TODAY'S YOUTH, TOMORROW'S TAX 

by Thandolwethu Gulwa  | Youth Day 2022 

South Africa finds itself on the tip of the African continent that holds, richly, the youngest population in the world. This gives us both a major asset and a strong competitive advantage over the rest of the world. 

 

The African Development Bank estimates that the youth will double to 850 million by 2050. Currently, Deloitte has estimated that Africa’s youth, between ages 15 to 29, stands at 450 million, which is a quarter of the 1.8 billion youth globally. 

 

The various reasons why youth are so important to a company's future are briefly discussed below, as well as how your company may directly profit from efforts that encourage and incentivize youth employment and training.

 

The youth and its contribution to society

It is pivotal to emphasise the importance of the youth in upholding a healthy tax revenue. It should bring a sense of pride that, as young people, they contribute to access to social services including medical facilities, schools, roads and social grants for 56 million people. 

 

Yet, it is a fact that tax revenue in South Africa has slowed. This also means that the increase in the Value Added Tax to 15%, the marginal income tax rate to 45% and the introduction of new taxes including sugar tax, and environmental taxes do not hold the same weight.

 

High unemployment rate 

The South African Reserve Bank (SARB) said in its annual performance plan for 2021/2022, that the high unemployment rate is a serious threat to the country’s tax base. In 2020’s fourth quarter, Statistics South Africa (StatsSA) reported a 63.2% rate for unemployed youth between 15 and 24 years of age.

According to President Cyril Ramaphosa, the Presidency's Social Employment Fund aims to "encourage the substantial creativity, initiative, and institutional capacities that exist in the wider society to engage individuals in work that serves the common good."

 

While this is a positive beginning in the right direction, the best benefits come through cross-sector collaboration. There are organizations in South Africa that are available to help companies to get the right youth working in their business. 

 

Invest in youth today, invest in the workforce tomorrow 

Today’s youth is tomorrow’s workforce. At times, they need a second chance, some grounding, and some foundation to succeed. 

 

In an episode of the DirectEmployers Association talk podcast, the podcast show hostess sat down with Denny Armington, President of Youth Opportunity Foundation (YOF), to discuss how they work with disadvantaged and post-adjudicated youth to mentor, educate, and train them as they prepare for a stable and rewarding future in the workforce. 

 

It is important that SA companies take note and partake in leading and educating themselves about the South African youth's disconnect to economic issues in theoretical and practical terms and how they may affect taxation. 

 

Organically, youth and corporate companies can collaborate in building a national fabric that values education and births economic education, its fruit of freedom and enjoyable liberties. 

 

SA corporate can and should collaborate with youth 

South African firms can, however, take advantage of incentives to boost youth training and employment. Employee tax incentive (ETI) is a SARS incentive for employers to hire young South Africans that is valid until February 2029.

Employers can claim a PAYE deduction for employees who are under the age of 29 and earn less than R6,500 per month. It is for a maximum of 24 months per qualifying employee and is not subject to BBBEE requirements.

 

As accountants you should inform your clients of these options and educate them on the value this incentive will add to SA and their business.  

 

Employers with learnership agreements registered with the Skills Education Training Authority are eligible for an additional tax deduction under the "section 12H Learnership Agreement tax allowance" (SETA). Both a yearly and a completion allowance are included in the agreement. These deductions can be done internally or through programs such as the NEASA Youth Program, which provides qualified TVET interns for 18 months and is financed by FASSET, the Finance and Accounting SETA.

 

In the NEASA Youth Program, students receive a monthly stipend and travel allowance, while companies can hire additional entry-level labour for a cheap monthly fee (R2,575 excl.) without having to commit to a job.

 

The youth of Africa is the future of tomorrow - resilient, young, learning and unlearning from the loud cries of its past. The present stares at us all, young and old, to feed into a sustainable economic system. It has become increasingly significant that each South African understands the importance of paying taxes from early on, especially as an active participant in the economy.  Therefore, as for today's youth and tomorrow's tax base, we must educate one another on how the youth contributes to the economy and what lack of such knowledge feeds.

 

The time has come for companies to build healthy relationships with you, their accountants.  Educate your clients on how you can enrich their business and how they can invest in the future tax base.

“If a business is not listening to the youth, they are not listening to their future competitors, employees, or customers”

- Wadia Ait Hamza, Head of Global Shapers at the World Economic Forum