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Archive for August 2014

What women want

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An infographic pinned to the wall of our office lift last week shows the large discrepancy between male and female appointments at different levels of the university. At the top, women are significantly underrepresented; only 4 of the 23 members (17%) of Council and only 61 of the 256 Senate members (24%) are women. At the administrative level, men are in the minority. But the issue really is at the top: A recent article by Xolela Mangcu of UCT’s Department of Sociology in City Press makes the case for both more black and female professors at South African universities. The article notes that only “194 black or African South Africans are professors out of the country’s total of 4 000. This number translates to 4% of the total. The situation is more dire when it comes to women. Only 34 or 0.85% of the total number of South African professors are women.”

Mangcu’s plea for greater equality confuses gender and racial inequality. These two are not the same, and their origins are also very different. I’ll focus on gender. Mangcu was referring to black female professors, of which there is only 34, a low 1.5% of all full professors. AfricaCheck* redid Mangcu’s calculations and it turns out there are 534 female out of a total of 2174 full professors in South Africa, or 25.6%. While it suggests that Stellenbosch is very much on par with what is happening in the rest of the country, it does seem as though women are significantly underrepresented as professors in South Africa.

The critique is labelled against universities, but it is even more valid for the private sector. As an experiment, consider South African businesses that are part of Business Leadership South Africa, an “independent association whose members represent South African big business leadership and major multinational investors”. Of the 76 member companies listed on their website, which include nearly all of South Africa’s largest companies, only 14.4% has a woman in charge. That is 11 percentage points less than the number of women professors in South African universities (25.6%).

It seems like there is no reason to smile if equal numbers of men and women in leadership positions is what we are aiming for. But is equal numbers really the aim? What exactly do we mean when we say we want gender equality? Do we hope to see equal numbers of men and women in all professions? Do we hope to see, for example, equal numbers of men and women at university Senate level, but also at administrative level? Or is gender equality something else? Is gender equality perhaps not the ability of every man and every woman, regardless of their gender, to face the same barriers to entry, the same salary, the same leave, the same career opportunities? If that is true, is gender representation the best way to measure gender equality? What if the median woman have a greater propensity to choose a career that offers her more free time? What if the median woman have a greater propensity to choose a career that has a greater social impact, however defined? What if the median woman chooses to spend more time at home with her children, not because she is forced to but because she actually wants to?

This last question is tricky, right. Because perhaps our long history of unequal relations (at least since the Neolithic Revolution 10000 years ago) has ingrained in all of us the idea that women are better carers and men are better providers, where in reality there might not be such a large biological difference. Yet for the purpose of my argument, whether these preferences are because of genetics or cultural heritage doesn’t really matter. I think we can all agree that the median women has a higher likelihood of not ‘leaning in’, as Sheryl Sandberg writes.

So why this fetish of 50%? Why would we expect to see equal numbers in all professions? What if women are better learners, better connectors or better communicators? What if they work harder at university (and are therefore more likely, ceteris paribus, to become professors than, say, CEOs), live longer, or make better investments? Do we expect to see equal numbers of men and women in all occupations, in all ranks of corporate life, or do we simply want to ensure that everyone, regardless of their gender, has the opportunity to move into whatever occupation or rank or lifestyle they choose? If we choose the latter, we won’t be able to use the ratio of male to female professors and claim injustice, simply because it could signal either discrimination or preference, and we won’t be able to know which.

So how can we identify discrimination, then? Wages and salaries are a good start. Women and men should earn equal pay for equal work, and where this is not happening, the law should step in. But even this could be tricky. Should the (male) players in the Springbok rugby team earn similar salaries to the female players of the women’s team? Both represent their country, and both presumably put in equal effort. But the men’s team create a far larger income for SA Rugby, of course, so I suspect they also earn more. Other benefits, I would argue, should be equal too, like parental leave. Why is it that women get 4 months and men only 3 days? Is that not unfair? In Sweden, which ranks as one of the most gender-egalitarian countries, men and women often get an equal period of time off for parental duties. That not only seems fair, but it also affects the incentives companies face when they hire. Why would you prefer to employ men to women who are nearing child-bearing years when both are ‘penalised’ equally? (I wrote about this last year.)

