South Africa: Mixed Reaction to Proposed National Minimum Wage

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By Edwin Naidu

Nov. 30—Multinationals and large corporations may be able to absorb the financial impact of South Africa’s proposed national minimum wage but the country’s small business sector may have to lay off workers, warned lawyer Michael Maeso, partner and head of the Employment & Pension Law Department at Durban-based law firm Shepstone Wylie.

“Multinationals will build it into their pricing and have the infrastructure to absorb it,” Maseo said, “while the impact to the country’s small to medium enterprises would be significant and potentially do more harm than good.”

‘Triple Challenge'

South Africa’s Deputy President Cyril Ramaphosa said Nov. 20 that a panel that has been studying options for a national minimum wage for the past two years has proposed a monthly 3,500 rand ($244) wage, equivalent to 20 rand ($1.30) an hour.

“We all know that we have a triple challenge in our country—unemployment, inequality and poverty,” Ramaphosa told a Johannesburg media briefing. “And when we were given our task it was precisely to see whether the national minimum wage could make an impact on addressing inequality [and] employment, and of course the issue of unemployment has been with us for some time. It is with this in mind that we embarked on this process.”

The proposed 3,500 rand minimum wage is higher than the current wage received by 6.2 million workers (47.3 percent of the workforce), including over 90 percent of domestic workers and almost 85 percent of agricultural workers, according to the panel. Wages paid these employees would rise by an estimated 14 percent on implementation of the new minimum wage, by about 5 percent in other sectors.

The proposal will be studied in detail before the government responds, Ramaphosa said.

Job Losses?

Carol O’Brien, executive director of the American Chamber of Commerce, which represents 250 out of an estimated 600 U.S. firms in South Africa, told Bloomberg BNA that the majority of U.S. firms in the country already pay above the minimum wage.

“We don’t see this impacting them,” O'Brien said. “In fact, I didn’t get a negative answer from any companies regarding the proposed minimum wage.”

According to Alan Mukoki, chief executive officer of the South African Chamber of Commerce and Industry, while businesses recognize the social justice imperative in raising the minimum wage, they expect the government to provide data on its likely economic impact.

Mukoki also expressed concern that the minimum wage would result in actual loss of jobs, giving the following examples:

  •  Gasoline retailers may require motorists to fill their own tanks as in the U.S. if they cannot afford the extra cost of attendants.
  •  Supermarkets may require customers to “swipe and go,” bagging their own groceries and paying by automated credit card readers, as in the U.K., if the cost of paying shop assistants the new minimum wage is unaffordable.
  •  Restaurants may rely more heavily on unpaid student servers compensated only by tips.

“A laborer earning 3,500 rand a month could be replaced by automation,” Mukoki said, urging a “socioeconomic assessment” of the possible consequences of the proposed minimum wage and especially of likely job loss.

‘Balanced, Thoughtful, Constructive'

Finance Minister Pravin Gordhan said in a statement Nov. 24 that his ministry fully supports the report and the approach recommended by the national minimum wage panel.

“The report represents a balanced, thoughtful and constructive approach to addressing the challenge of inequality and unemployment,” Gordhan said. “It represents an important milestone in our government’s efforts over the years in this regard. The report also takes account of the need to support employment creation.”

To contact the reporter on this story: Edwin Naidu in Johannesburg at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

Deputy President Cyril Ramaphosa's Nov. 20 statement is available here, the report “A National Minimum Wage for South Africa” here.

For more information on South African HR law and regulation, see the South Africa primer.

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