Cyril Ramaphosa puts a number on the minimum wage

The government, labour and business have moved to create a more stable labour relations environment, reaching a broad consensus on measures to prevent long and violent strikes, and agreeing to consider a monthly minimum wage of R3,500.

Ratings agencies have been looking to labour reforms, and to the ability of the government, labour and business to work together on these, as one sign of whether SA is serious about effecting the structural reforms it has promised to implement in order to boost investor confidence and economic growth.

Organised labour and the ANC have long called for a national minimum wage to combat SA’s high levels of inequality and poverty, but there have been concerns that too high a wage would see businesses shedding labour, driving up SA’s already high unemployment rate.

At the same time, there have been growing concerns among investors and ratings agencies about uncontrolled strikes that destabilise SA’s labour environment and put question marks over economic growth and investment. While many in the market were keen to see strike balloting and arbitration made compulsory to ensure peaceful strikes, this had been a contentious issue for labour.

Representatives of the three stakeholders met to receive the report of the expert advisory committee on the national minimum wage, which they appointed after talks between the parties deadlocked in June this year.

The committee’s report, which has now put a firm number on the table for the first time, recommends that the minimum wage be phased in over two to three years, that the minimum level be set lower for domestic work and agriculture, and that provision be made for employers to apply for exemption.

Deputy President Cyril Ramaphosa, who met ratings agencies Moody’s and Fitch last week and was due to meet Standard & Poors following the committee of principals meeting, said on Sunday it had been broadly agreed that there should be balloting before strikes commenced. However, there were still unions that had to amend their constitutions to enable them to incorporate balloting. There would be a transitional period to allow this.

It had also been largely agreed that the Labour Relations Act should be amended to ensure a mediation and arbitration process and prevent strikes going on indefinitely.

Ramaphosa said the report on the national minimum wage, which was compiled by a seven-person committee chaired by Wits University dean of commerce and law Imraan Valodia, still had to be discussed by the social partners, but "we are now a step closer to finalising our discussion on the national minimum wage before we finally reach agreement", he said. "It will have an impact on millions of South Africans and begin to address the issue of income inequality in SA."

The committee’s proposal sought to strike the right balance between being bold in dealing with the problems of poverty and income inequality, while acting responsibly to make sure what we are trying to do does not hurt those we are trying to help

—  Imraan Valodia
Wits University dean of commerce and law 

The 130-page report, which drew on research already done on the effect of a national minimum wage as well as on international experience, found that 47% of people who had jobs earned less than R3,500 a month, with that proportion reaching more than 80% in domestic work and agriculture.

Sectors such as construction and the wholesale and retail trade also have a high proportion of low-paid workers.

Valodia said the committee’s proposal sought to strike the right balance between being bold in dealing with the problems of poverty and income inequality, while acting responsibly to make sure that "what we are trying to do does not hurt those we are trying to help".

The committee had recommended that the minimum wage should not be adjusted for the first two years, allowing time for its effect to be investigated.

International evidence suggests the employment impact of a minimum wage in comparable economies has not been as great as initially expected.

Ramaphosa said he had informed ratings agencies that a lot of progress had been made on the labour instability issue. The government had also made progress on other concerns, streamlining the governance of state-owned enterprises and taking steps to bringing in the private sector to invest alongside the government.