Monday, November 20th is Africa Industrialisation Day, designated by the United Nations Industrial Development Organisation to raise global awareness of the challenges faced by the continent with regard to industrialisation. At an event to be held in Vienna, attended by African ministers, ambassadors, senior policymakers, UN organisation representatives, entrepreneurs and representatives of civil society and academia, the UN aims to mobilise African leaders and international organisations to drive the sustainable industrialisation of Africa.
Under the theme “African Industrial Development: A Pre-Condition for an Effective and Sustainable Continental Free Trade Area (CFTA)”, the meeting will review the industrial challenges faced by Africa, with special attention paid to industrial development as a foundation for the implementation of the CFTA.
South Africa enjoys a level of industrialisation ahead of most of its continental peers, so why should we care about Africa Industrialisation Day or the CFTA?
The African continent is the second most populated continent in the world, with over 1.2 billion inhabitants, or 16% of the world’s population. Yet Africa accounts for less than 2% of international trade and global manufacturing. The continental economy is largely founded on its mineral wealth, but unfortunately the extraction of minerals does not on its own create economic prosperity. Over the last decade, Africa has enjoyed an annual average growth rate of 5%, with some countries reaching more than 7%. But that growth has been based mainly on commodity exports and extractive industries and has not contributed to socioeconomic transformation. Sadly, most of the benefits of this healthy growth rate have been experienced by only a small proportion of the population.
Those who prosper are those who add value to commodities through manufacture. We need inclusive and productive sector-led growth to lift people out of poverty and allow vulnerable communities to benefit from and contribute to the economy. Inclusive and sustainable industrial development (ISID) has been acknowledged in the 2030 Agenda for Sustainable Development as vital to helping Africa overcome its critical development challenges, within Sustainable Development Goal 9 (SDG9), which calls for the construction of resilient infrastructure and the promotion of sustainable industrialisation and innovation.
What is the CFTA?
In the first decade of the millennium, only about 10-12% of Africa’s trade took place with other
African countries. That’s a lot of economic potential being exported to other parts of the world. To increase cooperation between African countries, at the 2012 AU Summit, Heads of State and Government agreed to establish a Continental Free Trade Area (CFTA) and endorsed an Action Plan on Boosting Intra-Africa Trade (BIAT). The Plan identified seven areas of cooperation: trade policy, trade facilitation, productive capacity, trade-related infrastructure, trade finance, trade information, and factor market integration. In June 2015, at the 25th AU Summit, held here in South Africa, negotiations were launched on the creation of the CFTA, with the aim of liberalising trade in goods and services. The hope is that expanded markets for African goods and services, unobstructed movement, and reallocation of resources would promote economic diversification, structural transformation, technological development and the enhancement of human capital.
Trade alone is not enough
Increasing the share of African trade that stays on the continent is one factor that will contribute to economic growth, but it is not the only thing that must happen. Historically, industrialisation has been the most effective means of reducing poverty, because of the associated employment opportunities, productivity gains, and wage increases. No developing country has made the transition to developed country without industrialising.
Socially responsible growth
Two years ago the United Nations launched a set of 17 Sustainable Development Goals (SDGs), as part of the 2030 Agenda for Sustainable Development, calling for industrialisation to be inclusive and sustainable. What this means in practice is that industrialisation in Africa must take place within a robust social and environmental policy framework. An approach that includes corporate social responsibility (CSR) may help to facilitate greater distribution of the benefits of industrialisation; and energy- and resource-efficiency requirements at policy level will contribute to sustainability.
The World Economic Forum believes multi-stakeholder partnerships are key to achieving sustainable development, bringing together major players in the development process: governments, bilateral and multilateral development agencies, national and international development finance institutions, the private sector, civil society, and even academia. It sees the private sector as a crucial role player, with the capacity and expertise to make a significant contribution to international development efforts through investment and CSR initiatives. Fruitful industrialisation and sustainable growth on the continent won’t happen without South-South cooperation and regional economic integration, which the CFTA aims to support.
The CTFA is scheduled to come into effect by the end of this year, to “create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union”, according to the African Union. If it does, we will all benefit from the increased trade opportunities, and from the industrialisation and subsequent development that will ultimately result from regional economic integration. And that’s why we should care about Africa Industrialisation Day and the CFTA!
For more information on Africa Industrialisation Day, click here.
