South Africans are the world’s worst-off citizens. For many in South Africa, there is no doubt that we are the poorest of the poor – striking teachers state as a fact on the evening news that they are the most impoverished workers in the country.
Next week, the municipal workers will say the same. Miners, doctors and even our former president have all complained about their own poverty.
When the minimum wage was imposed in South Africa, there was an outcry that it was not enough.
While it is true that it may not feed and clothe a family of four if only one person in a household works, it is not low by international and relative standards.
Yes, our minimum wage is low. It is only the 53rd highest in the world. A more complete picture, however, would include the fact that another 105 countries have minimum wages with purchasing power lower than ours. And there are 30 states that do not have a minimum wage.
Sectoral minimum wages are higher
Furthermore, many of our sectors have sectoral minimum wages way above the national minimum wage – and in many of them, the number of people on the minimum wage is less than 10% of the total.
Remember too that for a developing country, SA spends a lot on social income grants – more than almost all other developing countries as a percentage of GDP. Moreover, free water and power are also part of the social wage as is free housing. Transport costs as a percentage of income are high but most other costs are relatively low.
The South African average monthly formal sector salary is the 18th highest out of the 50 countries we have purchasing power parity adjusted wage data on.
In 2017 South Africans in the formal sector had a higher wage than those in Sweden, Japan, New Zealand, and 10 other countries in the rich world – the 34 countries that are members of the Organisation for Economic Co-operation and Development (OECD).
We can buy more than most
South Africans who work in the formal sector earned more than any of our Brics partners in the formal sector. We could buy four-and-a-half times what an Indian employee could and three times that of a Brazilian and twice that of a Chinese or Russian worker, in purchasing power parity terms.
Even in nominal rand terms, South Africans earned more than those in 29 countries, while only 26 countries earned more than us – mostly rich and advanced countries, along with some bigger developing markets.
Even in simple dollar terms, South Africans earn more than any Brics partner country. This is not news to those who read the tri-annual UBS report on prices and earnings around the world, which shows very similar levels of relatively high earnings by South Africans.
Leaders who plead poverty
South Africans obviously do not believe this, and the report is not widely published, but in order to make decisions about protests and strikes, we should make informed decisions at least as far as hurting our economy is concerned.
Our leaders probably do not know these facts either as they are so wrapped up in a victim mindset and perceptions of their own poverty that we are all in danger of being exploited.
But nothing is further from the truth! The problem is the vast numbers of people in the unemployment queue who have nothing or are underemployed by only having ‘piece’ work.
Demanding more without delivering more
Our productivity is, by some production measures, quite poor. In terms of workers employed in crude steel production, for example, SA workers produce less steel per employee than those in India, Malaysia and China. (Even America and other developed countries in part cannot compete with Chinese production per worker and firms often import their basic steel. Hence the tariffs in steel all over the world.)
SA steel production accounted for 2.2% of world steel production in 1987. We fell to less than 0.35% early in 2019.
Not only does South Africa now produce less steel while the world is increasing production, but the Eskom fiasco is also likely to reduce our ability to produce.
Like Zimbabwe, South Africa is in danger of losing its entire steel industry in the next decade due to these low productivity levels and high cost structure.
In vehicle production, we seem to fare better but we are still nowhere close to the best. And our wages on the factory floor seem reasonable, particularly when one compares them to the likes of Thailand and Turkey.
Yet we are forced to allow massive tax breaks and other subsidies in vehicle production to make it work. A few years ago National Treasury estimated the subsidies to be in excess of R18 billion a year.
Yet motor vehicle production is not keeping its market share in the world either. Despite the massive subsidies, SA is not keeping up despite the positive headlines you may read. Again power blackouts and cost increases will hurt here too.
SA has dropped from the world’s biggest gold producer to eighth place this year. The output ranking has dropped in coal, iron ore and even wool production.
If South Africa wants to avoid being a victim of its own victimhood it needs leaders who have the courage and wisdom to inform the public that those of us lucky enough to have a formal sector job have far less to complain about.
The unemployed can complain – but those of us in formal work are generally not as poor as we have led ourselves to believe.
If we are not careful and productive we will believe ourselves poor. Why? Because we demand more without delivering more productivity compared to the rest of the world. This year Sri Lankans, for example, will probably become richer than us.
South African production struggles to compete and we lose jobs and income to other countries.
Mike Schüssler is an economist at Economists.co.za.
