Prospective job seekers queue to be registered outside the Alberton Civic Centre during a youth job creation initiative in June.  Picture: THE SOWETAN
Prospective job seekers queue to be registered outside the Alberton Civic Centre during a youth job creation initiative in June 2015. Picture: THE SOWETAN

THE effect of the Employment Tax Incentive, commonly known as the youth wage subsidy, has been higher than projected, with time running out if the incentive is to continue in 2017, the Treasury says.

In a statement on Friday, the Treasury said if amendments to extend or alter the design of the incentive were required, a draft version of the legislation would be published in the next two months to allow public comment and time for the legislation to be considered in Parliament.

The incentive was claimed for 134,923 jobs in 2014 and 686,402 jobs in 2015, implying that approximately 5% of all jobs within individual employee tax certificates in the 2014-15 tax year, the Treasury said in the statement.

A total of R6.06bn was claimed between the beginning of 2014 and March 31 2016, and while the implementation of the tax was deferred, the numbers were higher than the estimate of R5bn and 423,000 jobs supported over three years, the statement read.

The incentive was implemented in January 2014 after wrangling and opposition from organised labour. The Congress of South African Trade Unions (Cosatu) violently opposed the scheme in its previous form — the youth wage subsidy — maintaining it was a subsidy to capital, which would simply substitute older employees with younger ones.

The scheme offers stiff penalties for those who replace their workforce to benefit from the incentive, and Treasury has given assurances that its affects would be closely monitored.

The act reduces the cost to employers of hiring young people through a reduction in the pay-as-you-earn employee tax, and aims to give youth crucial work experience, to try alleviate high unemployment rates.

Half of all economically active South African youth are unemployed. The International Labour Organisation’s World Employment and Social Outlook Report released on Wednesday estimates that despite consistently declining youth unemployment rates in sub-Saharan Africa, SA’s rate would remain the highest in the region in 2016.

The global youth unemployment rate is on the rise after a number of years of improvement, and is expected to reach 13.1% 2016, from 12.9% in 2015, the report read.

The Treasury said on Friday more analysis was required in order to determine to what extent jobs created by the incentive would have been created anyway, or represented jobs that would have been lost. These reports would be made public as they were completed, the Treasury said.

"Parliament had requested a full review of the incentive in order to inform whether it should be continued, refined or allowed to lapse. Government is currently engaging on these issues with other constituencies in National Economic Development and Labour Council (Nedlac)," the Treasury said on Friday.