This is not to deny that there are many places where women are held back simply because they are women, where stereotypes about a women’s place in society exclude their participation. I suspect that much of this is disappearing. Nevertheless, the legacies of past discrimination against female appointments will persist for some time to come (especially in universities, where staff turnover is very low), but new appointments at lower levels certainly reflect more female participation. At Stellenbosch, there are more females than males in Lecturer and Junior Lecturer positions, for example.

So at what stage, one has to ask, is gender no longer a consideration in new appointments? Will this happen only when we have at an equal share of men and women as full professors? Isn’t that a bit paternalistic, a bit social engineery?

Gender equality is not about a fixed ratio of 50% women and 50% men in all spheres of society. That ignores personal preferences, tastes, and choices. A society where we strive for a perfect 50% gender balance everywhere is a society where men and women have lost the agency to act in their own interests.

* Even AfricaCheck’s numbers are slightly wrong. They note that 21 of the 2174 professors’ race is listed as unknown. They claim it’s 0.1% of the total. It is 1%, of course.

On Tito Mboweni, banking and building your own empire

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Business mogul of the future? Tito Mboweni and the business of empowerment banking

Business mogul of the future? Tito Mboweni and the business of empowerment banking

When I was young I had this vision that I would one day own my own publishing house. The dream withered as I grew older, studied economics and realised that there are more rewarding (financially, and otherwise) careers to pursue. But it never completely vanished. So soon after I started lecturing at Stellenbosch, I had a business idea: why not write and publish a book about what students should know before they go to university. When the writing turned out to be a pain, I got experts to do the writing for me. (I still don’t know why people like Ruda Landman, Jonathan Jansen and Tim Noakes agreed.) I then proceeded to publish the book, and founded a publishing house (with the help of two friends). Gabbema Books. In 2007 we published the first Afrikaans edition with an English edition following in 2009. But to print the 3000 copies that I hoped would sell out easily, I needed to afford the considerable printing costs of more than R70 000, a massive amount for someone with student debt and a Junior Lecturer salary. So I approached the bank. I drafted an impressive business plan. My Accounting friend helped tweak the numbers so that financial success seemed inevitable. And I put on my best business suit and smile.

Proposal rejected. I don’t remember the exact reasons the bank gave for their refusal, but I do remember being extremely angry. How could my perfectly reasonable application for funding be denied? Wasn’t the government trying to encourage young entrepreneurs? What kind of society do we live in that wouldn’t grant me the funding to pursue my dreams? (My frustration may have boiled over on the phone to some unsuspecting banker. Glad I didn’t write blog posts back then!) But let me be honest: that was the best decision the bank could have made. Not for them – R70k is a drop in the ocean on their balance sheet – but for me. See, I was never going to sell 3000 books. At least not in the two-year period that I had hoped. I did manage to scrape together R70 000 and so the two editions did see the light of day. But we never really made a profit on any of those books (the English edition is now available for free on Google Books). Somewhere in a dark office (I imagine) sat a man with a white shirt and polka-dot tie (I imagine) and realised, even before we printed a single copy, that it is crazy to want to make money selling books. He deserves an employee of the month award.

This story came back to me when I read the cover article of the Financial Mail a few weeks ago. Tito Mboweni, former labour minister in Nelson Mandela’s government and ex-governor of the South African Reserve Bank (and, different to what the article claims, still an extraordinary professor at Stellenbosch University), is a frustrated man. His plans to build his own business empire is being thwarted by the big banks’ unwillingness to invest in his dream. Mboweni and his brother wanted to buy a stake in a new iron ore project in Tzaneen. “We went to the banks to raise capital and got a rude awakening. There were no takers. They just wouldn’t. I was shocked, actually.” Even after Mboweni phoned the chief executives to express his dismay, they couldn’t get a loan. Mboweni and his brother also ventured into the media world and joined a consortium vying for the broadcast licence of a now-defunct radio station. But the banks were only willing to advance loan capital on the condition that Mboweni put up his private wealth as collateral. “I said you can’t pledge private wealth for business. They are two separate things. What we have here is a radio licence; if it does not work, you take the business. No-one will seize my private wealth. They think I am a fool.”

