Cut UIF contributions to create jobs and stimulate the economy 

The Democratic Alliance (DA) calls on the Labour Minister, Mildred Oliphant, to take advantage of our massive R65 billion Unemployment Insurance Fund (UIF) to introduce temporary stimulus measures to lower the costs of doing business and put money in the pockets of workers. 

The UIF has grown from R54bn at the end of 2010/11 to R65bn at the end of 2011/12. Annual collections of approximately R12.4bn are offset by expenditure of only R5.6bn. This means that the fund grew by a tidy R6.8bn in the last financial year.

We propose that UIF contributions made by both employers and employees are provisionally halved (from 1% to 0.5%) until the capital base of the fund contracts to a predetermined benchmark. 

This combined employer/employee discount would stimulate the economy on two fronts:

• Demand side - the cost of hiring workers would be reduced, incentivising business to increase employment;
• Supply side - the net wages of workers would receive a boost, effectively increasing the spending power of consumers.

The DA supports the current proposals aimed at utilising UIF capital to promote job creation. Approximately 4.53 million unemployed South Africans can, however, attest to the fact that government's stimulus projects have had little significant impact on unemployment thus far. We believe that the capital base and net revenues of the fund are more than sufficient to push for a UIF-based stimulus package targeting both business and workers.

The fiscal risk of our proposal can be mitigated by reinstating the 1% contribution determined by the Unemployment Insurance Contributions Act if the capital base contracted beyond a certain benchmark. 

The DA is considering the submission of a private members bill to the Committee for Private Members' Legislative Proposals and Special Petitions to propose Amendments to the UIF Act, which would allow for a UIF-based stimulus package which would encourage job creation and increase the disposable income of workers.

I will also be writing to the Labour Minister to ask that she calls for proposals on UIF reform. 

Growth of R6.5bn strongly suggests that the capacity for such a package is there. The Department of Labour should leverage this asset to create jobs and boost our economy. 

Statement issued by Sej Motau MP, DA Shadow Minister of Labour, July 12 2012

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