DA welcomes courageous implementation of youth wage subsidy

The Democratic Alliance (DA) warmly welcomes the inclusion of a youth wage subsidy in Minister Gordhan’s budget speech. The DA looks forward to studying the relevant discussion document and will be liaising with the minister to ensure its eventual implementation. South Africa’s most pressing concern is the creation of jobs for unemployed young South Africans, and we believe this to be the most effective solution to start addressing this challenge. The DA has been advocating for the implementation of this policy for several years now; we are excited to see that it has not been discarded, and that progress is now underway to implement it. A wage subsidy will stimulate growth, create jobs and place our country on the right path. In the face of union obstinacy, the minister has made a courageous decision.

The inclusion of this policy, and a R9 billion jobs fund, is a crucial step in the right direction towards the adoption of growth-oriented economic policies. It is interesting to note that these policies are not in step with the state-driven approach prescribed by Minister Patel in his New Growth Path. Three brief mentions of the New Growth Path by Minister Gordhan were clearly an attempt to placate egos in the cabinet, as the minister’s budget differs on almost every count from the plan proposed by Minister Patel.

Youth wage subsidies and tax incentives for job growth are growth-oriented DA proposals that vehemently contradict the state-driven approach espoused in the New Growth Path. Viewed through the budget, Minister Gordhan has made the New Growth Path provisions irrelevant.
The DA supports the various initiatives by Minister Gordhan that would help strengthen the productive capacity of our economy. These include the initiative to invest in the green economy, to increase access to tertiary education for poor matriculants by increasing NSFAS funding, increasing funding to FET colleges, increasing spending on schools and teachers’ salaries, giving tax relief to jobs-intensive industries, improving homes in informal settlements and increasing the number of police personnel. These are all similar to many of the proposals contained within our own alternative budget for 2011/2012.

There are, however, also some proposals with which leads to concern. The DA disagrees with a R1.2 billion appropriation for the National Youth Development Agency over the next three years. This is unproductive spending. We disagree with increasing spending on SETAs. These should be scrapped and the funds diverted to FET colleges. We are also disappointed to learn that the public wage bill has doubled in the last five years without any corresponding improvement in service delivery. The commitment to a National Health Insurance scheme, which would be prohibitively expensive and which would not address our country’s primary concerns with health, is also questionable. The minister has not provided any details on how such a scheme would function, how it would be paid for or when it would be implemented. We cannot continue to address an issue of such manifest importance in this vague manner. The minister and president should provide the country with more details on this scheme immediately.

The DA believes the minister has also missed some key opportunities to address outstanding issues. The minister failed to address the massive backlog in road maintenance, which will require billions to address in the coming years. He has also missed an opportunity to implement a zero rate VAT on books, which would make books more affordable to pupils. And, perhaps most seriously of all, the minister, just like the president, failed to adequately address the issue of nationalisation. This issue continues to stoke uncertainty about South Africa’s credentials as a stable investment-friendly country, and as such, the president and relevant ministers should speak clearly about this issue.

Finally, we will need to look carefully at possible increasing stealth taxes being imposed, as well as the clear indication given by the minister that if certain proposals are implemented, the tax burden will be increased significantly. This needs to be analysed in greater detail.

On the whole, the DA welcomes the new budget for the year. The most important aspect is the commitment to industry-led growth through wage subsidies, the R9 billion jobs fund and targeted tax cuts to help job creation. These are all proposals we have endorsed and advocated in the past; if implemented, they will go a long way to addressing unemployment and poverty in South Africa.