Cosatu has intensified its opposition to the employment tax incentive because of the government’s refusal to exclude labour brokers from the scheme.
Matthew Parks, Cosatu’s parliamentary co-ordinator, said on Thursday that the union federation was going to support the latest incentive but rejected it because Cosatu’s demand for the exclusion of labour broking companies and outsourced services providers was ignored.
Cosatu said these types of firms did not support decent work and fair labour practices.
"Government wasn’t able to agree. Our support for the extension fell by the wayside," Parks said.
The state initiated a review of the incentive legislation, which expires in December. The new scheme proposes a two-year extension of the incentive and a R20m cap to limit the tax revenue the state would forfeit as a result of the incentive.
Submissions from a range of stakeholders will be heard in Parliament on Wednesday.
Business and some labour federations support a proposal that the Employment Tax Incentive Act be extended with no changes for two years. A task team will be allowed to conduct a more conclusive assessment of the incentive.
However, Parks claimed 11% of the companies drawing the incentive were labour brokers and the figure could be higher.
Cosatu has in the past argued that the incentive promoted casual work and displaced older workers as it incentivised the employment of youth of 18-30 years, who earn less than R6,000 a month.
Government wasn’t able to agree. Our support for the extension fell by the waysideMatthew Parks, Cosatu’s parliamentary co-ordinator
The scheme was started in 2014 against the backdrop of low economic growth and an out-of-control unemployment rate. The government claims it has been successful.
Official figures show that a total R6.3bn has been claimed between January 2014 and February 2016, and more than 600,000 incentive-supported jobs were created.
However, research shows that the positive effect of the incentive declines when a firm reduces its size.
Ismail Momoniat, head of tax and financial sector policy at the Treasury, said: "We’ve asked Cosatu to tell us how to do it or what criteria would apply."
Momoniat said the government had indicated that the exclusion of groups from the incentive had to be based on criteria. "Part of the problem is: ‘can you identify all the labour brokers?’" The Treasury relies on data from the South African Revenue Service about the incentive’s claimants.
Tanya Cohen, the business representative at the National Economic Development and Labour Council, said business remained opposed to the R20m cap, which would affect about 93,000 employees.
Business has also suggested the introduction of a short-term incentive to give students paid work during holidays. But this proposal will be shelved until a later stage.