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South Africa: Shoprite could lead the way in the inequality debate

Andrew McGregor
By Andrew McGregor
Managing Director, Who Owns Whom

Andrew McGregor is the Managing Director of Who Owns Whom, an independent research organisation

Posted on Thursday, 17 October 2019 09:23

Shoprite workers are paid many multiples less than their directors. REUTERS/Akintunde Akinleye

South Africa needs to have tough conversations about labour broking if it wants to change direction on inequality.

I recently had a conversation with a packer at a Shoprite supermarket who told me she worked five days a week including Saturday and Sunday, for which she was paid the minimum wage of R3,500 per month, which she supplemented with domestic work for the other two days.

By way of contrast, the average monthly salary of Shoprite’s executive directors is R724,000 or 207 times more than the packer’s.

  • Shoprite’s average executive salaries are still the lowest relative to its main competitors.
Source: Who Owns Whom wealth research

This not an attack on the retail groups or their directors.

The four groups depicted on the graph collectively employ over 290,000 people, and they are complex entities to manage. If these executives where not remunerated as they are, they would likely find other companies that would.

In all probability, these same directors share my view on the iniquity and indignity of poverty.

We have a structural problem which is not unique to South Africa.

The United Nation’s has set 17 Sustainable Development Goals for 2030, one of which is to reduce inequality within and among countries.

  • The first of ten specific targets is to “progressively achieve and sustain income growth of the bottom 40% of the population at a rate higher than the national average” by 2030.

“South Africa is not only the most unequal country in the world, but inequality has increased since the end of apartheid in 1994”, notes the World Bank notes in a 2018 report.

  • In the Institute for African Alternatives’ 2018 book called Confronting Inequality (to which I contributed a chapter), Ben Turok stresses that inequality is deeply embedded in South Africa’s social structure and cannot be addressed by welfare and taxation alone.
  • In the same book, David Francis and Kaylan Massie raise the issue of a regulatory or voluntary target pay ratio, which would cap executive pay as a multiple of the minimum wage or a multiple of the lowest paid worker or average worker wage at the company. The two latter options are preferable as executives have the flexibility to increase their income with a corresponding increase for their workers.

The subject of remuneration cannot ignore the creep of labour broking, where workers are placed with companies based on the broker’s contract with the company, leaving workers with no job security. While the recent Constitutional Court ruling guarantees lower paid workers permanent employment after three months, all other workers are commodities to be sold to the highest bidder and multiple commissions are earned off their labour.

  • Staff loyalty is important indicator of effective management, and labour broking destroys loyalty as it is a ruthless outsourcing of the company’s responsibility to its employees.

While technical disruption in the banking sector is the reason for the closure of physical branches, the reaction from union Sasbo indicates that management and labour have not jointly walked that path, causing distrust between management and one of its key stakeholders.

In her chapter, Trade and Industrial Policy Studies senior economist Neva Makgetla points out that South Africa has one of the highest GINI coefficients in the world at 0.63, while former Public Protector Thuli Madonsela’s contribution states that “structural inequality translates into structural inefficiency in the utilisation of human capital”.

It is the state’s responsibility to create a business environment which attracts investment, and therefore growth, and therefore more taxes to fight poverty. But as Turok correctly points out, welfare and taxes are not enough to correct the distortion of poverty. The private sector should be setting its own agenda for an inequality reduction strategy. For instance, targets parallel with the UN 2030 Sustainable Development Goals could be set to:

  • Reduce the multiple of the CEO earnings to (say) 100 times the lowest wage or 20 times the average wage with a reciprocal undertaking from the state to reduce the top tax rate.
  • The elimination of labour broking.
  • A management/labour agreement that when retrenchments take place the same percentage (based on number of peers at each level) retrenchments should apply to all levels of management.

At a recent AGM, Shoprite’s executive remuneration policy was rejected by shareholders and the board has undertaken to review and replace the policy in 2020.

Shoprite is known for innovation and adventurism, and it would be a first if it could introduce a long-term goal of reducing inequality in the revised policy.

Andrew McGregor is the Managing Director of Who Owns Whom, an independent research organisation

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