Employment and Learnership Tax Incentives: Public hearings

Meeting report

Employment and Learnership Tax Incentives (ETI): Public hearings
Congress of SA Trade Unions (COSATU) submission

Mr Matthew Parks, Parliamentary Coordinator, COSATU, gave a context around the South African economy. Unemployment was increasing, and this was not only a South African but also a global phenomenon. Youth unemployment specifically was a big challenge for government. COSATU had held consultations with various stakeholders on the ETI since 2013 and found there was a rise in labour broking and outsourcing. COSATU had urged that labour broking and outsourcing be excluded from the incentive, but government had rejected its proposals during negotiations in the National Economic Development and Labour Council (NEDLAC). The flood of labour broking, outsourcing and casualisation devastated workers in all sectors of the economy, from private sector to the state. He emphasized that all employment tax incentives claims had to be for new permanent jobs with the actual employer. COSATU identified displacements within the employment sector. Government interventions were needed and the Department of Labour (DoL or the Department) should increase its inspectors by filling vacancies.

Mr Parks said COSATU proposed an amendment to Part 2 of the Act, by inserting a reference to temporary service providers (labour brokers), and outsourced contractors should be removed from eligibility to claim the ETI. COSATU thought that it must be a requirement that jobs should be new, permanent and the employee directly employed by the host employer to access the ETI. COSATU also proposed that government should act on, fine and bar companies who had been identified as displacing older workers. It was necessary to fill Department of Labour inspector vacancies. Government also had to capacitate SA Revenue Services (SARS) to gather accurate comprehensive information on ETI claimants. In general, COSATU wanted more engagement between the relevant government departments. Research found that the displacement and lower hiring of older workers was estimated to be only 1.5% but enforcement action was required to prohibit any further claims from companies engaging in this practice.

Servest submission

Mr Costa Diavastos, Managing Director, Servest, gave an introduction to the company. Servest was established in 1998, and is Africa’s leading integrated facilities management company, providing a range of specialist technical and soft service offerings. It provides opportunities for permanent meaningful employment, in support of over 5  500 South African companies in a range of specialised business support solutions. Servest employed approximately 30  000 employees. It operates ethically and actively participates in industry body leadership at senior level, whilst actively participating in centralised collective bargaining in all sectors in which it operated. He said Servest was a strong advocate for fair labour practice and compliance across the board. It was 53% black owned, in partnership with Kagiso Tiso Holdings (KTH) in a deal which was heralded as the first ‘post-graduate’ empowerment deal in South Africa.

Servest commended government on the ETI, and believed it had been an extremely effective and successful intervention. Servest had been actively supporting the ETI since its inception in 2014 and it gave Servest renewed focus on the importance of investment in South Africa’s youth. The ETI incentivised Servest to employ more young job seekers who had limited opportunities. Servest continued to provide these young people with comprehensive training, which equipped them with the skills required to be fully integrated into the workplace and the broader economy. Servest thus supported the extension and continuation of this effective and much-needed incentive. It believed the proposed R20 million cap would limit the ability of firms to create youth employment. Servest had commissioned research, which was conducted by Kehinde Oluwasen Omotoso of the University of Pretoria, to better understand the impact of the ETI. The highlights of this research demonstrated the many positive impacts of the ETI. Since its inception, a total of 14  592 employees who qualified under ETI requirements had been permanently employed by Servest. Of these,  7  891 (54.1%) of the employees have been retained.

He set out the amounts that Servest had claimed by way of the ETI: in 2014 it claimed R20 million, in 2015 it claimed R44 million and up to September 2016 it had claimed R32 million. Total ETI related cost on ETI training spend for 2014 was R14 million, for 2015 it was R13 million in 2015, and for the nine month period up to September 2016, it was R15 million. For the 2015/16 year to date a total of 6  780 employed learners were being trained, of which 2  944 (43.42%) were ETI supported learners. He emphasized that Servest grew significantly in recent years. This, in conjunction with the ETI, allowed Servest to direct new employment opportunities towards the youth. The ETI provided the supported employees with the opportunity to acquire new job related skills and experience for future development, advancement and promotion. The direct result was higher earnings for the majority of youth employed under the initiative. Feedback from employees under this incentive was to the effect that their standard of living had greatly improved. Being full time employees, most had benefited from the first time inclusion into formal benefits such as provident funds, life insurance, death and disability cover. Over 95% of the ETI-supported employees were Black Africans and 34% were Black females.