Let’s review the facts. Firstly, the radio station Mboweni had hoped to buy is now defunct. To me this suggests that the man in the dark office, with his white shirt and polka-dot tie, made the correct decision to decline Mboweni’s application. Had he approved the application, his bank would’ve lost money (and, perhaps, he his bonus or, worse, his job). Secondly, the reason banks require collateral is because they want to avoid moral hazard, i.e. give people money to spend without any consequences for themselves. The bank wouldn’t give me a loan if I did not have assets they can seize when their money is wasted. This is true for all banks, in all times.

Which reminds me of another story. Following the Great Depression of the 1930s, white poverty had become very visible in South Africa’s burgeoning cities, notably Johannesburg. The centennial anniversary of the Great Trek, the construction of the Voortrekker monument, and various other factors contributed to a rise in Afrikaner nationalism. The topic of white poverty was so serious that a national convention was called in 1939. These nationalist Afrikaners believed that the capitalists (the English and the Jews) held them economically hostage. They had to find a solution to pull themselves up by their proverbial boot strings. The answer? The reddingsdaadbond (RDB), a savings fund (with the slogan ‘A people saves themselves’) in which Afrikaner households (70000 of them within five years) could invest six pennies every month. Part of these funds helped establish Federale Volksbeleggings (an investment corporation) which would invest in new Afrikaner businesses like Gencor which would later become a mining giant. This was grass-roots development at its very best.

Compare this story to what Mboweni, having failed to access credit, proposes: “It was very nice for me sitting in the Reserve Bank as governor, supervising the banks and so on, and resisting the idea of a state bank. But I am now more than lukewarm to it with the experiences that I have gone through.” He explains: “We should not waste our time on BEE; the state must concern itself about the fact that access to capital for black entrepreneurs is restricted. How do we solve that? I think the idea of a state development bank is central to resolving this.”

A state bank is not a novel idea, as the Chinese have shown, although, ironically, they’re in the process of privatising said banks. The reason for their privatization is exactly the moral hazard I discussed earlier: state banks don’t have to report to shareholders and can therefore fund projects that are less profitable, like sports stadia and other feel-good projects. (China could afford these failures for a long time, given their growth rate in excess of 10% per annum.) State banks also tend to support those individuals that have strong ties to government.

This is not to say that Mboweni is completely missing the plot. Perhaps it is true that accessing capital is difficult for black entrepreneurs (because, in general, they lack collateral, although this is perhaps a strong generalisation), and when such a market failure exists then government can potentially intervene. But before we address these apparent ‘market failures’ we need to be sure that they are indeed failures of a financial sector that is widely considered one of the best in the world. And even if we do identify a market failure, we need to be careful about the incentives addressing such failures create. How will a state bank be different than a private bank? Will it be less stringent in its criteria of profitability? Who will carry the risk if the projects – like the radio station – turn out to be a bad investments? If it is a state bank, it is inevitably the taxpayer who will have to pay up.

I enjoy Tito Mboweni’s innovative ideas to solve South Africa’s deep-rooted challenges (which he frequently posts on Facebook). His frustrations at starting his business empire is understandable. But that is no reason to start a state bank which may benefit a small minority at the cost of everyone else. I say start from the bottom instead. Because of his experience, Mboweni has recently started MB Capital to offer funding to black entrepreneurs: “The biggest investors are going to have to be pension funds, but also wealthy private individuals. It’s actually at an advanced stage. It could be like private equity but not a hedge fund.”  MB Capital could be the modern version of Federale Volksbeleggings. But only if it empowers from below: imagine its power if it could attract 700 000 black South Africans to invest R50 every month (you can do this much more easily with the technology of today). That R35 million per month could be used to invest in new business ventures of black entrepreneurs who create jobs and prosper. That is how you build a business empire. That is how a people save themselves.

Written by Johan Fourie

August 22, 2014 at 08:43

A flight into the future: Lessons for South Africa’s industrial policy

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Ahrlac Paramount

Yesterday was a proud moment for African aviation, as the first wholly built African aircraft successfully undertook its maiden public flight in Pretoria. The aircraft, Paramount Group’s Advanced High-Performance Reconnaissance Light Aircraft (AHRLAC), is a “revolutionary new African-designed and developed aircraft”, as their website explains, “destined for a significant role in a wide range of military, policing and civilian tasks around the world. The two-crew aircraft can carry out a wide range of operations including surveillance, policing, border/coastal patrol and anti-smuggling; armed patrol and counter insurgency operations; disaster relief and emergency supply to remote areas; and intelligence gathering.” Or just watch this video (which feels a bit like the demo for a video game). Or read this.

