A former senior Treasury official has called for the government to be more ambitious about public employment projects, balancing more spending on social grants with more spending on public employment, particularly for young people.
The University of Cape Town’s Andrew Donaldson, who served for many years as the Treasury’s deputy director-general in charge of the public finance and the budget offices, said the rapid scaling up of the presidential employment stimulus over the past two years showed that the government could “think big” about public employment. But such programmes should be thought of as permanent ones that SA will need for a long time, rather than as just relief programmes.
The government should also be scaling up measures such as tax credits to incentivise labour-intensive private sector employment.
“Relative to what government is spending on social grants, it is still spending far too little on public employment programmes,” Donaldson said in a PSG Group seminar on Tuesday. In the context of the extension of the R350 a month social relief of distress grant and the debate about a basic income grant, the government needs to be sure to get the balance right between income support for households and support for public and private job creation, he said.
His comments come at a time when SA’s official unemployment rate has reached 35%, with an economic growth rate that is likely to come in well below 2% this year and over the next two years in a rapidly weakening global economy.
Donaldson found in a recent study that government public works programmes, which go back to the 1990s, contributed 2.6% of total employment and just over R12bn in wages in 2019/2020, but this had declined since 2014/2015 because of fiscal constraints.
However, this excludes the jobs programme that President Cyril Ramaphosa announced as part of his Covid relief and stimulus package in the depths of the pandemic in 2020.
Donaldson said on Tuesday that while it took 15 years for the government’s other public works programmes to get to 400,000 work opportunities, the presidential employment stimulus reached that number in just six months.
These programmes not only provide work experience, but also public benefits, such as fighting fires and providing health and security services.
The presidential employment stimulus has now provided almost 1-million temporary work opportunities for young people, the majority of these as teacher assistants in public schools. The target is to reach 1.2-million, but the presidency’s Rudi Dicks said he would like to see the number increased to over 2-million and extended to include new initiatives (such as putting young people to work to help digitise home affairs records or to clean cities).
The government allocated a total of almost R23bn to the programme in its first two years. In his February budget, finance minister Enoch Godongwana allocated a further R18.2bn for the next two fiscal years to the end of 2023/2024.
Dicks said the programme adopted a different approach to earlier more inefficient public works programmes. It is not just cheap labour, but is designed to provide support to young people and help them transition to other job opportunities.
“It’s not the solution to [un]employment. But ... it is a short-term solution that will have to continue for some time,” Dicks said. “We want fewer young people on the social relief of distress grant and rather in some sort of active labour market programme.”
Donaldson, who has long been an advocate of the employment tax incentive scheme — which the government introduced some years ago to provide an incentive for companies to hire new low-wage young workers — said the incentive scheme should be expanded.
The government has done too little to support labour-intensive industry and needs to shift the “terms of trade” to make it more attractive for the private sector to employ more low-wage workers. It is not hard to design subsidies to achieve this along the lines of the US government’s tax credit.
But, Donaldson emphasised that higher rates of private investment are needed to tackle unemployment, and investment will itself help to improve skills, though “learning by doing”.
Describing SA’s unemployment rate as “catastrophically high”, he said other countries usually integrate income support for work seekers as part of the unemployment benefit and employment search programmes and SA should look at doing the same.
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