Episode 5: Education, Skills and Talent

Full transcript

Peter Englisch: Hi, everyone. I'm Peter English. Welcome to our fifth episode of our podcast series Up Next For Your Private Business. So far, we have discussed four aspects of PwC's EPB [EMEA Private Business] Heatmap. First, what constitutes an enabling environment for private business, then focusing on three of the Heatmap’s seven categories; the tax and regulatory regime, public health, and ESG.

Now we're going to drill down on education, skills, and talent. Having a well-qualified workforce and good education system is vital, not just for the success of a company, including private businesses, but also for the wider economic development of a country.

The Heatmap looks at the range of metrics from employment, youth unemployment, literacy rate to education spending, and quality of universities.

To discuss this topic, we felt it's time to get the perspective from a different continent and from a representative of an emerging market.

So I'm very delighted to welcome Duncan Adriaans, EPB Leader from PwC South Africa.

Duncan Adriaans: Thank you so much Peter, and I'm absolutely delighted to be here with you today.

Peter Englisch: Thank you, Duncan.

So, we will discuss the Heatmap and the importance of education in a moment. But first, I would like to ask you about your personal experience of growing up in the South African education system.

Duncan Adriaans: Thank you so much, Peter. I finished high school in South Africa in the year when our icon, or the Father of the Nation, Nelson Mandela, became President of South Africa, which was in 1994. I was one of the last of those who was at school when we had segregated schooling systems under the old apartheid system.

As we entered into the new democracy, my father said to me quite often, "Duncan, you need to go and study, go to university because education is going to be your route out of poverty."

I had no idea what he meant. I genuinely thought by then we had a comfortable lifestyle, but in many ways I've been very fortunate.

But I do think the story that I'm sharing with you today does speak profoundly for many people who were disadvantaged in 1994 and prior to that as well in terms of access to higher education in South Africa.

Peter Englisch: This is a very moving and personal story. Thanks for sharing.

What has happened with the education system in South Africa since then?

Duncan Adriaans: Yeah. So post-1994, access to higher education in South Africa has been broadened and that's one of the key performance indicators for a number of higher education institutions in South Africa and especially targeting those who have been disadvantaged pre-1994.

But while access has opened up for a number of individuals, the throughput, in terms of those who are coming out with degrees, master's, PhDs, and the likes has not been at the desired level.

The numbers have been churning, but not at the high enough level for us to see a remarkable growth in skills. We still continued to see, what I would say, high dropout rates, particularly in the junior parts or the foundation phases of the higher education space.

The education system of many years back pre '94 was a very fragmented system, very disjointed. And I recall, particularly my final year in 1994, I think the matric exam, there were at least twelve different education departments for each province, which means that there were twelve different exam papers for a particular subject. So that's really crazy.

In 1994, the government centralised a number of these-- the education departments and the work that was being done, meaning that we have a single education department that is being run from the centre. 

And I think that's been an improvement. It's a step in the right direction, but there's still room for quite a lot of work to be done in terms of broadening access and improving the quality of education.

Peter Englisch: Let me ask you another question, because you mentioned dropout rates and throughput was disappointing. If you go into the Heatmap territories and want to understand what effect this dropout rate and low throughputs have on Africa's economy, especially in South Africa's economy, what do you think is the impact to the economic development, the attractiveness for investors and the like?

Duncan Adriaans: Yeah, so I was one of the few, as I've said, that was fortunate enough to be able to go to university and there was a big focus on, well, higher university, higher education, going to university. That was the panacea.

We've then seen the advent and rise of colleges, TVET [technical and vocational education and training] colleges, FET [Further Education and Training] colleges for other types of individuals. But some of those have not kicked off at the levels that we would have liked. And so one goes to the root cause. And some of the root causes why we're not getting those high levels of graduation has been that early childhood development is not at the right level, so what we have seen is a number of ECD [Early childhood development] centres reaching out to many communities to help, at least at the foundation phase.

The result of not doing this at a much earlier phase is that that's part of the reason why we see high youth unemployment in South Africa. University is still, perhaps for some, a dream, but access and affordability seems an issue.

And so for many households which were really affected by poverty, big decisions are being made in terms of do I go and study or do I go and live, ignore the studies, and rather go and work because the cost of living in the household depends on providing some form of income and providing relief.