Mr Diavastos felt that to a large extent, the incentive contributed to the growth of the company, which in turn led to even more employment of young inexperienced job seekers. Servest believed that those staff who left Servest after being employed under the ETI scheme had managed to acquire important skills and work experience which made them more employable. Approximately 300 people succeeded in attaining higher levels of employment as a result of internal promotion. ETI also drove better compliance with tax and industry regulations.

The ETI had enabled Servest to employ and retain youth and invest in training and skills development. It also helped Servest grow, which allowed more employment opportunities for unemployed persons. Therefore, Servest recommended that the ETI be extended. It had noted that National Treasury reported mixed results for large businesses and Servest had demonstrated that as a large user of the ETI, it implemented the incentive in a manner that was consistent with its objectives.

He noted that the imposition of a R20 million cap per employer would limit Servest’s access to the scheme and the positive effects of it. He suggested that this would be contrary to the intention of the scheme, which was to stimulate and support as many young people accessing first time employment as possible. Servest recommended that, rather than imposing a financial cap for all employers over R20 million, either the cap should be removed entirely or the cap should be raised to R50 million per employer. These options would enable larger firms that had the capacity to employ and train large numbers of youth in excess of their business requirements, to significantly scale up youth employment efforts, for the benefit of the economy and society at large.

Witzenberg Partners in Agri-Land Solutions (PALS) NPC

Mr Lennox Plaatjies, CEO, Witzenberg Partners in Agri Land Solutions (PALS) said this was an initiative established in agreement with the agri-producers, local government and the community of the Witzenberg area. The main objective of the PALS was the expedition of land reform in unique ways that stimulated economic growth and job creation as well as build social harmony. This was in line with Chapter 6 of the National Development Plan (NDP) which spoke of “an inclusive rural economy”. He noted that the NDP emphasised the “developing of strategies that give new entrants access to products and support from better resourced players”. The goals of PALS included the following:

(1) The establishment of successful black farmers

(2) The involvement of the whole community in an inclusive process

(3) The extension of the initiative to other areas and agri-related industries

(4) The establishment of the Witzenberg Centre as a “one stop shop”

(5) Placing a focus on mentorship and training programmes

Mr Plaatjies said the PALS mentorship programme was not a formal programme or learnership, as envisaged in the Skills Development Act 97 of 1998, but a practical guide facilitating the transfer of skills, leadership and the organisational ability of an entrepreneur, to the emerging farmers in projects. It viewed this as a “simulator” approach, where farming business and other related skills were learned through practice. As part of any PALS project, a commercial farmer would enter into mentorship agreement with the black farmer. The monitoring and implementation of the mentorship agreements were of paramount importance to PALS, since emerging black farmers required assistance and knowledge of the commercial farmers in order to successfully proceed with the farming activities on the farm.

He commented on the learnership allowance. Section 12H of the Income Tax Act No 58 of 1962 provided that an employer may receive a tax deduction for any registered learnership agreement, if all the requirements referred to in Section 12H were met. The following was a summary of the requirements that must be met in order for an employer to qualify for the learnership allowance:

(1) A learnership agreement must have been entered into or completed during the year of assessment

(2) The learnership agreement must be a registered agreement

(3) The learnership agreement must have been entered into on or after 01 October 2001

(4) The employer must be the original employer in terms of the learnership agreement

(5) The learnership agreement must have been entered into in the course of trade.

Section 16 of the Skills Development Act (SDA) set out the criteria of a learnership. This provided that it must consist of a structured learning environment, include a structured work experience, must lead to a qualification by the South African Qualifications Authority (SAQA) associated with a trade, occupation or profession and be registered with the Director-General of the Department of Labour in the prescribed manner.

Section 17 further provided that a learnership was an agreement entered into for a specific period of time between a learner, an employer or group of employers and a skills development provider accredited by the Quality Council for Trades and Occupations (QCTO).

Mr Plaatjies said in stark contrast, PALS mentorship agreements were sui generis and were essentially a special relationship between a successful commercial farmer and an emerging black farmer. In this relationship, a commercial farmer took the black farmer under his wing and a “father-son” relationship was formed. The commercial farmer invested his time, money and other resources to expose the black farmer to teaching and experience of the practicalities of running a successful farm. He highlighted that this was done in the most pragmatic manner possible, so that black farmers were taught the essential skills that were required to manage and administer a farm successfully. PALS mentorship agreements were practical in nature and did not follow the formalised approach that was currently required by legislation. The commercial farmer imparted skills and knowledge that he had acquired by experience in the field. Accordingly, commercial farmers were not accredited by the Quality Council for Trades and Occupations as prescribed by Section 17. Similarly, a PALS mentorship agreement would not lead to a qualification registered by SAQA associated with a trade, occupation or profession.

