Deputy Minister Ntuthuko Sibiya: Side Event the Fifth Ordinary Session of the Specialised Technical Committee on Social Development, Labour and Employment

The Dynamics of Minimum Wages in Africa

Distinguished colleagues, esteemed delegates, and honoured guests,

On behalf of our government and the people of the Republic of South Africa, it is a pleasure to be honoured with the opportunity to share our experiences in implementing the national minimum wage. This instrument represents our government's commitment to improving the lives of those in precarious situations.

Furthermore, it is both an honour and a privilege to address you as we convene today to explore the vital issue of minimum wage policies across our continent.

This afternoon, my address will share South Africa's journey and insights, reflecting the challenges and successes of implementing this transformative policy.

As in the rest of the continent, the focus on minimum and living wage policies in South Africa has intensified due to, among others, severe inflationary pressures that have significantly increased the cost of living for millions of citizens. Our country has experienced sharp price rises in recent years, which created substantial economic strain for low-income households.

This inflationary environment demanded a carefully considered response from our government, and we concluded that a robust minimum wage system was critical. The idea was to create a proactive measure to address wage disparities, reduce poverty and promote a fairer distribution of economic benefits.

In the past, our country had different types of wage-setting mechanisms, introduced at the dawn of democracy as part of far-reaching labour reforms aimed at addressing the apartheid-era continuities, discrimination and inequalities that had plagued our labour market.

Ladies and Gentlemen,

This implies that South Africa's minimum wage system was complex before the national minimum wage legislation. Minimum wages were set through a combination of bargaining council agreements negotiated between trade unions and employer organisations and sectoral determinations set by the Minister of Employment and Labour.

While this approach aimed to address various sectoral needs, it often resulted in inconsistencies and difficulties in enforcement. The fragmented nature of this system, coupled with insufficient resources for labour administration, fell short of the standards recommended by the International Labour Organisation (ILO).

Complicating the situation were substantial sectoral differences in the sectoral minimum wage regime.

In light of these challenges, the national minimum wage legislation was introduced to create a unified framework for minimum wages. This comprehensive approach sought to address the systemic issues that had previously left many workers vulnerable to exploitation and poverty.

Therefore, the promulgation of the National Minimum Wage Act marked a significant turning point in South Africa's labour market. This landmark legislation, effective 1 January 2019, introduced a national minimum wage and established a uniform standard designed to protect low-earning workers and address income inequalities.

The Act aims to establish a fair wage floor for all employees, thereby promoting greater economic equity and worker protection.

Dear colleagues and delegates,

Since its introduction, the National Minimum Wage Act has profoundly impacted approximately six million workers, many of whom were previously unorganised and vulnerable.

Our government's decision to introduce a national minimum wage has provided these workers with greater economic stability and protection, significantly improving their financial well-being. For workers who had endured exceedingly low wages, the National Minimum Wage Act has offered a vital platform for escaping the cycle of poverty.

One key feature of this law was its phased implementation, which recognised the potential for significant disruptions, particularly in vulnerable sectors.

To address this, the Act initially set lower minimum wages for farm and domestic workers, allowing for a gradual transition to the general minimum wage. This deliberate approach was designed to mitigate potential negative impacts while ensuring a fair and equitable wage system for all workers.

By 2021 and 2022, the minimum wage rates for farm and domestic workers were successfully equalised with the national standard. Thus far, this equalisation has been particularly beneficial for approximately 892,000 domestic workers—predominantly women—and 800,000 farm workers.

Staying true to our initial promise, the adjustments have played a crucial role in lifting these workers out of poverty and ensuring they are no longer marginalised by inadequate wage levels.

From the governance perspective, the National Minimum Wage Commission is central to effectively implementing the Act, which is critical in overseeing and recommending adjustments to the national minimum wage.

The Commission comprises representatives from employers, employees, community members, and independent experts. This diverse composition ensures that wage adjustments are made based on a balanced and comprehensive understanding of the needs and interests of all stakeholders.

The Commission's mandate is to ensure the national minimum wage effectively addresses inflation, maintains its real value and assists in poverty reduction. This involves analysing economic conditions, labour market trends and the impact of wage adjustments on various sectors.

Adjustments are based on thorough research and evidence, evaluating inflation rates and economic trends to ensure wage increases are fair, sustainable, and aligned with economic objectives while minimising economic disruptions.

It is important to emphasise that the effectiveness of the national minimum wage is closely monitored through detailed data analysis.

Our data indicates that the annual increases in the national minimum wage have consistently outpaced the Consumer Price Index (CPI)-adjusted wages. This demonstrates that wage adjustments effectively address inflation and protect workers' real income levels.

Figures from our research also show that the growth rate of the national minimum wage has regularly exceeded CPI rates. This is a testament to our commitment to ensuring that wage increases keep pace with the cost of living, thereby achieving the objectives of the Act in promoting greater equality and economic stability.

Research conducted by the Development Policy Research Unit at the University of Cape Town further supports these findings. The research indicates that while there have been some minor and variable decreases in employment following wage increases, the overall effects have been minimal.

This reinforces the efficacy of the national minimum wage in achieving its intended goals without causing significant negative consequences.

Esteemed Colleagues;

Implementing a national minimum wage presents challenges, particularly for smaller businesses that may struggle to meet wage requirements. To address this, the Act includes provisions for exemptions, allowing employers facing genuine financial difficulties to apply for relief.

This balanced approach helps support businesses while ensuring workers receive fair compensation.

Despite the progress made with the National Minimum Wage Act, South Africa remains one of the most unequal societies in the world. The challenge is setting wages that improve living standards while avoiding economic disruptions.

Therefore, it is essential that we continue to refine our approach, ensuring that the national minimum wage serves its purpose effectively while supporting overall economic stability.

As we look to the future, it is clear that the journey towards equitable minimum wage policies is ongoing. Our experience underscores the importance of continuously evaluating and adapting minimum wage systems to meet evolving economic conditions and societal needs.

The lessons we have learned offer valuable insights for other nations grappling with similar challenges.

Our commitment to fair labour practices and economic equity must remain steadfast. As we share our experiences and collaborate with all of your countries, we must strive to develop and implement policies that address immediate needs and promote long-term economic stability and social justice.

In closing, the journey of implementing a national minimum wage in South Africa has been one of both progress and learning. While significant strides have been made, our work is far from complete. We must continue to address the challenges of income inequality, inflation and economic sustainability with determination and innovation.

Today's discussions provide a valuable opportunity to share insights, learn from each other's experiences and explore new avenues for collaboration. By working together, we can advance our collective understanding of minimum wage policies and contribute to a more equitable and just labour market across Africa.

Thank you for your attention.