Despite being described by industry body, the Manufacturing Circle (MC), as “a step in a positive direction”, the draft Employment Tax Incentives Bill, which was published for public comment by National Treasury on Friday, is likely to receive a mixed reception from manufacturers as it could, in its current form, create an “uneven basis” for competition.

MC executive director Coenraad Bezuidenhout on Monday averred that the draft Bill should not be viewed as a panacea to youth unemployment and that it would, in all likelihood, not incentivise growth-driven employment.

“It instead wants to maximise youth employment uptake by existing employers, public entities and those who relocate to, or establish, new operations in special economic zones (SEZs).

“In addition, it may create an uneven dispensation between existing employers who remain in their current localities and those employers who relocate or establish new operations in government’s SEZs, as well as any public entities that may be favoured for the incentives,” he said in a statement.

Engineering News Online reported on Friday that the public had been given until October 11 to comment on the Bill, before Cabinet submitted the proposed legislation to Parliament in late October.

The Bill aimed to incentivise the employment of young, first-time workers between the ages of 19 and 29 and to reduce the cost to employers through a cost-sharing mechanism with government.

Tax-registered employers would cut the pay-as-you-earn employees tax by as much as 50% for those qualifying young South Africans hired under the proposed employment tax incentive.

But Bezuidenhout cautioned that disruptive industrial relations and mandatory remuneration structures that incentivised attendance rather than productivity could hamper the Bill’s ability to promote employment growth in the manufacturing sector.

“In addition, less restrictive employment incentives being offered to SEZ investors are unlikely to promote growth-driven employment, as the incentives proposed for SEZs may be attractive enough to bring forward the tipping point for local investments, but will struggle to tip the scales in South Africa's favour when competing with international SEZ schemes,” he commented.

He believed that, to achieve growth-driven employment, investors first needed to be provided with incentives to become employers which, in the manufacturing space, would entail providing the necessary bulk infrastructure investment sightlines; improving municipal services and security of water and electricity supply; deepening industrial policy and local procurement traction; expanding market access for manufactured goods to South America, the rest of Africa and Asia; and addressing administered prices.