What is the national minimum wage in South Africa

During a media briefing held on 20 November 2016 at the National Economic and Labour Development Council, Deputy President Cyril Ramaphosa announced the introduction of a national minimum wage.

In his 2014 State of the Nation address, President Jacob Zuma urged NEDLAC to address the issues of wage inequality, as well as the duration and violence of strike action. This led to the establishment of the Committee of Principals (‘COP’).

In regard to strike action, the question of whether a strike ballot should take place was raised. The social partners of the COP have largely agreed that there should be.

Practically this would require a trade union to conduct a ballot amongst its members in order to determine whether or not to commence with the strike. The results of the ballot must then be verified. Currently, trade unions are not required to hold a strike ballot but are required to give employers 48 hours’ notice before going on strike. The proposal of a strike ballot would in effect place another hurdle before trade unions attempting to exercise their right to strike. In 2012 the Labour Relations Amendment Bill proposed the introduction of strike ballots. The proposed amendment was met with resistance by trade unions who criticised the strike ballot as a hindrance to trade unions wishing to embark on strike action. The amendment was then subsequently done away with.

The introduction of the strike ballot requirement may also result in trade unions having to amend their constitutions to incorporate provision for balloting and may require the amendment of existing collective agreements between employers and trade unions.

Another question which was raised was how to curtail the length of strikes. It has been suggested that in order to facilitate this, an amendment to the LRA would be introduced to enable public interest intervention to strike action in the form of voluntary arbitrations. It is hoped that this process will prompt strike participants to consider the settlement of the strike.

These suggestions are not in force yet and may not ever come into force. It is likely that both will be met with resistance from trade unions and employers.

The issue of wage inequality was also discussed at COP in the context of a national minimum wage. The purpose of a national minimum wage, as stated by Deputy President Ramaphosa, is to reduce income poverty in the country.

Currently South Africa does not make use of a national minimum wage, but rather minimum wages are regulated by sectoral determinations which only apply to certain sectors of the industry. The proposed national minimum wage will apply to all sectors if it is introduced.

The proposed national minimum wage is R3500 per month, for implementation in 2019. The COP have agreed that the proposal will be discussed with the constituent members of NEDLAC, who will then make a decision on whether the recommendations should be accepted or rejected. The amount of R3500 is therefore by no means a final amount and will be subject to further debate. The South African public will have an opportunity to put forward their own proposals and voice their own concerns about this issue.

The most obvious practical implication of a national minimum wage is how it will be funded. The most probable answer would be through consumers paying higher prices for goods and services. Another implication is that businesses may have to reduce their costs to accommodate a higher wage. This may result in costs cutting exercises including retrenchments.

The issue of a minimum wage is contentious. On the one hand, proponents of the minimum wage argue that it will establish greater labour stability and also suggest a progressive and optimistic cooperation between business, labour and government. On the other hand, opponents of the minimum wage have argued that its introduction will force unskilled workers into the informal sector as businesses will have to reduce their workforce to compensate for the higher wage. The full implications of the introduction of such a minimum wage may only be fully contemplated after its introduction, if it is introduced.

Andre Van Heerden is the Senior Associate & Jacques van Wyk is the Director at Werksmans Attorneys.

Read Previous

6 tips on how to manage multiple businesses as an entrepreneur

Read Next

What to do now that you’ve graduated and need a job