‘Born free’ to unemployment? A Tax Incentive Post Implementation

Abstract

South Africa, the economic engine of Africa’s youth face numerous challenges in accessing employment. Young individuals have been confronted with unemployment percentages exceeding 40 per cent after democracy and the unemployment rate has persisted closer to 50 per cent of late. To combat the youth unemployment crisis the South African government implemented the Employment Tax Incentive (ETI) in 2014. The ETI is an incentive offered with the intention of mitigating extraordinarily high youth unemployment in South Africa by encouraging qualifying firms to hire younger and less experienced individuals.

This research dissertation serves to provide a critical analysis of the youth unemployment in South Africa and how the ETI has affected the youth unemployment in the nine-years post implementation. During the implementation period, South Africa endured the COVID-19 pandemic affecting life as we knew it and employment globally. The youth unemployment in the BRICS member countries has been analysed with their measures to address youth unemployment. Lastly the study analyses the experiences small business owners in South Africa have had with the ETI post implementation.

This study aims to evaluate the influence of the Employment Tax Incentive on the unemployment of young South Africans. This is achieved by conducting a qualitative study using critical analysis to review the ETI post implementation, determining the impacts of the COVID-19 pandemic on unemployment, assessing the other BRICS member countries who have implemented initiatives to improve youth unemployment and conducting interviews with small business owners in South Africa to understand the ETI in the business sector.

The data suggests that a subsidy is not a stand-alone answer to youth unemployment in South Africa. The subsidy, however, does create some employment according to the data analysed. The country experiences extraordinary youth unemployment rates. The employment of young South Africans generates greater value than just the employment, it allows for the youth to use their time constructively by gaining experience and skills instead of participating in socio-economic issues such as alcohol and drug abuse. It is acknowledged that the implementation of an employment incentive on its own will not be enough to resolve the South African youth unemployment crisis; the inferior education needs to be addressed. The BRIC member countries face similar challenges and their interventions have not entirelyhad the desired outcome.