Minimum wage increase could break small businesses

Small to medium enterprises (SMEs) in South Africa may struggle to afford the new 9.6% national minimum wage (NMW) increase, which could lead to an uptick in unemployment and business failures.

The NMW Commission announced on 21 February that the minimum hourly wage would increase to R25.42 starting from March 2023. Currently, the NMW is R23.19 per hour.

Daniel van der Merwe, national collective bargaining co-ordinator for the Consolidated Employers’ Organisation, said that the commission ignored pleas from small businesses when deciding to implement this drastic increase.

SMEs are the country’s largest employers and a significant contributor to GDP. 

Businesses in South Africa are already struggling to overcome worsening load-shedding, which has led to big and small enterprises laying off staff.

It has led to a sharp rise in unemployment, which Van der Merwe warned would only increase more due to the increased minimum wage.

“One should never ignore the hardships faced by many minimum wage earners in South Africa and the dire economic circumstances they find themselves in,” he said. “The purpose of the NMW is to ensure a living wage.”

However, he said South Africa’s current economic environment had placed both wage earners and SME employers in a difficult position.

Some have argued that the NMW increase, given South Africa’s current economic state, will not improve the lives of minimum wage earners.

The Pietermaritzburg Economic Justice and Dignity group reported that Eskom’s electricity tariff hike of 18.65% will wipe out 47% of the NMW increase.

Combined with rising food prices, minimum wage earners will be in the same position they were in in 2022, despite the wage increase.


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