The fact that South Africa can build its own military aircraft has a lot to do with our history. One of the unintended consequences of the increased international isolation South Africa faced after exiting the Commonwealth in 1960 and the sanctions imposed against the apartheid state in the 1970s was the development of an technologically-advanced weapon industry. Not only did South Africa build an atomic bomb in the 1960s, but new weapons like the Casspir (a truck specifically built to protect passengers against land mines which later became synonymous with controlling township unrest) and the Rooivalk (an attack helicopter designed to operate for prolonged periods without sophisticated support) were engineered to deal with the internal and external threats of the apartheid government. The expertise built up during the isolation years was not only limited to the military. Much of Sasol’s technology was development, for example, because of the curb on South Africa’s oil imports. But with the transition to a new government in the early 1990s, the opening of South Africa to international markets, and a shift away from government expenditure on military expenditure (which had some component of research and development) to social spending, much of this ‘forced’ innovation slowed down or stopped completely.

While military innovation ended, the innovators remained behind. Consider, for example, Kobus Meiring. Meiring studied engineering at Stellenbosch University and was a key member of the team who created the Rooivalk during the 1980s and 1990s. After 11 years of service, he needed a new challenge and became the project leader of SALT, the largest single telescope in the southern hemisphere (situated close to Sutherland and certainly worth a visit). After completing SALT, he moved on to design South Africa’s first electric car, the Joule, which was unfortunately closed down in 2012 after government, so to speak, pulled the plug. There are others like Meiring, who worked at the forefront of military technology in the 1970s and 1980s and then found alternative outlets for their skills after the transition, either in manufacturing (such as the motor-vehicle industry) or in South Africa’s burgeoning ICT industry, with companies like Vodacom, MTN and even DStv now providing services across Africa.

Yet the ‘success’ of the sanctions in building South Africa’s technological capacity leaves economists with a conundrum. Free trade and open borders are usually considered to be a pillar of a strong economy. But the apartheid example also suggests that there is a role for the state to incentivise the creation of local technologies, as Dani Rodrik and others have argued. It seems that the state indeed has a role to play: both Sasol and Denel certainly wouldn’t have been able to develop the technologies they did without huge state investment. Yet once the technology exists, commercialising the technology requires a free market. The comparison between Denel and Sasol is a case in point. Sasol, now a publicly traded company, has been much more successful than Denel in globalising its technology after South Africa opened up; it now has 34000 employees and trades in 38 countries. For much of the 1990s and 2000s, Denel operated at a loss, supported by tax payers. It has still not been successful, despite the widely-acclaimed potential of the Rooivalk, to sell the technology to an international market.

Economists also know that once governments start supporting businesses, it is extremely difficult to remove those incentives: the South African clothing and textile industry has, for example, received support since the 1930s! Dani Rodrik argues that while it is true that the state cannot pick winners, the only real requirement is that the losers must be let go. Well, given the support of the clothing industry has received over the years, there is little evidence that this would be possible here. (Meiring’s Joule, of course, suggests the opposite. It boils down to the political support trade unions in the clothing and textile industry have vis-á-vis workers in the electric car industry…)


Product space of South Africa and South Korea. Source: The Observatory of Economic Complexity

So perhaps the best the state can do is to not pick individual winners, but to support the skills that create winners. For example, state supported hubs of advanced engineering will go a long way into improving South Africa’s manufacturing malaise. The graph above shows South African exports on a product space compared to South Korea. Note all the blueish dots for South Korea. That represents manufacturing exports. South Africa’s only real manufactured export is motor vehicles. Our main exports are low-value added minerals and agricultural goods. (Note also how dispersed our exports are across the map. That suggests that there are few linkages between our different industries. South Korea, in contrast, focus more on products that have synergies and their dots are therefore more closely situated in the product space.)

Much has been made of the government’s attempt to increase beneficiation, an ugly word that means to add value to our exports. So instead of exporting unrefined iron ore, we should be exporting manufactured goods that use iron. But such a strategy miss the point of how manufacturing work. Consider again the AHRLAC (also an ugly name). Was it built in South Africa because of cheap resources? No. It was built here because we had the engineering capacity to design a technologically-superior light aircraft.

