Peg minimum wage to avoid junk status rating, warns Ramaphosa

SOUTH Africa should embrace a national minimum wage in order to avoid a downgrade to junk status from international credit agencies, says Deputy President Cyril Ramaphosa.

He was speaking at labour federation Fedusa’s national congress in Johannesburg yesterday.

He indicated that an agreement on a minimum wage – embraced by the government, labour and the business sector – was one of the key issues that rating agencies Fitch and Standard and Poor’s had asked about during their assessment visit this week.

“They wanted to hear about the national minimum wage, they wanted to know what progress we are making and they wanted to know on the issue of strikes and strike balloting and whether they were part of the possible agreement. We said yes, it will,” said Ramaphosa.

He said the country was closer than ever to delivering a national minimum wage, with the team of expert advisers, appointed by him earlier this year, about to present a report at the National Economic, Development and Labour Council (Nedlac) tomorrow.

Ramaphosa’s statement confirms earlier reports from some Nedlac sectors that the country’s high levels of inequality are a growing cause of alarm for ratings agencies and international investors, leading to the emergence of consensus over the need for a minimum wage and other policy interventions to stem the tide.

The report will make recommendations on key elements, such as the contentious issue of where the minimum wage should be pegged.

Despite tomorrow’s report, labour and business remain far apart on their expectations on this. Nedlac’s community constituency is closer to labour on the matter. However, Independent Media understands that Ramaphosa’s expert panel is likely to endorse a minimum wage level far lower than the monthly R4 500 demanded by organised labour.

“The report discusses what the minimum wage should look like and it is a proposal. The proposal contains a figure, the magical figure that everyone was waiting for. It will be discussed across the nation and once accepted, we look at how it will work, change over time, when it will be implemented and accepted,” said Ramaphosa.

Talks at Nedlac will also discuss labour stability, which will include an agreement on the contentious matter of strike balloting and pickets.

Despite Ramaphosa’s upbeat stance, it is unlikely that the national wage will embrace all workers initially. Social partners at Nedlac have indicated before that South Africa’s most vulnerable employees, domestics and farmworkers, will probably be excluded. Wages in these categories of work are currently regulated through sectoral wage determinations made every year by the Department of Labour.

Ramaphosa said the implementation of a minimum wage was part of a package of a broader social compact between social partners that was needed to kick- start growth and development.

He said this compact should also be extended to include an agreement on economic growth, job creation and boosting investor confidence. Good leadership, tackling corruption and increasing accountability were also needed to steer the country in the right direction.

“It should also be a compact about us all South Africans working together to ensure accountability and that we are accountable to one another. That is a compact we should have,” he said to loud applause from delegates.

This echoed sentiments from Deputy Finance Minister Mcebisi Jonas, who on Thursday told the congress that the “1994 consensus” had collapsed.

Fedusa also agreed that more social co-operation was the key to stabilising growth and creating jobs. General secretary Dennis George said that in his discussions with rating agencies and investors, he was confident that enough had been done to avoid a credit downgrade next month.