Job creation crucial to cut welfare bill

2010-10-30 12:30

Before delivering his medium-term budget policy statement, Finance Minister Pravin Gordhan told journalists that employment creation was crucial to reducing the number of South Africans living off state welfare handouts.

“We want more people working than on welfare and that is why there is more focus on job creation and skills development,” Gordhan said.

He said the state had over the years been forced to widen its welfare net because the economy could not create jobs, while the country’s education system also failed to produce enough trained people who could sustain themselves.

Gordhan was also hopeful that the new growth plan, which aims to generate five million jobs and cut the unemployment rate to 15% from 25% in 10 years, could also help to broaden the taxpayers’ base.

At this juncture, South Africa has more people on state grants than in jobs. Roughly 28% of the population or 13.8 million people receive welfare grants compared to 13 million employed people. But only five million of these workers pay income tax.

In 1994, only four million people received state grants.

Treasury said in its medium-term ­budget policy statement it had done a study which showed that if the economy were to sustain 7% growth for 10 years, its size would ­double, thereby generating 5.5 million jobs.

“For South Africa to grow at 7% per year, jobs, investment and productivity all need to grow more quickly,” the statement reads.

Neren Rau, the chief executive of the SA Chamber of Commerce and Industry, ­believes that a more productive and competitive South Africa is a prerequisite for creating jobs and new businesses.

“If we get our productivity and competitiveness up, most of our challenges including job creation will be resolved,” Rau said.

Rau said one way of creating jobs was to make the country’s four industrial development zones (IDZs) more attractive to ­foreign investors.

He said authorities should consider ­introducing flexible labour laws at the IDZs and as well as excluding them from the transformation legislation.
“I am not suggesting we deprive anyone or labour of any rights, but you can be flexible without depriving people of their rights. We must make it easy for businesses to hire and retrench according to business cycles.
“Our members are afraid to hire people because of the challenges associated with bargaining with the workforce,” he said.
“They are scared of the damage associated with strikes including damage to property and harm to other workers.”

Rau, whose chamber represents 15?000 businesses, said the recession has done so much damage to the economy that he was unsure if South Africa could achieve ­sustained 7% growth yearly.

“The SMME (small, medium and micro enterprises) component of the economy has been severely damaged by the economic crisis. We lost bad businesses in the initial stages of the crisis, but now we are losing good businesses,” he said.

Kuseni Dlamini, who runs Old Mutual’s South African operations and the life assurer’s emerging markets businesses, said it was appropriate for entrepreneurship to be taught at schools before learners embark on university study.

“SMMEs have been an important underpin in the rise of the Bric (Brazil, Russia, India and China) nations. The social impact of a vibrant culture of entrepreneurship is visible in these economies,” Dlamini said.

“All social partners need .?.?. to hammer out an enterprise development strategy .?.?. to facilitate the growth of the SMME sector.”

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