Not only is the creation of an African aircraft a proud moment, but it should also serve as a signal to policy-makers that manufacturing is based not on politically-appealing beneficiation strategies, but on getting smart engineers to work on new technologies. Only then will the manufacturing sector, exports and our economy take off.

Blackface: Ignorance is no excuse, but it is an explanation

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I have a confession to make: I have donned blackface. In 2002, at a residence dance with the theme ‘Opposites Attract’, my date and I decided that nothing could be more opposite than a Boeretannie and a bandiet. She being a fair-skinned blond could easily master the role of a white farmer’s wife. To show the contrast, I found some old clothes at the local second-hand store, printed a ‘pass’ to hang around my neck and, most importantly, attempted to paint my face. The latter, unfortunately for my date and everyone else who came in contact with me that evening, was less successful. See, this was before the era when Google was the source of all wisdom. I had to rely on my own ingenuity for the best way to darken my skin on a shoestring budget. Somewhere via the grapevine (never trust the grapevine!) I’d heard that Ricoffy mixed with Coca-Cola works best. Let me be clear about this: it doesn’t. The difference on my already tanned skin (it was summer) was hardly noticeable. Instead of making me darker, a pungent coffeeish smell enveloped me. Not a nice-morning-coffee smell; more like a I-forgot-to-wash-this-cup-of-coffee-for-the-last-two-weeks smell. That lasted until around 10 o’clock when I returned to my room to wash and change and save everyone the torment of my smelly presence.

But the point is: I donned blackface. And, disregarding my lack of ability to actually do so successfully, I committed the same offense in 2002 that two Pretoria University students were expelled for this week. The two white girls, attending a private 21st party, painted themselves in an attempt to mimic black domestic workers. Their picture soon circulated widely on social media and caused two distinct responses: those claiming that it is derogatory and those claiming that it is nothing more than student fun. Their expulsion (from their residence but not from university) has resulted in even more polar views, from “political correctness gone mad” to “white people don’t even realise they are racist”. On Facebook, Jonathan Jansen said “If two German students dressed up as Jews with exaggerated physical features, I wonder whether there they would have the same muted response to the way we allow youngsters to poke fun at hurtful, historical stereotypes of other people?” Rhoda Kadalie responded: “Why not punish Leon Schuster, Pieter Dirk Uys and Ben Vos. The universities should get a life and do research and make headlines for excellence not for student pranks which are just fun. Political correctness will kill this country!!!”

I have no reason to suspect the two girls harbour any bad feelings towards black people. They may, of course, but without any additional information, their use of blackface does not make them racist. It makes them ignorant. And while ignorance is no excuse, it is an explanation, and one that I can attest to from my own experience. I, too, was oblivious to the existence of blackface during my student years. Less than a decade after apartheid ended, Leon Schuster was making movies with caricatures of all kinds of South Africans and the country, I thought, was laughing along merrily. Finally some release from all the racial tension that had been built up for centuries! Yet what Leon Schuster did, what I did and what these girls did, was not okay. Blackface perpetuates a stereotype of black people that continued the psychological subjugation of one group over another. The thing is: I (and my suspicion would be, these girls too) were blissfully unaware of how we perpetuated these stereotypes. (I must add: so too were everyone else at the dance. The only comments I got was about my “strong coffee smell”. And not in a good way.) As I sit and write this more than a decade later, I wonder what those coloured and black students thought who also attended the dance? I don’t know. I’m pretty sure they were also unaware of the existence of blackface, but that doesn’t mean that they didn’t feel a tinge of hurt, of irritation, of disappointment. I apologize if I did offend.

The first time I heard of blackface was when the issue became a national point of discussion in, wait for it, Holland. See, every year in early December, the Dutch welcome Sinterklaas (Santa Claus) and his helper, Zwarte Piet, into their cities, towns, and homes, handing out sweets and supposedly making people happy. But Zwarte Piet, as the name indicates, is black, and is almost always a black-painted white person with big, red lips and curly hair, a stereotype of the colonial way black people were often portrayed. (Another example: think of Tom and Jerry and Mammy Two Shoes whose face was never shown.) Surprisingly, the Dutch, who vehemently protested against South Africa’s apartheid and are considered one of the most liberal countries in the world, have a tough time letting Zwarte Piet go. One of the largest Facebook groups in Holland are pro-Zwarte Piet supporters. They, too, claim that Zwarte Piet is nothing more than everyone having a good time. But it is clearly not, as those opposed to its use have made abundantly clear. In July a Dutch court ruled that Zwarte Piet is “insulting” and the Mayor of Amsterdam was given six weeks to decide whether the festival in December would continue. There will be a lot of backlash, I’m sure, but like all traditions that offend, Zwarte Piet should disappear sooner rather than later.

