Minister of Finance Trevor Manuel has spoken out against the trend of exorbitantly high salaries and greed among professionals, and has called instead for them to give something back to help to reduce the growing levels of inequality and poverty in the country.
Speaking at the annual convention of the Association of Black Accountants in South Africa (Abasa) on Thursday, Manuel pointed out that the consequences of the current shortage of skilled black professionals in South Africa — particularly accountants — has seen an undesirable skyrocketing in salaries for those with sought-after skills as well as the rise to powerful positions of people without adequate experience.
“The top 20% of earners in South Africa earn almost half of all the income in the country, while the bottom 20% of earners earn just 4% of the income,” he remarked. “This situation must be turned around and will only be turned around if we increase the production of skills, but at the same time, we moderate the excesses in remuneration of some people.”
For example, he said, in 2003, Ian Cockerill — CEO of Gold Fields — had received a 63% salary increase, Steve Ross of Edcon 36% and Laurie Dippenaar of First Rand 25%, all in the context of inflation of about 6% and a decline in corporate profits in most sectors of the economy. Salaries in the financial services sector led the pack.
“Is this sustainable? Is this conducive to long-term growth in our economy?” he asked.
In general, salaries of black accountants have risen dramatically, and black female accountants command an even higher premium, the minister pointed out.
The public sector is finding it very difficult to attract qualified chartered accountants to posts that are crucial to effective financial management, as the salaries commanded are “simply out of the range of what we can afford”.
“While high salaries may be good for the insiders, it limits the opportunity for new entrants to break into the labour market,” he observed. “This is surely not assisting our economy to grow in a sustainable manner. The whole issue of education, training and salaries of those who qualify needs to be addressed seriously by the [accounting] profession.”
At the same time, he warned of the consequences of placing inexperienced people in positions of power within organisations.
“When people without adequate experience are placed into positions of power and influence simply because they possess the right qualification and are of the right race and gender, then the result is massive financial risk for the companies concerned, and in some cases for the economy as a whole.
“The problem has arisen in the public sector where salaries of senior management in some parastatals approached stratospheric proportions, but profitability continued to decline.”
Not only are inexperienced people being given jobs with huge salaries, but some people are also engaging in excessive “job hopping”, Manuel said, under the guise of broadening their scope of work.
The “opportunistic” role played by headhunters also has a role to play, he noted, since their objective is often to maximise their commission by unrealistic price fixing without looking at the costs and benefits to the economy in general and the value added by the employment of these individuals in particular.
There has been a “dramatic” rise in inequality within the black community in South Africa in recent years, he pointed out, partly caused by skyrocketing salaries, with skilled people on average earning more than 16 times the average household income for black people.
Between 1995 and 2001, the Gini coefficient — a measure of inequality — for the country had been roughly stable. However, for African households the Gini coefficient had worsened from 0,54 to 0,57 over the same period, suggesting that inequality within the African community was rising.
In conclusion, Manuel called on members of Abasa to help increase skills and moderate the excesses in remuneration within the accounting profession.
Accountants could give of their time and money by helping with training directly or helping to finance the education of promising candidates. Overall, it is crucial for the profession to invest in the human capital of young people to mitigate the skills shortage and help eliminate the social imbalances caused by it, he said.
“You have a leadership role to play in ensuring that we are producing more black and female accountants, that the gap between rich and poor does not increase further, that we make a meaningful impact on poverty.
“I call on you to lead a national enquiry that will enlist the support of other professional and business organisations, on how we turn around the shortage of skilled black people in the second decade of democracy, and on how we begin to reduce the level of inequity between the haves and the have-nots.” — I-Net Bridge