National Minimum Wage – but can employers afford it?

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The National Minimum Wage (NMW) for 2022 has been set at R23.19 per hour, which translates to R185.52 for an eight-hour day, and R3 710.40 for a month with 20 working days. This represents a 6.9% increase over the 2021 NMW.

The new NMW was Gazetted by Thulas Nxesi, the Minister of Employment and Labour, on February 8, and comes into effect on 1st March 2022. It applies to all workers in South Africa, including farm, forestry and domestic workers.

The only employee group exempt from the NMW are Expanded Public Works employees, whose minimum wage for 2022 has been set at R12.75 per hour.

Reaction to the NMW increase has generally been positive. It marginally improves the real value earnings of bottom rung employees in South Africa (it is 1% above the December CPI inflation rate of 5.9%) and comes as no surprise to the majority of employers who were expecting an inflation-linked increase.

However it follows a hefty 16.1% increase in the NMW that was introduced for farm and forestry workers last year (2021) when their minimum wage was boosted to reach parity with the NMW.

Commented Forestry South Africa’s Executive Director, Michael Peter: “FSA believes the increase is very reasonable considering the above CPI increases our sector has experienced over the past few years. It is also very positive to note that in contrast to previous years, FSA was given an opportunity to provide recommendations to the National Minimum Wage Commission to inform their decision."

However a major ‘red flag’ for the forest sector in South Africa is that it appears that the vast majority of small scale timber growers operating in tribal authority areas are not complying with NMW legislation, meaning that they are unwilling or are unable to pay forestry workers the national minimum wage.

A recent survey of small scale timber growers undertaken by the Sustainable African Forest Assurance Scheme (SAFAS) in several tribal authority areas in KwaZulu-Natal, including Matimatolo, Ozwathini, Hluhluwe, Mandeni and Richmond, found that there was 0% compliance with the NMW. The consequence of this is that these growers are not legally compliant and are thus also unable to achieve forest certification, which means they are excluded from premium timber markets.

This points to the reality that there is a parallel economy operating in rural tribal authority areas where wages are significantly lower than they are in the rest of the country. The SAFAS survey found that the average wage for a chainsaw operator working for a small scale timber grower in the surveyed tribal authority areas was R101 per day, while the average wage of a general forestry worker was R74 per day.
According to the Department of Labour, all workers in South Africa, irrespective of the size of the business employing them - or its geographic location - are entitled to a wage not less than the NMW.

Employers who have valid reasons for not being able to pay the NMW can apply for an exemption, but it is an extremely onerous process that small scale timber growers are unlikely to be able to navigate.
This leaves them in a situation where they are forced to conduct business outside of the law of the land.
To address these and other problems, the SAFAS team is in the process of developing alternative mechanisms to provide small scale timber growers with market access via a ‘Community Label’.

But it seems that it is not only small scale timber growers who are struggling to comply with NMW legislation, and that many commercial farmers in South Africa are in the same boat. Christo van der Rheede, Executive Director of Agri SA, said that the increase in the minimum wage raised concerns around the ability of many farmers to continue operating their businesses profitably, and to contribute towards employment creation in labour-intensive sub-sectors. He said farmers have had to absorb extraordinary increases in input costs over the past few years, ranging from fertilisers to fuel prices, electricity price hikes and the double-digit increase of the minimum wage in 2021.

This, he says, has come against the backdrop of the dilapidated condition of rural and some provincial roads which have been rendered all but impassable, with the result that farmers struggle to get their crops to market. 

To add to farmers’ woes, he says large-scale locust outbreaks have occurred in parts of the Northern Cape and Western Cape. Plus there have been torrential flooding and hailstorms in North West, Free State, Limpopo, KwaZulu-Natal and Mpumalanga which have had a devastating impact on farmers, some of whom have lost 100% of their crop.