On average South African workers would have to toil for 111 years to match what their bosses earn in just one year.
While the salaries of the country’s business heavyweights have skyrocketed over the past 10 years, their workers’ wages have hit record lows — a trend that spells out a grim future for tackling South Africa’s soaring unemployment levels.
Since 1994 the salaries of executive directors have increased by 29% every year, while workers’ average wage increase was 6,5%. In hard statistics, the salaries of company directors have leaped by R300 000 a year compared to their employees’, which have increase by a paltry R967 a year. The unemployment rate has handed management a lethal weapon.
”Unemployment … undermines [workers’] ability to struggle for higher wages and it allows management to increase their workload by threatening them with retrenchment,” says a landmark report released by the Labour Research Service, a non-profit company that provides support for trade unions in South Africa.
”Many unions have been, and still are, confronted with the choice of either bargaining for legitimate wage increases or bargaining to save jobs.”
The report, called Bargaining Indicators, is an annual publication and provides trade union negotiators with economic indicators for collective bargaining. In the context of sluggish economic growth — about 1,9% last year — companies rely on the ”suppression of compensation to employees to boost their surpluses”, says the report.
In five of the 10 years since 1994, workers’ wage increases have been below inflation levels. A sample of 439 bargaining council agreements cited in the report show that the average minimum wage last year was R1 609,68 a month.
This falls well below what the report calls the ”poverty datum line of R2 452,73 a month”. On the other hand, directors’ salaries leapt 17,8%, from an average of R2,2-million in 2002 to R2,6-million in 2003.
Zwelinzima Vavi, general secretary of the Congress of South African Trade Unions, said that these figures are a useful bargaining tool but that the ”dominant economic paradigm” — economic growth, imports and exports, foreign direct investment and productivity — must be overcome.
”We accept that directors take more serious decisions and that they must be remunerated, but not to the extent that this report reveals.”
Companies defend directors’ remuneration based on factors such as ”improved financial performance, demand and supply, and comparison of what other directors earn in developing countries”, says Trenton Elfley, a senior researcher on the report. ”However there is no correlation between company performance and directors’ pay increases.”
According to Tony Dixon, executive director of the Institute of Directors, ”a lot of CEOs are imported from overseas, which puts upward pressure on their salaries in South Africa. Local salaries have to be brought into line with [those of] our foreign compatriots.”
But a survey completed by PE Corporate Services found that South African executives are better off than executives in other countries, both developed and developing, ” … [because of] above-inflation increases, generous performance incentives, the strong rand and falling inflation”.
This survey found that ”executives in other countries may have bigger pay packages in hard currencies, but after paying tax and deducting costs such as housing, food, transport and education, they are left with less discretionary spending at their disposal than executives in South Africa”.
Company financial performance in South Africa measured by the percentage change in pre-tax profits declined on average by 4,41% between 2002 and 2003 as a result of the strong rand, and these losses are being passed on to workers.
For example, the CEO of Durban Roodepoort Deep, Mark Wellesley-Wood, took R14,1-million home with him last year. At the same time 14% of his workers lost their jobs.
Chris Thompson, chairperson of Goldfields Limited, received a total package of R14,9-million in 2002 but wrote in the company’s 2003 annual report that one of the concerns that might affect the outcome of the transformation of the mining industry was ”the excessive cost pressure being imposed by zealous union demands”.
Directors at SABMiller are, on average, the highest-paid directors. Their average minimum salary — R13 124 337 — is 536 times higher than their workers’ wages.
”This is a difficult problem because we are part of a global economy, so the labour market — particularly the upper echelons of management — are poached fairly easily by companies elsewhere in the world,” said Kevin Wakeford, managing director of Growth Africa, which focuses on trade and investment in Africa.
”One must be mindful of the retention of our professional class to remain competitive.
”However, when there is squeeze on the market, like we are currently experiencing, there is rarely an equitable response to cutting salaries.
”It boils down to whether we can sustain our society on the current rules of the game, which are based on a lack of leadership and blatant greed.”