And so the net effect of this is that we have a number of people who are unemployed or uneducated getting to the job market. And it does have a snowball effect amidst the social impacts and even some of the social ills that we continue to experience in our country.

What we have also seen is that post 1994, we have seen a rise of our colleagues from the Diaspora African continent arriving here, and lately, we have seen some sort of resentment, unhealthy in my view, and even some instances of xenophobia where it’s thought that some of these individuals from the Diaspora are taking some jobs locally.

And I think that's unfortunate. But I think part of the solution is going to be how we take South Africans and others on a journey of being educated and creating those kinds of opportunities as well themselves.

Peter Englisch: I think education is not only a role for the government. So what is the role of private businesses? What can private businesses, entrepreneurs do and what are they already doing in South Africa? What do you think?

Duncan Adriaans: So if I just think of myself at PwC-- in terms of PwC as a private business, and I think they're a good example. So, when I started out here at PwC, I was just taught how to audit. And a few years back, we entered onto this digital transformation journey. And before you knew it, I had to do all sorts of courses that I never would've imagined in my mind.

And that upskilling and using some of those tools have made me effective in the way I do my work. It's improved quality, but without those tools, I'd still be driving down in deep Excel sheets and that kind of thing.

And so if I look at that, I believe there's immense opportunity for private businesses, particularly in South Africa, in terms of creating opportunities for upskilling, for training, and perhaps even re-skilling in some aspects as well for some of the employees.

We have seen, using the example that I've shared earlier, some may delay university studies or any form of study after finishing schooling. And in some cases, we have seen that some of the private businesses have paid for the education, for the upskilling, and the retraining.

These are happening. I think there are pockets of excellence where we see some of it happening. Is there room for improvement? Without a shadow of a doubt, but if we were to scale this up in South Africa where we have that kind of private partnership with the private sector, together with the public sector and in terms of what we do, I think there's a huge, huge opportunity that we are perhaps seeing at the moment.

And I do believe people are really keen to upskill themselves. Many individuals that I speak to from various aspects of life are always looking at ways of improving themselves, improving their lifestyle.

And I think it creates a great value proposition for many employees and particularly private businesses from a longevity and employee proposition as well.

Peter Englisch: That sounds really good. And I like your example. I think there should be a vested interest of entrepreneurs and private businesses to invest in the workforce, for sure.

But do you think that's already enough or can private businesses, or should private businesses do even more than they do today?

Duncan Adriaans: Well, the straightforward answer is they can always do more, but they have an important role to play, Peter. I do believe that private businesses have a very important role to play.

Since South Africa has joined the global economy, we have seen some sectors being completely decimated or even disrupted when we joined global forces. And part of that was because we were not competitive at a global scale.

And so part of it is that the government has not protected some industries. As a result of it, we were exposed and the only way to survive is that we either have to disrupt ourselves to be competitive-- and this is the same challenge for private businesses especially as we emerge from COVID.

New opportunities are being created and it's about how we disrupt ourselves to make sure that we can do this and we can disrupt ourselves by the way we think about things, the way we approach things, and this is where upskilling and retraining is going to play a huge role.

Some of the larger corporates we have seen investing substantially just in themselves. Some businesses who have said the existing business model is under threat have spent an enormous amount of money in the reskilling, upskilling their teams to make sure that they remain productive, efficient.

So I do believe there is a huge opportunity going forward. What we have seen is also a brain drain in South Africa where we've lost some talent as a result of this, so I think private businesses do have a role in making sure that they're able to do so.

Peter Englisch: I think you make a very important point. Private businesses should do that also to protect themselves, to do good for others, of course. Upskilling means to secure your business, and it seems that not all entrepreneurs, including private businesses, have invested the amount, time and effort that would have been needed.

So, there must be problems to businesses as a result of this underinvestment. What do they look like in South Africa?

Duncan Adriaans: So as I've alluded earlier, as a result of the underinvestment and the throughput not coming through at the tertiary education, what that means for private businesses is that if you're looking for skilled talent or even, let's say, scarce talent, there's a premium that needs to be paid.

And in many cases, private businesses cannot afford that. And so they're competing with some of the corporates who are able to perhaps be able to pay a competing remuneration. And at the same time, it's not just at the corporate level, you also get the public sector who's also demanding those same sets of skills as the government wants to build a capable state using some educated individuals.