In South Africa, the issue is even more complex: what to do with the Schuster films and other comedians who don blackface? What to do with the Cape minstrels (Kaapse Klopse), who, according to Wikipedia, use a “pared-down style of blackface which exaggerates only the lips”? What punishment for those who do indeed use blackface? Perhaps the expulsion of the two University of Pretoria girls is a harsh sentence for something that I think was nothing more than ignorance. One could rightfully ask whether the reaction would have been the same had they not painted their faces but wore the outfits with exaggerated features or simply painted their faces with no outfits? Probably not. These girls, I suspect, wanted to do something different and thought that a domestic worker costume is an easy, cheap and creative solution. They did not want to offend.

But they did, and that it was unexpected simply reflects their and the rest of white society’s obliviousness to the perceptions of black South Africans. Perhaps, then, there is truth to both “political correctness gone mad” and “white people don’t even realise they are racist” sentiments. Unfortunately for these two girls, though, it is necessary to lay down a marker: blackface is just not on. From now on, no-one should be able to claim ignorance. Not Schuster, not students at a 21st birthday and not even theme party revellers like me in 2002. Had I known then what I know now, I would have selected some other opposite to attract. Not only would I have saved my date from an utterly forgettable evening, but I would not have unnecessarily exposed my fellow South Africans to a culture of ingrained insensitivity.

Written by Johan Fourie

August 8, 2014 at 12:03

The truth about domestic workers in South Africa

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Superwomen: Domestic workers will become more, not less, frequent (Image from:

Superwomen: One out of every five women in South Africa is a domestic worker. (This image is obtained from here. The same image appears on the side of an apartment building in Market Street, Stellenbosch.)

Domestic workers are ubiquitous in upper-middle class households in South Africa. And because of our peculiar history, domestic workers are often black while upper-middle class households are still mostly white. This feature of South African life strikes many visitors who spend time in South Africa. One interpretation is that domestic workers are being exploited. Last year, in a post that circulated widely, Maria Hengeveld, a graduate student at Columbia University who lived in South Africa for four years, questioned why employers don’t pay their domestic workers a “decent wage”. In July, Haji Mohamed Dawjee raised the ire of many Mail & Guardian readers when she wrote about her experience driving through an upper-class neighbourhood in Johannesburg:

I stepped into an alternate universe the other day, which literally stunned me – a dog park filled with domestic workers and white babies. I may as well have been a fly on the wall from the movie The Help – set in the United States in the 1960s. There were no dogs, just a community of maids and children who were not their own.

While Dawjee’s criticism was mostly aimed at (white) parents who don’t have time to walk their children but nevertheless have time to take the dog on an evening stroll, her reference to The Help insinuates an undertone of slavery. A week later, Victoria John of the Mail & Guardian summarised this viewpoint well:

But don’t for one second think that being kind to someone doesn’t mean those of us privileged enough to afford domestic help are not benefiting from a hideously perverted system. A system that is rooted in the roughly 350-year-old oppression of black people by white people, and a system from which mostly white people have benefited.

Strangely, none of the above stories consider the latest research on the domestic worker industry. Two largely neglected research papers have appeared within the last year that shed light on two aspects of domestic workers: their incomes and their standards of living.

But let’s establish some facts about the industry first. Personal services, of which domestic work is one component, constitute 5.4% of GDP. More importantly, it creates jobs: roughly one in five South African women work as domestic workers. Four out of five domestic workers work full-time (more than 28 hours a week). They are predominantly black and Coloured women, with an average of 6 to 7 years of education. This should suggest that they are the poorest of the poor, but in truth they are not. Because they have a job in a country that has a broad unemployment rate of 40%, they are not within the poorest four deciles; in fact, many of them may even be above South Africa’s median income. That is because domestic work is mostly an urban phenomenon, while poverty is most rife in South Africa’s rural areas.

