Job creation: Government must enable economy to provide the solution

Job creation: Government must enable economy to provide the solution

With an unemployment rate of 25.5 percent, rising to 50 percent among young people, joblessness is rightly seen as a national issue—and a political hot potato. The South African Institute of Professional Accountants (SAIPA) urges the Minister of Finance to use the budget to stimulate the small to medium-sized enterprise (SME) sector as it has the potential to generate the jobs we need at the speed we need.

Government must resist the temptation to attempt to solve the problem by itself employing more people, adds Ettiene Retief, chairperson of the National Tax and SARS Stakeholders Committees at SAIPA.

“The hard truth is that the public-sector wage bill is already too large. The latest increases have reduced the amount government can spend on services and infrastructure by R100 billion over the next three years, as Minister Nene pointed out in the mid-term budget—all of this without notable improvements in service delivery,” says Ettiene Retief. “Aside from being unaffordable, increasing the state’s wage bill is not really effective in creating large numbers of jobs—only entrepreneurs in a growing economy can do that.”

Retief points out that government has long recognised the role that SMEs can and must play in job creation—the National Development Plan’s target of 11 million new jobs by 2030 is dependent on this sector to a great extent. Using the budget to stimulate this sector not only makes good economic sense, it is in line with government policy. 

Ways to achieve this goal include strategic infrastructure spending that favours the awarding of contracts to SMEs, as well as tax and other incentives to SMEs. Excessive red tape and onerous compliance should be further eased for SMEs, areas in which government has already made some headway. Our tax and labour legislations and the initiatives by the Department of Trade and Industry still fails to recognise services with regards SMEs.

“In addition, we would suggest that the Minister give serious thought to providing special allowances for SMEs that provide professional services. Such businesses are quick to set up, require little capital and are much less risky than other types of business, with great potential for skills development and transfer—an important consideration given the high proportion of SMEs that fail in the first three years,” he says. “We are really urging the Minister to apply his considerable creativity to spend taxpayers’ money more smartly, in line with the government’s own plan to grow the economy.”