So there's a real war for talent in South Africa for those who are there, and then we have another bucket of those who are perhaps saying, well, this is not a home for me anymore. Perhaps this is not where my future is.

And especially some of the younger professionals we have seen post '94 upward global mobility of our people moving around the globe has been on the increase. And so we do have a sense of brain drain in terms of making sure that people are being affected.

But I do believe private businesses can think of innovative ways of making sure that we retain some of the talent as we go forward. We are all targeting the same people and so private sectors can think of more innovative ways.

I'll give you a simple example. Some private businesses cannot afford a CFO with many years of experience. What we've seen is companies coming to the fore, helping smaller private businesses say, well, let's hire a CFO for X amount of hours per month or days per week, or whatever it may be and that individual is being shared across a number of smaller businesses where that skill and talent is then being shared across a number of businesses as a result of that.

And I think that model where some of those are being used, I think, has been used with some success as well.

Peter Englisch: This is very interesting and the joint effort is probably needed from public and private. You mentioned already the correlation of education, unemployment, youth unemployment, and the problems. I strongly believe if we would make an analysis for other countries based on the Heatmap data, we will most likely see a strong correlation between the welfare of a nation, GDP per capita and the effort goes into that education system in order to reduce unemployment and to make the workforce and therefore the companies more competitive in the market space.

So obviously, this is the shared responsibility of policymakers in South Africa and private businesses, NGOs [non-governmental organisations], and probably others. You mentioned earlier that the government already started after 1994 with some good initiatives.

Do you think that the policymakers at the government are doing enough or what could be improved? And do you see any promising initiative already going on that is aiming to close this gap?

Duncan Adriaans: So I look at it twofold. One is each year there's a bunch of kids who finish high school and we then become a little bit depressed about what happens to their future. So there's that bunch of individuals that finished school, perhaps not educated, that require some upskilling, and I'll talk about that.

And then there is an opportunity to go back right to the beginning and say, well, at early childhood development level, we've got to do things. And I think that's the one, at a government level, where I think more investment needs to be made whether it being the remedial or learning support at the foundation phase because I think that creates the good building blocks for those as they finish school.

For those who have finished school and find themselves sort of in the vacuum system about, okay, I didn't make it enough to go to university or college. Where does that leave me? And I think this is where private businesses can play a role.

One of the avenues that I believe is still to be explored substantially in terms of opportunity is we have, what we call in South Africa, the sector of education and training authority.

So each sector has what we call a SETA, which is the Sector Education and Training Authority and on a monthly basis whether it's corporates or private businesses.

If you employ any individuals, you need to pay what we call a skills’ development levy and it goes to the necessary authorities. So this happens without a flinch. You pay your taxes, you employ taxes.

This money goes, without a doubt, into that particular authority. These funds sit with those various authorities, and as private businesses, you have an opportunity to go and claim some of that money back.

So one of the bigger things I would be thinking of as a private business, as you listen to it, is to say, well, I need to invest. Where do I find the cash? This is one source of saying, well, I've spent this money, I can get some of this money back following the necessary protocols.

So I do believe there is an avenue because some of these SETAs sit with huge loads of cash, but it's not being effectively used or private businesses or corporates are perhaps not tapping into it and making sure that they get some of this money.

And I would say perhaps more can be done, either from a government level, from an advocacy point of view that these piles of cash are being put to good use and for what it's been intended for. And that corporates find the time and the energy to identify how they can claim some of this money back because I do believe if one is looking for a bit of seed capital to invest in your own stuff and in your own workforce, I do believe 

claiming some of these funds back can make a remarkable difference.

And any employer who invests in their staff gets a lot of loyalty and quite a lot in return and perhaps will reduce some of the unemployment that we're starting to see increasing in South Africa as well.

Peter Englisch: This sounds very interesting. I would really like to learn more about this SETA, which really sounds like a great model, which creates motivation for companies to invest in education and it sounds like a very interesting model, not only for emerging markets, but also for developed marketplaces and countries.

Thanks so much, Duncan, for being with us here today for the fascinating discussion and all the best for you. Bye, bye.

Duncan Adriaans: Bye, bye. Thank you.