A Case Study: Coega MICT SETA Graduate Internship Programme

A curious problem presented itself last year, when we assessed the local employment impact of several large-scale digital infrastructure investments, we [as Coega] are pursuing. Eastern Cape graduates, who are qualified in scarce and critical Information and Communication Technology (ICT), Fourth Industrial Revolution (4IR) and other digital skills, are being overlooked by employers and investors in digital infrastructure. Graduates are being overlooked despite this being a rapidly growing investment sector that is hungry for local skills. 

Digital infrastructure is necessary to enable the migration of the Eastern Cape economy to a 4IR platform. Doing so would enable the province to retain and improve the competitive advantage and productivity of our manufacturing base through the adoption of 4IR into engineering, manufacturing, resource conservation and smart agriculture, and ultimately, unlock significant economic growth. It would also allow us to take advantage of new sector growth, including offshore resource exploration and commercialisation where oceans autonomy solutions and smart pipelines will play a key role; advance our trade and logistics capability; and harden the cybersecurity of our trade infrastructure (rail, ports, pipelines, and financial systems). Investment into the sector is booming, and South Africa has already attracted several large investments. Both Eastern Cape Special Economic Zones are engaging with investors in this space, with Coega’s pipeline already exceeding R5bn, and with the investment, other benefits like technology transfers and skilled jobs will come into the province. 

The Eastern Cape has a very competitive location proposition. This includes our coastal location – which means that we can respond to the cooling requirements of hyper-scale datacentres, industrial scale renewable energy solutions to power digital infrastructure while meeting ESG investment criteria, and connectivity to the intercontinental sub-sea data cable. In addition, with four universities offering ICT and Engineering qualifications, and high graduate unemployment, we have the skills to support this digital transition. Or so we thought. Our four universities produce the ICT and related skills that industry requires, but for some or other reason, despite these being scarce skills, a great majority of graduates struggle to find employment in the sector. 

When Coega’s Digitalisation Work Stream looked at the post-qualification employment data of ICT graduates, we found that except for top graduates who find viable employment within three months of qualifying, the balance of Eastern Cape graduates remains unemployed for between eight to eleven months post qualification, with the bottom quarter of the qualifying class spending on average 18 months to two years seeking employment. 

We also found that underemployment is rife. Put simply, this is when a graduate trained in network architecture or software engineering ends up working as a fibre installations technician, desk top support assistant, or worse, a cashier at a convenience store. The fact that the post qualification employment data in a scarce and critical skill set field mirrors graduate employment trends in occupations that are clearly in oversupply – for example, the humanities – astounded us. More so, is the extent to which employers hiring 4IR and ICT skill sets tend to favour the importation of entry level talent from abroad or provinces such as Gauteng and the Western Cape, when these skills are in ample supply in the Eastern Cape.

Upon investigation, we found that the curriculum content offered by the Eastern Cape universities was similar to that offered by universities elsewhere in the country whose graduates have better employment outcomes.  Many students at these universities, also incidentally come from the Eastern Cape. When we consulted several employers active in the 4IR space, including engineering firms, the financial sector, trade, and logistics inclusive of customs, existing ICT firms, potential investors, sister state-owned entities (SOEs), and of course, our own ICT Department, the problem statement related to three main concerns: 1) complexity, 2) depth, and 3) occupational competence.  

There seems to be a mismatch in the depth and extent to which the curriculum covers certain topics, specifically in the areas of systems engineering, mathematics, software development, data architecture and cybersecurity, relative to workplace entry requirements.  Specifically, curriculum assessment outcomes are not aligned to occupational competency profiles. A common concern among employers was that young graduates are limited in that they tend to favour simple linear thinking, as opposed to the complex and systems type thinking required in the workplace. These graduates are qualified in skills domains demanding complex thinking abilities such as software development, systems architecture and engineering, cybersecurity, and the like. Not being able to deal with complexity at the level demanded for entry-level candidates, renders them undesirable to employers who are hiring for these skill sets. 

