A welcome adjustment to the Employment Tax Incentive (“ETI”)

One of the biggest challenges facing our country currently is the rate of unemployment, currently reported to be around 34.9%. This number is far higher than the other BIRCS countries with Brazil in second place at around 13%.

South Africa’s unemployment number is even more alarming when you look at the youth component thereof between the ages of 20 to 29 years. In this age group, during quarter 1 of 2021, this component was estimated to be around 56.2%.

Employment is indeed the backbone of every economy with individuals contributing to in the region of 40% of annual tax collections. During his 2022 SONA address, our President made a call for the private sector to create jobs. However, without Government support and conducive economic and regulatory framework, this may be nearly impossible to achieve.

It is indeed good to see the Minister of Finance heeding the call from the President to assist business to create employment especially for our youth in South Africa. The proposed ETI increase of 50% will go a long way in allowing business to employ youth to enable them to acquire prerequisite skills to either climb the corporate ladder or be able to venture into the entrepreneurial space.

The proposed increase of ETI from R1 000 to R1 500 for the first 12 months and R750 for the subsequent 12 months will go a long way in assisting businesses especially after the impact of COVID-19 that hit South Africa.

This increase represents approximately 33.3% (R1 500) and 16.7% (R750) respectively where the qualifying employee earns a salary of R4 499 per month. This is good news for employers, and some may see it as a true commitment by Government to create an environment where the private sector can create jobs for the most vulnerable in our society.

The ETI legislation saw recent changes aimed at curbing schemes whereby employers claimed ETI allowances without necessarily having provided employment of substance. These changes are meant to ensure that this incentive is utilized to provide real employment to the youth as well as to equip them with the required skills and experience.

Read more BDO Insights