President Cyril Ramaphosa highlighted the urgency of South Africa’s youth unemployment crisis in his State of the Nation Address, promising a wide range of programmes to help put young people in work, notes Yolandi Esterhuizen, registered tax practitioner & Compliance Manager, Sage Africa & Middle East.
His commitment to setting aside 1% of the budget to fund a youth unemployment initiative is welcome, and it will be interesting to learn more about these plans in the Minister of Finance’s Medium-Term Budget Policy Statement later in the year.
Certainly, high levels of youth unemployment remain one of the biggest challenges we face as a nation. Joblessness among South African youth is more than 50%. This is a tragic waste of potential, when the energy and youthfulness of our country should be one of its biggest assets.
Bear in mind that a young person who remains unemployed for several years is denied the opportunity to build a career, and may spend most of their life unemployed or underemployed. In addition to the level of suffering and poverty this causes, losing a generation to unemployment will make true economic recovery more difficult in later years because we’ll lack the skilled people needed to grow and build the country.
Say YES to the ETI
In the interim while government fine-tunes its plans, there are several opportunities for South African businesses to step up to the plate and create employment and skills development opportunities for the youth. The Employment Tax Incentive (ETI) and the Youth Employment Services (YES) programme are both excellent initiatives, and I’m surprised that businesses are not making more use of them.
The ETI is an incentive from National Treasury that aims to encourage employers to hire young jobseekers and was put in place some six years ago. For growing companies, the benefits are quite attractive. It reduces the cost of hiring young people by reducing the amount of Pay-As-You-Earn (PAYE) companies pay over to SARS. Employers can claim the incentive for a 24-month period for all employees who qualify.
Although R20.5 billion had been claimed from January 2014 to March 2019, it has not been used in full by all employers. As far as we can tell, the reason for this is that many businesses, particularly smaller companies, find it so complex to administer the ETI that they don’t bother with it. Some of the companies we speak to worry about the risks of claiming the incentive incorrectly and the associated penalties of getting it wrong.
Make it easier for businesses
I’m hoping Finance Minister Tito Mboweni will say something about the simplification of the administration of ETI in his budget speech on 26 February. But even if he doesn’t, I urge businesses to give the scheme a second look. With the proper tax advice and a robust payroll system in place, the ETI can generate a significant benefit for an employer.
The YES programme is also a good initiative, but awareness seems to be lower among the medium businesses that could benefit most from it. YES, which is a partnership between business, government and labour, aims to create one million jobs for youth. In the process of hiring young workers, firms can gain one or two levels on their B-BBEE scorecard.
These two avenues could help a business to grow, and in so doing, help to spur on South Africa’s economic recovery. But more than that, participating in these initiatives is a way for businesses to invest in South Africa’s future.
Let’s not lose a generation to unemployment – it is within our reach to help them develop the skills they need to thrive in the future as employees or entrepreneurs.