Skills development is the most important indicator in government's balanced black economic empowerment (BEE) scorecard. (See table on Skills Development.)
Conservative economist Paul Krugman says there is nothing miraculous about the so-called Asian miracle. Between 1966 and 1990 the Singaporean economy grew by 8,5%/year; per capita income grew at 6,6%/year, roughly doubling every decade. However, all of Singapore's growth can be explained by increases in measured inputs: growth in employment, the education level of the workforce and the stock of physical capital. There is no sign of increased efficiency.
The employed share of the population surged from 27% to 51%; in 1966 more than half the workforce had no education; by 1990 two-thirds had completed secondary education. The country had an enormous investment in physical capital; investment as a share of output rose from 11% to more than 40%. All the growth was achieved through the mobilisation of human and physical capital, Krugman argues.
In SA, 10 years after democracy, the country is still struggling to overcome the apartheid legacy.
According to the Economist World in 2004, 4,3m people in Singapore generated a GDP of US$95bn in 2003, equivalent to $22 230 per capita. In SA, 45m people generated a GDP of $154bn, equivalent to $3 310 per capita.
The reason is that the average Singaporean is well-educated and there is more capital employed per worker, which results in increased productivity (or output) per worker.
In SA, government's Ten Year Review says: "Approximately 71% of the population over 20 years of age has not completed secondary schooling. This finding is significant in terms of the impact of human capital on employment."
The flip side of this statistic is that 70% of economically active black Africans do not have a formal-sector job.
About 50% of black Africans are unemployed while 20% eke out a living in the informal sector where they add little value to the economy. Of those black Africans who are employed in the formal sector, 80% earn less than R2 500/month. According to the February 2002 Labour Force Survey, 89% of the population of working age does not have work-related training. For the employed population the figure is 85%. Therefore, BEE must be about increasing the amount of economic value added (or productivity) of black South Africans and moving millions of people from zero and low-productivity activities towards medium- to high-productivity activities.
However, on the supply side, the Ten Year Review says: "It should be noted that there has been a decrease (since 1994) in the absolute number of matriculants due to the implementation of tighter progression standards at lower levels and limitations on repeaters."
In 2002, fewer than 6 000 African learners graduated with a higher-grade maths pass. At this rate of output, it will be impossible for many sectors to meet the targets being negotiated in more than a dozen sectors of the economy.
In the private sector, SA spends less than 1% of GDP on training compared with 6% in the US and 10% in Japan, according to the University of SA's Bureau for Market Research.
In this Top Empowerment Companies report only seven companies spent 5% or more of payroll, on skills training (see table).
In the US, companies spend on average 4% of basic salaries and wages, which is lower than the total payroll.
The HR manager of a large listed company says SA's new legal and institutional framework for skills development is a complex and convoluted maze of Greek and acronyms. "It took us a year to understand the whole thing. Most companies have adopted a policy of malicious compliance. They regard the payroll levy as a tax.
"On the other side, the institutions spent the past five years developing the capacity to deliver.
"There is also a gap for training courses at the senior and executive levels," she says.
However, the HR manager now believes the system is beginning to work. "Companies are beginning to see the benefits. The institutions must now deliver outputs that are in line with the national skills development strategy."
The new institutional framework for training may well deliver results over the next decade. A bigger challenge is to equip millions of unemployed and underemployed people with the skills to participate in the economy.
