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South Africa – Workers benefit from higher pay hikes

20 March 2013

South African workers can expect higher pay rises than workers worldwide over the next 12 months, according to a survey by Grant Thornton. But it is questionable whether this situation is sustainable given current global economic conditions.

The International Business Report found that a surprising 68% of South African businesses will increase salaries in line with inflation, while more than a quarter (26%) will raise pay by more than that over the next year. Less than 5% of South African businesses do not intend to increase wages.

This follows the recent Budget Speech by finance minister Pravin Gordhan who focussed on poverty, unemployment and inequality.

“We applaud the government for raising this concern so vocally in the Budget Speech 2013,” said Ian Scott, managing partner at Grant Thornton Cape. “However, while pay rises are certainly a necessity to help eradicate poverty concerns, unrealistic wage hikes will only bring added pressure to an ailing economy.”

South African workers fare better than their global counterparts regarding salary increases. A total of 18% of BRIC (Brazil, Russia, India, China) businesses and 21% of global businesses do not plan to offer any pay rises in the next 12 months. Only 15% of BRIC and 14% of global businesses will offer increases higher than inflation in the year ahead, while approximately half the businesses in each of these geographical areas will offer increases in line with inflation.

But Ian Scott, managing partner for Grant Thornton Cape, warned that continuing to increase salaries every year in a struggling economy places South Africa “firmly in the danger zone for rising inflation over the next 12 months – and this could have a negative impact on this county’s growth expectations for the year ahead.”

South Africa is also facing major challenges from skills shortages. 83% of local businesses reported a lack of technical skills when it came to recruitment. Only 61% of BRIC economies and 64% of global businesses reported these problems. The survey revealed that 58% of South Africa businesses report difficulties in recruiting skilled workers.

“South Africa urgently needs to address the enormous dichotomy between the skills shortage and unemployment,” said Mr Scott. “There is much talk in both the private sector and government about initiatives that could improve this situation, but the time for talking is over.”

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