LETTER: Joblessness a far bigger issue than CEO pay

I get the gist of Pali Lehohla and Moeletsi Mbeki’s article, but have serious concerns about using data such as per capita GDP in SA (“How bosses earning big bucks is behind SA’s economic malaise”, January 12). GDP per capita is low in SA not through low-paid workers or high-paid executives, but because only 35% of all adults are employed. If we include children, fewer than 25% of South Africans earn any money at all.

It is true that the average formal sector salary of R23,500 is more than three times the per capita income, but this reflects only how “rich” formal sector workers are. It should be noted that the whole of the Southern African Customs Union and most of its neighbours have very high unemployment rates.

Moreover, taking the highest-paid CEO on the JSE — who lives in Switzerland and operates around the world, and whose company gets 96% of its income from outside SA — and comparing him to SA workers is not a sane exercise. Switzerland has a cost of living a few times that of SA. Instead, we should compare SA-based CEOs of mainly SA-based companies. Of the top 40 companies a few years ago, about 70% of their turnover came from outside SA and the region.

The JSE is the only emerging-market stock exchange where listed firms earn more turnover outside their home country than in their home country! That has nothing to do with CEO pay but with profits, risk and diversification. One needs to ask why that happens, rather than bash foreign-based CEOs.

CEO/leader/rich bashing harms our ability to attract more companies for direct investment. Rather scream at the people who make decisions that result in only 35% of people being employed in the country and SA seeing less fixed capital formation than almost all other emerging markets.

I would expect Lehohla in particular to have noted that SA’s unemployment problem is a far bigger issue than CEO salaries. The median CEO on the JSE earns about R3.9m a year, while the average is R24m. The average is so much higher due to the hundreds of millions of rand (a weak currency) paid to the foreign-based CEOs of the likes of Richemont, Prosus, British American Tobacco, Old Mutual and SABMiller.

According to PWC and Deloitte research, it is clear that SA-based CEOs get far less than what is described in this article. Yes, CEOs get paid a lot. They are doing well, but so are SA’s public servants, who on average now earn 30% more than the private sector average. Our fundamental problem in SA is jobs, jobs, jobs.

Mike Schussler
Via BusinessLIVE

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