SA's wage deals weaken fight against inflation

Friday, September 11, 2009

Cape Town - South Africa's recent high wage settlements have weakened the fight against soaring inflation rates.

"Wage settlements above the projected rate of inflation and in excess of productivity gains tend to undermine the fight against high inflation," said outgoing Reserve Bank Governor Tito Mboweni on Thursday evening.

The governor said the recent upsurge in strikes across the country have revealed worrying trends.

"They lead to labour cost increasing way above those of trade competitors and therefore loss of competitiveness," he said.

Labour unions across sectors have gone on strikes demanding double-digit wage hikes and most settlements have been above the inflation rate, which stood at 6.7 percent year-on-year in July.

However, on the positive side, Mboweni said the country could pride itself on the improved living conditions of ordinary South Africans.

He said no-one could dispute the positive impact social grants had made on addressing poverty, while also emphasizing the sustainability of these grants.

"While no one can dispute the positive impact social grants have made on poverty we need to interrogate the sustainability of the social welfare grant approach in the long run," said Mboweni.

The governor noted the need to support citizens who were physically and mentally incapacitated due to illnesses, disability or old age, however cautioned against people becoming too dependent on social grants.

"But when millions of our people depend on social grants for sustenance and urban legend has it that teenagers go to the extent of falling pregnant so as to gain access to grants we need to ask ourselves, as I think Steve Biko would, are we not running the risk of these social grants becoming an end in themselves and nurturing a dependency syndrome?" questioned Mboweni.

Mboweni was speaking at the 10th annual Steve Biko Memorial Lecture at the University of Cape Town,