What will happen to the R 9 billion job creation fund?

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2011 Budget Options

This article previews the budget looking at three options for spending the R 9 billion for job creation activities announced in the State of the Nation Address.
President Jacob Zuma left the details of the R 9 billion for job creation activities vague in his State of the Nation Address, simply saying:

We are pleased to announce the establishment of a jobs fund of 9 billion rand over the next three years to finance new job-creation initiatives.

The announcement on the details of this are eagerly anticipated when Minister Pravin  Gordhan delivers the 2011/12 Budget Speech. There are three major readings about what the details of the proposal will mean. The major options are:

  1. Application based fund
  2. Subsidy to support youth employment
  3. Support small business


There is an update to this story covering more recent developments.

Creating an application based fund

The development of a competitive fund within government to incentivise job creation is the most likely outcome. The National Treasury has long supported competitive funding arrangements with performance measures. The reasons for this support is that it provides greater control on the areas in which public funds are spent, and that a planning has been undertaken as part of the application process.
The amount of R 9 billion is however spread over three years, which translates to about R 2-R2,5 billion available in the current financial year. The amount is small compared to the overall budget, and would not provide the scale needed to have a demonstrable impact on employment.

Resurrecting the youth wage subsidy proposal

In the 2010/11 Budget Speech [PDF Link], Minister Gordhan proposed the introduction of a wage subsidy to address youth unemployment, in the following words:

We propose to support these reforms through a subsidy to employers
that will lower the cost of hiring young  people without work experience.  Under
consideration is a cash reimbursement to employers for a two-year period, operating
through the SARS payroll tax platform, and subject to minimum labour standards. It
will be available to tax-compliant businesses, non-governmental organisations and
municipalities.

The Budget Review 2010 provided more details on the reform as follows:

  • Providing a wage subsidy or hiring voucher to lower cost of labour and compensate employers for the perceived risk of hiring inexperienced workers
  • Regulatory reform covering the probation period to reduce cost of determinining a young workers productive potential
  • Assessing existing measures, such as learnership allowance, so that they provide incentives to hire younger, inexperienced workers
  • Minimum wage reforms to align productivity and wages for young workers, similar to those in Turkey, Chile and Argentina

Several commentators, and the opposition Democratic Alliance have argued that the intention is to reintroduce the proposal on the wage subsidy. It would however be a decision that would make the prospects of reaching a social accord extremely difficult, given the opposition to the proposals from trade unions and several youth organisations.

Support small business

A different reading of how the R 9 billion would be allocated, is that it will be focussed on the small businesses in South Africa. There are potential policy options on the income and expenditure side of the budget.
There is potential space for direct spending on the job creation activities, with the following aligning with the New Growth Path:

  • Renewable energy
  • Agricultural investments
  • Manufacturing
  • Other sectors identified in the New Growth Path

The potential for this proposal especially if combined with tax policy.

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9 thoughts on “What will happen to the R 9 billion job creation fund?”

  3. Planets Events workbased learnership programme should be taken to another level by encouraging 100000 companies in SA to offer this initiative to 10 to 50 learners per company per year.In this way the country will keep the youth on their path to job fulfillment.

  4. As Richard Sabelo Khuzwayo i don’t think its going to work because i don’t have a member of my family in Government that can stands for me,every thing goes to friends brothers family members in Parliament and i don’t believe that money has been allocated for samall business people like us as Kamikazi Training Development Solution,We have been sending proposal every every where but no responds,What can we do to BELIEVE that its true of what they are saying in Parliament.

    • Dear Sabelo, I totally understand your frustration. I have been thinking about a couple of interventions on the site to help people just like you. What would help? Obviously, we want to create a level playing field. Thanks for sharing, Ebrahim

  5. While these ideas sound great on paper I think they miss the critical word here – Initiative.
    Government and Business need to work together and be committed to create real change. Sometimes this change is painful initially but the benefits area real. Government firstly, needs to fill all the vacant positions immediately. This needs to be done in a 12 month period so recruitment processes need to be shortened. I would guess that this would account for around a million jobs including shortages. It would also improve service delivery too. Secondly, Business needs to COMMIT to 1 job per company per month, this could be structured to meet business sizes i.e. SMME’s, etc.
    This might sound like pie in the sky but look at the numbers. Let’s assume hypothecticly 300,000 jobs per month at an average earning rate of R1,500.00 per month. Just this allone is 450 Million rand into the economy per month now multiply that by 12 and then by 2 for the second year and then compound this show the monht on month multiplier effect. This assumes that these are just basic labourer positions and initially most these positions will be exactly that. In the end though this will translate beyond unskilled labour to recruting skilled labout too. Now go beyond this and imagine how this money gets spent back in the economy and what impact that has back on business and government for creating these jobs, that is there spin-off. Once you add these numbers up they become quite scarey and you need to big calculater very quickly. I am not an educated man and I am certainly not an economist. But I understand that an economy is like an engine. In economic terms this engine needs fuel and this fuel is money which comes from an income earning population. The more jobs that are created the more income there is and the more expenditure there is. I would be keen to hear the thoughts of the readers.

  7. I agree with Mark first remove red tape to employ people,secondly get rid of all paid public holidays our country is unproductive enought.use basic compliance theory 1.registered company 2.register employees dept. of labour.3.register with SARS..4.sighned lease of premises. NOW THIS SHOWS TOTAL COMMITMENT.INSTEAD OF GIVE MONEY FREELY TO ALLPAY individuals rather subsidise each employee that wants to earn a living wage EMPLOYED BY S.M.M.E, SMALL BUSINESS WILL CREATE THE JOBS BUT TALK TO US AND WE WILL CREATE THE GREEN PAPER MORE JOBS MORE BUYING POWER MORE ECONOMIC GROWTH

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