South African Reserve Bank (SARB) deputy governor and Monetary Policy Committee (MPC) member Fundi Tshazibana says there is a high risk of sharp inflation between wage demands and labor productivity. Tshazibana was speaking at the Nedgroup Investment Treasurers Conference in Johannesburg on Thursday.

The risk comes from a high level of compensation that is lower than performance.

“And that’s because the structure of our labor market is such that some parts of the workforce are in a privileged position. They are [are] either protected by labor laws that favor insiders or by skills shortages that confirm market power. These segments tend to require a full cost-of-living adjustment over and above any productivity gains they achieve. This leads to higher inflation for everyone else,” Tshabana adds.

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