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Nedlac, Treasury clash over youth wage subsidy

Deputy President Kgalema Motlanthe addressing the opening session of the 2 day  South Africa- Norwegian Rountable on Social Dialogue held at NEDLAC office, Rosebank, Johannesburg, Gauteng Province. 21/10/2013, Elmond Jiyane, GCIS

Deputy President Kgalema Motlanthe addressing the opening session of the 2 day South Africa- Norwegian Rountable on Social Dialogue held at NEDLAC office, Rosebank, Johannesburg, Gauteng Province. 21/10/2013, Elmond Jiyane, GCIS

Published Jan 26, 2014


THE ANC’s apparent move to muscle through the reworked youth wage subsidy before this year’s general elections has pitted the Treasury against the National Economic Development and Labour Council (Nedlac), with the latter considering legal action. 

The dispute between treasury and Nedlac could have serious implications for economic policy contestation in the cabinet and the ANC-led tripartite alliance. 
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Last week, in an attempt to smooth relations between Nedlac and government, Deputy President Kgalema Motlanthe met the council to discuss its unhappiness. 
The dispute arose at the end of last year when treasury rammed through the bill, which the ANC’s alliance partners – including Cosatu – continue to oppose.
The council had gone as far as seeking a legal opinion in December last year – eight days before the Employment Tax Incentive Bill was passed on January 1 – confirming its suspicions that the Finance Department flouted the Nedlac Act to push the bill through before the elections. 
The bill incentivises the employment of first-time job seekers by giving a tax rebate to businesses. 
With recent Statistics SA figures showing |71 percent of the unemployed were aged between 25 and 34, job creation is a key election policy issue. It has, however, led to divisions in the tripartite alliance over the ruling party’s job-creation strategies.
Nedlac’s legal opinion was however in sharp contrast to the one sought by the Finance Department two months earlier, stating that there was no obligation on them to share the proposed legislation with the council. 
“The pace with which this enactment has proceeded from the date of first tabling in Parliament to the date of coming into operation is in our experience unusually rapid,” states the legal opinion given to the council. 
“There is an obligation upon the state, if the state proposes changes in social and economic policy and draft legislation relating to labour market policy, to first table such policy and/or legislation at Nedlac before it is tabled in Parliament,” it concluded. 
Contacted yesterday, Nedlac executive director Alistair Smith said: “Treasury’s intention wasn’t to undermine Nedlac.
“The bill has been signed into law. It is now an act so it’s water under the bridge but how do we prevent this from happening in the future? Our legal opinion does not just say look at the letter of the law, but (it says) look at the spirit of the law,” said Smith. 
The legal opinion is seen, however, as a stern warning to treasury. 
Smith confirmed that the meeting with Motlanthe was “extremely constructive in reinforcing the role of Nedlac and in giving a commitment to ensure steps that Nedlac is not undermined and that social dialogue is very important. 
He said: “The very strong message that comes out is a recognition that we’ll ensure adherence from government to Nedlac protocols."
“You don’t engage with social partners because of the legal requirement but because of the political and social imperatives. It’s working towards the social compact,” he argued.
Treasury deputy director-general of tax and financial sector policy, Ismail Momoniat, said any party was always well within its rights to obtain a legal opinion as this facilitated a more constructive discussion.
“The law only sets the minimum requirements of consultation. As government we are committed to engage all players affected by legislation to ensure we have good legislation,” he said.
He said Treasury was committed to engaging social partners including outside of Nedlac constituencies and was committed to a co-operative relationship with the council based on good faith. 
This week, a senior Nedlac official, who asked not to be named given the sensitivity around high-level discussions with the government, said the treasury was under political pressure to pass the Employment Tax Incentive Bill late last year.
“There was a political push. There’s a possibility it was out of the hands of the treasury in terms of the haste with which the legislation was passed,” the official said.
A treasury official confirmed this, saying the cabinet’s approval of the bill late last year with elections approaching, was because the ANC was “desperate to say something on jobs”.
“Government… as the ANC… was very determined to push on (with the employment tax incentive bill),” the official said.