Despite not falling into Section 16 or Section 17 of the SDA, PALS mentorship agreements still brought great value to those who benefitted under them. Not only did learners in this mentorship agreement get taught about the broadest aspects of financial responsibility and management, but they were also exposed to wealth of knowledge and experience that could only be acquired through a more pragmatic approach. 

Mr Plaatjies added that the second requirement, under section 12H of the Income Tax Act, provided that the learnership agreement had to be registered with a Sector Education and Training Authority (SETA) in terms of the SDA. This presented another problem to PALS because an employer who had entered into a learnership agreement with a learner, but which had not been registered with a SETA, was not entitled to claim the learnership allowance under a “registered learnership agreement” as defined. None of the PALS mentorship agreements had been registered with any SETA, so that they could not be considered as a “registered learnership agreement” in terms of the Act. This ultimately meant that PALS would not qualify for the learnership allowance provided for in Section 12H of the Income Tax Act.

In the Learnership Tax Incentive Review of September 2016, the Economic Tax Analysis Chief Directorate pointed out a number of issues that came with the requirement of “registered” learnership agreements. Respondents to a survey on SETAs felt that SETAs were a major barrier to the uptake and efficiency of the incentive. Respondents also felt that SETAs were unable to assist efficiently  with the administrative process and that the overall process was too cumbersome. Also, SETAs were unable to supply them with the correct information to get a learnership agreement registered, possibly because some SETAs had different requirements for the registration process. SETAs in sectors such as agriculture had shown a particularly low uptake of the incentive.

The appeal to the Committee based on the objectives behind the learnership tax initiatives were as follows:

(1) To promote skills development

(2) To encourage human capacity development

(3) To encourage job creation by reducing the cost of hiring and training employees through formally recognised learnerships.

Mr Plaatjies highlighted that PALS mentorship agreements fulfilled all three of these objectives. When considering the duties placed on the commercial farmer in the PALS mentorship agreement, it could be clearly seen that the development of skills and human capacity was the main objective underlying the agreement. Job creation, economic upliftment, skills development, training and land reform were therefore the key focus in any PALS mentorship agreement. This was in line with the other objectives that the legislature sought to achieve when enacting the learnership tax incentive. In the Learnership Tax Review, it was found that the training available for some sectors may not be aligned with workplace needs. In order to create successful black farmers within the PALS framework, it was crucial to have practical training and assistance with regards to the realistic and functional aspects of running a successful farming business. He emphasised that the best person to teach an up-and-coming black farmer about any aspects of farming aspects would be a commercial farmer who had years of experience and knowledge to his name. PALS focused on the partnership between commercial farmers and black farmers to ensure that the latter was in a position to run the farm independently one day.

The PALS Centre also oversaw that the goals and objectives of the mentorship agreement were adhered to and achieved. Currently, PALS did not qualify for the learnership tax deduction. PALS producers were, however, still waiting to transfer land to black beneficiaries and mentor these beneficiaries to ensure the viability of the project. If they were to get tax relief in the form of this tax initiative, they would be even more committed to the cause. PALS projects redistributed land, invested in infrastructure, stimulated growth, created jobs and ensured that previously disadvantaged farmers were trained and mentored so as to guarantee their commercial success. PALS ultimately spoke to the core objective underlying the institution of learnership tax incentive. Therefore even though a PALS mentorship agreement did not fall under the strictly formalised concept of a “registered learnership agreement”, it still catered for all objectives on which the learnership tax initiative was based.

Mr Plaatjies emphasised that commercial farmers who partnered with black emerging farmers in PALS projects were fully dedicated to ensuring the success of the projects. All available funds in the project would be invested in the project to impart important practical knowledge in black farmers, facilitate the creation of more jobs and accelerate economic growth as a whole. The PALS framework dictated that commercial farmers in a PALS project initially should co-own property together with the black beneficiaries. Accordingly these commercial black farmers had a vested interest in the project’s success, and would do all they possibly could to ensure the prosperity and sustainability of the project. He noted that black farmers had the option of buying the commercial farmer out and owning 100% of the shares of a farm later on.