At the wage premium entry level graduates expect by virtue of their qualification, employers demand applied competence that is contextually appropriate. In other words, a graduate who can add value to the bottom line. Accepting that this ability may not be immediately present in the case of a first-time employed recent graduate, employers tend to favour young graduates who fared better in their studies and graduated toward the top of their class, as these graduates also tend to learn a lot faster in the workplace. 

We observed a distinct bias in both hiring and renumeration practices skewed towards four South African universities – which partly explains why local talent, except for those graduating at the top of their class, is overlooked by large employers in the sector. Across the board, employers indicated that the graduates from these universities develop the required applied competence and productivity much sooner than their counterparts. They are regarded as more open and coachable, seen as more diligent, disciplined, and committed in their early career development, and actively seek out problems to solve and opportunities for innovation. 

This seems to be echoed by the graduates themselves. We spoke to recent ICT graduates in the province, and they consistently told us that the biggest barrier they faced in finding gainful employment was their inability to demonstrate their competence during the selection process and solving the problems put to them during recruitment assessments. Competence-based recruitment practices are extensively used in industry, including tests that are specifically normed for entry-level candidates who have no practical experience.  

We started looking very closely at the universities whose candidates tend to fare better in their job search and found several common threads. In all cases, we found that the universities favoured by employers align their assessment outcomes with occupational competency requirements. These universities have all specifically created institutional mechanisms through their engagement portfolios to enable them to engage in long-term and substantive partnerships with industry, resulting in joint financing of research and development projects, industrial cluster development and closely integrated learning programmes, into which industry have substantial inputs including co-delivery of course materials. They all participate in the National Innovation (4IR) Clusters. 

The University of Stellenbosch and the University of the Western Cape participate in the Space Cluster (developing space technologies, including advanced space weather and global positioning systems and launch codes in support of the South African Satellite New Launch Programme), while the University of Cape Town participates in the Fintech Cluster involving the major South African Banks (including the South African Reserve Bank) and other financial sector players in the Western Cape. The Fintech Cluster is transitioning the South African Payments System to a fully enabled digital platform that will see the creation of the digital Rand, amongst others.  

The Artificial Intelligence (AI) Cluster was established in Gauteng with the Universities of Johannesburg, Pretoria, and Witwatersrand participating alongside industry and the Gauteng Infrastructure Development Agency. This initiative saw the development of the drone infrastructure monitoring programme and similar applications of AI-empowered spatial and drone technology. A similar cluster is currently under development in KwaZulu-Natal. 

These universities benefit substantially from research funding, international partnerships, and deep collaboration with industry at the very cutting edge of technology. The financing and partnership arrangements associated with such cluster designs offer a viable route to commercialise and industrialise intellectual property, which in the hands of public higher education institutions, support their financial sustainability and further investments into deepening their capability. Students at these institutions benefit from the innovation eco-systems created by these clusters, which also allows them to become deeply immersed in cutting edge technologies and industry application and exposure over the course of their studies. As a result, their academic training becomes contextualised, innovation- and problem-solving focused, and they develop the practical application over a range of contexts, in a multidisciplinary context early on.  

Clusters, with their deep industry linkages with leading firms, also tend to include structured graduate internships, and this further supports graduate employability. The combination of firms allows for the rotation of graduates to different firms, specialising in different aspects of digital and 4IR technologies, ensuring that graduate interns get the full range and depth of exposure that no single company can offer. Internships are also designed to build forward from the ongoing, structured workplace exposure and integration the graduates received during their undergraduate studies, with student projects often designed to produce workable solutions with real world applications. An example is Kimberley Taylor, a Witwatersrand student who came up with the Sixty60 application now used by Checkers, while solving the travelling salesman problem as student assignment. 

When we look at the lifetime earning patterns of graduates who started their careers with a structured graduate internship and those who did not, the value of a good graduate internship to a young graduate is clear. Comparing the longitudinal employment and income data across disciplines at different intervals, we found that those who benefitted from a structured internship at the start of their careers out earned their counterparts by 28% on average after five years, 53% after twelve years, and that after 20 years, the gap reached 54%. From an accumulated wealth perspective, the ones who benefited from structured graduate internships were 4.3 times better off than their counterparts. 

