President Jacob Zuma must lead the way by telling the nation that he will freeze his salary increase and not take a bonus, scenario planner Clem Sunter said on Thursday (18/10/2012).
"President Jacob Zuma must tell us what is he going to do as the president to address inequality. He must be the first to tell us that he is willing to freeze his increase for the benefit of the poor,” he said.
Sunter commended the move to freeze salary hikes and bonuses for CEO and executive directors in both public and private sector.
"But the president must tell us what he is going to do to cut back the range of benefits that government officials enjoy, such as travel allowances,” he said.
On Wednesday, President Jacob Zuma announced the outcome of his second meeting with business, labour and community representatives, which was aimed at addressing the economic challenges facing the country.
The meeting called on CEOs and executive directors in the private sector and senior executives in the public sector to agree to suspend increases in salaries and bonuses over the next 12 months, to signal their commitment to build an equitable economy.
They also called for a national conversation on income inequalities.
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.
The National Education Health and Allied Workers’ Union (Nehawu) pledged its support on Thursday.
"Our union has been calling for a moratorium on salary increases of all senior bureaucrats and political leaders in order to address the unacceptable income disparities for years now, and we are happy that something is being done about it,” said spokesman Sizwe Pamla.
However, Nehawu was disappointed that the call came after the president approved a 5.5 percent salary increase for public officials this financial year. Earlier, chief economist at Econometrix Azar Jammine said the government could lose R5 billion in tax revenue if it implemented the new call.
"Assuming that the executive directors and CEOs received an increase of seven to eight percent, South Africa would lose R5bn in tax revenue in 12 months,” he said.
Jammine and other analysts have warned that freezing salary hikes would deal with the symptom of inequality instead of the root cause.
"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, an economist at auditing firm KPMG, said freezing salary hikes might be a good gesture, but it would not end inequality.
"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.
"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.” Nedbank economist Isaac Matshego said: ”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.” - Sapa