|Written by:||Meshack Masibo|
In Africa, South Africa has always been sort of a big brother when it comes to economic development so when the government shared that it was introducing minimum wage, it was not such a huge surprise. However it has not always been so, before South Africa’s vast mineral wealth was discovered in the late nineteenth century, there was a general belief that southern Africa was almost devoid of the riches that had drawn Europeans to the rest of the continent. South Africa had no known gold deposits such as those the Portuguese had sought in West Africa in the fifteenth century. The region did not attract many slave traders, in part because local populations were sparsely settled. Valuable crops such as palm oil, rubber, and cocoa, which were found elsewhere on the continent, were absent. Although the local economy was rich in some areas–based on mixed farming and herding–only ivory was traded to any extent. Most local products were not sought for large-scale consumption in Europe.
Today, South Africa is one of the most mineral rich countries in the world, with massive gold, diamond, coal, iron ore and platinum deposits spread across the country. It has vasts amount of agricultural land and the ideal climate for the production of wheat and maize. Its climate also provides perfect conditions for wine making.
During the Apartheid years, loads of sanctions were in place against South Africa. This necessitated that South Africa locally develop or manufacture goods that could not be imported. Leading to a strong manufacturing industry within South Africa to supply the local market. The economy was however very closed and very little trade took place between South Africa and the rest of the world during the Apartheid years. Strict rules regarding the flow of money out of South Africa was in place too, leading to little money leaving the country. This in turn lead to the development of a very strong banking system in South Africa.
Most of the technical and skilled labour was made up by white people as the Apartheid regime favoured the minority population, The same goes for access to education, water, electricity, health, transport routes etc. All leading to a very skew distribution of income and quality of live in South Africa. South Africa introduced its first minimum wage recently, with President Cyril Ramaphosa saying millions of workers would be better paid as he readies for a tricky election in May with the national economy struggling for growth. Trade unions have been split over whether to support the minimum wage, which has been set at 20 rand (1.39 dollars) an hour.
“Millions of South African workers will benefit,” Mr Ramaphosa said in his New Year message. “This is the result of many decades of tireless struggle and is a powerful demonstration of the shared resolve of all social partners to tackle poverty and inequality.” The African National Congress (ANC) party hopes that the move will appeal to its traditional electoral base among poor township and rural voters. Support for the ruling party dipped during the rule of scandal-marred Jacob Zuma, when it lost control of the economic hub Johannesburg and the capital Pretoria in municipal polls two years ago. The minimum wage bill faced fierce criticism from the political opposition and some labour unions. The Democratic Alliance (DA), the main opposition party, voted against the bill saying it was rushed through parliament and would lead to 750,000 job losses.
The leftist Economic Freedom Fighters, led by the firebrand Julius Malema, also rejected the bill saying the minimum of 3,500 rand ($243) per month was too low. The second largest labour federation, the South African Federation of Trade Unions (Saftu), has labelled it a “slave wage”. But the Cosatu trade union federation said 6.4 million workers would benefit and hailed it is as “a major cash injection into workers’ pockets”.
The South African economy is forecast to have grown just 0.7 percent in 2017, with unemployment remaining at record highs of over 27 percent. In September President Cyril Ramaphosa unveiled a raft of measures as part of an economic stimulus plan to boost investor confidence after South Africa entered a recession in the second quarter of this year. The plan includes infrastructure investment and easing of visa requirements in a bid to create jobs in the lucrative tourism sector, which accounts for 10 percent of the economy. “The measures we are announcing give priority to those areas of economic activity that will have the greatest impact on youth, women as well as small businesses,” Mr Ramaphosa said in his offices in the capital, Pretoria.
South Africa’s economy tipped into recession as it shrunk 0.7 percent in the second quarter, dealing a blow to Mr Ramaphosa who came to office in February. He faces elections in 2019 and has been on a drive to attract foreign investment and tackle soaring unemployment, which currently stands at about 28 percent. His five-point plan centres around re-allocating 50 billion rand ($3.5 billion) of public spending to kickstart economic activity and create jobs. Priority investment areas include agriculture, small businesses in the townships and the rural areas. “Our government has limited budget fiscal space to increase spending or borrowing, it is imperative that we make sure that the resources that we do have are used to the greatest effect,” he said. The government under Ramaphosa’s predecessor Jacob Zuma was marred by a string of corruption scandals and poor public service delivery.
A public inquiry is currently under way probing allegations that Zuma organised systematic plunder of government coffers in a scandal known as “state capture” Mr Ramaphosa meanwhile announced a large-scale infrastructure investment plan for 400 billion rand. “Infrastructure expansion and maintenance has the potential to create jobs on a large scale, attract investment and lay a foundation for sustainable economic expansion,” he said.
Ramaphosa’s office said in a statement that while the national minimum wage will not end income inequality, it was a first step towards addressing the clamor for a living wage.