New model of growth, job creation identified

Wednesday, February 17, 2010

Cape Town - Government is looking at ways to boost employment creation and economic growth as South Africa emerges from the global economic recession, says Finance Minister Pravin Gordhan.

"The recent crisis and its aftermath have led to a serious introspection and rethinking of what were thought to be robust and superior economic models," Gordhan said, delivering his maiden Budget Speech in Parliament on Wednesday.

He said all South Africans shared a commitment to expand job creation and grow the economy.

Chief among these are a need to reduce joblessness among youth, support labour-intensive industries through industrial policy interventions, improve the performance of the state and ensure that the country maintained a competitive exchange rate and low inflation rate.

Other interventions that the government would look at in supporting growth and employment were skills development, public employment programmes, rural development, improving the savings level and ensuring a more inclusive labour market, he said.

Gordhan highlighted that the new industrial policy, developed by the Department of Trade and Industry, which was approved by Cabinet recently, would contribute to transforming the economy towards a more inclusive one.

The Budget sets aside an additional R3.6 billion for industrial policy initiatives.

Government was looking at ways to promote the country as an attractive gateway for businesses looking to extend operations into Africa.

Measures were also being considered for a wage subsidy for youth, as announced by President Jacob Zuma in his State of the Nation address last week.

"Our preliminary estimate is that about 800 000 people will qualify," said Gordhan, adding that the aim was to raise employment by young school leavers by a further 500 000 by 2013.

Treasury Director General Lesetja Kganyago revealed in a media briefing before the Budget Speech that the idea was for the wage subsidy to be dispersed by the South African Revenue Service (SARS) to 18 to 24-year-olds for the first two years of employment.

Kganyago said the National Treasury would release a document next month which would further clarify the scope of the proposed wage subsidy.

The proposals come at a time when the unemployment rate among 18 to 24-year-olds currently stands at 48.2 percent, while about three million young people do not have work and employment by youth declined last year by 13.9 percent.

In its Budget Review the government revealed that it was also looking at a other ways to boost youth employment, including reducing the probationary period for young workers, gearing learnership allowances to act as incentives for hiring youth and installing a specific minimum wage for youth.

The economy is forecast to grow by 2.3 percent this year and at 3.6 percent by 2012.

Unemployment has slacked off - from 27 percent in 2003 to 24.3 percent last year. Yet about 7 percent of South African workers lost their jobs last year.

Inflation has fallen over the last year and is expected to average 6 percent during the current financial year.

According to the National Treasury, an economic growth of six percent a year would create one million more jobs than growth of 3.5 percent a year, reducing the unemployment rate to 13.8 percent compared with 19.8 percent at the lower growth rate.

Financial services remains the largest business sector of the economy - at 21.5 percent of GDP, followed by a steadily decreasing manufacturing sector at 14.8 percent of GDP and the trade and accommodation sector at 12 percent.