South Africa: National Minimum Wage Could Do More Harm Than Good, Some Experts Say

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By Edwin Naidu

March 24—A national minimum wage is expected to come into effect in South Africa later this year, but its imposition is likely to cause more harm than good, according to Tjaart van der Walt, a lawyer with Johannesburg legal outsourcing firm Exigent.

While the idea behind a minimum wage is admirable, Van der Walt said, it would in practice have negative effects.

“To arbitrarily increase certain low paid employees' salaries through legislation will have a negative impact on the very people whose lives it is intended to improve,” Van der Walt told Bloomberg BNA.

Supply and Demand

The issue, according to Van der Walt, is that while the government can increase the minimum wage, it cannot artificially increase supply and demand.

“If you look at the retail sector as an example,” Van der Walt said, “supply and demand determines the performance of any company. If the company performs well, salaries can be adjusted accordingly; if not, the company won't be able to afford increases. If unaffordable salary increases are implemented, it will only be a matter of time before the company will have to retrench to ensure its survival. You do not need to be a labor expert to know that the first employees to go are those at the bottom of the chain.”

According to Chris Todd, Bowman Gilfillan Africa Group's head of employment and benefits, “the potential impact of a national minimum wage is that if it is set too low to avoid destroying jobs in the lowest paid sectors, it will have little impact in higher paid sectors. On the other hand, if it is set too high, this may negatively affect jobs across the economy.”

The government has yet to set a date for the implementation of the national minimum wage, Deputy President Cyril Ramaphosa told parliament March 9, but once the date has been agreed to, no worker in South Africa should earn below the stipulated amount.

‘The Horns of a Dilemma'

While according to Todd the government intends to forge ahead with a minimum wage this year, it has yet to address other important factors, such as proposed changes to labor laws.

In a recent address at a conference on the national minimum wage debate, Neil Coleman, a senior leader with the Congress of South African Trade Unions, said that South Africa has failed to fundamentally transform the apartheid labor structure, particularly its cheap labor basis, and as a consequence the country continues to experience excessive levels of income inequality. COSATU has put forward proposals aimed to transform the apartheid wage structure and introduce a coherent wage solidarity policy, Coleman said, but the government has yet to act on them.

According to Todd, the government is “on the horns of a dilemma” as it grapples with attempts to demonstrate a commitment to worker interests.

“There are no signs of change or a new path during 2016,” Todd said. “It may be important not to overstate the extent to which labor laws and labor market policy can grow employment, but there is little evidence of government intervention in this area that will either stimulate employment or grow jobs during 2016.”

To contact the reporter on this story: Edwin Naidu in Johannesburg at

To contact the editor responsible for this story: Rick Vollmar at

For More Information

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

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