13 March 2019

South Africa: Does South Africa's Finance Minister Have His Job Creation Numbers Right?

Claims

Three claims on government job creation programmes

Source: Finance minister Tito Mboweni (February 2019)

Verdict

One correct, two unproven

Mboweni said the Employment Tax Incentive supported 1.1 million jobs, the Jobs Fund had created 200,000 new jobs, and the textiles industry incentive would support 35,500 existing jobs.

The tax incentive figure was correct based on existing data. The Jobs Fund has created 170,148 permanent jobs (and 55,654 short-term jobs) but has under-spent its budget.

Conflicting data meant there was no way to prove the textiles incentive would help workers keep 35,500 existing jobs.

Researched by Africa Check

In a speech peppered with biblical quotes and many tales about plants, finance minister Tito Mboweni outlined his budget for South Africa on 20 February 2019. He said it would push the country towards renewal and growth.

"I am here to speak about hard facts and figures," Mboweni said. But did he get his numbers right about employment, a critical issue for South Africa?

Claim

"Jobs for 1.1 million young people are supported by the Employment Tax Incentive (ETI) scheme."

Verdict

Correct

Describing the ETI as "highly successful", Mboweni said the government had raised how much a person employed under the scheme could earn and still benefit.

The Employment Tax Incentive (ETI) aims to encourage employers to hire young job seekers, as sustained high unemployment would hurt the economy for years to come. It started in January 2014.

Firms that hire qualifying young work seekers aged 18 to 29 pay less PAYE (pay as you earn) tax, without reducing the employee's income.

Some "1.1 million young people are supported" by this plan, Mboweni said.

The national treasury's most recent and publicly available data on the scheme is from the 2015/16 financial year, according to its 2019 budget review.

In 2015/16 about 31,000 employers claimed the incentive for 1.1 million employees, at a cost of R4.3 billion. This was an increase from 686,402 jobs in 2014/15 claimed by 32,368 employers at a cost of R2.26 billion.

Newer data was on its way, Catherine Macleod, the chief director of macroeconomic policy at the treasury, told Africa Check.

"We have taken on board some new financial years worth of PAYE data and we will be releasing those reports, but I don't have a firm date for when they are going to be ready," she said.

Macleod said the treasury "frequently and rigorously" evaluated the scheme as a benchmark for other job creation incentives in South Africa.

But is it 'highly successful'?

That would depend on how the success was measured, Amina Ebrahim, a researcher at the World Institute for Development Economics Research at the United Nations University (Unu-Wider), told Africa Check.

"If the question is whether the ETI has improved the employment rate of youth, the answer is no. If the measure of success is whether the policy created the jobs that it had intended then perhaps the answer is yes."

Unu-Wider is one of three organisations commissioned to review the scheme, the treasury told Africa Check.

The scheme doesn't cost as much as other job-creating policies, Ebrahim said.

Newer data will be welcome, but the available numbers do back up the minister. - Naphtali Khumalo.

Claim

"The Jobs Fund is a vital component to private sector job creation. The fund has... created well over 200,000 jobs since its inception."

Verdict

unproven

The Jobs Fund aims to support business activities that directly create jobs in South Africa. It was established by the treasury in 2011.

By December 2018 the fund had created 225,802 jobs, it told parliament in March 2019. Of these, 170,148 were permanent and 55,654 short-term jobs.

People classified as previously disadvantaged held 98% of the jobs. Women held 60% of the jobs and youth 57%.

How are these jobs created?

Both public and private sector employers can submit online proposals that "show development potential linked to job creation", the fund told Africa Check.

The proposals are assessed by an investment committee. When a proposal is approved, the organisation then estimates how many new permanent and short term jobs, internships and traineeships it will create.

After this, the project "reports separately against each indicator", fund spokesperson Lerato Seko said. Africa Check was however unable to collaborate the fund's numbers.

Are the jobs audited?

Parliament's standing committee on appropriations is responsible for evaluating the fund, chairperson Yvonne Phosa told Africa Check.

The committee was dissatisfied with a February 2019 presentation on the programme's effectiveness and asked for a second, more detailed report, Phosa said. This took place in March.

One concern was under-spending, as the fund had paid out less money than it was given. In 2011, R9 billion was allocated to the fund.

"We can't understand how if we've got this dire need for job creation there is under-expenditure," Phosa told Africa Check.

The treasury explained that the system works on a match-funding basis. This means employers have to match the amount of money provided by the fund.

Employers must also develop a project plan that clearly states what they intend to do and and the funds needed every three months - a quarter of the year. If the plan isn't delivered by the end of the quarter, the fund withholds its half of the grant.

"They then linked that to the under-expenditure," Phosa told Africa Check.

The committee found the newer level of detail "pleasing", she said. "We actually see it as a shock absorber for unemployment but not only that, as an enabler for job creation." - Cayley Clifford

Claim

"[Funding] to the clothing and textile competitiveness programme... will support 35,500 existing jobs."

Verdict

unproven

Mboweni said that out of the R19.8 billion allocated to manufacturing incentives, R600 million would go to the clothing and textiles competitiveness programme. This would support 35,500 existing jobs and create another 25,000 over three years.

The incentive was launched in 2010 and is run by the Industrial Development Corporation under the department of trade and industry.

Government incentives are designed to offer "a little extra" to achieve specific objectives, Prof Anthony Black told Africa Check. The clothing and textile incentive aims to support employment and competitiveness in the industry.

Black is the director of the Policy Research on International Services and Manufacturing unit at the University of Cape Town.

How many jobs does the plan support?

In a November 2018 report to parliament, the department said the programme had "supported" 95,000 jobs - over two times the minister's figure - since its launch, with R4.2 billion paid out.

We have repeatedly asked the department how these were defined and calculated. Programme manager Lucky Testa would only say the specific numbers were with the industry associations.

The incentive largely helps firms buy new equipment and increase productivity to remain profitable and globally competitive, Prof Nicoli Nattrass, an economist at UCT's Centre for Social Science Research (CSSR), told Africa Check.

It "is not a strategy meant to expand the number of jobs, but to prevent firms from shutting down", she said. Only eligible companies can benefit.

New equipment could cost jobs

But investing in new technologies could also lead to job losses, said CSSR director Prof Jeremy Seekings.

"These subsidies will protect the jobs of a small number of more skilled workers but may destroy some less skilled jobs in the very same firms and do nothing to protect workers in the most vulnerable firms," he said.

Nattrass also questioned if the programme was an "efficient or effective" way of supporting jobs, using the minister's figures.

"R600 million is the equivalent of about 350,000 one-month jobs in South Africa's public works programme (which currently pays R11 an hour)," she said.

Given the conflicting data, we rate this claim as unproven. - Lloyd Hazvineyi

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