Access to good internships and other quality entry-level career opportunities is often a function of social capital – the extent to which young graduates could rely on the professional and business networks of their own social network to connect them to opportunities. This is where many of your graduates who come from less fortunate socio-economic backgrounds find themselves at a significant disadvantage. 

The various graduate internships and integrated workplace learning opportunities funded by the Sector Education and Training Authorities (SETAs) were designed to overcome this. In essence, the logic is this – by encouraging employers to take on unemployed graduates and incentivising them by means of a wage supplement in the form of an internship stipend, allowances, or tax deductibles, both parties benefit. The young graduate gets the opportunity to earn some experience while working in industry and acquire the practical competence, while the employer risk is mitigated. Essentially, through these schemes, employers can “try before they buy”.

It turns out that in the view of employers, SETAs vastly underestimate the costs and risks to employers taking on graduate interns, and that the subsidies in many cases only partially cover the intern stipends, with all development and equipment costs being for the account of the employer. Employers, on balance, are not unwilling to incur these costs, but only after they have made the decision to employ a young graduate and they are unwilling to commit the resources costs associated with mentoring and training interns unless it is someone who already stands out in their view and who they wish to employ. 

In discussions with the Media, Information and Communication Technologies (MICT) SETA, it quickly became clear that the delivery of ICT related internships in the Eastern Cape is difficult. For starters, they don’t get many applications for internship programme support from Eastern Cape employers, and the majority of these being small operations, do not run the large networks and the type of systems a young graduate would need exposure to if they were to achieve the range and depth of exposure needed to prepare them for employment in the type of investment projects we [Coega] have in our pipeline.

The graduates themselves only consider internships as a last resort for financial reasons. Graduates coming from poor families need to maximise their earnings as soon as possible, because they have no family support to cover living expenses and are often expected to make a financial contribution to the family. If that means accepting a job as an admin clerk at R6,000 per month vs. an intern stipend of R3,500 per month, they will choose the admin job. These choices, made from necessity, entrench their socio-economic status in the long run. 

We decided to see how we could turn this situation around. This required: a workplace functioning at the cutting edge of technology and capable of providing the range and depth required to ensure young graduates meet investor requirements; qualified graduates who have not found employment at least eight months after graduation; an Eastern Cape institution of higher learning; and the MICT SETA. 

Our objective was two-fold – firstly, we wanted to assist 50 overlooked young graduates to find gainful employment in the industry. Secondly, by offering a structured internship, we were looking for ways we could change the way internships are delivered, and in doing so, address the financial barriers faced by the interns, help them build their social capital by connecting them to Coega’s professional staff and their considerable networks of influence, and help them develop practical skill sets. The Coega ICT Department runs one of the largest datacentres in the Eastern Cape, and in delivering the software and system requirements arising from Coega’s diverse and complex business environment, as well as providing services to several investors, sister SOEs and government departments, we had a workplace capable of delivering the full range of exposure needed by the graduates. To that, approximately thirty of Coega’s senior staff representing a range of different business functions volunteered to create specific projects for the graduates to work on, and to provide them with the contextual mentorship. 

By enjoining the Nelson Mandela University (NMU) School of ICT in the delivery of the internship programme, we hoped to create a feedback loop that would enrich the School’s curriculum going forward, while opening up our workplace and projects as research opportunities for the academic staff. We found willing, able, and extremely committed partners in Professor Sue Petratos, Ms. Karen Church, and Prof. Darelle van Greunen at the NMU School of ICT. 

For the MICT SETA, the experiment also produced valuable insights into designing pro-poor graduate internship incentive schemes, and Mr. Andile Nene, their Regional Manager, agreed to sit on our project steering committee while MICT-SETA co-funded the Programme. 

We decided to select two cohorts. The first cohort was selected in December 2022, and targeted graduates who by then, were almost a full year in unemployment post-graduation. This gave us an opportunity to understand why they were left behind, despite their skills being in critically short supply in the labour market. The second cohort targeted recent graduates, and they helped us understand some of the reasons young graduates choose to pursue further studies, or underemployment over internships, when they struggle to find desirable entry-level jobs.  

