Crisis for domestic workers and other minimum wage earners in South Africa

 ·26 Jan 2023

Eskom’s approved electricity tariff hike of 18.65% for 2023 presents a crisis for national minimum wage (NWM) earners in South Africa, with the proposed increase to the wage of 8% not being nearly enough to cover the knock-on effects.

According to the Pietermaritzburg Economic Justice and Dignity group (PMBEJG), a tariff hike of 18.65% will eat away close to half (47%) of the proposed increase, putting the most vulnerable workers in the country – such as domestic workers, farm workers and public works employees – in the same, if not a weaker position as 2022.

An 8% increase in the NMW would move the hourly rate from R23.19 to R25.05. On 21-days, at 8 hours a day, this monthly wage will move from around R3,900 to R4,200 – an increase of R300.

However, with an 18.65% hike in electricity prices, workers will have significantly less money to allocate to other critical expenses, the PMBEJD said.

At current prices, the group’s data shows that electricity takes up 20.2% of the NMW. With the 18.65% hike at the proposed 8% NMW increase, electricity expenses may take up 22.2% of the NMW.

“This is untenable,” it said.

“The 8% increase will act just to ensure a worker’s family is able to live at exactly the same level they lived at in 2022 – a level of hell, where worker’s families underspend on proper nutritious food by as much as 50%, and live in a constant state of food poverty.”

Domestic workers are particularly vulnerable as their wages have only recently (in 2022) aligned with the national minimum wage, and research shows that they, on average, still earn far below the NMW (R3,000 per month vs the mandated R3,700).

Tracking trends in pay throughout 2022, it is also evident that wages are not keeping up with inflation.

The big issue at play here is that proposals for the hike in the National Minimum Wage for 2023 – and many other wage negotiations for workers – took place before Eskom’s electricity price hike was announced.

The decision on the price hike was initially supposed to be made in November 2022, when the proposal period for the NMW was still open, but this was delayed to mid-January 2023 after the proposal was already made.

The PMBEJD said that the government needs to go back to the drawing board for the proposed hike and ensure that whatever increase is applied can absorb the hefty Eskom price increases.

“For the NMW adjustment to absorb and zero the Eskom hike, it would have to be revised upwards by adding 3.8% to the original 8% offer, thereby adjusting the offer to 11.8% or by an additional 87 cents,” the group said.

This would take the hourly rate from the proposed R25.05 to R25.92 (in total a R2.73 increase off the current R23.19 vs the original R1.86 on the 8%), with the monthly increase moving to R460, and a total of R4,350 for workers in full-time employment.

The PMBEJD said that even an 11.8% increase would ultimately not be enough to improve the standard of living for minimum wage earners, however, as this would only absorb the electricity price hike. The tariff hike will result in a rising cost of living across the board – from food prices to transport costs

“The 8% is just simply not enough of a cushion to absorb inflation on the other critical goods and services such as food, taxi fares, education expenses, airtime, domestic and personal hygiene, burial insurance, debt servicing fees, and a myriad of other monthly expenses,” the group said.

“We now live in a time of crisis and uncertainty and great fragility – caused by global and local, and even personal level factors. The buffers that we need to withstand crises need
to be much more robust so that we don’t become so vulnerable to the point where even a tiny unforeseen crisis results in a massive falling apart.”

The group said that a key intervention to help reduce the cost of electricity would be to remove VAT, which would immediately cut a large chunk off of monthly bills.

“Charging VAT sits entirely with the government, and the government can therefore remove it. As a first step, all prepaid electricity users should be exempted from paying VAT, as prepaid is the primary instrument to deliver electricity to households living on low incomes,” it said.

Read: Eskom before and after load shedding – the great collapse in one graphic

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