GroundUp (Cape Town)

23 June 2014

South Africa: An Urgent Need for Economic Solutions

The platinum strike has correctly been categorised as a national crisis, but it is only one aspect of a much more severe crisis that confronts the country. This was highlighted on Tuesday by President Jacob Zuma in his State of the Nation (SoNA) address in which he stressed the economy.

The economy is indeed in dire straits. But then, so too is the global economy which politicians have consistently assured us, is about to turn yet another corner. But every corner that may have been turned since 2008 merely leads to further crises. At least this year's SoNA seems to have acknowledged this.

At the same time, however, corporate profits have continued to increase while more small businesses have gone to the wall as increasing numbers of men and women around the world have found themselves without work and no prospect of getting any. And, in the unemployment league, we are among the world leaders.

But, as the government continues to trumpet: there are many more South Africans who today receive government handouts in the form of social grants. This is true. But such grants are, in fact, a badge of opverty.

Take the pension, for example. Between the ages of 60 and 70 an impecunious individual qualifies for R1 350 a month. Beyond 70, this increases to R1 370, hardly an above-poverty income, even if it did not have to be shared.

But most social grants are shared, sometimes by up to ten dependents. Many of these dependents will be part of the growing ranks of unemployed youth, raised, and still cared for, often by grandmothers. However, the ranks of the poor do not comprise only the unemployed and grant beneficiaries. There are still legions of the working poor.

According to most labour movement estimates, a wage of between R3 000 and R4 000 a month is the bare minimum "living wage". But, according to the same estimates, more than half the men and women in South Africa fortunate to have a job are still paid less than this. In some cases, substantially less.

Take domestic workers, for example. In most urban areas, the current monthly minimum, determined by government, is R1 877.70. Most such urban workers also live at a considerable distance from their jobs and transport costs are estimated to average R400 a month.

Domestic workers in the rural areas usually do not have the transport costs of their colleagues in the cities, so their minimum monthly wage of R1 618.37 probably makes them marginally better off. However, food and other retail costs in such areas can also be higher.

Farm workers are another group among the lowest of the low paid. But their government determined minimum pay rate soared last year after a series of sometimes violent protests in the Western Cape. Five years ago, monthly pay for a farm worker was R1 231.70. Today it is R2 274.82, having almost doubled in the wake of the protests.

There are other categories of low paid workers, such as in the forestry sector and among a host of various contract services. What all have in common are the basic needs: food, clothing and shelter, of which food requires the greatest share of income.

Most lower paid employees spend up to 50 per cent of their income on basic foodstuff. I have monitored the prices of a "basket" of basic groceries since 2007. By 2009, the goods in the basket cost R118.14. This week the same quantity cost R195.19, a 65 per cent increase. So unless the wages of lower paid workers increased by more than this, they are today worse off.

But there have been price increases across the board, not least in terms of fuel, and this has a knock-on effect on all forms of transport and the costs of delivery. The official statistician also notes that food prices are currently outstripping the rate of inflation (CPI), the measure commonly used to assess pay rises.

More highly paid employees may, therefore, also be feeling the pinch. This seems borne out by the retail sales statistics released this week. They show a substantial decline in purchases. At the same time, South Africa already has a frightening level of household debt.

Such economic and social realities make up what Cosatu general secretary Zwelinzima Vavi calls a "ticking time bomb". And the plans and promises of the SoNA do not seem likely to defuse this. Perhaps a "peoples' assembly" proposed by the National Union of Metalworkers -- it may incorporate a form of "economic Codesa" -- will provide some solutions. But some had better be found -- and soon.

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