Youth Day: Why Our Young People Are So Important to Your Business

Youth Day commemorates and celebrates the impact the youth of a country can have on the future – the Soweto Uprising on 16 June 1976 changed the course of history.

The size of its young population is Africa’s huge asset and a strong competitive advantage, according to The African Development Bank: a large youth population, bigger than on any other continent, which is also growing rapidly, while populations in the rest of the world are ageing and contracting.

Current estimates are that the number of youths in Africa will double to 850 million by 2050. They form part of the 1.8 billion global youth who, according to Deloitte, are between the ages of 15 and 29, accounting for more than 25% of the total world population. These are the future taxpayers, voters and leaders, as well as workers and consumers.

The many reasons why these young people are crucial to the future of companies are briefly highlighted below, along with the ways in which your business can benefit directly from initiatives that encourage and incentivise youth employment and training.

The tax base of tomorrow

As Nelson Mandela reminded us: “Our children are the rock on which our future will be built, our greatest asset as a nation. They will be… the creators of our national wealth who care for and protect our people.”

These future taxpayers are crucial in South Africa, with its very narrow tax base. A handful of taxpayers – just 3 million according to available data – paid 97% of total personal income tax collected in the past tax year, funding everything from hospitals and schools to roads and social grants for a population of 56 million! Tax on companies’ profits is only the third largest contributor (after VAT) – and its contribution decreased to just 16.6% by February 2019, compared to nearly 27% a decade ago. In addition, tax revenue growth has slowed, despite the increase in VAT to 15% and the marginal income tax rate to 45%, and despite the introduction of new taxes such as sugar tax and environmental levies.

SARS has also highlighted the high youth unemployment rate in South Africa as “a serious threat to the tax base and the overall integrity of the tax system” in its annual performance plan for 2021/2022. According to Statistics South Africa’s unemployment numbers, the official unemployment rate for young people aged 15–24 years was 63.2% in Q4 of 2020.

It is in the interests of all South Africans to invest in our youth, given that the only alternative to widening our country’s future tax base is higher taxes on the few individuals and companies who are already carrying the tax burden of an entire nation.

The market of tomorrow

The youth of today will be tomorrow’s consumer market – and in this respect, Africa is the place to be. Changing demographics and improving business environments across Africa are just two of the factors contributing to rising household consumption, which is predicted to reach $2.5 trillion by 2030.

This is according to The Brookings Institution, which also notes that Africa’s emerging economies will take the lead in consumer market growth, with one in five of the world’s consumers living in Africa by the end of the next decade, and more and more of these people falling into the category of affluent or middle-class.

Knowing that today’s youth will be the consumer market of tomorrow creates an opportunity for companies to positively brand and position themselves in the minds of tomorrow’s consumers, even if only in their immediate community.

How can your business connect with the young people who tomorrow will be your customers? Can your business sponsor a sports event or an academic prize at a local school? Perhaps you can provide opportunities for school tours of your facilities?

The workforce of tomorrow

The youth of today are also the workers and employees of tomorrow. The African Development Bank estimates that more than 12 million youth enter the labour market across the continent every year.

There are many benefits to employing young people in both the short-term and the longer-term.

As Deloitte suggests in their recent publication Preparing tomorrow’s workforce for the Fourth Industrial Revolution, now is the time for the business community to reposition itself as a driving force for change – investing in new ideas and alternative approaches to skilling youth for the future of work, such as retraining; technical, vocational, education and training (TVET); career and technical education (CTE); as well as internships, apprenticeships and artisanships for on-the-job skills training.

Take advantage of the tax incentives

Fortunately, there are also incentives for businesses to promote youth training and employment. The employee tax incentive (ETI) is a SARS incentive to employ young South Africans valid until February 2029. In short, employers can claim a deduction from PAYE for qualifying employees: those who are younger than 29 and earn less than R6,500 a month. It is for a maximum of 24 months per qualifying employee and is not subject to broad-based black economic empowerment criteria.

Think of asking your accountant for assistance – the requirements to claim ETI can be complex and the claims can differ month to month and from one employee to the next, as various criteria and formulas determine the amount businesses can claim. There are also a number of “ETI Schemes” being marketed at the moment and if you are offered one, ask your accountant for advice before committing to anything.

Another example is the “section 12H Learnership Agreement tax allowance” providing an additional tax deduction, currently until March 2022, to employers with learnership agreements registered with a Skills Education Training Authority (SETA). It comprises both an annual and a completion allowance. It can be implemented internally or through programs such as the NEASA (National Employers Association of South Africa) Youth Program, with qualified TVET interns available for 18 months, funded by FASSET, the Finance and Accounting SETA. With regard to the NEASA Youth Program, students receive a monthly stipend and travel allowance, while employers can access additional entry-level labour at minimal cost (R2,575 excluding VAT per month) without having to commit to employment thereafter.

The leaders of tomorrow

It was also Nelson Mandela who said: “The youth of today are the leaders of tomorrow.”

Businesses that will operate in the environment created by these future leaders have a vested interest in their development.

As the World Economic Forum points out, cultivating non-traditional talents such as soft skills, critical thinking and empathy is increasingly important, as is teaching young people to be entrepreneurial thinkers.

Forward-thinking companies could, for example, offer mentorship to promising young leaders, invest in established leadership development programmes, host conferences or learning events, or provide bursaries to impact positively the young people who will be tomorrow’s leaders.