They say the grass is always greener on the other side. If you are employed in a job that is not 100% fulfilling, you may look at friends who are consultants or contractors and envy their independence and freedom. Or you may be a contractor missing the security of a regular salary and paid leave. Which is the better option?
There is no right answer. The correct choice for you will depend on your career and the opportunities within it, your personal circumstances, your attitude to risk and your personality – are you calm and able to deal with the unpredictable or does uncertainty make you anxious? We are all different, and you need to consider all angles – not just the financial one – when considering the path of the independent contractor.
Be an entrepreneur, not a temp
Contracting is not a temporary solution. It is a conscious decision to change your career to a completely different employment model, that of an independent entrepreneur. It is a lifestyle choice, not just an alternative work option to get you over an obstacle such as retrenchment or an unsatisfactory employment situation.
When you’re up, you’re up
As a contractor you are your own boss. You are running your own business, even if you turn up in someone else’s office everyday. The product your business sells is your time, skill and expertise. So when it all goes right, the success is yours and yours alone, not that of a team, and can give you quite a high. Equally, you must take responsibility for things that go wrong. There is no one to blame for blunders but yourself. Do you have the resilience to learn from your mistakes and move forward, especially if the error has cost you a contract? Can you tolerate – both financially and emotionally – the loss of income that may result? If you prefer collaboration and enjoy contributing to a team effort, as well as having the support of colleagues when projects go off the rails, then you may not be suited to independent contracting.
Are you motivated?
What motivates you? Do you need the structure of a job description and clear objectives? Do you respond to the encouraging words of a boss or colleagues? Or are you a self-starter who finds motivation in achieving results? Are you able to pick yourself up after a blow? Can you perform at your best every day, even when you don’t feel like it? Permanent employees inevitably have days of minimal productivity; no one is at their peak every day. Salary is paid regardless. But expectations of contractors are higher. You are paid for results, not for attendance. Your client is paying a premium for your talent and expects you to deliver top performance whenever you are on their service.
Neither style is better than the other. We all respond to different motivators and it’s important to recognise what yours are, as you consider the factors that will ultimately determine your choice.
The legal and financial stuff
So you’ve made the decision to become a contractor. Even then, it’s not that simple. SARS has quite strict conditions that must be met to ensure a permanent employee is not disguised as a contractor. It is very important that you are correctly classified so that you – and potentially your client employer – are not hit with hefty penalties.
Historically, the preferred option among contractors was to set up a company. However, current tax legislation requires quite a few boxes to be ticked in order to go this route. An easier option is to engage the services of a contractor management company, such as Highveld, which, for a fee, will handle all the administration for you.
Whether you opt to trade as a company or a sole trader, you will need a good accountant. Attempting to handle your own books is a false economy; an accountant skilled in tax and bookkeeping for small business and the self-employed will help you take advantage of all the deductions you are entitled to and can save you money in the long run. You concentrate on meeting your clients’ technical needs and let a specialist SMME accountant take care of the other aspects of running your contracting business. Most importantly you will avoid any late tax penalties and other errors of omission.
Replacing employment benefits
As an employee you may have enjoyed access to an in-house medical aid scheme, pension or provident fund, and other benefits. It is important to replace these with private plans. When your income fluctuates, it can be daunting to commit to regular large expenditures every month; but it is critical to build them into your budget and make sure you have the cover you and your family need. Have a discussion with a financial planning adviser and thoroughly assess your savings and insurance needs. This may include income protection cover in case you are unable to work.
We can help!
Highveld and Rosstone Consulting can help you establish yourself as a professional contractor. Highveld provides end-to-end contracting and financial solutions that allow you to concentrate on marketing your specialist skills while we take care of financial, tax and labour services. We do more than ensure your compliance with tax and labour legislation, we make sure you maximise your earning potential and simplify your administrative burden. We can also give you access to a range of ancillary services tailored to the needs of contractors, such as travel, short-term insurance, wellness and more.
Rosstone Consulting has been providing expert tax and accounting services to individuals and small businesses for 25 years and can help you manage the business of your business. We also provide wealth management and financial planning services to give you expert advice on insurance and long-term savings products.
If you’d like to have a no-obligation conversation about your prospects as a contractor and your personal earning potential, contact Highveld on 012 367 5600 or firstname.lastname@example.org. We’ll give it to you straight.