Corporate hypocrisy around South Africa’s high levels of poverty and inequality

In the discourse about the just transition in South Africa, companies, especially those with vested interests in the continuation of a fossil fuel-based economy, regularly argue that they are committed to taking climate action but that the transition needs to take account of the South African “context” – that it must be balanced against Africa’s development needs. What they really mean is that the transition must be slow, and allow for more exploitation of fossil fuels, in defiance of economics, science, and planetary boundaries.

Little attempt is made by those claiming the importance of fossil fuels to explain exactly how this approach will benefit the country, but vague references are usually made to South Africa’s high levels of unemployment, poverty and inequality. By contrast, when it comes to fair wages for their employees, the corporate approach appears to indicate an altogether different attitude.

Energy poverty and the transition 

The argument that a transition to a lower-carbon economy is bad for economic development, and that fossil fuels are the answer to growth and poverty alleviation, is fundamentally flawed.

For one thing, South Africa is the 13th largest GHG emitter in the world and has one of the highest global levels of inequality. We have failed in over one hundred years (including the almost 3 decades of democracy) to convert the exploitation of fossil fuels into better development outcomes for most people living in South Africa.

For another, it is a distortion of the notion of the just transition, which is, in fact, based on a recognition that the transition is inevitable, and that it must be carried out in a manner that takes account of those most vulnerable to the concomitant disruption. It requires us to recognise and seize the multiple opportunities inherent in the transition to address the historical failures which are the legacy of fossil fuel-based economies, and to ensure that those opportunities are shared more equitably than has been the case during big economic shifts in the past. It is certainly not meant to empower excuses for delay.

What’s more, besides being false, there is also a concerning inconsistency in this argument about South Africa’s “context”, which appears when companies are confronted with questions about the internal wage gaps between their highest and lowest paid workers.

Inequality and wages 

When Just Share and other shareholders question corporates about their refusal to disclose the pay of their lowest-earning workers, their responses are predictably consistent. They argue that such data is unnecessary and will be “misinterpreted”, that it is unemployment – not low wages – that causes inequality, and that as employers, they provide wider social support that is more impactful than the wages they pay to their employees.

The implication appears to be that by providing jobs, companies are absolved of any responsibility to pay their employees fairly, and that the level of the wages paid in any event has no impact on poverty and inequality in the country.

This response fails to acknowledge the impact of wage inequality as a driver of overall inequality. A 2019 Statistics South Africa report, Inequality Trends in South Africa: A multidimensional diagnostic of inequality found that “the labour market remains one of the key institutions through which South Africa’s exceptionally high levels of both vertical and horizontal inequality get transmitted”. The report finds that while the remuneration – real earnings – of very high earners has surged, the average worker’s income has failed even to keep pace with inflation, meaning that they are earning less year-on-year, in real terms.

Similarly, the International Labour Organisation’s 2022-23 Global Wage Report indicates that minimum wages have declined in real terms in several countries, including South Africa, and that low-paid workers have been disproportionately affected by the cost of living crisis.

Unsurprisingly, then, the stagnant real earnings of the lowest paid workers are generally glossed over by companies when reporting on their remuneration practices. The Companies Act Amendment Bill currently before parliament will go some way to addressing this (that is if it is passed in its current form, despite strong opposition from business), as it requires companies to report on the ratio between the total remuneration of the top 5% highest-paid employees and the total remuneration of the bottom 5% lowest-paid employees of the company. But this is only about disclosure, it does not require companies to do anything to reduce it.

The context is always there

The amendment to the Companies Act will help at least to shine a light on the remuneration gaps within companies, but it does not get to the root of the issue – which is corporate South Africa’s continued refusal to genuinely acknowledge and engage with the context in which it operates: one characterised by inequality, poverty, a high proportion of working-poor and an energy crisis that disproportionately affects the most vulnerable groups in society.

Their concern for South Africa’s development, its vast and unconscionable poverty and inequality, which is so key to their arguments on the issue of transitioning the economy away from fossil fuels, is simply absent when it comes to fair remuneration.

But this two-faced strategy is unsustainable and holding us back, as South Africa’s context is crucial to both discussions. Companies have to take a more comprehensive, rational approach to addressing both climate change and inequality.

They need to acknowledge that the just transition is at the nexus of environmental and social justice – it is about transitioning as quickly as possible while taking account of those most affected by the transition (who are also largely the most vulnerable to the physical effects of climate change) and building a better, more inclusive future.

When it comes to fair and responsible remuneration within organisations, it is about recognising the influence of the national labour market, the role that the growing disparity between the impact of real wages on high and low income earners over the past decade has had in driving inequality in South Africa, and proactively addressing stagnant and inequitable wages.

Only by genuinely acknowledging and honestly expressing South Africa’s context can businesses truly fulfill their claims to be drivers of positive change.

This article was first published in the Business Day on 2 October 2023.
By: Emma Schuster and Kwanele Ngogela

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