EMMA SCHUSTER and KWANELE NGOGELA: Corporate hypocrisy over high poverty and inequality denies facts

In the discourse about SA’s just transition, companies, especially those with vested interests in the continuation of a fossil fuel-based economy, regularly argue that they are committed to taking climate action but that the transition needs to take account of the SA “context”; that it must be balanced against Africa’s development needs.

What they really mean is that the transition must be slow, and allow for more exploitation of fossil fuels, in defiance of economics, science and planetary boundaries.

Little attempt is made by those claiming the importance of fossil fuels to explain exactly how this approach will benefit the country, but vague references are usually made to SA’s high levels of unemployment, poverty and inequality. By contrast, when it comes to fair wages for their employees, the corporate approach appears to indicate an altogether different attitude.

The argument that a transition to a lower-carbon economy is bad for economic development, and that fossil fuels are the answer to growth and poverty alleviation, is fundamentally flawed.

SA is the world’s 13th-largest emitter of greenhouse gases and has one of the highest global levels of inequality. We have failed in more than a century (including the almost three decades of democracy) to convert the exploitation of fossil fuels into better development outcomes for most people living in SA.

It is also a distortion of the notion of the just transition, which is in fact based on a recognition that the transition is inevitable, and that it must be carried out in a manner that takes account of those most vulnerable to the concomitant disruption.

It requires us to recognise and seize the multiple opportunities inherent in the transition to address the historical failures that are the legacy of fossil fuel-based economies, and to ensure that those opportunities are shared more equitably than has been the case during big economic shifts in the past. It is certainly not meant to empower excuses for delay. 

Social support

Besides being false there is also a concerning inconsistency in this argument about SA’s “context”, which appears when companies are confronted with questions about the internal wage gaps between their highest and lowest-paid workers.

When Just Share and other shareholders question corporates about their refusal to disclose the pay of their lowest-earning workers their responses are predictably consistent. They argue that such data is unnecessary and will be “misinterpreted”, that it is unemployment — not low wages — that causes inequality, and that as employers they provide wider social support that is more impactful than the wages they pay to their employees.

The implication appears to be that by providing jobs companies are absolved of any responsibility to pay their employees fairly, and that the level of the wages paid in any event has no impact on poverty and inequality.

This response fails to acknowledge the effect of wage inequality as a driver of overall inequality. A 2019 Stats SA report, “Inequality trends in SA: a multidimensional diagnostic of inequality” states that “the labour market remains one of the key institutions through which SA’s exceptionally high levels of both vertical and horizontal inequality get transmitted”.

The report says that while the remuneration — real earnings — of very high earners has surged, the average worker’s income has failed even to keep pace with inflation, meaning they are earning less year on year, in real terms.

Similarly, the International Labour Organisation’s 2022-23 Global Wage Report indicates that minimum wages have declined in real terms in several countries, including SA, and that low-paid workers have been disproportionately affected by the cost of living crisis. 

Unsurprisingly then, the stagnant real earnings of the lowest-paid workers are generally glossed over by companies when reporting on their remuneration practices.

The Companies Act Amendment Bill before parliament will go some way to addressing this (if it is passed in its current form, despite strong opposition from business), as it requires companies to report on the ratio between the total remuneration of the top 5% highest-paid employees and the total remuneration of the bottom 5% lowest-paid employees of the company. But this is only about disclosure; it does not require companies to do anything to reduce it. 

Remuneration gaps

The proposed amendment to the Companies Act will help at least to shine a light on the remuneration gaps within companies, but it does not get to the root of the issue — corporate SA’s continued refusal to genuinely acknowledge and engage with the context in which it operates, one characterised by inequality, poverty, a high proportion of working poor and an energy crisis that disproportionately affects the most vulnerable groups in society.

Their concern for SA’s development, its vast and unconscionable poverty and inequality, which is so key to their arguments on the issue of transitioning the economy away from fossil fuels, is simply absent when it comes to fair remuneration. 

But this two-faced strategy is unsustainable and holding us back, as SA’s context is crucial to both discussions. Companies have to take a more comprehensive, rational approach to addressing climate change and inequality. 

They should acknowledge that the just transition is at the nexus of environmental and social justice — it is about transitioning as quickly as possible while considering those most affected by the transition (who are also largely the most vulnerable to the physical effects of climate change) and building a better, more inclusive future.

Regarding fair, responsible remuneration within organisations it is about recognising the influence of the national labour market, the role the growing disparity between the impact of real wages on high and low income earners over the past decade has had in driving inequality in SA, and proactively addressing stagnant and inequitable wages.

Only by genuinely acknowledging and honestly expressing SA’s context can businesses truly fulfil their claims to be drivers of positive change.

• Schuster is senior climate risk analyst, and Ngogela senior inequality analyst, at shareholder activism organisation Just Share.