Trade and Industry Minister Ebrahim Patel has announced a raft of measures aimed at “democratising” the economy.
The minister outlined some of the measures planned:
– A Companies Amendment Bill will be prepared within the next three months to set out the modalities for improved representation of worker interests in company decision-making and boards;
– The outcome of the register of worker ownership in the SA economy will be published on an annual basis and we will work with unions and corporates to improve the funding arrangements to ensure that this model provides for real ownership and a greater say in decision-making. We also intend to work with tertiary educational institutions to assist in the further education of worker directors and potential directors.
– A Practice Note under the BB-BEE Act will be gazetted to provide guidance to regulators and clarity in the market on the treatment of broad-based empowerment vehicles, so that worker ownership schemes, community trusts and union investment vehicles are properly recognised for BEE-purposes. Aside from worker representation, there are other significant steps that must be taken to achieve greater fairness, more opportunity, and deeper transformation in the economy:
– Promoting black industrialists and small businesses is critical. Though we have made progress with BB-BEE, it is clear that we need to bring greater rigour and credibility to BEE statistics and practices and ensure that claims made by firms in their BEE reports are verified. This may require adjustments to the reporting requirements. I will appoint an expert panel to review the current BEE Framework in order to address these legitimate public concerns.
– We recently released a report containing details of R32 billion made available by the dtic-institutions to nearly 800 black-owned entities to grow their footprint in areas such as food production, auto components, textiles, steel and film-making.
– Master Plan implementation of transformation measures, covering some R9 billion will begin rollout; and the first allocations from the Auto industry’s Transformation Fund will be made, covering black component suppliers.
– By November, the new JP Morgan Fund to support 500 local firms and small businesses, with R384 million of support through an ‘equity equivalent’ agreement with the state, will begin disbursing funds.
– This week, the Competition Commission launches a Market Inquiry into online platforms, like e-commerce marketplaces, food delivery, short-term accommodation and travel e-platforms, the first such inquiry under the new legislation; and will later this year release a report on the state of economic concentration in SA industry. I am pleased to announce that Deputy Commissioner, James Hodge, an eminent competition economist, will chair the Market Inquiry into online platforms.
– A Policy Statement on Competition Policy for Jobs will also be released this week.
– A Green Paper on the Social and Solidarity Economy will be released for public comment within 60 days, which can assist with the rebuilding of the economy in the wake of the number of formal businesses that have been devastated and to support township and rural enterprises. A further amendment to company law is required to tackle the gross injustice of excessive pay.
A new Bill will that will be finalised within 60 days will require disclosure of wage differentials in companies, stronger governance on excessive director pay, and enhanced transparency on ownership and financial records. Our economy needs a production boost. So the Second Pillar of our deeper integration strategy recognises that we must build local industrial capability, both for the domestic and export markets. South Africa’s import to GDP ratio is too high for an economy that desperately needs more jobs. We import goods worth 25% of our GDP – our propensity to import is out of line with peer countries and developed economies and more can sensibly and sustainably be produced locally. Compare our 25% with China at 14%, India at 16%, Brazil 10%, the US at 12% and the EU at 14%.
Not everyone sees the minister’s plan for disclosure of wage differentials as a benefit to the country.
“Planned new legislation announced in his departmental budget speech on 18th May by Industry minister Ebrahim Patel to narrow the earnings gap between company executives and the lowest-paid workers will further fuel job losses,” say Dr Lawrence McCrystal and Adv Hein van der Walt of Cofesa, the Confederation of Employers of South Africa.
“It will bring negligible benefits to a decreasing number of employees, while increasing the 40.2% unemployed, alienates business and reduce tax income, Cofesa predicts. Instead, by must modernize our economy by ‘picking the low hanging fruit of deregulation’. We can in a relatively short time create between 22-30 million job opportunities in SA and 50 million on the continent they stated.
Patel said the new bill will be finalised within the next two months. The draft legislation will require disclosure of wage differentials in companies, stronger governance on excessive director pay, and enhanced transparency on ownership and financial records.
South Africa is one of the world’s most unequal nations, a legacy of the system of racial discrimination that disadvantaged the Black majority and ended in 1994. Chief executives and top lawyers can make in excess of R20 million a year, while the official minimum wage is just over R20 an hour.
April data from BankservAfrica’s Take-home Pay Index (BTPI) shows that the average salary is currently R15,092 in nominal terms and R12,749 in real terms.
Data published by PwC at the end of 2020, meanwhile, shows that the Median Total Guaranteed Package (TGP) for a JSE chief executive is R5,242,000 pre-tax. This drops down to R2,833,100 post-tax.
The report shows that the chief executive salaries are significantly higher at large-cap companies such as the JSE’s top 10.
The Median Total Guaranteed Package (TGP) for a JSE chief executive at a JSE top 10 company is R23,600,000 pre-tax. This drops down to R12,990,000 post-tax.
The JSE’s top 10 listed companies are predominantly companies whose primary operations are based in foreign territories and as a result the respective CEOs are remunerated in foreign currency terms, PwC said.
Move from a ‘welfare’ to a ‘workforce’ perspective–
In a recent ‘Blueprint for invigorating SA Economy’ webinar of Inclusive Society, Ms Joan Fubbs calls for macro-economic strategy to move from a ‘welfare’ to a ‘workforce’ perspective. It resonates with Cofesa’s Blueprint for a modern SA economy submissions to government that calls for wide ranging economic reforms reminiscent of Ms Margaret Thatcher’s 1980 reforms and Glasnost (transparency) and Perestroika (restructuring) of Mr Michael Gorbachev that turned their economies away from failing socialism and communism. This blueprint calls for the removal of business unfriendly laws, including the reduction of the top marginal txa rate from 41% to 17% and VAT from 15% to 10% or even 5%.