Agri SA’s submission to Parliament’s Portfolio Committee on Labour

Workshop regarding a National Minimum Wage

Cape Town, 17 September 2014

Introduction•Agri SA welcomes opportunity •Employer of largely un-unionised labour force•Important role of farm workers•Close relationship: farmers and workers•Higher national minimum wage – various challenges

Background of the organisation•Agri SA federation of agricultural organisations•Established 1904•9 Provincial and 24 commodity organisations•Represents a diverse grouping of farmers•Agri SA’s policy advocacy•Member of BUSA, NEDLAC, WFO, SACAU, Cairns, etc.

Government policy objectives• NDP goal = 1 million jobs in agriculture in 2030•NDP refers to expanding irrigation agriculture•Potential of horticultural products, table grapes, citrus, subtropical fruits and vegetables•Conducive labour market practices•NPC assumptions based on lower minimum wage (R67/day)

NDP’s illustration of their proposal with regards to job creation

Background on the sector•SA agriculture diverse sector with intensive and less intensive labour practices•Trend – fewer workers but higher skilled •Farming units: 1993 = 57 980; 2002 = 45 848 and 2007 = 39 982•Employment: 1993 = 1 093 265 and

2007 = 796 806•20% of commercial farms are responsible

for 80% of SA’s total production

Background on the sector (continues)•Larger farms have ability to mechanise•Wages rise – mechanisation more attractive•Trend of increase in larger farms and higher levels of mechanisation will continue•Result = lower number of jobs but increased employment for staff with higher

skill levels (higher remuneration)

Background on the sector (continues)

Effect of the structural adjustment in the minimum wage•Sectoral determination governs the wages and conditions of work•Agriculture’s wage bill ±R14.5 billion in 2013/14 (13.3% of total cost)•Social wage•Statutory provident fund for farm workers•Sector – price taker not a price maker

Effect of the structural adjustment in the minimum wage (continues)•Prof Bhorat study – minimum wage has negative impact on employment (17% decline)•2013 – 52% increase in minimum wages had major impact•1996 producers applied for relief•Take time to bring about structural adjustments (73 000 job losses)•A national minimum wage higher than current minimum wage – even more job losses

Effect of the structural adjustment in the minimum wage (continues)

Social and competitive challenges of a higher national minimum wage

•High wage – attractive to foreign workers•Attractive for RSA and other farmers to invest in neighbouring countries

Neighbouring country

Monthly minimum wage for agriculture

Namibia N$888.00 per month R888.00 per month

Botswana P408.00 per month R570.00 per month

Mozambique 2,500 meticals (U$61.5) R615.00 per month

Zimbabwe US$ 59 R590.00 per month

South Africa R2420.00 per month

Affordability of higher wages by the sector•BFAP analysis – negative net farm income if wages rise to more than R105/day•More that R105/day – mechanisation; more skilled labour and consolidation of enterprises•Sector cannot absorb more significant wage increases•BFAP report – R150/day not enough to

afford balanced daily food for ahousehold of two adults and two kids

National Minimum Wage: Factors for consideration•Productivity sets level of prosperity•Productivity determines competitiveness, return on investment economic growth•World Competitiveness Report of 2014/2015•SA ranked 56th out of 148 countries in

terms of world competitiveness

National Minimum Wage: Factors for consideration (continues)•“Labour context” - problematic•Sectoral consideration (rural vs urban labour; skills availability; social wages; differing minimum wages)•Minimum wage in agriculture is R2 420/month vs that of a wholesale and retail shop

assistent is R3 063/month

Conclusion•Higher wage – more structural adjustments

- Shedding of jobs- Increased mechanisation- Consolidation of farming units

•Collective effect/risk factors should be carefully considered•NPC objective – 1 million additional jobs in 2030

Thank You