Salaries for professionals in South Africa should decline

Renowned political economist Moeletsi Mbeki argues that South African salaries are inflated due to historical issues, and they should come down to make the country more competitive.

He told State of the Nation that many of South Africa’s black middle class measure their standard of living against the white population.

To achieve this high standard of living, they rely on the state to provide them with the necessary salary to make it happen. However, he says that this is unsustainable.

Mbeki said the reason for the high salaries among the white population stems from historical issues related to South Africa’s mining industry.

When diamonds and gold were discovered in South Africa, the native population, including the black Africans and white Afrikaners, lacked the necessary skills to mine.

“They had to attract skills from Australia, the United Kingdom, and the United States to help them mine these resources,” he said.

“However, the miners who were imported saw this as a hardship assignment. This means they demanded higher salaries than they would get in their own countries.”

“This is how the white standard of living in South Africa was created – by bringing white people from abroad into a hardship assignment.”

This created artificially high salaries for the professional class in South Africa, which, in turn, created an artificially high white standard of living.

“The high salaries were completely artificial and could only be maintained while South Africa had scarce minerals nobody else had,” he said.

As the mining environment matured globally, South Africa lost its strong position on many of its resources, which changed the environment.

However, despite these significant changes in the mining sector, salaries in South Africa’s professional class remain inflated. “They have to come down,” he said.

He said South African salaries for professionals must align with those from South Africa’s key competitors, including China, India, and the rest of Asia.

“For us to effectively compete with the Chinese, our salary structure must be similar,” Mbeki said in the interview.

He explained that China produces millions of skilled professionals annually. This drives down the price of these skills. South Africa should do the same.

This will eliminate the heritage of the high standard of living of white people and make the economy more competitive. “You don’t lose anything,” he said.

Mbeki added that there are huge benefits to having a competitive economy compared to the uncompetitive economy South Africa currently has.