The retail sales figures and the inflationary trends and expectations the SA Reserve Bank supplied in the recent monetary policy committee (MPC) announcement are filled with economic clues as much as they present a micro-image of all our economic woes. These two numbers are significant in that they present, in the middle of our postfestive hangover, a snapshot of what household demand looks like, and by extension its effect on sales, employment, prices and output.
Outside of the Black Friday stampedes and frenzy, the February value-added tax increase, high levels of household debt and steep fuel price rises in 2018 put a damper on any Christmas windfall the retailers may have been expecting. In the months preceding Black Friday in November, there was a moderate 1% rise in October and a 0.5% decline in sales in September. And, as the Bank showed us, the economy is not “overheating under the hood” of strong demand pressures.
It is clear that SA is a wage-led economy, rather than a profit-led one.
As the MPC’s statement read, “inflation is expected to remain within the inflation target range, averaging 5.3% in 2020 and 4.8% in 2021”. Judging by the weak numbers that came out of Mr Price and Woolworths last week, it is clear that consumers were indeed “particular” and “choosey” when it came to when to buy, from whom and what.
Economies function on the basis of people interacting, producing, purchasing and exchanging goods and services. When household incomes are depressed and income and asset growth filters to the top, folk don’t even have the money to buy the things they help produce. In the absence of any change in underlying demand conditions, we cannot expect any sustained economic growth.
So, in the spirit of New Year’s resolutions, goals and wishes, as a policy wonk I am putting out “to the universe”, as some of us often say, a few wishes that I think can potentially turn this state of affairs around. It is clear that SA is a wage-led economy, rather than a profit-led one. Wages are not just a payroll cost (and thus a theoretical limitation on profit and investment) but also a source of demand in key consumer-facing sectors. So we need policies that not only tackle wage growth but in effect make SA’s wage structure more equitable and give more randelas to poor households to drive aggregate demand.
For this to happen we first need to seriously embrace and implement the national minimum wage. Although not a living wage, its material effect on millions of workers (in retail, fuel stations, private homes, taxi ranks and farms) working for much less, is unavoidable. The SA wage structure, unfortunately, is that exploitative, inhumane and cruel. This is a measure to tackle that.
Second, as suggested by the jobs summit framework agreement, corporations must disclose how much their top paid executives earn in relation to the lowest paid, average paid or even median paid. This should not only be disclosed to Tabea Kabinde and her team at the Employment Equity Commission, but in their results, integrated reports and in their brand messaging. It is in the public interest to do so. Those with excessive gender, racial and class pay gaps should be outed as profiteering and gluttonous corporate citizens undeserving of our soiled, sweat-stained and hard-won rands. Corrective action must involve the remedying of these inequitable structures by improving pay (and by extension demand) at the bottom end of the payroll.
Lastly, I wish for the timely adoption of amendments to the Competition Act, introducing the themes of “margin-squeeze”, “buyer-power” (or monopsony power) and greater vigilance on merger activity and the abuse of market dominance and power. These changes, expected to broaden market access for black SMMEs and greater protection of consumers against excessive pricing by dominant firms, have the potential to tilt the balance of power in our economy.
One can only wish. The policy Santa Claus may be a no-show, but not for a lack of directions. The subdued retail numbers and demand challenges are the GPS location sent. Only time will tell if the results arrive.
• Cawe (@aycawe), a development economist, is MD of Xesibe Holdings and hosts Power Business on Power FM.
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