DUMA GQUBULE: State should use UIF surplus to grow public sector jobs

In 2016 my fellow columnist on this page, Neva Makgetla, a senior economist at Trade & Industrial Policy Strategies, wrote a policy brief that brought attention to the growing surplus at the Unemployment Insurance Fund (UIF), which was then more than R100bn.

She made an innovative proposal of using a portion of the surplus to finance a fiscal stimulus for the economy. In the wake of the Covid-19 pandemic in 2020, SA created almost R60bn “out of thin air” when it ran down the surplus to pay 13.8-million people who were temporarily unemployed during the lockdowns.

According to the Treasury’s 2023 Budget Review, the UIF will have a surplus of R109.1bn at the end of the 2023/24 fiscal year. There was no need for the UIF surplus before the pandemic, and there is still no need for it now. But the government has run out of ideas on how to use it.

Recently the department of employment & labour came up with a mad plan to spend R15bn to create 2-million jobs by the end of March 2024, a few months before the national election. A better option is to use the UIF’s surplus to significantly expand public employment.

SA has three public employment programmes that had a budget of R17.8bn for 2023/24. They will create almost 1.8-million work opportunities and 900,000 full-time equivalent (FTE) jobs during this fiscal year.

The Presidential Employment Stimulus (PES) had a budget of R9.4bn. It will create 500,000 work opportunities and 290,000 FTE jobs. The Community Works Programme (CWP) had a budget of R4.3bn and will create 250,000 work opportunities and 100,000 FTE jobs.

The Expanded Public Works Programme (EPWP) had a budget of R3.1bn and will create 1-million work opportunities and about 490,000 FTE jobs. In addition, the Public Employment Services within the department received R1bn and the National Youth Development Agency (NYDA) R880.3bn. 

The 2023 medium-term budget policy statement (MTBPS) extended the PES, only for 2024/25, but there is no budget allocation. Ominously, the Treasury said: “The MTBPS proposes that the government should co-ordinate its approach to employment support. In this regard, significant portions of the EPWP and the CWP will be repurposed into the presidential employment initiative.”

But cutting spending on other public employment programmes to pay for the extension of the PES makes no sense given the scale of the crisis. During the third quarter of 2023 the expanded  unemployment rate was 41.2% and 11.7-million unemployed people did not work.

SA needs an annual GDP growth rate of 4.2% just to create jobs for the estimated 700,000 people who will enter the labour market each year until 2030. Since GDP growth alone will not be enough to create full employment, there must be other policy levers to create work.

We must create a new quasi-public institution with professional management and civil society oversight that amalgamates all the country’s institutions that create employment: the PES, the CWP, the EPWP, Public Employment Services, the National Youth Service within the NYDA and Harambee, a youth employment accelerator.

The new institution should have a three-year target to create 5-million work opportunities and 2.5-million FTE jobs at a living wage of R5,000 a month, indexed to the inflation rate. It should eventually develop the capacity to provide a job guarantee in SA.

US economist Pavlina Tcherneva says a job guarantee is a public option for jobs. “It is a permanent, federally funded and locally administered programme that supplies voluntary employment opportunities on demand for all who are ready and willing to work at a living wage.”

Civil society organisations, communities and companies could bid for job creation projects that would be evaluated based on objective criteria. A large transfer from the UIF surplus can provide the initial capitalisation for the new institution.

• Gqubule is research associate at the Social Policy Initiative.