Commission Recommends Increase for 2025
The announcement by the National Minimum Wage (NMW) Commission over the weekend, in the government gazette, outlines its recommendations for the annual review of the national minimum wage.
The Consumer Price Index (CPI), which measures changes in the prices paid by consumers for goods and services over time, is a key factor in these considerations.
As of November 2024, South Africa’s CPI stood at 2,9%, a slight increase from 2,8% in October 2024.
As of February 2024, the national minimum wage in South Africa was set at a rate of R27.58 per hour. This rate is applicable to all workers, including farm workers and domestic workers. However, workers employed under the Expanded Public Works Programme (EPWP) have a different minimum wage of R15.16 per hour.
The commission has recommended a 1,5% increase in the minimum wage in 2025 and has requested input from industry and society on the increase.
Minimum Wages are not the Core Problem
At the heart of it, despite the inevitable criticism that will come on this decision, for most business owners, it is not an unreasonable ask with only a 1,5% increase proposed.
A person paid minimum wages would then be earning R224 per 8-hour day and based on an average of 22 working days a month, would be earning R4928 (ZAR) a month. If one takes into account that most workers will need to pay between R20-R50 a day just for transport to get to work and back, it leaves them with little on the table to get by on each month.
What the real problem is, is the ever increasing burden being placed on businesses to fund more and more of governments ill-thought out programmes that is creating a massive divestment from the country.
Currently Businesses seeking to establish new business in the country must allow for a large portion of the company to effectively be given away to local citizens on a racial bias basis. This known in South Africa as it’s broad based economic empowerment programme or BBBEE, and has prevented major international businesses from investing in the country. The latest being Elon Musk’s Starlink.
The nett result is that companies are moving out of the country at an alarming rate and that manufacturing in South Africa is slowly being strangled to death.
New Preposterous Tax Proposed
This past week saw the Minister of Trade, Parks Tau announced a new levy that he wants South African businesses to pay. His proposed Transformation Fund will see 3% of annual net profits for all businesses, after tax, being taxed to create the new R100 billion transformation fund. Tau unveiled the proposed R100 billion transformation fund during his department’s annual performance plan presentation to the Portfolio Committee.
The fund, is proposed to be administered by the National Empowerment Fund (NEF), and will apparently issue funding only in line with BBBEE regulations to support black owned businesses via loans and disbursements determined solely by the department.
The Democratic Alliance, has warned that the R100 billion transformation fund risks being a slush fund and is open to abuse.
“Not only does the DA reject race-based legislation, but BBBEE has proven counterproductive in closing our inequality gap,” said Toby Chance, DA spokesperson on trade, industry, and competition. He added that the majority of funding is missing the mark in terms of stimulating high-growth enterprises in South Africa.
Business in South Africa Already on the Ropes
When one considers that the corporate tax rate for bossiness in South Africa is 27%, and that in addition they have to pay a skills development levy, Value Added Tax, Dividend tax, plus provide an array of benefits to workers such as contribution towards medical aid and pensions, if they are to remain competitive. This leaves little on the table, particularly for small and medium enterprises, that are the growth point in terms of providing new jobs.
There is also the question of maintenance of infrastructure in the country that has seen the likes of road, rail and ports deteriorate to such a degree that it is costing companies more each year to insure, maintain and grow their fleets and to have to invest in their own power supply that all weigh heavily on businesses.
For government to suggest an additional 3% tax at this point, is quite simply a remarkable lapse of judgement and can only harm the economy and potential further investment and also result in further job losses as every additional cost to business is inevitably weighed against continuing to do business in the country.
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