The project design itself was simple. One group of students, the communications technology cohort, would join the Coega ICT Department, who designed a special programme for them according to their field of study and provided them with dedicated mentorship in both the workplace and technical elements of the Programme. 

We decided to place the software development cohort in the different departments at Coega, where their task was to develop specific applications, often simple derivatives of complex systems already in place, for their host business unit who would also be their client. This element of the mentorship required specialised supervision from skilled mentors in software development, and this is where the university lecturers were supposed to step in. The overall lead mentor was Mrs. Karen Church from the NMU School of ICT, who together with Prof. Petratos, the Director of the School, served on the project governance structures. This provided the workplace integration link and allowed the University to directly interface with both the graduate interns, the workplace mentors, and the ICT Department. The observations made by the University found their way into further iterations of their own curriculum, and we are pleased to hear, that subsequent to the Coega Programme, the University also chose to run a second graduate internship in partnership with the MICT SETA to continue this work with other employers. 

Coega also supplemented the graduate stipends to match those of our other corporate interns in the finance, engineering, and legal professions, and by fully integrating the ICT cohort into the corporate internship programme, all our ICT interns enjoyed the benefits of community in a multidisciplinary environment. The Programme yielded some encouraging results. Many of our interns, once enrolled in the Coega Programme, were recruited by big corporations to join more specialised graduate development programmes coupled with employment, including one in the Capital Raising and Funding Office, who was recruited to specialise in fintech by one of our banks. Others found employment, including six, whom our ICT Department decided to keep. But there were also lessons. Some creative ones decided to, while undertaking the internship, supplement their stipends by enrolling for further studies and capturing the NSFAS benefits, including on-campus accommodation. This provided them with (we hope) a valuable learning opportunity in ethics and integrity. 

Our biggest success was the communications and technology stream who benefitted from working in the ICT Department where they could receive their technical mentorship as well. The software cohort did not fare so well. While the workplace mentors could teach the interns much about how finance, infrastructure projects, customs and logistics and other types of businesses work, for the interns to develop their software projects, they also needed input on the technical aspects of software development. The original idea was that the interns would be helped to develop their own applications and offer these either as a portfolio of work evidencing their ability when they apply for jobs, or to develop these as commercial applications supported by Coega’s ability to assist them to develop the prototypes and link them to early-stage venture funding. 

It turned out that the idea of getting the university lecturers in to deliver this component in the absence of a fully-fledged cluster environment, while in theory had merit, did not work in practice, given the courseload of the lecturers. This is something we need to solve going forward.  

Coega has far-reaching cooperation and partnership agreements in place with several leading universities and national research institutions including the Council of Scientific and Industrial Research (CSIR), South African National Space Agency, and the Agricultural Research Council. These being further backed by deep financial partnerships, international trade, and investment arrangements, standing co-operation agreements with industry associations and sister SOEs, make for an excellent capacity to leverage trade agreements to support technology transfer, investment into Research and Development (R&D) and support the deepening of South African R&D capacity. The existing biofibre cluster is an example of how Coega and the CSIR are collaborating to develop a sector that will be instrumental in greening value chains, including auto, (composites, woven and non-woven auto components), agriculture (geo-textiles and other applications), construction, and the clothing, textile, and leather sector. 

The focus for the Eastern Cape is to capitalise on the deep engineering capability in its export-oriented and advanced manufacturing base, and to create value in emerging sectors. For example, the development of oceans autonomy solutions to support offshore resource exploration while building on the work already done by the innovation clusters, the terrestrial application of space technology in agriculture, the oceans economy, the composites sector, and the like. 

Similarly, the work of the AI Cluster in Gauteng could find application in telematics and other applications in smart component manufacturing, and the work of the fintech cluster, when combined with distributed ledger technology can completely transform our trade and logistics sectors.  By ensuring that these linkages happen, we may be able to offer our graduates similar opportunities to those enjoyed elsewhere, and as a result, ensure that they are not overlooked as we continue to develop the digital economy.