Various organisations have responded to government’s decision to increase the national minimum wage by 8.5% to R27.58 an hour, effective from March 1.

Youth development agency Afrika Tikkun says that while this increase will enhance the quality of life and dignity of the poorest of the poor, there are also potential negative consequences, especially in light of the country’s high youth unemployment level.

While advocating for the need to address inequality, CEO Onyi Nwaneri posits that the decision “may inadvertently discourage job creation”.

“A blanket minimum wage increase, though well-intentioned, poses challenges for businesses, especially for small, medium-sized and microenterprises, which are the lifeblood of South Africa’s economy.

“It is crucial to strike a delicate balance between [reducing] inequality and fostering an environment that promotes job creation. Expensive labour and stringent labour policies hinder job creation and will hamper the country’s efforts to provide access to the economy. This will ultimately counteract the government’s goal of reducing dependence on welfare,” says Nwaneri.

Afrika Tikkun has called on government to carefully consider the potential consequences of the minimum wage increase on job creation and economic growth, and has urged policymakers to explore alternative measures that it says would strike a balance between improving living standards and fostering an environment conducive to sustainable business development. 

Meanwhile, the South African Chamber of Commerce and Industry (Sacci) says government did not consult all affected business sectors ahead of announcing the increase in the national minimum wage.

“Government prefers to only consult big business who may well afford those rates, but the majority of South African businesses are the small [to medium-sized] family-owned businesses that cannot afford this high minimum wage in an environment of low economic growth, high cost of energy that is also unreliable, and high interest rates.

“This decision will further exacerbate the already high unemployment situation in the country, and lead to future retrenchments as businesses try to survive,” Sacci states.

It posits that the decision would encourage business to explore and deploy an uptake of available and nascent technologies and artificial intelligence applications to reduce reliance on labour in an effort to survive.

According to Sacci, adding domestic workers to this same national minimum wage category, “further complicates the situation”.

The organisation says there are few households that can afford these new rates when real household incomes have been shrinking.

It also posits that the increase in the national minimum wage could lead to more businesses in the agri sector failing.

Sacci has called on government to review its decisions in this regard.

National Employers Association of South Africa CE Gerhard Papenfus points out that Employment and Labour Minister Thulas Nxesi announcing an 8.5% increase to the national minimum wage was done on the advice and recommendations of the National Minimum Wage Commission (NMWC).

According to him, the NMWC “ignored the input of numerous business institutions and trade unions who warned of the dire consequences of implementing further increases and the calls for the scrapping of the national minimum wage and simply proceeded with recommending the implementation of its own original proposals”.

Papenfus adds that the manner in which the NMWC reached its conclusion shows the “futility” of the public participation process leading up to its eventual recommendation.

He suggests the solution lies instead in a growing economy, robust labour market arrangements and a new approach to working.