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Midterm budget: Government failing to create jobs

  • Read the full speech here.

This was a key trend in the budget votes of various government departments, released with the medium-term budget policy statement on Thursday.

A key signifier of this trend was the fact that the treasury had reduced the initial allocations to the jobs fund because it cannot be spent due to slow progress in establishing administrative capacity.

The R9-billion jobs fund, announced last year and implemented by the Development Bank of South Africa, was expected to achieve its objectives over a three-year period commencing in April last year but has now been rescheduled over five years ending 2015-16 resulting in medium-term expenditure of a far lower R5.5-billion.

Treasury insists the approved R9-billion is expected to be fully committed over a five-year period.

An amount of R1-billion has been shifted from the jobs fund allocation over the 2013 medium term budget policy statement to other labour market priorities.

In Finance Minister Pravin Gordhan's February budget speech he said "the fund began operating in June last year and received over 2 500 applications in the first call for proposals … project allocations of over R1-billion have been committed".

In his medium-term budget speech, Gordhan said that 39 projects had received R1.8-million in total.

Increase work opportunities
The government plans to increase work opportunities through the expanded public works programme to 1.65-million jobs and full-time jobs through the programme to 684 783 jobs by 2013/14.

The government also plans to spend R4-billion in incentive grants to expanded public works projects implemented by provincial departments and municipalities.

However, even in public works, the government is behind on job creation targets.

For the current financial year, it is expected to create 1.2-million work opportunities and currently has only produced 29% of this target or 350 068 work opportunities.

The public works budget vote said the department would "fast-track" its technical support programme in the next six months to address this failure.

Outside of the expanded public works programme, the picture is even bleaker.

Many departments are way behind the job creation targets they are to be measured against for the current financial year.

No jobs created
One particular concern is the failure of South Africa’s industrial development zones. The Coega, East London and Richard’s Bay industrial development zones were forecast to bring in R1.5-billion in total investment in the current financial year, but together have brought in no investments.

Similarly the three industrial development zones were expected to create 1 100 jobs in the current financial year, but for the six months from April to September not a single job was created.

Treasury credits the lack of performance here to the global economic downturn.

"Only one investor was anticipated to have been secured in respect of Coega between April and September 2012 but that investor has been delayed due to the current status of the environmental impact scan pending approvals.

Richard's Bay industrial development zones is still dealing with bulk earthworks and is not expected to secure any investors this financial year.

The economic development department was forecast to spend R5-billion in the current financial year in special financing for small businesses, targeted growth sectors and companies in distress, in the six months to September it spent a mere R168.56-million or 3.4% of the forecast.

"The establishment of the Small Enterprise Finance Agency in April 2012 ensures the consolidation of funding for small, medium and micro enterprises,” says the economic development budget vote. "Sefa will have a national footprint and increased funding through a shareholder loan from the Industrial Development Corporation."

"To increase entrepreneurial capacity, the small business incubation programme is being scaled up through the Small Enterprise Development Agency, together with private initiatives,” said the economic development budget vote.

Public art programmes
The arts and culture department was expected to create 2 000 jobs through the public art programme but has not created a single job in the first six months of this financial year.

This estimate has been revised to 1 500 jobs.

It was also expected to create 250 jobs through the touring venture programme, but has not created any jobs there.

The budget vote for the arts and culture department suggests the failure to create jobs was due to provinces not identifying public art projects.

The communications department has only managed to create 150 jobs of the 17 322 it was expected to create in the current financial year through information and communication technology-related projects.

The budget vote for the department said this was due to funds being reprioritised away from these projects to other areas of the department.

The department was also expected to establish 60 e-cooperatives to increase entry of youth-owned small enterprises into the ICT sector; it has not created a single one.

Again this failure is accredited to funds being reprioritised away from these projects.

Department of tourism
The tourism department was set targets of creating 6 000 full-time jobs through the Tourism Enterprise Partnership; so far it has created 22% or 1 335 jobs.

This target has been revised to 5 000 jobs and the department maintains that the figure was always meant to be 5 000 jobs, that the 6 000 jobs target was an error.

It was also expected to create 5 054 full-time jobs through the expanded public works programme, with only 15% or 762 jobs being delivered.


See the rest of the M&G's medium-term policy statement coverage:

Pravin Gordhan mum on Zuma's Nkandla upgrades
Finance Minister Pravin Gordhan remains guarded about public works's decision to use state funds for upgrades to President Zuma's Nkandla homestead.

Government debt to rise as tax revenues wobble
Pravin Gordhan has offered some optimism for SA's economic outlook, despite his mid-term budget signalling plans for a rise in government debt.

Midterm budget: Money put aside to revamp mining sector
In response to developments in mining, the medium-term budget policy sets out imperatives to modernise the industry and amend labour relations.

Development cash linked to delivery
The government wants more bang for its buck when it comes to provincial and local government infrastructure roll-out.

Midterm budget: Strikes cost economy dearly
The treasury says unrest has had a negative impact on growth, adding tax revenue will be lower as wildcat strikes are estimated to have cost R10bn.

Fighting talk from Pravin Gordhan
Finance Minister Pravin Gordhan tightened his belt, chided the country's critics and delivered a no-nonsense medium-term budget policy statement.

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Lloyd Gedye
Lloyd Gedye
Lloyd Gedye is a freelance journalist and one of the founders of The Con.

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