Budget 2022: ‘There is a real risk that jobs lost to the pandemic may never return’

Job creation, a subject that preoccupied President Cyril Ramaphosa’s State of the Nation address (Sona) earlier in February, was also high on the 2022 budget’s list of priorities.

The budget provides immediate support for creating jobs, according to the treasury review tabled on Wednesday. Of its R227.1-billion spending on economic development, R24.8-billion has been allocated to job creation and labour affairs.

There is good reason for this focus on jobs: in the third quarter of 2021, unemployment rose to 34.9% — the highest level on record. Statistics South Africa was scheduled to release its data for the fourth quarter of 2021 on Tuesday, but quality checks have delayed this.

Persistently high joblessness, the budget states, has emerged as a key weakness in economic performance. Elevated unemployment “lies at the root of poverty and exacerbates inequality”.

In his speech to parliament on Wednesday, Finance Minister Enoch Godongwana noted that the country had seen more than a decade of economic stagnation, adding: “Only through sustained economic growth can South Africa create enough jobs to reduce poverty and inequality, enabling us to reach our goal of a better life for all.”

The otherwise upbeat budget notes that South Africa’s better-than-expected economic recovery from the onslaught of Covid-19 has not been matched by higher employment or investment.

The government is using a portion of its additional revenue — the result of better-than-expected tax collections on the back of the commodity cycle — to promote job creation through the presidential employment initiative. 

An amount of R18.4-billion is allocated in the 2022-23 and 2023-24 financial years to support youth employment and the creation of short-term jobs under the initiative, which has already provided support to more than 840 000 people, the budget review noted. The initiative aims to create more than 500 000 targeted short-term jobs each year over the next two years.

During his Sona, Ramaphosa made a controversial statement, suggesting the government’s incapacity to create jobs. “Business creates jobs,” the president said.

Wednesday’s budget review similarly expresses the need to create an environment in which the private sector can invest and create jobs. The government intends to do this through a combination of structural reforms, support for small business and new infrastructure investment. 

Over the next three years, the government will introduce additional measures to improve the delivery of public infrastructure and attract private capital. Poor infrastructure, which also results in inadequate service delivery, has been identified as a risk to investor confidence.

“Structural constraints have reduced potential economic growth for the past decade and remain an impediment to the recovery,” the budget states. 

“During 2021, the economic effects of the pandemic — lost jobs and delayed investments — were exacerbated by inadequate electricity supply, with the highest levels of load-shedding to date.”

According to the budget, public-sector infrastructure spending over the next three years is estimated at R812.5-billion. The budget facility for infrastructure has approved a total of R6.7-billion in fiscal support for infrastructure projects. Most of these projects have multiple funding sources and are designed to crowd in private investment.

The budget notes that there is a real risk that the many jobs that were lost to the pandemic — and as a result of the social unrest that swept through parts of KwaZulu-Natal and Gauteng last July — may never return.

In light of this, post-Covid recovery strategies have converged around job creation and income support. Interventions include stimulating the economy through public employment programmes and tax incentives, while implementing reforms that ease the skills constraint and make it easier to do business. 

“Reforms that lead to job creation and expand entrepreneurship would raise incomes and consumption expenditure over time, and lead to growth of the middle class … As confidence and investment rise, bolstered by reforms, employment is expected to recover,” the finance minister said.

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Sarah Smit
Sarah Smit
Sarah Smit is a general news reporter at the Mail & Guardian. She covers topics relating to labour, corruption and the law.

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