The National Minimum Wage Commission ignored pleas from small businesses in pushing hefty wage increase through.

As the news broke on 21 February 2023 that South Africa’s National Minimum Wage (NMW) had been increased by 9.6% one could not help but feel a deep sense of empathy and concern for the sustainability and possibility for survival of Small to Medium Enterprises (SME’s) across South Africa – collectively the country’s largest employer. A main reason for the dismay was the circumstances and processes that lead up to the decision to increase the NMW by such a drastic percentage.

In September 2022 the National Minimum Wage Commission published a report on the possible adjustment of the NMW and called for public comment. The Consolidated Employers’ Organisation (CEO), being one of few employer organisations that protect the interests of small and medium sized businesses, responded to the call for the commentary and expressed great concern regarding the sustainability of SMEs given the current economic climate and prevailing economic conditions were the NMW to be raised significantly.

Following the initial commentary process, the Commission published a follow-up report in December 2022 in which they recommended – in spite of all the risks pointed out by CEO and other organisations – an increase of the NMW in the region of 9%. Disturbingly, this report was conveniently published, with calls for comment over the December vacation period – a time when most employers would have shut down for the year and would not have been privy to the Commission’s publication.

Still, CEO was once again a voice for SMEs and highlighted again the perils faced by business and the fact that much of the information relied upon by the Commission in their report was at times inaccurate, misleading and would place a severe burden on SME’s. Despite best efforts to persuade the Commission to implement an increase that was sustainable for all parties, the NMW has been increased by the drastic amount of 9.6%.

One should never ignore the hardships faced by many minimum wage earners in South Africa and the dire economic circumstances they find themselves in. The purpose of the NMW is ensure a living wage. Unfortunately, South Africa’s challenging economic environment has created a ‘Gordian Knot’ for wage earners and SME employers alike. SMEs are held hostage by ever worsening loadshedding and lower labour productivity levels which have given rise to increasing unemployment levels. The plight of SMEs seems to be totally ignored in the interests of short-term political gains. It is illogical to place already-overburdened employers in a more perilous position rather than looking for ways means to stimulate the economy and create more jobs.

The decision to increase the NMW will almost certainly divide opinion and almost certainly kill off many SMEs already standing at the precipice of liquidation. It is hoped that the realisation that these organisations are highly susceptible to factors such as rising costs and loadshedding will dissuade the NMW Commission in future from imposing such punitive measures on an already-struggling sector of the economy. Focus should be directed at rectifying the issues within economy, stimulating growth and looking for ways to weed out corruption and create employment.

Article by Daniel van der Merwe
National Collective Bargaining Co-ordinator for the Consolidated Employers’ Organisation (CEO)
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