Pravin: Jobs crisis the greatest economic challenge

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Minister flags "catastrophic" implications if SA can't put its unskilled to work.

PRETORIA - In this year's mini-budget statement, Treasury has said that creating jobs, particularly among the millions of relatively unskilled South Africans, is the country's "greatest economic challenge". The statement warns that if a resolution is not found for this problem, there will "be catastrophic implications for social stability and future growth.

"Only 42% of the population aged between 15 and 64 are in some form of employment. This compares unfavourably with countries, such as Brazil and China, where about two-thirds of the adult population work. In the former homelands, the picture is even bleaker, with fewer than 30% of the adult population working," warns Treasury. "According to the Labour Force Survey, almost half of young Africans have never worked."

Government initiatives aimed at addressing this crisis include the training layoff scheme and the expanded public works programme.

The training layoff scheme's immediate purpose is to avoid retrenchments while boosting the country's skills base. It targets companies who are considering job cuts or closure as a result of the recession. Workers agree to forego their normal wage and receive training and an allowance instead of being retrenched. The employment contracts remain in place and employers maintain their contributions to the basic social security package. The scheme is funded by the National Skills Fund and the Unemployment Insurance Fund. It has an initial allocation of R2.4bn.

Treasury reports that by the beginning of this month, 24 companies with 3 438 employees had applied to the scheme.

The expanded public works programme aims to create 4.5m short-term jobs over the next five years. Treasury says this is the "equivalent of 2m full-time low-skilled jobs for unemployed South Africans." The jobs will be created in the infrastructure sector and for nongovernmental and community organisations providing services on behalf of government.

Government departments will be incentivised to use labour-intensive methods. The incentive is a reimbursement of R50 of the daily wage of each person hired, provided that the job target threshold has been exceeded.

A community works programme, which operates largely in rural areas, is being rolled out in the current financial year, notes Treasury. It aims to provide work to a minimum of 1 000 people per week on each site. The programme targets the creation of 180 000 full-time equivalent jobs by 2014.

Treasury has identified the following policy options to boost employment:

Expanding services that are labour intensive, such as home-based care, refuse removal, building maintenance, grass-cutting, rural road construction, securing government buildings such as schools, and cleaning up environmentally sensitive areas such as rivers, lakes and wetlands.
Changing the orientation of industrial incentives to focus on labour-intensive industries.
Using the tax system to encourage employment. Government can consider using the income tax system to provide incentives to employers to hire staff, lowering the cost of employment without affecting wages. Similarly, government can subsidise social security contributions (such as unemployment insurance) for low income workers.
Making greater use of research and development capacity and innovation to support job creation by the private sector. Similarly, responding to the climate-change challenge provides the opportunity to increase investment and employment in "green" technologies.
Introducing a targeted voucher to help matriculants enter the workforce. Such a voucher could either be used for further education and training, or be presented to an employer willing to hire the school leaver, helping young workers to gain skills and experience.
Implementing a coherent rural development programme, including support for access to agricultural markets, training and assistance to small farmers. Rural infrastructure projects tend to be labour intensive, with positive effects for community livelihoods.

Write to Julius Cobbett: julius@moneyweb.co.za