WAGES IN AFRICA: WHAT SHOULD A FOREIGN FIRM DO?*
| Author | J. B. KNIGHT |
| DOI | http://doi.org/10.1111/j.1468-0084.1975.mp37002001.x |
| Published date | 01 May 1975 |
| Date | 01 May 1975 |
OXFORD BULLETIN
of
ECONOMICS and STATISTICS
WAGES IN AFRICA: WHAT SHOULD
A FOREIGN FIRM DO?*
By J. B. KNIGHT
INTRODUCTION
In 1973 a very successful press campaign was waged, mainly in The Guardian,
against the wages and employment practices of many British firms operating in
South Africa.' This led to a public inquiry into these practices, undertaken by the
Trade and Industry Sub-Committee of the Expenditure Committee of the House of
Commons. Amidst a good deal of publicity, and on pain of going to the Tower, or
at any rate of further adverse publicity, various captains of industry were
questioned by the Committee about their practices and policies. The Committee
finally reported in March 1974.2 Its main recommendation was that the British
Government should publish a Code of Practiceconveniently provided in the
report8which British companies operating in South Africa could be called on to
observe. One of the main canons of the Code was that companies should pay in
excess of the so-called Poverty Datum Linean arbitrary estimate of the minimum
family requirements in urban African conditions.4 In making its recommendations
the Committee had in mind the good name and reputation of British industry
abroad,5 and also a moral case against the payment of low wages. The recom-
mendations were accepted by H.M. Government.6
This raises questions. A number of witnesses pointed outand there is no good
reason to doubt themthat their companies paid lower wages in other countries of
* A revised version of a lecture delivered in a series arranged by the African Studies Centre,
University of Cambridge, October 1974.
1The Guardian, March 12 onwards.
Fifth Report from the Expenditure Committee, Session ¡973-74, Wages and Conditions of
African Workers Employed by British Firms in South Africa, 1974, H.M.S.O. The author acted
as Specialist Adviser to the Committee; the views expressed here are of course entirely his own.
Ibid., pp. 98-102.
Ibid., p. 102.
Its terms of reference were'to investigate how far the wages and conditions of employment
of African workers employed by British companies in South Africa represented a factor
affecting the investment prospects, export performance and reputation abroad of British
Industry' (Fifth Report, para. 1).
6House of Commons, Parliamentary Debates (Hansard), Volume 872, No. 30 (1 May 1974),
1156-61.
73
Volume 37 May 1975 No. 2
74 BULLETIN
Africa and elsewhere in the Third World. It sounds an odd sort of defence'If
you think this is low, just see what we can do when we really try'but it was used.
One witness, referring to operations in an unspecified African country, and another,
referring to a subsidiary in India, said that the host Government in each case had
prevented them from raising wages.7 The Committee expressly recognized these
points. However it shielded behind its terms of reference, and all it would venture
to say was the following: 'Poverty is poverty wherever it is encountered, but, libe
the Department of Trade and Industry, we believe that South Africa is a rather
special case'.8 In this paper, unconfined by terms of reference, I shall explore tie
matter further. If there is a case, based on reputation or on morality, against
British firms paying low wages in South Africa, does it not apply also in other lo'v-
wage countries? In what sense can South Africa be regarded as a special case?
Is it right for the British Government to tell British companies how they ought to
conduct themselves in other countries, on matters of wages and employment?
What if the advice runs counter to the policies of the host government? It is also
interesting to examine, not how foreign firms ought to behave, or ought to be made
to behave, but how they actually do behave, given the motives and objectives of
their managers and shareholders and the external influences and pressures operating
on them. For instance, is it necessarily the case that foreign firms will choose to
pay the lowest wage possible, say the going market rate?
The paper takes the following form. Thesis: what case can be made out for
encouraging British companies to raise unskilled wages in South Africa? An/i-
thesis: what is the case for policies of wage restraint in other African countries?
Synthesis: can the apparent inconsistency be resolved, i.e. can South Africa be
regarded as a special case?
WAGES IN SOUTE AFRICA
I shall explain the circumstances which influenced the recommendations tLat
British affiliates in South Africa should, in many cases, improve their wage and
employment practices. Although the industrial structure of the South African
economy approaches that of developed countriesmanufacturing is the largest
sector and its output now exceeds agriculture and mining combinedthere are very
great differences in labour productivity between sectors, and the most important
sources of African employment are low productivity services, wage-employment on
White farms, and self-employment in peasant agriculture.9 The 1970 census
records 33% of Africans as resident in the urban areas on the day of the census,
24% in rural areas outside the so-called Bantu homelands and 43% in the rural
Bantu homelands.1° The Bantu homelands account for only some 13% of the
land area, and even in 1955 an official commission" expressed concern about
Expenditure Committee, Wages and Conditions of African Workers Employed by British
Firms in South Africa, Minutes of Evidence, Volume 1, 1973, Q714, Q1582.
° Op. cit., para. 187, and Minutes of Evidence, Vol. 1, Q1025.
Fifth Report, para. 19.
'° Ibid., para. 20.
" Union of South Africa, Sui'nmary of the Report of the Commission for the Socio-Economic
Development of the Bantu Areas within the Union of South Africa, 1955 (Tomlinson Report).
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