Eskom tariff hike will cut minimum wage offer by half and reduce quality of living

The Eskom tariff hike that is set to be implemented in April will wipe out almost half (47%) of government’s proposed 8% national minimum wage (NMW) increase for 2023, reducing the offer to 4.2% in reality.

This is according to the Pietermaritzburg Economic Justice & Dignity (PMBEJD) Household Affordability Index for January 2023.

Impact of Eskom tariff hike

The 8% increase, which is yet to be announced, will move the hourly rate for a general worker from R23.19 to R25.05 (an increase of R1.86 per hour).

For eight hours a day and 21 days of work per month, a minimum-wage worker’s pay will rise from R3 895.92 to R4 208.40 – an extra R312.48 per month.

‘Massive chunks of money’ for electricity

However, as the PMBEJD report notes, electricity is a “non-negotiable expense” that households must pay for “regardless of the price”.

“All South African staple food must be cooked in order for it to be edible; maize meal, rice, sugar beans, cake flour, potatoes, chicken pieces.”

With the 18.65% electricity tariff hike, workers will be forced to re-allocate “massive chunks” of money to electricity, jeopardising the possibility of meeting all other essential needs.

“The 8% increase will act just to ensure a worker’s family is able to live at exactly the same level they lived at in 2022 – a level of hell, where worker’s families underspend on proper nutritious food by as much as 50%, and live in a constant state of food poverty,” it adds.

Minimum wage offer

It says for workers to be cushioned against the electricity tariff hike the NMW offer would have to be revised, at least 3.8% added to the original 8%, taking it to 11.8%.

This revised offer would take the hourly rate from the proposed R25.05 to R25.92, with a monthly increase of R459.34 to R4 354.56 for full-time workers.

“The national minimum wage offer of 8% currently being considered was tabled before the Eskom hike was known; now that we know what the hike is, and that it is likely to cut the offer by half, the NMW offer must be revised upwards to absorb the Eskom hike,” it adds.

Cost of living

Added to the burden of exorbitant electricity prices is the ever-rising cost of the average food basket in the country, it says.

The report, which tracked food price data from 44 supermarkets and 30 butcheries in low-income households in Johannesburg, Durban, Cape Town, Pietermaritzburg and Springbok, calculated that the average household food basket costs R4 917.42.

On a month-on-month basis, the average cost of the food basket increased by R64.25 (1.3%), from R4 853.18 in December 2022 to R4 917.42 in January 2023.

This translates to a R516.40 (11.7%) year-on-year increase from R4 401.02 in January 2022 to R4 917.42 in January 2023.

Food basket decreases monthly

The report further notes that in January 2023, food baskets saw a month-on-month decrease in Johannesburg (down 3.73%) and Springbok (down 6.9%), and an increase in Durban (up 1.2%), Cape Town (up 3.6%) and Pietermaritzburg (up 3.8%).

Considering the NMW, electricity and transport costs, PMBEJD says it calculates that workers, who on average support four family members, will underspend on food by a minimum of 52.3% in 2023, a 5.5% increase from the August 2022 edition of its report.

It says eight out of 44 items saw price increases of 5% or more in January 2023:

• Potatoes (10kg) increased by 28%
• Curry powder by 12%
• Wors by 9%
• Cabbage by 8%
• Stock cubes by 7%
• Oranges and Carrots by 6%
• White sugar, apples, and soup by 5%.

The report indicates that in January 2023 it cost R853.04, on average, to feed a child a basic nutritious diet.

The figure is a 1.1% (R9.57) increase on a month-on-month basis and a 9.9% year-on-year increase of R76.75.

“In January 2023, the Child Support Grant (CSG) of R480 is 28% below the food poverty line of R663, and 44% below the average cost to feed a child a basic nutritious diet [of] R853.04.”

The CSG is received by an estimated 12.8 million children in South Africa.

Hygiene costs

The report also calculates that household domestic and personal hygiene products amount to R920.87 in January 2023, a 20.8% year-on-year increase.

“The cost of basic hygiene products is high. The products compete in the household purse with food. These products are essential for good health and hygiene.”

Those on minimum wage ‘are getting poorer and poorer’

All in all, the report says the high cost of living means that workers will have to cut further on food and subsequently go into deeper levels of debt to cover wage shortfalls.

“The national minimum wage is a poverty wage. Small annual increments off such a low base, and which do not reflect inflation levels as experienced by workers (including not projecting inflation forward for workers in the entire 2022/23 term), means that workers on the NMW are getting poorer and poorer each year,” it adds.

It says the financial stress emanating from the myriad increases calls for a centralised unit in the Presidency or National Treasury to consider the global picture, monitoring various price increases and assessing how they impact the prices of other items, along with the consequences for the South African household.

“This global picture can then be used to inform better policy making, and policy interventions to directly target and mitigate various risks, whilst also assisting trade unions with projections of where wage levels need to be to protect workers and keep services and institutions functioning optimally, as well as businesses to assist with planning.”

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This article first appeared on Moneyweb and was republished with permission.

Author profile:

Nondumiso is a creative at heart, passionate about issues pertaining to youth, the economy, politics, art and music. A Wits alumnus, she is also an award-winning producer for community radio talk show ‘I Talk Youth’. Nondu was awarded the TV Journalism Student of the Year award by the Wits journalism school, a recognition based on the quality of her video production portfolio.