S. Africa aiming to narrow wage gap

South Africa is betting on a newly introduced national minimum wage to increase domestic spending, improve lives and tackle poverty in the African country.

The country introduced national minimum wage for the first time this year. In his New Year address, President Cyril Ramaphosa said low-paid workers will now earn $1.44 an hour, translating to $252 per month depending on the number of hours worked.

While there is opposition in some quarters, some experts and trade unions agree that it was a necessary tool to close the wage gap and address poverty.

Imraan Valodia, dean of commerce, law and management at the University of Witwatersrand business school in Johannesburg, said the national minimum wage will raise the incomes of 6.4 million people, which equals to 47 percent of the labor force.

Currently, about 30 million people live below poverty on less than $75 per month, said Valodia who also chaired the advisory panel that recommended the policy intervention.

The scholar said that the move could not have come at a better time despite a sluggish economic growth and high unemployment rate at 28 percent in 2017. "The country urgently needs this policy intervention. We have to start from somewhere."

South Africa is in lackluster economic growth, with the World Bank reducing its forecast to 1 percent from 1.4 percent for 2019 due to domestic constraints from high unemployment.

However, criticism followed the signing of the bill into law in November from the political opposition and some labor unions. The South African Federation of Trade Union, who says the rate is too low, has threatened to call for mass protests.

The country, nevertheless, is grappling against high unemployment and poverty rates creating an ideal environment for the introduction of a minimum wage, said Cas Coovadia, managing director of Banking Association of South Africa.

"This was carefully negotiated by the National Economic Development and Labor Council that included stakeholders from government, businesses and labor force across the country. We now need to be prudent and look at the long term prospects of increasing employment opportunities to improve the living standards of many households."

Coovadia noted that having a national minimum wage may bridge the country's income gap and also stimulate consumer spending. He also urged the government to explore new growth drivers through policies that create an enabling environment for investors. "Economic growth and employment goes hand-in-hand."

Livhuwani Mammburu, the spokesperson of the National Union of Mine Workers, said farmworkers, forestry workers, domestic workers, welfare sector and care workers are the winners.

Nigeria is also considering introducing a national minimum wage.