Mr Plaatjies therefore summarised PALS' request that reconsideration be given to the formal requirements, so that PALS mentorship projects could qualify for the learnership tax deduction. Although PALS mentorship agreements did not fulfil the requirements of the Income Tax Act, he submitted that they provided an invaluable benefit to the previously disadvantaged. PALS did not have all the solutions to legislative problems but it suggested consideration be given to the creation of a new category of agreement to cover PALS and similar initiatives. The Committee’s input and consideration would therefore be greatly appreciated by PALS and its beneficiaries.

FEDUSA

Mr Dennis George, General Secretary, Federation of Unions of South Africa (FEDUSA), said that FEDUSA focused on a labour stability accord to align wages and productivity, targeting an additional 30  000 youth recruits over five years into a National Youth Service Plan. It also wanted to create an entrepreneurship fund to help create over new businesses. FEDUSA also focused on modernising and listing State Owned Entities (SOEs) by injecting private capital to fund national imperatives. The establishment of an Infrastructure Fund to execute large national projects, and a drive to attract local and international fixed capital investment were also outlined. The goal was to improve confidence in the South African economy by driving higher growth, labour stability, encouraging entrepreneurship, public private partnerships and addressing youth unemployment and skills.

Mr George said FEDUSA welcomed and supported the recommendation by government to extend the Employment Tax Incentive (ETI) scheme by another two year period after the sunset clause was due to expire on 31 December 2016. The two year extension period would afford all social partners the opportunity to critically analyse the outcome and uptake of the scheme which encouraged youth employment by both small and large businesses. The Federations' position on the ETI had been mitigated by the presentation of empirical evidence, satisfying all concerns that no displacement of older workers was evident. FEDUSA supported the regulation of temporary employment services, commonly referred to as Labour Brokers. However evidence presented had suggested that labour brokers did not extensively benefit from the ETI. He said the positive developments and policy interventions could only contribute towards the collective actions championed by the social partners, demonstrating total commitment to the promises made during the international investor road show and the 2016 South Africa Tomorrow Investor Conference in New York. FEDUSA believed the ETI offered some solution to addressing the structural challenges of unemployment, whilst attempting to increase the levels of employability and experience of both the unemployed and graduates who failed to secure formal employment.

Mr George highlighted that constructive interventions and collaboration that paved the way for more sound and stable economic and labour relations had to be encouraged, to ensure rapid and inclusive economic development. FEDUSA remained committed to working together with all social partners in the spirit of deepened collaboration, to find workable solutions that would lead towards economic prosperity, poverty eradication and equality.

FEDUSA remained fully opposed to the proposed introduction of a R20 million cap on the incentive. It believed that this would only act as an inhibitor and limit the opportunity to absorb and expand the skills base and competitiveness of both employees and businesses. National Treasury showed that ETI claims in 2013/14 amounted to 134  923 jobs and 686  402 jobs in 2014/15. FEDUSA believed that this upward trend should be encouraged, not stifled. 

Business Unity South Africa (BUSA) and Black Business Council (BBC)

Ms Tanya Cohen, Board Member, Business Unity South Africa (BUSA), said that the Black Business Council (BBC) and BUSA fully supported the Learnership Incentive and the Employment Tax Incentive as these were enablers of youth employment and skills development that would be necessary for inclusive growth and employment. Current conditions were not conducive to employment creation, due to sluggish growth in the economy, resulting also in retrenchments being on the rise. The country also faced a risk of a sovereign ratings downgrade. Unemployment was at 27%, on the narrow definition, and youth were doubly less likely to secure employment than those between the ages of 30 and 60. She explained that this complex and mismatched skills environment was not conducive to inclusive economic growth. Productive employment was the most effective mechanism to address poverty and inequality. South Africa had a window of opportunity, until 2038, to take advantage of the demographic dividend.

Ms Cohen said BUSA and BBC had participated, on behalf of organised business, on the ETI. Robust engagement with research was presented over a six week period. The Learnership Tax Incentive was not part of the direct scope of deliberations in NEDLAC. She explained that NEDLAC’s report on the ETI had reflected the research done, although too short a time had lapsed to fully evaluate the effects. The research broadly reflected a positive impact on youth employment, at a relatively low fiscal cost. There was appreciation for the consultation process in NEDLAC and the evidence presented during the process. There was also support by social partners in favour of the ETI, to extend the scheme without the cap.

