Jobs at a premium -- cost, that is

Politicians, of course, excel at rhetoric but at least once a year they are called to order when a set of spending numbers that set out the country’s actual priorities are published. We call this the budget and we watch it keenly to see what we have to pay in and how the money will be spent.

Of particular interest is the budget deficit, the difference between what government collects and what it will spend. But the real interesting number to me this budget comes from the Industrial Development Corporation (IDC), which is upping its expenditure as a key building block of President Jacob Zuma’s jobs, jobs, jobs campaign.

Geoffrey Qhena, the IDC’s chief executive, told reporters on Tuesday that it will make R10-billion available over five years to tackle employment and facilitate job creation.
Companies big and small, start-ups and established, will qualify, the only limit being that the cost of a job should not be more than R500 000.

Take a breath now and think about this. To get two unemployed people into employment will cost a cool R1-million. We have just lost one million jobs during the recession. To create new jobs to get these people back into employment, on the IDC’s numbers, will cost R500-billion.

At the national level, with six million unemployed, the R500 000 cost a job works out at R3-trillion, three times the R900-billion budget that Finance Minister Pravin Gordhan just tabled. The R3-trillion is also a substantially larger figure than our gross domestic product of about R2,3-trillion.

At R500 000 a job, the IDC’s R10-billion will buy 20 000 jobs. This is more or less the same number of clothing workers’ jobs that the organised industry wants to close down at Newcastle because employers have been paying below the industry-agreed minimum wages.

Given that closure threatens R10-billion worth of jobs, you’d think that a rational response would be to get Lindiwe Sisulu to send in her army to put a ring of steel around the clothing factories to keep the sheriffs with their closure orders at bay.

IDC job creation priced too high
Although R500 000 for a formal sector job, particularly in capital- or technology-intensive sectors, is not necessarily a lot of money, Qhena clearly knows that the IDC is in the high-priced end of job creation.

He chose not to reply to a reporter who asked if labour market flexibility was not desirable in these high-priced circumstances.

I asked the IDC what the typical cost of creating a job through an IDC investment was. Shakeel Meer, IDC divisional executive, said that the initiative announced this week, which was expected to create 40 000 to 50 000 jobs, would be at an average cost of between R200 000 and R250 000 a job.

Gordhan wants to create jobs for the youth at a somewhat lower price in terms of the youth subsidy the treasury has been championing. To date, though, it has to be said, this has been without success.

Although many observers saw the inclusion of the youth subsidy as a key building block of Zuma’s R10-billion jobs programme, it will go as a proposal to the National Economic Development and Labour Council (Nedlac) before implementation on April 1 next year.

Gordhan says the subsidy, which will cost R5-billion over three years, will compensate employers for taking on young workers. The idea is that it will lower the risks of employing young people and encourage them to be more active in job seeking.

Subsidy could create cheaper jobs
The treasury estimates that the subsidy could create 178 000 jobs over three years. The subsidy will cover 423 000 young workers aged between 18 and 29. But given that some of these workers are likely to have been hired anyway, the number of new jobs created is estimated at 178 000, at a cost of R28 000 a job.

The treasury says that unemployment figures show that 42% of 18- to 30-year-olds are unemployed compared with those aged 30 and above. Compared with most emerging economies, South African youth are worse off: only 12,5% of South Africans aged below 25 had a job compared with 40% in most emerging economies.

The treasury says that getting the first job is an important factor in staying in the jobs market. Once one has had a formal job, the chances of getting another are improved. Young unemployed people who have some work experience are at least three times more likely to find a job than those who have never worked.

At just R28 000 a pop these are really cheap jobs, at least compared with the up to R500 000 the IDC is prepared to fund. You’d think that given Zuma’s emphasis on jobs, jobs, jobs, the youth subsidy would have been the key feature in Wednesday’s budget — but no.

The IDC can go ahead and fund jobs at R500 000 each, but the treasury has to go cap in hand to Nedlac to be able to create jobs for young people at just R28 000 each. Its best hope is that its programme can start in April. Next year.

Kevin Davie

Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote. Read more from Kevin Davie

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