Minimum wage: Special dispensation for small businesses needed

Mine workers sometimes spend up to 15 hours at a time underground, but they don’t complain because this boosts their meagre salaries
Mine workers sometimes spend up to 15 hours at a time underground, but they don’t complain because this boosts their meagre salaries

Cape Town – A national minimum wage across the board will not necessarily benefit the most vulnerable workers in South Africa, interest groups in the small business sector said. 

Deputy President Cyril Ramaphosa on Sunday proposed at a media briefing a national minimum wage of R3 500. 

A report of 130 pages have been compiled by a seven-member advisory panel, which suggested that the domestic workers and those in the agricultural sector be set lower, while some employers should be allowed to apply for exemption. 

READ: Higher pay rates for domestic workers 

The panel also recommended that the minimum wage should not be changed in the first two years to see what impact it has on the economy. 

Impact on small business sector 

Gerhard Papenfus, CEO of National Employer’s Association of South Africa (Neasa) told Fin24 by phone that most of the businesses represented by his organisation, already pay their workers above the mooted R3 500 national minimum wage. 

“But for sectors such as retail, private security and hospitality a R3 500 minimum wage will require significant upward adjustments in salaries. These industries are likely to pass on the effects of a higher minimum wage to the consumer in the form of higher commodity prices.” 

Papenfus said although a R3 500 minimum wage is not an “unreasonable amount”, such a direction is not going to benefit the most vulnerable workers in South Africa who don’t necessarily have the required set of skills. 

“For example, a small construction company will not be prepared to hire someone with no skills for a minimum of R3 500 per month,” Papenfus said. 

Different wages according to skills level 

Guy Harris, thought leader and entrepreneurship mentor, said he is worried about the mixed messages that government sends out on employment creation. “On the one hand, they say we’ll give a huge wage subsidy or employment incentive below the minimum wage or close to the minimum wage, but then we’re going to bring in a minimum wage.

“Instead, South Africa needs every incentive to create jobs. Obviously the more jobs that can be created at a wage that can give people a decent living the better, but by implementing a minimum wage you’re not going to deal with inequality,” said Harris. 

A national minimum wage should rather be based on industry and geographic area and should take into account the type of work that a person will be doing. 

READ: Why a minimum wage doesn't equal employment 

Janine Myburgh, President of the Cape Chamber of Commerce and Industry, said in a statement although the organisation does not advocate a minimum wage, she is pleased that it will be phased in over two or three years and that there are provisions for exceptions – “especially in the agriculture and domestic fields”. 

“The minimum wage is well below what some unions were demanding so there has been significant compromise,” Myburgh said. “Given that 47% of the workforce earns below R 3 500, this could make a small contribution to reducing wage income inequality but broader consultation is required with industry employer associations to look at impact especially on the SMME (small and micro enterprises) sector and informal business which could be hardest hit,” she said. 

Flexible labour regulations 

Toby Chance, DA spokesperson on small business development told Fin24 that a minimum wage would place an additional burden on small businesses. 

“There needs to be relaxed labour regulation to make it easier to hire and fire employees. At the moment our labour market is very inflexible – it is dominated by big unions and bargaining councils that put pressure on small businesses to comply with these regulations. 

Chance suggested small businesses should be allowed to have flexibility over their labour force. 

“My view is that the recognition of a national minimum wage should be accompanied by the deregulation of labour laws to make it easier for small businesses to either be exempt from regulations, or have the ability to manage their labour force more flexibly.” 

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