Finance Minister Pravin Gordhan has set aside R5-billion over the next three years for the youth employment subsidy, which will be implemented next year.

The subsidy, which unions criticised when it was announced in last year’s Budget, would be available for workers between 18 and 29 years with wages below the personal income tax threshold, which had been raised to just under R60 000 a year.

The scheme would cover 423 000 young workers, but the Minister noted that given the fact that some of these workers were likely to have been hired by companies anyway, the number of new jobs created for youths was estimated to be 178 000, at a cost of R28 000 a job.

Companies could receive as much as R12 000 a year, if they employ a new worker earning less than R24 000 a year.

Currently, about 42% of people between the ages of 18 and 29 years are unemployed in South Africa, while 87,5% of youths below 25 are unemployed. This was about double the youth unemployment rate of any other emerging economy.

“We must offer young work seekers real hope where at present there is despair,” said Gordhan.

He explained that the subsidy would lower the cost to the employer of hiring a young and inexperienced person, without reducing the worker's salary. In addition, the work experience and on-the-job training gained during the period of subsidised work would improve the longer-term employment prospects of the youth.

“We need to do things differently and to have the courage to pilot new approaches and build new partnerships, promoting innovation throughout our economy,” said Gordhan.

The subsidy had been set out in a discussion paper, for further consideration by Parliament and the National Economic Development and Labour Council.

The youth employment scheme formed part of a range of measures that would be implemented during 2011/12 to fuel the State’s drive of creating additional employment. Other measures included a R9-billion jobs fund, R14-billion being allocated to further education and training colleges, R20-billion going to the Sector Education and Training Authorities and R5-billion to the National Skills Fund.

Further, South Africa would spend R73-billion on its expanded public works programme over the next three years, including community-based projects, environmental and social programmes and the maintenance of roads and infrastructure.

Gordhan also announced the renewal of tax incentives of R20-billion for manufacturing investment with a focus on job-creation potential and R25-billion to build the country’s “green” economy.