Mostly because of concerns similar to those raised above, the South African government introduced a minimum wage in 2002. According to Taryn Dinkelman (of Dartmouth College), Vimal Ranchhod and Clare Hofmeyr (both of UCT), authors of a paper investigating the impact of this minimum wage, the increase in wages government proposed was substantial. Full compliance with the law would lead to a huge increase in the total wages to be paid to the majority of domestic workers. Economists and others were sceptical: Economics 101 would tell you that a price floor (a minimum wage) will introduce a gap between those demanding work and those willing to supply work, i.e. unemployment would increase. Also, experts doubted the ability of government to enforce the policy, given the decentralised nature of the industry. So what happened? Did workers’ incomes increase, or did unemployment in the industry increase?

Using evidence from the Labour Force Surveys of the 2000s, Dinkelman, Rancchod and Hofmeyr explain:

First, the introduction of the minimum wage appears to have had an almost immediate positive effect on the average hourly wage of domestic workers. The rise in hourly wages was substantial, at approximately 20%. The pre-law average wage was R3.67, rising to R4.37, which was actually above the stipulated minimum of R4.10 (for full-time domestic workers in urban areas).

Secondly, there was no significant reduction in the number of hours worked. This was reflected in the fact that average monthly earnings also rose by approximately 20%. Moreover, the probability of being employed as a domestic worker (for somebody in the labour force) did not decline, indicating that the law had no negative impact on the employment prospects of domestic workers.

This, remember, in the context of little or no enforcement. So why were the economists wrong in predicting a rise in unemployment? The authors of the paper do not venture a guess, but let me try. First, not everyone complied with the new law. Those employers on the margin of using domestic help probably continued to pay the low price instead of letting their workers go. (Actually, 60% of domestic workers still did not earn above the minimum wage.) Second, the fear of the consequences (penalties, social stigma) of non-compliance for those who could afford to pay more may have been worse than the additional cost of compliance, even when enforcement is low (although perceptions about enforcement may have been different). Third, the minimum wage law may have improved information asymmetries. Because the industry was unregulated for so long, and collective bargaining was non-existent, employees mostly determined wages with very little information or failed to adjust it annually for inflation. The new law afforded an opportunity to identify the common denominator.

So the new minimum wage law improved the incomes of domestic workers significantly. But wages are not the only benefits domestic workers get. Ronelle Burger, Marisa Coetzee and Carina van der Watt (all of Stellenbosch University) examine, in a Working Paper published last year, whether there are any additional gains from being a domestic worker rather than, say, a cleaner in a hotel. They consider two groups: domestic workers, and people similar to domestic workers in terms of income, location, marital status, household size and other such variables but employed in a different industry. They find that the households of domestic workers, in comparison to the control group, are significantly less likely to suffer from both adult and child hunger. Household members of domestic workers are also less likely to be discouraged work-seekers and spend less time searching for employment. They are also more likely to own a TV and radio, but not more likely to own books. Interestingly, despite being more likely to receive education bursaries, their children are not more likely than the households in the control group to attain a matric certificate.

What causes these benefits? Burger, Coetzee and Van der Watt attribute these benefits to the social ties that are created between domestic workers and their employers, social ties that reduce inequality:

In the South African context, where there is large-scale social exclusion and socio-economic divides between individuals of different races, education levels and income, domestic workers mostly find themselves on the wrong side of the divide. However, in most of the dimensions we consider we find that these women appear to benefit from their regular and close contact with their employers. Broadly, this can be interpreted as evidence that linking ties may help to improve the lives of poor households in South Africa and that there may be significant benefits to repairing these deep divides in the social landscape.

Different to the pundits above, who base their research on anecdotes and their own non-representative observations, the average domestic worker is not exploited. While the old adage says that you can tell a lot about a man by looking at how he talks to his mother, you can learn much more about someone by looking at how they manage their (domestic) workers. Of course there are instances of abuse which should be eradicated, but this is not unique to the domestic worker industry. (Marikana comes to mind.)  Instead of vilifying an industry because of sporadic and isolated incidents or because it highlights the stark realities of South Africa’s income distribution, let’s recognize that domestic workers benefit from higher incomes and the additional benefits of closer social ties with richer households. More than any other industry, it is here where we begin to tackle inequality and loosen the shackles of the past.

Written by Johan Fourie

August 1, 2014 at 10:03