Business was in support of the proposals for the Learnership Tax Incentive, namely to extend the tax allowance for five years in respect of formal learnership contracts, with some adjustments, in order to promote greater emphasis on lower level skills, and alternative registration of learnership mechanisms. The incentive provided much-needed support to fund the high costs incurred in securing and running learnerships, taking into account the firm level costs such as trainers, training time, mentorship, administration and registration on learnerships. The regulatory burden of registering, verifying and providing learnerships was proving to be prohibitive. Therefore, Business regarded this incentive as an important component of workplace skills development and was actively exploring solutions to unblock impediments to skills development in line with the future needs of an inclusive economy.

She said that ETI research findings showed that hundreds of thousands of youth were given the opportunity to access first time employment. Research reflected positive results with 15% of youth jobs being supported, amounting to 5.7% of the individual tax base. ETI had a positive impact as it achieved the intended objectives; those with low levels of experience, earning between R2 000 to R4000 per month, aged between 21 and 25, were supported the most. There was a 4% higher wage and improved skills and job security for ETI supported workers. Also, small firms took up a disproportionately larger percentage of claims per job and there was significant potential to expand this further. The manufacturing sector displayed the highest average claims relative to eligibility.

Ms Cohen highlighted that new jobs were created and employment was directed towards the youth. Many ETI supported youth were retained after one year and after the conclusion of the ETI. Research findings also indicated that some of the concerns when ETI was introduced had not in fact been proven. One concern was the displacement of older workers. There was 1% negative growth on employment of 30 to 35 year olds but quantitatively this was a very small number and must be seen against the general background of a slow-down in employment anyway. There was an 8% job growth in 18 to 30 year olds, with no reports of either displacement or CCMA referrals. Another concern was wage suppression, but this too had not manifested itself, since economic evidence indicated that job growth in ETI firms was seen to be 8% faster than those firms not claiming, with overall increase in employment, thus indicating these were new jobs. ETI claims were  relatively proportionate to the number of eligible firms per sector. Labour brokers claimed 9% out of the 11% eligible to claim.

She noted that another research finding indicated that ETI was being effectively utilised to support inclusive growth and employment objectives. Employment growth in ETI-claiming firms was far higher than in non-claiming firms in all age categories. This was confirmed in the qualitative research. The ETI resulted in an increase in employment and was an effective mechanism to make business more competitive and manage transitions.

The Singizi research demonstrated that the ETI provided the space to reduce labour churn. It was a bridge to address the gap between education and work. It provided access to work experience, including enabling a focus on work readiness and cognitive skills. The ETI also facilitated training in excess of direct company needs, enabled large scale workplace training and supported the provision of structured learning, which was a good alternative to the high costs and complexity associated with running SETA learnerships. ETI resulted in employment and training for employees with disabilities, which created a basis for career progression. It was also an important contributor to workplace integrated learning, as studies showed an 80% retention rate of employees.

Ms Cohen concluded that there was still room to improve access to the ETI and learnerships through non-legislative improvements. The learnership and employment tax incentives were highly effective, low cost, targeted tools that incentivised and encouraged youth employment and skills development, thereby contributing to inclusive growth and employment. She recommended that proposed extensions must be passed speedily. BUSA and BBC wanted to see the exclusion of the R20 million cap. There should be continued monitoring and within the next two years the ETI should be subjected to rigorous review again. The incentives were highly valued by firms. They had proved to be effective tools to support youth employment and the acquisition of workplace skills, both of which were critically needed for inclusive growth and employment.

Solvency Asset Management (SAM) submission

Mr Danie Claasen, Head: Group Tax Services, SAM, said that SAM was a joint venture of the Financial Services Board (FSB) and was established as a risk-based regulatory regime for the prudential regulation of both long-term and short-term insurers in South Africa. It wished to make a submission to the Committee around the 2016 Taxation Laws Amendment Bill (TLAB) and it had proposed amendments to section 29A on the taxation of long term insurers. During a meeting on 1 November 2016, which was attended by various insurers, it was proposed that industry should provide comment to National Treasury and SARS on the October 2016 Tax Laws Amendment Bill, specifically the proposed amendments to Section 29A of the Income Tax Act (ITA). This was to ensure clarity on the interpretation and application of the section 29A amendments and to highlight potential risk.

