Excessive executive pay is not unnoticed - Ramaphosa

9 September 2016

Boksburg – It is not wise for businesses to go in the direction of awarding excessive executive pay, especially in periods of unemployment and an economic slump, said Deputy President Cyril Ramaphosa.

Ramaphosa was speaking at the 21st annual National Economic Development and Labour Council (Nedlac) summit held in Boksburg on Friday.

“Business should never think excessive pay rises do not go unnoticed by labour. They observe it and record that in the back of their minds,” said Ramaphosa.

He said that Nedlac was making progress in achieving labour market stability by working to reduce income inequality and through the introduction of the concept of a national minimum wage. He added that it was important to achieve a balance in pay rise and job security in wage negotiations.

“Excessive wage demands could have a negative impact on employment,” he said. Business can demonstrate their commitment to achieving this balance by constraining excessive executive pay and preserve jobs in periods of economic stress, he added.

It is a struggle to achieve growth without constraining the labour market, said Ramaphosa. He believes Nedlac has the ability to achieve consensus on solutions that may be found, given its track record and ability to bring together different social partners in discussion.

In South Africa it is important to increase employment and lower dependency rations. The only way to raise household income is to increase employment.

Growth plan

The reports earlier this week that South Africa achieved 3.3% growth in the past quarter should be a source of encouragement to “deepen collaboration” with all social partners to implement an agenda of growth and development, said Ramaphosa. “It gave us a vision of the future that we desire to have.”

Government is sticking behind its nine-point plan that will supplement the National Development Plan (NDP) to achieve growth, said Ramaphosa. “It covers key priority areas. If addressed it can turn around the economy.”

He listed the energy sector as an example where the plan worked. “A year ago, the country was going through serious energy challenges,” he said. But now load shedding is a thing of the past and factories and mines are operating because of “a good and effective” energy source, he said.

Currently work is being done to address the challenges of unemployment. It is expected that one million jobs can be created in the agriculture sector by 2030. “The NDP is not a pipe dream, it is possible,” he said.

Further economic zones and entities have been established to draw investment for the manufacturing sector. The Beijing Auto Works company will invest R11bn in South Africa. “This will create 9000 jobs in the construction of the plant and thereafter 4000 jobs on a permanent basis,” he said.

“Despite a constrained fiscal environment there is still investment in economic and social infrastructure,” he said. The infrastructure build in the country is one of its “greatest success stories”.

Additionally small businesses are being empowered through the establishment of incubation centres across the country.

Ramaphosa said that although it appears things are “rickety” in the State Owned Enterprise (SOE) sector, work is being done on a “constant basis”. “When announcements are made, people will be amazed at the progress,” he said.

This article first appeared on Fin24, see here.