Foreign influx makes a mockery of Manuel’s plan

National Planning Minister Trevor Manuel’s national development plan has enjoyed much support, even from the unions.

Yet only Lindiwe Mazibuko of the DA will be left in parliament in 2030 to see if anything comes of it. The rest will all be in the Shady Pines retirement home.

Manuel’s plan calls for 11 million new jobs by 2030, reducing unemployment from 27% to 6%. Two million new jobs have to come from the public works programme by 2020. That is nearly five times as many as are employed there today.

Where will the other nine million come from? Real growth rates must exceed 5% for there to be any prospect of reaching the jobs target. Yet Finance Minister Pravin Gordhan’s medium-term budget framework speech in October showed that growth rates will be determined by the world economy. And that’s in tatters.

Gordhan is calling 3.1% growth for 2011/12 and he is only budgeting for 4% by 2014/15. We haven’t seen 5% growth since the glory days of 2007.

Manuel’s plan goes back to the concept of a wage subsidy. But we know the unions don’t agree. The result is more delay.

We know that South Africa has lost more than a million jobs since 2008. But we don’t know how many jobs have been lost in the informal sector, agriculture and among domestic workers. Perhaps the 2011 census will shed some light on this.

The informal sector made a fantastic contribution in reducing unemployment in the early years of the previous decade after it hit the record level of 31%. But more recently the informal sector seems to be losing steam. What’s happening?

The popular view is that it cannot compete with dirt-cheap products from India and China. Yet many in the informal sector benefit from cheap imports. That’s how they source their stock.

Others say it is lack of finance, or the administrative burden, or income tax and VAT that kills small business. Rubbish. Few in the informal sector have ever been able to access finance and even fewer are registered for tax or VAT.

The problem is that the informal sector is being thrown off the streets by foreign traders, many of whom are here illegally. They didn’t jump the border fences with a sack of curios either. They just fly in on all the new air routes SAA has opened into Africa. Then they import everything from China and India.

And in the domestic and farm-worker sector it is far more convenient to hire fence-jumpers who cannot complain, than register a local employee for UIF.

I do hope this does not sound xenophobic. But all the good intentions of Manuel’s national development plan will quickly unravel unless something is done to control our borders.

We just cannot find work for more than a million new adult citizens every year, plus all the rest.

Originally published in the Sunday Times Tax Talk column.

Showing 2 Comments »

  1. Is that the best answer you can come up with? Foreign traders are throwing out the informal sector. Really? I am disappointed that an Associate Professor from the Rhodes Business School seriously believes this.

    You think it’s the foreign African traders that are importing cheap products from China? When was the last time you were in Shoprite, Game or any other local shop for that matter? A huge percentage of the products there are made in China, am not sure about India though? Those foreign traders you see on the streets of South Africa are retailers not wholesalers and definitely not importers of the products they sell.

    I agree that there is a problem in the informal sector and it’s because SARS is not doing enough to ensure compliance with the country’s tax laws. I doubt many of the small traders in South Africa are registered with SARS and that is not because they are foreign or that the borders are not secure. Does SARS go from shop to shop checking on tax registration? I seriously doubt that it does

    On the question of fence jumpers being employed on farms and domestically, I suggest you do some research first before you assume that the reasons employers employ them is for purposes of dodging UIF registration and payments. I’ll hazard that most people who employ farm labourers and domestic workers do not pay UIF anyway whether said employees are foreign or local.

    It’s easy to blame foreigners for every socio-economic ill under the sun but that is not going to fix the sluggish economy. There is a need to control the country’s borders more efficiently but not for the reasons that you canvas in your article. If its readership you seek with quirky writing then I suggest you give much more critical thought to the country’s tax system and write about that.

    Comment by Thabani Matshakaile — 29 November 2011 @ 1:08 pm

  2. Obviously you have not followed the debate surrounding small business in tax. It was universally accepted back in 2005 that it was unreasonable to burden the informal sector with tax administration matters. Thats why they called an amnesty in 2006/7 followed by the the Presumptive Tax legislation of the 6th schedule.

    all of this was deliberately put in place to prevent SARS from wasting valuable resources chasing down small business who owed very little anyway..

    Yes, you do hazard that most farmers don’t register RSA citizens for UIF. The level of compliance has increased dramatically across the board.

    As for the rest, you are entitled to your views and I to mine. But you don’t have to be rude about it.


    Comment by Matthew Lester — 29 November 2011 @ 5:20 pm

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