Mr Claasen explained the potential impact of the section 29A amendments. The current wording would align all insurers with the International Financial Reporting Standards (IFRS) treatment of negative liabilities, in a case where an insurer changed its accounting disclosure in 2016 or any later year. At the moment, the wording in section 16 of the Act allowed for this benefit to be obtained by any insurer in any future year, through a change in its disclosure of negative liabilities for IFRS purposes. This would allow an insurer to increase its value of liabilities and therefore reduce the transfers to the corporate fund. SAM wanted clarity on the interpretation and application of the amendments, and also wanted to highlight potential risks and agree on a process to ensure certainty.

SAM had made a submission to National Treasury on 4 November 2016. This had included examples prepared independently by accounting professionals and industry players. It put forward some recommended wording to clarify the interpretation of the TLAB. The expectation was that there should be a formal response from National Treasury, and further engagement on the wording, since the principles had been agreed upon. Due to the complexity of the matter, the objective was to get consensus on interpretation prior to promulgation, even if further amendments were needed.

Department of Labour submission

Mr Ian Macun, Director: Collective Bargaining, Department of Labour, said there were specific reasons for considering a wage subsidy in South Africa. Mainly, it was to counter the high social and economic costs of unemployment, to improve the chances of targeted workers and reduce risks associated with hiring. A subsidy allowed employers to provide individuals with access to gain experience and to the labour market and it balances the policy options available within a mix of interventions.

He described that the 2014/15 labour law reform saw amendments to the Labour Relations Act (LRA), Basic Conditions of Employment Act (BCEA) and the Employment Equity Act (EEA). There was a common thread for the regulation of non-standard employment. The main amendments to the LRA extended protection to employees who had been placed in jobs by temporary employment services (labour brokers), employees on fixed term contracts and part-time employees. The LRA amendments now applied to all employees who may claim the ETI. Policy recommendations made by NEDLAC Task Team included that the employment tax incentive should be extended for two years and that the employment tax incentive should be extended, with a limit on claims by employers for all qualifying employees at R20 million for any year.

He gave some statistics related to ETI claims and jobs. The number of firms claiming had increased from 13  399 in 2013/14, to 32 368 in 2014/15. The number of ETI supported jobs were 134  923 in 2013/14 and 686  402 in 2014/15. The marginal cost per job was R1  090 in 2013/14 and went up to R3  578 in 2014/15.

The Department of Labour recommended that an extension to ETI should be viewed in the context of the initial indicators that it had had a generally positive impact. There was a continued high rate of unemployment in the South African labour market with weak economic forecasts. Therefore, there should be the possibility of further monitoring and evaluation.

Discussion

Dr B Khoza (ANC) wanted clarity by Servest on the increase of its ETI claims from R20 million to R32 million and then to R44 million. She was trying to understand if there was any change to unemployment. She felt that this increase was not justifiable and wanted to see if it was supported by trends. She was concerned that many of the labour intensive jobs were not filled by South Africans as the Committee noted that many foreigners were being employed as caterers and in restaurants.  She agreed with COSATU on most things but it had been said that COSATU tended to focus more on those already employed, rather than the unemployed. In South Africa there were abnormally high unemployment rates yet the Department of Labour had proposed the cap. Most of the submissions today had suggested doing away with the proposed R20 million cap on the ETI, and it was essential to know why both sides held this view.

She asked Servest what it referred to as “specialist outsourced provider” as the pictures on the presentation showed nothing “specialist” to her mind.

She was very impressed with the Witzenberg PALS and suggested that it needed to escalate the concerns.

Mr Diavastos replied that there was a huge uptake on the number of claims, due to the fact that the company had grown in the last three to four years. The increase of the number of workers had increased the value of claims directly proportionate to young people. If there was more access to claiming the ETI, more would be put back into leadership positions in the workplace. The term “specialist” was used to refer to the nine operating divisions providing high level and specialised services in security, marine service operations, landscaping and other technical skills.

Mr Parks noted that COSATU cared about the employed through the trade union of workers as this was its responsibility. Those employed workers supported brothers and sisters back home in the rural areas. However, it did not mean employment had to be slave labour. Labour brokers were found everywhere, in the retail sector, mines, universities and even some government departments, not only in the private sector. These were the same jobs other permanent employees were doing just without any benefits. The intervention of the brokers led to the collapse of collective bargaining and therefore made it difficult to organise interventions from unions.

Mr Plaatjies said that he agreed with Dr Khoza. Currently, in the area, there were 8  000 people permanently employed and there were more than 12  000 sustainable jobs.

