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#Budget2017: Where To From Here For The National Minimum Wage?

Rob Cooper, Tax Expert and Director of Legislation at Sage, gives his expert opinion on the matter of the National Minimum Wage, as the Deputy President signed a National Minimum Wage Agreement into existence on 8 February this year. Rob looks forward to what Minister Pravin Gordhan will have to say on the matter.

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Vital Stats

  • Event: South African Budget Speech 2017
  • Date: Wednesday, 22 February

We’ll be watching Finance Minister, Pravin Gordhan, closely this week in the run up to presenting his Budget for the 2017/8 tax year, on Wednesday, 22 February. One of the issues we hope the Minister will provide clarity on in his statement is the implementation of the National Minimum Wage. 

Deputy President Cyril Ramaphosa signed a National Minimum Wage Agreement into existence on 8 February this year – the culmination of years of debate between labour, business, government and economists. 

The arguments about whether a National Minimum Wage Agreement will close the wage gap and stimulate the economy or rather lead to job losses can be set aside. We should now focus on what needs to be done to ensure that it is a success for workers and businesses alike.

Related: Will Minimum Wage Increase Boost Economic Growth In South Africa?

With implementation set to begin in May 2018, government is proceeding with caution. Many details in the agreement still needs to be fleshed out as government creates draft legislation for the National Economic Development and Labour Council (Nedlac) discussions and public comment before promulgating an Act.

Minimum Wage Value

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The success of the National Minimum Wage will depend on setting the minimum wage at a high enough level to close the wage gap, yet not so high that businesses can’t afford it or decide to automate rather than hire. Government has taken a cautious stance, setting the initial National Minimum Wage at R20 per hour. 

This is a practical approach, aimed at limiting the potential economic damage of an unrealistically high minimum. It was not the intention (and it is not financially possible) to pay a minimum wage at the level of a ‘living wage’. The National Minimum Wage is not meant to be a wage that an individual can live on – it is designed to move people out of poverty and gradually close the ‘wage gap’. 

Specifying hourly rates as the base value is a pragmatic decision.  It is the only realistic way in which to monitor compliance since different industries have different ordinary hours of work and since working months vary between four and five weeks.

Minimum Working Hours

Parties to National Minimum Wage Agreement all accept that it should not be possible for employers to drastically reduce working hours to reduce the total wage cost. 

There appears to be general agreement that a minimum number of ordinary hours of work must be set, though labour and business differ about the minimum working hours.  

The panel favours a minimum of four hours per day; Cosatu wants a minimum of six hours which amounts to a minimum wage of R120 per day.  A morning-only job is five hours per day, so perhaps this could be a practical number to compromise on.

‘Casualisation’ is another matter for discussion.  To prevent permanent labour being replaced by casuals, premium rates of pay i.e. more than R20 per hour, and minimum working hours per day are on the table.

Related: #Budget2017: 5 Areas Where Businesses Are Seeking Clarity From The 2017 Budget Speech

Increases to the National Minimum Wage

Labour would like the National Minimum Wage to be increased substantially every year to overcome what it perceives to be a very low starting value, while business will argue for more moderate increases. The plan is to set a medium-term target, and then work progressively towards that.

Introduction of the National Minimum Wage

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When the National Minimum Wage is implemented from May 2018, businesses that are unable to afford the minimum wage will be able to apply for an exemption of up to 12 months. Farmworkers will phase in at 90% of the National Minimum Wage, and domestic workers at 75%.

All current wage regulating measures will have to be changed to bring their levels, if lower, up to the National Minimum Wage level by May 2018.  The National Minimum Wage will set the rock-bottom wage value across the length and breadth of the country, and across all industry sectors.

Employment Tax Incentive

To qualify for The Employment Tax Incentive (ETI), an employee must pass a minimum wage test, which involves comparing the employee’s wage paid to that of the sector’s wage regulating measure.

If there is no wage regulating measure, the monthly wage paid must be at least R2 000, with no option for a weekly or hourly minimum. The ETI legislation will need to be amended to be based on the National Minimum Wage’s hourly rate.

Related: Why Tax Law Changes Could Threaten The Uptake Of The Employment Tax Incentive

National Minimum Wage and Child Support Grants

The monthly national minimum wage of R3 500 (based on a 40-hour week) equates to an annual income of R42 000, which is the current maximum income ceiling for parents to qualify for child support grants.

If worker’s wages were today increased to the R3 500 monthly minimum, those who are parents would no longer qualify to receive child support grants. One assumes that this will be addressed by the relevant authorities.

Is the agreement going to assist Workers?

At 2016 values, over 6 million workers would benefit from being paid at R20 per hour. Even though the R20 will be eroded by inflation by May 2018 and even though it is being phased in for farm and domestic workers, approximately 4 million workers will still benefit from the National Minimum Wage when it is implemented. 

