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Rocky road ahead for youth wage bill - analyst

Cape Town - He was "pleasantly surprised" at the ANC’s vigorous defence of the youth wage subsidy bill now before parliament against an attack by trade federation Cosatu, Nomura emerging markets expert Peter Attard Montalto said on Monday.

Enoch Godongwana, head of the ANC economic development committee, last week pointed out that incentive policies were agreed by the ANC at Mangaung, and Cosatu therefore must have realised that they would be policy, said Montalto. 

"The youth wage subsidy is a small but vitally important part of the National Treasury’s attempt to lower youth unemployment, based on an extremely politically difficult (but entirely correct in our view) calculation that targeted assistance for the youth is more efficient at improving long-run growth, reducing crime and improving the outcomes for families than older worker support," said Montalto.

The scheme "has had to be watered down somewhat, but we think it is still a big positive that it still exists", said Montalto.

However, Treasury has only managed to get the bill this far with the aid of "a significant amount of political capital" and "it still looks at odds with the fact the youth wage subsidy was left out of a youth employment compact with Cosatu earlier in the year". In fact, Cosatu could still thwart the process, said Montalto.

"Indeed, the amount of political capital that has been expended over the course of three years since it was originally proposed in the budget shows the significant uphill struggle the National Treasury is facing in pushing even the simplest form of structural, investor-friendly measures through government and the tripartite alliance," said Montalto.

He attributes the ANC’s reaction to the desire to "wrest youth support from drifting left towards Malema and the Economic Freedom Front (or even towards the DA)" in the run-up to elections. Montalto is concerned that implementation may still lose momentum and fall flat if Cosatu manages to stall the bill until the election is over.

"Equally, we will not be holding our breath on wider labour market reform because of the step back taken with recent legislation on that front and the fact the National Treasury has pushed back on the need to do too much else on that front," said Montalto.

- Fin24

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