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Parliament, Cape Town - Offering tax incentives to employers will not help solve the ticking time bomb of youth unemployment, says the National Union of Metalworkers of SA (Numsa).
“We don't need incentives or handouts to create employment; we need to industrialise, we need to localise,” Numsa first deputy president Andrew Chirwa told members of Parliament's finance standing committee on Tuesday.
The committee was holding public hearings on the draft Employment Tax Incentive Bill, which offers an employment tax incentive to private sector companies, encouraging them to take on more young people.
It applies to youths aged between 19 and 29 who earn less than R6000 a month.
Earlier on Tuesday, Treasury deputy director general Ismail Momoniat told the hearings that youth unemployment in South Africa was extremely high by international standards, with 2.4 million of the country's unemployed under 30 years old.
Chirwa said Numsa was not naive about the unemployment problems facing South Africa, especially its youth.
“ 1/8We 3/8 need to move with speed to bring on board proposals that... will address this challenge.”
However, the reason there was a problem was not that companies had decided they did not want to employ workers, but because there were not enough opportunities.
“If there are not enough opportunities, what is it that the incentive is meant to do?”
In the current economic situation, employers were simply not employing people.
Chirwa offered the automotive industry as an example, noting that productivity levels in this sector were generally high, and rising.
“But the industry... is not creating jobs. Instead, the level of productivity is going up, profit margins are going up, but job opportunities are going down. Employment is dwindling, it's shrinking.”
Yet the committee had heard government wanted to “throw in” money, in the form of the proposed incentive, in the hope that employers would “all of a sudden” start recruiting unemployed youths.
Numsa maintained this was a wrong basis from which to proceed. There were already many incentives and related schemes and subsidies in South Africa.
Expanding industrialisation was the key to addressing unemployment. Companies were patriotic to profit, not people.
“Why would we think that all of a sudden they are there to create jobs? They don't employ people because they like people; they employ because there are jobs to fill,” Chirwa said.
Committee chairman Thaba Mufamadi warned of the enormity of the youth unemployment problem and the dangers it posed.
“The challenge we have is that of the unemployed in this country, 70 percent are young people. We cannot turn a blind eye to that... it is amazing that South Africa has not gone through what some refer to as the Arab Spring... These young people we are talking about, their patience is endless. We don't want to test 1/8that 3/8 patience,” he said.
In an earlier submission, the Congress of SA Trade Unions said it intended making sure the bill was not passed and implemented. The head of the union federation's parliamentary office, Prakashnee Govender, listed the reasons for their objections to the measure.
These included that employers might unfairly dismiss older workers in favour of subsidised younger ones.
Momoniat said the suggested implementation date for the scheme was January 1 next year, with young workers hired from October 1 this year being eligible.
It was further proposed that the incentive scheme would run to December 31, 2016.
“The potential cost of the incentive, in terms of the future tax revenue foregone, is estimated to be between R1 billion and R2.3 billion over the two years duration.”
An amount of R500 million had been set aside for the current (2013/14) financial year.
Momoniat noted that the scheme was not a silver bullet designed to strike down youth unemployment, but one of many policy options.
An important point was that in designing it, Treasury had aimed to keep the process - which did not affect wages at all, but worked by setting off the incentive amount against employees' tax (PAYE) Ä as simple as possible.