We are coming off a base of high levels of unemployment (27.1% of the workforce), and according to recent surveys, we have the worst wage inequality in the world. To estimate the countrywide cost of introducing the National Minimum Wage, assume an average wage of R1 per hour per worker for 4 million workers for a 160-hour month and do the sums. 

The principle is that in the process of employers paying an extra wage of R640 million every month to help uplift 4 million workers, that the R640 million will circulate back into and stimulate the economy. 

Follow @SageGroupZA on 22 Feb for LIVE expert insights from the annual Budget Speech. #Budget2017

Rob will be conducting the 2017 Annual Payroll Tax Seminars in different cities around South Africa, where he will discuss the 2017 Budget proposals. 

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FNB Sets Its Sights On Growing Female Entrepreneurs In South Africa

First National Bank looks to grow women entrepreneurship in South Africa.

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FNB has set its sights on growing women owned and led businesses in South Africa, a commitment that has seen the bank enter into partnerships to facilitate mentorship for some of the most promising enterprises.

The bank has a good foundation to build on, as 38% of all new business accounts opened with FNB Business are either led or owned by women, highlighting an already established entrepreneurial momentum.

“We are cognisant of the fact that neither government nor corporate South Africa are going to be the sole sources of job creation. We therefore have an obligation to support and grow entrepreneurship. Partnerships such as the one entered into with International Finance Corporation (IFC) enables us to assist in developing women owned business,” says Michelle Geraghty, Head of Women in Business at FNB Business.

Over the last few years, FNB has, through a partnership with the Vumela Fund, assisted businesses such asSAIL, a leading skills and training institute that offers a range of qualifications to the public sector, and Toni Glass who produce a collection of world class tea, to not only scale effectively, but to bolster each of the business’s offering to market.

Related: Watch List: 50 Black African Women Entrepreneurs To Watch

“Our approach is to, much like we have done with the likes of Sail and Tony Glass, enable qualifying women owned businesses in their growth curve by offering help that includes transact, lending, investing and insuring solutions. This will include facilitating the registration of the business online via the FNB registrations system which links to CIPC, to Instant accounting and payroll solutions aimed at reducing operating costs for the business. This will also extend to support in the incubation stage of selected businesses through Vumela. We will carry this right through to private equity funding,” explains Geraghty.

Vumela was established as an innovative model that is aimed at filling the gaps in the current SME funding and support landscape. While Vumela is an SME growth fund, it also functions as the bank’s primary Enterprise Development and Supply Development vehicle, able to fulfil both SME funding and growth needs, and corporate ESD requirements, avenues that FNB will be making use of.

FNB also intends on tracking jobs created through these initiatives to ensure a trickledown effect that not only benefits the business owner but also increases the overall number of women participating in business in South Africa.

“The need to grow the number of women in business is one that if done correctly, can address many of the disparities and anguish that women continuously face. Access to fair opportunities to grow their businesses and in turn make a real impact on the South African economy,” concludes Geraghty.

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Great Bunch Of Entrepreneurs Make Top 10 In The Workspace/MiWay Competition

The top 10 in The Workspace/MiWay entrepreneur competition have been selected.

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After an intense four-month process, the top 10 contenders in The Workspace/MiWay Entrepreneur competition have been notified that they’re through to the next round. These entrepreneurs will pitch their businesses to the judges, who will then whittle down the number of contenders to five, from which the winner will be chosen.

“There has been great excitement over the past four months. As every single new entry came in, we would clap our hands and cheer,” said Mari Schourie, CEO of The Workspace. It was a tough job judging all the entries to reach the top 20 submissions, she said, before having to find the top 10.

“We’ve had really strong entries submitted by people with good business knowledge,” said Schourie. “You can see the willingness to work hard and the great amount of effort they have put into their initiatives.”

Schourie said judges saw “wonderful ideas and fabulous business minds and quality people with big dreams shine through the entries”.

The top 10 are:

  1. Loyal 1
  2. Dwyka Mining Services
  3. Minatlou Trading 251
  4. Sindis Best for all
  5. Convergence Three
  6. Zinde Zinde
  7. Matla Risk Management
  8. Artsort Trading
  9. Iconic Talent Agency
  10. Nthedikgwadi Transport Services

Related: How to Name (Or In Some Cases, Rename) Your Company

Schourie said she wished she could tell President Cyril Ramaphosa, who supports the growth of small business as an economic driver, “the ideas and the passion that these business owners have is inspiring and should be focused on more”.

The prize on offer – worth over R350 000 – will help set-up the winning entrepreneur for a period of 12 months, giving them a boost to help build their business.

Morné Stoltz, Head of Business Insurance at MiWay, said the theme that ran throughout the entries was that entrepreneurs wanted to make a difference and contribute to positive change in South Africa. “Many of the submissions focused on technical and developmental fields,” he said.

