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29 Mar 2018 00:00
In 2014, the government introduced the employment tax incentive, commonly known as the youth wage subsidy, which gives companies reason to hire more young, inexperienced people through a cost-sharing system with the state (David Harrison/M&G)
The Youth Employment Service (YES) launched by President Cyril Ramaphosa this week has been cautiously welcomed by organised labour, which insists that the only solution to South Africa’s unemployment crisis is to change the country’s economic policies.
Labour federations Cosatu and the South African Federation of Trade Unions (Saftu) this week said that, although they welcomed the new scheme, there was an urgent need for structural changes to the economy to fully absorb young people into permanent employment.
The two federations believe the beneficiation of minerals would be a first step toward creating new industries and jobs in a country whose unemployment rate is among the highest in the world.
The new employment initiative, launched on Tuesday, is led by the private sector in conjunction with the government and labour. It aims to create one million job opportunities for young people within three years, in the form of one-year internships with participating companies that sign up to the YES database.
There is no promise of permanent employment thereafter but the project’s initiators say research indicates that having a year of work experience under their belt increases young people’s chances of future employment.
But Cosatu general secretary Bheki Ntshalintshali warned that, despite the optimistic outlook on the benefits of these internships, the YES initiative ran the risk of leaving young people feeling more frustrated because the economy at present provided little promise of absorbing them into permanent jobs.
“The issue for us is not the supply side; it’s about the demand side.
The question of what will happen at the end of that period is what’s important.
“Of course, experience is one element but until the economy is structured in a different way to absorb young people, it’s going to be more of a frustration because they will be saying: ‘We have qualifications and experience and yet the economy does not absorb us,’” he added.
Saftu general secretary Zwelinzima Vavi echoed Cosatu’s sentiments to address the “ticking time bomb” of youth unemployment.
“Until government does the hard job of restructuring the economy and creating a new growth path around the use of our minerals, nothing will change,” Vavi said. “That’s why we insist that the minerals must be owned by the state and [be] under the control of the working class.”
He said the state should beneficiate minerals, build secondary industries and shift the patterns of ownership.
Statistics South Africa has put the country’s unemployment rate at 27%, with youth unemployment the most acute. More than 34% of South Africa’s 17‑million people aged between 18 and 34 are unemployed.
Even more concerning to the government is that 56% of the young people who enter the workforce do not have a matric qualification.
On Tuesday, confetti machines blasted colourful strips of paper around a beaming Ramaphosa at the Riversands Incubation Hub in Fourways as he launched the project he had steered alongside business. In a nod to his State of the Nation sentiments, Hugh Masekela’s Thuma Mina blasted through the speakers.
South Africa’s economy grew by 3.1% in the last quarter of 2017, according to Stats SA. And this week, ratings agency Moody’s revised the country’s outlook from negative to stable, citing a change in political leadership as one of the contributing factors.
Ramaphosa’s Thuma Mina optimism appeared infectious to executives from large companies such as Investec, Absa and Sasol, who sat smiling with pride under a small tent as they listened to the president laud them for being among the first to commit to the YES initiative.
Behind them sat 100 excited young people, the first group of YES interns, clad in neon-orange hats and T-shirts branded with the logos of the participating host companies that will employ them for the next 12 months.
The founders of the YES initiative believe it stands a high chance of keeping big business interested in creating jobs because a new youth employment broad-based black economic empowerment (BEE) incentive has been introduced.
Companies that meet the YES employment targets move up a level on their broad-based BEE scorecard. They also qualify for the employment tax incentive.
It remains to be seen whether the new employment initiative will succeed this time around, after a number of similar schemes have failed to make a serious dent in South Africa’s high unemployment rate in recent years.
YES is not the first initiative that has seen the government attempt to woo big business into playing a more prominent role in addressing the unemployment crisis.
In 2014, the government introduced the employment tax incentive, commonly known as the youth wage subsidy, which gives companies reason to hire more young, inexperienced people through a cost-sharing system with the state.
When the initiative was launched, the government set aside R5‑billion to fund it over a three-year period.
To date, the subsidy is believed to have cost at least R1‑billion more than was budgeted for, with no clear data on whether it has created more jobs for young people or merely subsidised companies to make appointments they would have made anyway.
The department of labour’s employment services division makes a database of five million job-seekers available to companies that want to make appointments.
But the department has only a 2% placement success rate with this match-making service because of what it says is the reluctance of big business to use the system.
Now, the prospect of a better BEE ranking may keep the private sector interested in maintaining a role in employing more young people.
Labour analyst Loane Sharp warned that using incentives of this nature to entice the private sector would only create “fake jobs” for the sake of a more attractive BEE scorecard, with no real promise of permanent employment for the young people involved.
“The research shows over and over again that getting your first job is the single biggest predictor of economic success in later life.
“But this doesn’t include fake jobs — in other words, jobs that you create as a business just to win political points, or jobs that you create because of a transient
incentive,” Sharp said.
“In a way, you can see the absurdity of this new scheme. We’re saying that, added to all the initiatives we’ve had before, we’re now going to introduce a new scheme that will give you [big business] exemptions from the old policies in an effort to create jobs.”
After launching YES, Ramaphosa took a walk around the Riversands Incubation Hub, where young entrepreneurs stood in small stalls waiting to showcase their handmade furniture, landscaping services, printed works and other products and services.
Ramaphosa felt fabrics, took pictures and listened attentively as eager business owners tried to cram in as much information about their enterprises as possible before
their brief interaction with him ended and he moved on to the next stall.
YES chief executive Tashmia Ismail assured small business owners that they would also be included in the system.
Small businesses that sign up to participate in it would receive sponsorships from large companies that would allow them to employ interns for a year, she said.
“Bigger companies can sponsor an SMME [small, medium or micro enterprise] to host and teach a young person. They [the large companies] then earn the BEE points and SMMEs get competitive edge,” Ismail said.
“This SMME placement strategy gives small, black-owned entities access to labour that will be paid for by the big businesses and also gives youth jobs closer to home.”
At present, sponsoring an intern is as far as YES goes in empowering the small business sector, which is being looked at to create 90% of the country’s jobs by 2030.
The small business development minister, Lindiwe Zulu, has lamented the lack of commitment from the private sector to fund small enterprises. Zulu has also expressed unhappiness about the size of her department’s budget, relative to the immense task of driving employment.
Sharp said the focus on big companies as opposed to small businesses was a matter of concern, considering the employment patterns in the country, because the bulk of jobs were created by SMMEs.
“Two-thirds of all employment happens in businesses employing less than 50 people.
“JSE-listed companies now employ only 1.3‑million people, which is 8.5% of the national workforce. So [the focus] has to be [on] small business,” he said.
Sharp said, however, that it was unlikely that the private sector would give increased support to SMMEs because large companies recognised the threat posed by their smaller counterparts to their own operations.
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