South Africa minimum wage the beginning of a difficult process: Nene

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South Africa’s Minister of Finance Nhlanhla Nene speaks to reporters at an investor event in London, U.K., on March 13, 2018.

South Africa is one of the most unequal societies in the world. According to the World Bank, the poorest 20 percent of South Africans consume less than 3 percent of the country’s total expenditure. Meanwhile, the wealthiest 20 percent account for 65 percent.

Introducing a minimum wage could help alleviate this, and also stimulate much-needed economic growth by boosting consumer spending. South Africa’s consumer price inflation has been on a largely downwards trajectory since early 2016, hitting a seven-year low of 3.8 percent in March. But, in April it rebounded to 4.5 percent as a result of price rises in product groups that are specifically taxed, according to Statistics South Africa.

But, some fear that a minimum wage could lead to a rise in unemployment, already at 26.7 percent for the first quarter of this year.

While Nene acknowledged that laying off workers could be an “unintended consequence,” he argued that the new legislation has provisions to “protect” jobs, allowing for businesses struggling to pay their workers to submit to the government for an exception.