Abstract
M.Com. (Business Management)
The overall aim of this study was to investigate the impact of the wage-setting institutions, including bargaining councils and minimum wages, on the creation and long-term survival of small, medium and micro-enterprises (SMMEs) in South Africa.
The objectives of the study focused on (i) gaining an understanding of how the legislative requirements impact on SMMEs; (ii) investigating what needs to be done to assist small companies in order to cope with the burden of compliance with "the prescriptions and provisions of the law; (iii) demonstrating how the current wage setting mechan-isms are partly responsible for the promotion of capital intensive firms at the expense of small- and medium sized entities; (iv) investigating how other countries approach the issue of exemption of small businesses from the stringent requirements of labour legislation; and (v) exploring the possibility for the establishment of a separate dispensation that may be utilised to govern the wage-setting environment for the SMME sector. The study commenced with the review of different literature sources. First, the importance of the SMME sector in wealth creation and the role of the government in developing SMMEs were dealt with. Existing constraints and problems, other than labour-related factors, facing the SMMEs were identified with the sole purpose of highlighting the general conditions under which they operate. The support offered by government and other stakeholders in developing SMMEs in South Africa were also discussed. Second, an overview of wage-setting institutions that shape the South African labour market, i.e. the National Economic Development and Labour Council (NEDLAC), bargaining councils and the Employment Conditions Commission (ECC) was provided. For the purposes of this study, two case studies (i.e. Sweden and Egypt) were chosen and a comparative analysis of these case studies focusing on the wage setting environment was performed, with the hope of drawing important lessons for South Africa. The cross-case analysis revealed that there are differences and similarities in the nature of wage-setting institutions that are found in Sweden, Egypt and South Africa. The lessons for South Africa are that there is a need (i) of strengthening of the role of NEDLAC (tripartism); (ii) of recognising the fact that globalisation is not a myth but a reality, even for SMMEs; (iii) of creating an institutionalised dialogue for the SMME sector, i.e. SMME representative body; and (iv) of expanding the role of workplace forums in the South African environment to facilitate meaningful collective bargaining at local level. Following the cross-case analysis, the research findings on the effects of wage-setting institutions on SMMEs were presented. This was achieved by examining empirical evidence. First, an analysis of collective bargaining and minimum wages was conducted by focusing on the different aspects of the wage-setting institutions that may be considered to have an impact
on the creation and long-term survival of small and medium enterprises. This was followed by an exploration of empirical evidence if there is a need for creating a separate dispensation, i.e. two-tier labour market, for the SMME sector in South Africa.
Despite an intense scrutiny of the relationship between wage-setting institutions and their effects on SMMEs, the study found that there are no discernible impacts on small and medium businesses. As a result, this study proposes that the policy framework for developing a suitable environment for small and medium businesses in South Africa should be based on targeted strategic policy interventions rather than general measures such as tax reduction or labour market deregulation. These strategic policy interventions are given as recommendations of this study. In concluding the study, the following recommendations are made: • Strengthening of the social dialogue and collective bargaining in South Africa through the expansion of the role of workplace forums; • The establishment of a separate dispensation for SMMEs in South Africa, e.g. two-tier wage system, is not necessary; • A case is made for the establishment of a SMME representative body or bodies, independent of large companies, to collectively represent the interests of smaller businesses in general or in a particular sector of the economy or a geographical area in South Africa; • A need for a shift in small and medium-sized enterprise policy in the South Africa away from "one size fits all" approach to clustering SMMEs in economic sectors that have growth potential; and
• SMME policies need to be re-focused to address the economic challenges the
country faces due to external competition and globalisation, and this will ensure a
more co-ordinated approach to the development of SMME policy in South Africa.