The Chairperson asked whether the Comprehensive Agricultural Support Programme (CASP) funding covered learnership tax incentives for PALS.

Mr Plaatjies replied that CASP funding went to business and commercial farming projects. It was aimed at farming business across the whole spectrum, from getting newly formed land to cultivating it. This went directly towards black farming. The ETI would look at mentorships between new black farmers and established farmers.

Mr M Hlengwa (IFP) said the reasons for doing away with the proposed R20 million cap had to be investigated through interaction with the beneficiaries of the programme.

Mr Diavastos replied that qualitative research done had indicated that people said their lives had been changed as a result of Servest employment. All sectors had centralised collective bargaining. A pervasive issue was the use of exploitative labour, but the rules around ETI ensured that ethical companies claimed. Servest did not regard outsourcing and labour broking as the same thing. There were benefits for employees under outsourcing.

Mr S Buthelezi (ANC) felt that government was trying to put its money where its mouth was with the incentives, as it was trying to solve unemployment. However, he was concerned what happened to the level of retention beyond the ETI. What checks and balances did the Department of Labour have in place and what was the average cost per job created? What was considered to be a “decent job”? The ETI could not become an incentive for casual labour. He also wanted to hear more from BUSA on this point.

Mr Diavastos replied that retention was good at the entry level jobs but there were high levels of staff turnover at other job levels, largely because people were then moving on to better jobs. The company did not terminate any employee as it would like to keep them, but people moved to other sectors. There was a 15% growth from 2014 to 2015 on staff retention.

Ms Cohen responded that it was difficult for young people to find jobs. The ETI offered opportunities for these young people to essentially gain experience. If the company did very well financially, it created a future for these people to become permanently employed. She felt that it did not increase casualisation of labour but rather provided an opportunity for skills development, which strengthened decent work practices.

Ms P Kekana (ANC) said she shared the sentiments of the Department of Labour on monitoring and evaluation. This would assist with job creation. She agreed with Mr Hlengwa that recipients should be evaluated. It would have been good if the National Youth Development Agency (NYDA) could have given a presentation, noting how young people had benefited. These incentives were geared to assist in lowering unemployment rates, and she was able to see the impact.

Mr D Maynier (DA) wanted to know why Servest wanted to scrap the R20 million cap and increase the amount to R50 million.

Mr Diavastos replied that the R50 million cap was based on the company’s own projections. However, Servest would prefer not to have a cap at all.

Ms T Tobias (ANC) wanted Servest to submit statistics to the Committee on how many people were employed through the ETI, for how long these people were employed and what their age and gender profile was.

Ms Kekana noted that it was not a matter of whether the employee knew or did not know whether he/she was employed through the incentive. The question was whether the ETI was making an improvement in peoples’ lives. This had to be tracked through Statistics South Africa or the Council for Scientific and Industrial Research (CSIR).

Mr Ismail Momoniat, Deputy-Director General: Tax and Financial Sector Policy, National Treasury, gave a response on the Employment and Learnership Tax incentives. He explained that it was difficult to say whether the ETI was a success or not. From the data collected over the last year, it seemed to be doing well, comparisons were strong and forecasts were strong. . From comparisons done it looked great and forecasts looked good. National Treasury was open to hearing more on capping. The take-up on the incentive was tremendous and it was creating new employment opportunities. Training and internships were also worth more discussion.

Ms Marlé Van Niekerk, Director: Personal Income Tax, National Treasury, said that according to Home Affairs legislation, these incentives were for South African citizens as well as asylum seekers. The tax data would only be able to show the qualitative results on the incentives next year.

Mr Cecil Morden, Chief Director: Economic Tax Analysis, National Treasury, added that Department of Home Affairs and SARS applied themselves to the ETI monitoring and evaluation as best as possible. The cap was not part of the current system, but it would be included in the future. He suggested that Witzenberg PALS should try implementing internships, but if this were to happen, these would need to be monitored by the line department involved. In respect of learnerships, there were already processes in place.

The Chairperson felt that the Committee could not agree to anything before getting a thorough understanding of the entire process, so he thanked the presenters for their valuable contributions. It was important to get feedback from beneficiaries in order to evaluate whether the ETI was making a positive impact on the lives of unemployed and disadvantaged persons.

He noted that the presentation from SAM was not entirely related to the purpose of the meeting and felt that it had been presenting a very complex issue, on which more engagement would be useful, in the future.

The meeting was adjourned.