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Government will lose an estimated R5 billion if salary hikes of CEOs and executive directors are frozen, according to a chief economist at Econometrix.

“Assuming that the executive directors and CEOs received an increase of seven to eight percent, South Africa would lose R5 billion in tax revenue in 12 months,” said Azar Jammine.

He together with other analysts have warned that freezing salary hikes was dealing with the symptoms of inequality instead of the root causes.

“The cause is that South Africa has low levels of education and skills development... many of the people are not employable.

“The solution is in the government's national development plan.

“I was surprised it was not mentioned during this meeting,” said Jammine.

Lulu Krugel, economist at KPMG, said freezing salary hikes could be a good gesture but would not end inequality in South Africa.

“If we want to address inequality we have to get a long-term solution. We should not think that we can use one thing to solve everything,” she said.

She said freezing salary increases of those who earned high incomes could send a positive message to the workers, but would not end tension between the workers and their employers.

Independent economist Richard Downing echoed Krugel’s view.

“We are trying to fix the symptoms and not the problem that is causing inequality.  

“There is a dichotomy between what government thinks is the way the economy must go forward and what business views as the way... It is much more than just a labour dispute,” he said.

Downing pointed to the lack of law and order as one of the main causes of the unstable economy.

“People can’t keep to agreements.” 

He warned that freezing salary hikes would negatively affect the fiscus in the long term.

“Our tax base will be eroded and our economy base will be eroded.” 

Isaac Matshego, economist at Nedbank, was also not convinced that the freezing of salary increases would end the current tensions between workers and employers.

“It’s an appropriate gesture in the current environment. Whether it will lead to any fundamental change in improving relations between workers and employers, that is not known,” he said.

On Wednesday, President Jacob Zuma announced the outcomes of his second meeting with business, labour and community representatives which was aimed at addressing the economic challenges facing the country.

All parties made a call on CEOs and executive directors in the private sector and senior executives in the public sector to agree to a freeze in increases in salary and bonuses over the next 12 months, as a strong signal of a commitment to build an equitable economy.  

They also called for an informed national conversation on income inequalities and how best to address them.  

A committee would be set up to consider the local and international experience in addressing income inequalities and would develop further proposals within the next six months.

On Thursday, Economic Development Minister Ebrahim Patel reassured the public that the freezing of salary increases would also take place in the public sector.

“Everybody must show some restraint. We’ve got to do it in the public sector, we’ve got to do it in the private sector,” he said.

Strikes in the mining industry that spilled over to other sectors caused rating agencies Moody’s and Standard & Poor’s to downgrade South Africa’s economic outlook.

There was a general concern among analysts that the downgrading would reduce the country’s attractiveness as a foreign investment destination, and that this would hamper job creation.

Comments

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Sun May 26 08:57:18 SAST 2013 ::

Oct 18, 2012

Knan

Is this refering to black CEO's, if not why such a black dummy on the pic? okare e tswa ko zim...
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Oct 18, 2012

ApelMankotsana

Again the President is coming up with cosmetics solutions to the problem...freezing salaries for 12 months will not help in closing the gap between the rich and poor, it will not assist in having the community of Naas in Mpumalanga to access clean water, ir will not assist in having textbooks delivered in Limpopo, it will not assist a poor old granny in KZN who does not have electricity....The country needs a long term solution to fighting poverty...
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Oct 18, 2012

!!!!Sinudeity!!!!

Strange how private and public sector wage increases are requested to freeze, AFTER JZ and his MP's got their increases.
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Oct 18, 2012

HoneyB

I do not see what this initiative is aiming to achieve. Is this aimed at appeasing mine workers? Unfortunately it will not work as they are past the self entitlement phase of their cause. To determine if we are dealing with rational individuals here would use a simple test; they should justify how they come up with the pay increases demanded.

I would have expected the president to have applied his mind and seen that this would cause a loss to the fiscus. The example that needs to be set is where govt cuts unnecessary spending instead.

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Oct 18, 2012

Smaiza

@!!!!Sinudeity!!!!

Strange how private and public sector wage increases are requested to freeze, AFTER JZ and his MP's got their increases.

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Public sector wage increases for SMS to President is effective every January. The 5.5% increase is not in their current salaries.
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Oct 18, 2012

!!!!Sinudeity!!!!

Smaiza - Not in this case, the 5.5% increase has been backdated from the 1st of April.
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Oct 18, 2012

!!!!Sinudeity!!!!

http://www.sowetanlive.co.za/news/2012/07/26/zuma-accepts-5.5-percent-increase
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Oct 18, 2012

Fanle

@ ApelMankotsana

Government is coming up with a strategy to reduce the number of strikes in SA.
Every decision has prons and cons baba
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Oct 18, 2012

Smaiza

@HoneyB
I do not see what this initiative is aiming to achieve. Is this aimed at appeasing mine workers? Unfortunately it will not work as they are past the self entitlement phase of their cause. To determine if we are dealing with rational individuals here would use a simple test; they should justify how they come up with the pay increases demanded.

I would have expected the president to have applied his mind and seen that this would cause a loss to the fiscus. The example that needs to be set is where govt cuts unnecessary spending instead.

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The govt alway spend based on their 3 year rolling strategic planning.
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Oct 18, 2012

Damora

The problem with JZ is that he is told what to say on almost every sphere of gorvermental policies and plans.What is actually freezing of CEO's salary increases going to do to an RDO and a poor unemployed on the ground? People want improvement in their lives not how much a CEO is earning. We must not come back and cry brain drain 12 months down the line. Long term solutions to our challenges are needed and i doubt Zuma is the right person to help this country sought about those solutions. His advicers must refrain from writing speaching that continue embarassing him as we all know he is advised on almost everything but women.
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