“Entrepreneurs recognise gaps in the market and see the potential for growth. Getting into the top 10 was not at all easy.”

Stoltz said South Africa had a “great bunch of entrepreneurs” and that standing together to give them a platform to launch was an exciting opportunity. “To grow our economy we need to help with skills development and give whatever assistance we can,” he said.

Part of the finalists’ road to the top includes a skills development programme for the top 10 entrants ahead of their important date to pitch their business plans to the judges.

As Schourie pointed out, it is vital to encourage South African citizens to act on their dreams and passions because “it can be a great success; they just need make that leap”.

Dates to watch:

  • 21 June: Top 10 skills development programme
  • 3 July: Top 10 pitches
  • 6 July: Top 5 announcement
  • 20 July: Final five workshops
  • 10 August: Final five pitches
  • 13 September: Winner announced

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Top 22 Start-ups Chosen For Final Selection Days – Startupbootcamp Africa

After receiving 1,004 applications from all over the world, the SBC team in conjunction with the programme’s corporate sponsors have narrowed the applicants down to 22 top-tier tech start-ups that will be invited to the Final Selection Days on July 11th and 12th at PwC’s headquarters in Cape Town.

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SBC Africa received 1,004 total applications from 77 countries on 5 continents. The start-ups that applied were exceptionally impressive and have gained more traction in the market than the applicants for the 2017 cohort. The talent in Africa is phenomenal and the corporate sponsors and SBC team dedicated 2 weeks to narrow it down to the Top 22 to be invited to Final Selection Days.

“It’s been an intense process due to the exceptionally high calibre of start-ups applying to the programme from across the continent,” states Philip Kiracofe, co-founder and CEO of Startupbootcamp Africa. “From 1,004 applications we have managed to narrow down to 22 of the most creative teams tackling daunting African problems. One of the key differentiators for start-ups that participate in the SBC Accelerator is the opportunity to secure commercial contracts with our sponsors. In order to make it onto our Top 22, each start-up has been chosen by at least 2 sponsors for potential proof of concept projects. The 2018 cohort is already shaping up to be a milestone moment for Africa.”

Related: How to Name (Or In Some Cases, Rename) Your Company

Zachariah George, co-founder and Chief Investment Officer of Startupbootcamp Africa added, “The investment community across Africa is taking note of the significant traction and access to market that being an alumni of a global accelerator programme like ours provides. We are excited to further galvanize venture capital funding into tech startups through significant de-risking of business models and customer validation with our corporate partners globally.”

From the 22 teams that have been invited to the SBC Africa Final Selection Days, 10 will be selected to join the 2018 cohort. Over the span of the two Final Selection Days, the startups in attendance will have the opportunity to present their pitches to high-profile corporate sponsors, investors, thought leaders and industry experts and will have the chance to sit down with mentors and sponsors alike. At the end of Day Two, the Top 10 will be announced and will be welcomed to the Cape Town-based Accelerator that kicks off in August. During the 3-month period, they will have the opportunity to scale at an incredible pace and seal pilot and proof of concept deals with the corporate sponsors to the programme.

The SBC Africa Accelerator is anchored and endorsed by heavyweight corporate sponsors RCS, BNP Paribas Personal Finance, Nedbank, Old Mutual and PwC.

“We’ve seen an increase in the quality of start-ups applying to the programme. The awareness of the value of the programme has increased and the success of the first year of the bootcamp speaks for itself. More mature start-ups are also seeing the benefits of participating in Startupbootcamp Africa,” comments Stanley Gabriel, Head of Innovation at Old Mutual.

The Top 22 start-ups invited to the Final Selection Days come from 7 different countries. The numbers are as follows: 8 from Nigeria, 5 from South Africa, 3 from Uganda, 2 from the Ivory Coast, 2 from Kenya, 1 from Ghana and 1 from Ireland.

Related: Entrepreneurship Is All About Overcoming Obstacles

The names of the start-ups invited to Final Selection Days by country:

  • Nigeria: Bankly Technologies, Biyabot, CredPal, FriendsVow, Kudimoney Bank, Medikal HMS, NebulaPay, and ZEEZZ Planet Solutions.
  • South Africa: Brandbookalytics Big Data, ifileme, LÜLA, Prospa, and Akiba Digital
  • Uganda: CoinPesa Ltd, RoundBob Uganda, and Swipe 2 Pay
  • Ivory Coast: Digitech Group, and DISTRICASH
  • Kenya: Kakbima, and MPost
  • Ghana: Inclusive Financial Technologies
  • Ireland: Pago Payments

It has been an incredible 3-month scouting journey for SBC Africa and now that the Top 22 have been announced, the Final Selection Days is the only hurdle left before the Accelerator officially kicks off on 13 August 2018.

There are high expectations for the Top 10 of 2018 and if the quality of the start-ups at this stage is any indication, 2018 is set to be a great success for the African tech and innovation ecosystem.

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