SA’s economic future is by no means sealed

Economy - []

When the newness of the year wears off, focus and talks about growing the economy, labour participation and jobs will begin to gather pace. Evidence from the world’s developed economies (US president-elect Donald Trump’s campaign was all about bringing jobs back into the American economy), tells us this is where developing economies must focus if they want to reduce poverty. South Africa is among those nations.

What better time to quickly catch us up on what to expect later this year, than to touch up on why business must be supportive of national minimum wage (NMW). To be clear, I say, the premise of national minimum wage is to consider its value relative to median wages. Therefore business’s position on it should remember that the real median pay for minimum or low wage work has not risen by much.

Let me remind you, since it’s easy to forget, when a national minimum wage was first introduced in 1999 in the UK it was a controversial policy. It was seen as a major policy proposal for the Tony Blair government and was strongly opposed by business and opposition, who gave dire warnings of massive job losses. Many were proven wrong. By 2005 David Cameron – then the new leader of the Conservatives – said: “I think the minimum wage has been a success.”

To business I say, whatever South Africa’s strategy is on NMW, there are some attractive and some not-so-attractive features. It is your duty to engage it constructively and do away with the hollow alarm bells. Ours is an economy that sees most of its people employed in jobs that tend to be sub-optimal solutions to reducing the levels of poverty or improving their lives.

After all, we are a country where people who own pets spend more on their dog food and healthcare than they do on the black women who clean their houses and look after their kids. 

South Africa has tough financial choices ahead, while discussions on poverty are topping the political agenda. The ongoing student protests against the rising cost of higher education have laid bare a reality that their (working class) parents have been striking and protesting about pre- and post 1994.

Fact: a vast number of people can hardly survive on their monthly pay cheques; most live without basic benefits such as healthcare and pensions. Due to the changes in conventional full-time work, most people are experiencing income insecurity as the norm rather than the exception.

The gloomy reality of the current economic trajectory means the once-great plans of turning the country into a society of care and abundance will continue to see a widening chasm of economic inequality and poverty. Although they are often overlooked, the number of low-income working families or the fictitious ‘black middle-class’ has become increasingly dependent on debt to supplement their income.

Let me provide you with an epiphanic moment, if you haven’t already come to realise it. Philippe Burger, tells us in his engrossing piece entitled ‘Wages, Productivity and Labour’s Declining Income Share in Post-Apartheid South Africa’:

“macroeconomic data indicates that labour’s share in Gross Value Added (GVA) has declined significantly during the first two decades following the first democratic election in 1994.”

He then expands on the statement further by saying that in South Africa, “a falling share of labour in income also means, by definition, that average labour productivity growth outstrips real wages growth”.

Do not be confused by what you often hear as ‘agreed-upon wage settlements’ between workers and their employers. At face value, the increase seems high, but if one considers that labour’s share of the national economy has declined, one can infer that other actors in the economy have done significantly better than workers.

Even though those employed are better off than the unemployed, the economy is falling to reduce the vast swaths of the poor in a nation of abundance for the few. The status quo of inequality, poverty and unemployment continues, because of the remoteness of a portion of our society. And this status quo survives because a critical contributor in South Africa doesn’t imagine why it should be involved in tacking inequality and poverty.

Whatever many failures and shortcomings of the State, I think it’s time we held the mirror of self-evaluation to South African business on the most fundamental question it must be asked, or ask itself: what has it done lately to help bootstrap the economy? A terrible apathy is holding back the private sector from working with the State towards ensuring a growing economy that is able to create jobs. Business with its distinct powerful voice and influence can’t afford complacency or crying foul all the time.

It is a fact: extreme inequality is bad for sustained economic growth. The result is that South Africa now putters on at less than half of what it could achieve. This is not good for anyone: business, employees, the self-employed, blacks or whites.

Countless studies from the OECD, IMF, ILO and Brazil have provided us with examples of the benefits of a national minimum wage. Without a doubt, much needs to be done by both the State and business. The true reflection of Business South Africa’s commitment towards a common vision of building this rainbow nation, is measured by its response to national policies that are trying to solve the inequality and poverty challenge. Business must be careful to not have South Africans and the world thinking it resists NMW because it prefers the legacy of aparthied wages over a tool (yes, I see NMW as such) that has the potential to tilt the scales against poverty.

Thus far, the way business has reacted in its submission and public commentary to the national minimum wage policy proposal has been found wanting.