This view was reinforced by the war of words between ANC MPs during public hearings on the bill in Parliament last year.
“The ANC had made a political decision. In our view there has been no opposition (to the incentive) in the ANC. Even the Progressive Youth Alliance (PYA) has been brought into line,” the treasury official said.
Tito Mboweni, ANC national executive committee (NEC) and economic transformation sub-committee member, however denied the party had pressured the treasury to ram through the bill in time for its election manifesto launch. 
“The… matter was stalling due to fear from trade unions that youth employment initiatives might displace older workers, and there has to be certainty that displacement of older workers would not occur,” he said.
“There were lengthy discussions in the economic transformation committee (ETC) and national executive committee, and also within alliance structures a decision had to be taken. The trade union movement is still opposed but the issue has been discussed and its time to move on. 
“The political question is we have to respond to (the) youth unemployment challenge. In terms of the urgency of tackling the issue. This might have fallen in between elections or before manifestos. But the point of implementation – whether it’s just before an election (or not) – is not the issue.
“These matters are discussed in economic transformation committees and alliance summits, and decisions of the national executive committee are made and government must move ahead and stop stalling.”
But national secretary of the Young Communist League, Buti Manamela, said it remained opposed to the tax incentive, even as part of a basket along with the youth employment accord, which it supported along with the PYA. 
The youth employment accord, a multi-pronged strategy to address youth unemployment spearheaded by the Economic Development Department, was signed in April last year by youth political formations across the spectrum.
“We remain convinced that the tax incentive is a youth wage subsidy in other words, and thus we remain completely opposed to it,” he said.
He said the YCL had “consistently raised the issue” that the incentive would not deliver the targets and policy intentions it promised to.
“It is merely a means with which the bosses will be getting money from government without doing anything. There are many other incentives intending to do the same thing. And we think we should be concentrating instead on other incentives,” he said.
“It shouldn’t even be considered.”
Treasury officials, who spoke to The Sunday Independent on condition of anonymity, still insist the tax incentive act is a money bill rather than a labour one and therefore need not be tabled with the council – an argument rejected by Nedlac on the grounds that it has significant implications for the labour market.
With tensions mounting between the ANC and its allies, Cosatu has felt the heat from its own affiliates for not taking a tougher stance against the ruling party. 
This resulted in a decision by its largest affiliate, the National Union of Metalworkers of SA (Numsa), decision late last year to leave the alliance and withdraw financial and political support for the ANC on the eve of the elections.
Numsa has given notice of a Section 77 strike against the tax incentive which begins on budget day, February 26.
Meanwhile, opposition parties also want in on the action. The the DA has planned a march to Luthuli House, the ANC’s headquarters, because of unhappiness with the ANC’s election manifesto promise of six 6 million job opportunities.
And as Nedlac struggles to shrug off its reputation as the graveyard where “good legislation goes to die”, boasting of a six-month turn-around time, government officials still bemoan that the youth wage subsidy policy document was introduced to Nedlac as early as 2011 but that discussions came to a standstill and “were going nowhere” due to opposition from labour federation Cosatu.
Cosatu president S’dumo Dlamini said he supported Nedlac seeking the opinion.
The council has however rejected this characterisation by accusing the government of “poor co-ordination” and a “lack of consensus” between the Labour, Economic Development and Finance departments on the way forward regarding the policy, revealing cleavages in the cabinet.
“I think everybody in cabinet has a business-like relationship but there are different views in government. Someone said to me our government is like a Parliament because you have opposing views in one government,” the same senior government official said.
“I sometimes think it would be better if we had a coalition government because then you would know if you had liberals (or conservatives) and what the compromises were, and the different personal policies, the different views and different languages. It’s no different in the ANC, but I think with disagreement you succeed in getting creativity.” [email protected]



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