The state is seeking an appropriate South African solution to the huge disparity between the top salaries of chief executives and the lowest paid workers in public and private business, but Economic Development Minister Ebrahim Patel says that policy is still in the discussion phase.
Pressed on the issue during the ANC policy conference last week, Patel said: “We are open to hearing the views of the business sector and also sharing and hearing views from other parts of society.”
He was specifically asked whether the Chinese model of paying chief executives a pay package only 10 or 11 times the salary of the lowest-paid worker in a company could be replicated in South Africa.
Patel said the departments of Economic Development and Public Enterprises were looking “at what the debate in the UK is all about and what are the mechanisms to try to address it… or whether we follow what China is doing”.
ANC insiders noted that China was better able to implement such a model because its government had a stronger grip on the economy.
Patel noted that counsel had been sought from UK high pay commission chairwoman Deborah Hargreaves. She reported that one of commission’s proposals was to give shareholders of private sector companies a binding vote on the chief executive’s pay and bonuses.
Hargreaves added that Johan du Toit, the chief executive of London- and Johannesburg-listed Central Rand Gold, had resigned after 75 percent of the shareholders voted to deny him a pay raise.
Speaking at the Progressive Business Forum, Patel said in reply to questions about how to cut the high Gini coefficient for income: “We have to do something about this… on the ratio of top-to-bottom pay (disparity). We have to find a solution (which is) appropriate to South Africa’s conditions.
“If workers and employers including management are to work together for the success of enterprises, they have to feel part of those enterprises and have a sense of shared benefit.”
Both Patel and Public Enterprises Minister Malusi Gigaba have underlined the importance of reducing the wealth gap.
Gigaba had argued that capping top salaries might be the way to go, but he acknowledged that the state might have to lead the experiment as the government had influence over state-owned enterprises.
Recently Patel, who has driven the New Growth Path policy initiative, told the Next Economy National Dialogue in income inequality at Parliament that the top 10 percent of earners in South Africa took home salaries that were 101 times higher than the bottom 10 percent of earners.
At the policy conference last week, President Jacob Zuma complained about the vice-like grip white males had over the economy, particularly top income earning jobs.
Patel did not racialise his argument, focusing instead on the role played in circumventing poverty through social grants, subsidising basic services and implementing the country’s progressive tax system. But he noted that this was not enough.
Geordin Hill-Lewis, the DA deputy trade and industry spokesman, said a “blunt cap” on executive pay would not work. Instead, there should be a system that increased accountability for bad service and rewarded good performance, he suggested.