ANC’s Mashatile cautions against 12% welfare tax, urges infrastructure investment for job creation

Recently, the Department of Social Development gazetted a Green Paper on “Comprehensive Social Security and Retirement Reform.” The paper (which addresses issues within our social security system) identified myriad gaps, including “the absence of provisions to address the plight of individuals who have no income but do not meet the means test criteria to receive social grants” and the “absence of a mandatory system for social security pension provision for retirement, death and disability benefits for all workers.” This means that all employers and employees would be obligated to contribute “between 8% and 12% of qualifying earnings up to a ceiling.” This was announced in the same week that South Africa was rated worst in the world for unemployment. While the figures showed some truly shocking numbers, GG Alcock (listen to the interview below) notes that our unemployment figures – while bad – are not taking the informal sector into account. Below, Bloomberg reports on the ANC’s Paul Mashatile, who has urged government to “accelerate spending on infrastructure,” in an attempt to spur job creation. What’s more, the treasurer-general of the ANC has also cautioned against “raising taxes to fund additional welfare benefits.” – Jarryd Neves

ANC official says infrastructure key to S. Africa jobs drive

By S’thembile Cele

(Bloomberg) – A top South African ruling party official urged the government to accelerate spending on infrastructure to create jobs and cautioned against raising taxes to fund additional welfare benefits.

“We have a lot of infrastructure that needs to be fixed, the rail lines, some provinces’ dams, road and bridges,” Paul Mashatile, the treasurer-general of the African National Congress, said in an interview on Thursday. “That is where jobs are going to come from.”

Mashatile’s comments come amid an ongoing debate in South Africa on how best to revive the coronavirus-battered economy, reduce a 34.4% unemployment rate and tackle rampant poverty and inequality. A recovery plan unveiled by President Cyril Ramaphosa in October last year envisioned the government allocating R100 billion ($6.7 billion) for new infrastructure within four years, spending that would galvanise a further R1 trillion of private investment.

Mashatile, 59, a former premier of the central Gauteng province who’s been touted as a possible successor to Ramaphosa, said the implementation of the plan had to be accelerated, and newly appointed Finance Minister Enoch Godongwana would make that a top priority.

Luring investment won’t be easy. Restrictions that were imposed to curb the spread of the coronavirus caused the economy to shrink the most in 27 years in 2020, revised data published this week by the national statistics agency showed. Spending on infrastructure and fixed assets fell 14.9% last year, and business and consumer confidence are languishing at multi-year lows.

Last week, the Department of Social Development proposed that companies and workers be compelled to contribute as much as 12% of their earnings to a fund that could provide unemployment, retirement and disability benefits – an option rejected by business and labour groups. Civil rights groups have for years been campaigning for the government to introduce a social welfare grant.

“We do need social relief for the poorest of the poor, but we also need a funding mechanism that is sustainable that will not exhaust those who are already contributing,” Mashatile said. “We will be cautious looking at that. It may not be something we do immediately.”

Mashatile also revealed that the ANC may have to scrap its plans to change the constitution to make it easier for the government to seize land without paying for it and address racially skewed ownership patterns.

An amendment would require backing from two-thirds of lawmakers, meaning the ruling party would need the support of the radical Economic Freedom Fighters to pass it, but an agreement on the wording has proved elusive so far.

“We already have an Expropriation Act that allows us space to do some of the things that we want to do,” Mashatile said. While it does not explicitly say land can be expropriated without compensation, “we think that there is room for us to do so with that act and we can test it in the courts if there are shortcomings. But it seems that will be the viable way out under the circumstances,” he said.

The ruling party will make a decision later this year on when to hold a policy conference after its previous summit was put off because of Covid-19 restrictions, Mashatile said.

(Updates with Mashatile comments in final paragraph. A previous version of this story corrected the official’s title.)

© 2021 Bloomberg L.P.

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