South Africa

Details

  • Service: Tax
  • Type: Business and industry issue
  • Date: 2014/03/04

Budget promises don’t always translate into reality 

This article first appeared in The Citizen, 27 February.

 

Promises of job creation, fighting poverty, unemployment and government improving its service delivery mechanisms took centre stage in Finance Minister Pravin Gordhan’s Budget speech.

While government celebrated the fact that it has replaced the one million jobs lost since the low point of the recession in 2009, Gordhan said unemployment and inequality remain the biggest risks to growth and prosperity in post-apartheid South Africa.

 

Government has spent R100 billion on employment programmes over the past five years, funding more than four million job opportunities.

 

Yesterday Gordhan promised six million job opportunities over the next five years, reiterating President Jacob Zuma’s promise at the launch of the ANC election manifesto earlier this year.

 

Dave Mohr, chief investment strategist for Old Mutual Wealth, said that in the past many of these promises had not translated into reality. Job creation depends on the way the economy performs and job seekers should not put all their hopes on these promises.

 

Carolyn Chambers, head of international executive services at KPMG, said the minister did not give a lot of detail on exactly where the jobs would come from.

 

It seems the calculation method used for the Youth Employment Tax Incentive is aimed at job creation in the R2 000-R4 000 income bracket.

 

“The incentive seems to encourage companies to hire more people in this bracket rather than hiring less people in the income bracket R5 000 and up,” she said.

 

The attempt to shift towards a more labour-intensive growth path is supported by the youth employment tax incentive, which came into effect in January.

 

In the first month, 56 000 beneficiaries were recorded. Gordhan said for rapid progress in creating jobs and reducing poverty, the economy must grow at 5% a year or more.

 

He admitted to weak governance and corruption, as well as instances where service delivery has faltered. He gave the assurance government has heard the plea of the protesters and undertook to improve service delivery. “The community protests are a sign that people want government to quicken the pace of delivery of housing, water and sanitation.”

 

Gordhan said more must be done to improve accountability, and the high indebtedness of workers must be addressed.

 

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Contact

Carolyn Chambers

Director, International Executive Services

Tel: +27 (0)11 647 5764
carolyn.chambers@kpmg.co.za