raided the stands of the hawkers. The heavily armed Metro Police moved in and basically destroyed the stands and confiscated the goods of the hawkers. I was so angry. This is a terrible example of how one unit in a municipality can work against another. Contrary to popular belief, many hawkers have invested ALL their savings in their stands. In same cases I estimate the investment to be in the region of more than R5000 (500 Euro) in several instances R10,000 (1000 Euro). I confronted an official and he told me that they were focusing in unlicensed or counterfeit goods (show me an unlicensed or counterfeit banana and win a prize). The official became aggresive when I took photos and insisted that they have warned all the hawkers in writing!!

Look at these pictures and tell me what you think!

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