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REPORT OF EMPLOYMENT CONDITIONS COMMISSION 2013
REPORT OF THE EMPLOYMENT CONDITIONS COMMISSION TO THE MINISTER OF LABOUR ON THE FARM WORKER SECTOR, SOUTH
AFRICA
2013
2
Table of ContentsChapter One......................................................................................................................51. Background...............................................................................................................51.1 Collective bargaining............................................................................................61.2 Issues for discussion..............................................................................................81.2.1 Wages.................................................................................................................81.2.2 Agriculture economic analysis..........................................................................81.2.3 Disciplinary action/dismissals/intimidation/evictions.......................................81.2.4 Other demands put forward by labour...............................................................91.3 Terms of references...............................................................................................91.4 Methodology.........................................................................................................91.4.1 Phase One – Administrative aspects..................................................................91.4.2 Phase Two – Consultation with stakeholders..................................................101.4.3 Phase Three – ECC Process.............................................................................121.4.4 Phase Four – Publication of the new sectoral determination..........................121.5 Structure of the report.........................................................................................12Chapter Two...................................................................................................................132.1 Sector Profile/ Agricultural economy.................................................................132.2 Trends in the expenditure: 2009 to 2011 ............................................................172.3 Private consumption expenditure on agricultural products.................................182.4 Review of agricultural market.............................................................................182.4.1 Grain market review........................................................................................182.4.2 Fruit and vegetable market review..................................................................202.4.3 Meat Industry Review.....................................................................................212.4.4 Eggs and dairy Industry Review......................................................................23Chapter Three.................................................................................................................253.1 Inputs from Agri SA............................................................................................253.1.1 Impact of minimum wage and methodology of determination by AgriSA.....253.1.2 Policy imperatives by AgriSA.........................................................................263.2 Inputs from “Landbou Werkgewers Organisasie” (LWO) Employers Organisation...................................................................................................................273.3 Submission from Transvaal Agricultural Union of South Africa (TAUSA)......293.3.1 Collateral privileges.........................................................................................303.3.2 Unrealistic expectations and the fabrication of false perceptions...................303.3.3 Mutual trust.....................................................................................................313.3.4 Recommendations by Transvaal Agricultural Union of South Africa.............313.3.4.1 Individual exceptions.......................................................................................313.3.4.2 Open labour market.........................................................................................313.3.4.3 Economic study...............................................................................................313.3.4.4 Service delivery...............................................................................................323.4 Submission from Kwanalu..................................................................................323.5 Inputs from Agri East Cape.................................................................................343.6 Inputs from Free State Agri.................................................................................353.7 Inputs from the Cape Agri Employers’ Organisation (CAEO)...........................37
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3.8 Submission from Suiderland Plase in Tygervalley.............................................403.9 Inputs from Agri Limpopo..................................................................................413.10 Inputs from Transvaal Agricultural Union (TAU)..............................................443.12 Submission from CANEGROWERS..................................................................483.14 Inputs from Bronkhorspruit employers...............................................................544 Inputs from trade unions and workers....................................................................544.1 Inputs by the Food and Allied Workers Union (FAWU)....................................544.1.1 New minimum wages level:............................................................................544.1.2 Provident Fund:...............................................................................................554.1.3 Social Conditions:...........................................................................................554.1.4 Conditions of Employment:............................................................................554.2 Inputs by the Labour Research Service (LRS)....................................................564.3 Submission from the East Cape Agricultural Research Project (ECARP).........584.4 Inputs from farm workers in Worcester..............................................................614.5 Inputs from farm workers in Limpopo................................................................624.6 Inputs from farm workers in Eastern Cape.........................................................624.7 Inputs from farm workers in Free State..............................................................634.8 Inputs from farm workers in Mpumalanga.........................................................634.9 Inputs from farm workers in North West............................................................644.10 Inputs from farm workers in KwaZulu-Natal.....................................................644.11 Inputs from farm workers in Gauteng.................................................................654.12 Inputs by workers in Grabouw............................................................................654.13 Inputs by workers in Paarl...................................................................................664.14 Inputs received from Workers Against Regression (W.A.R) trade union..........674.15 Inputs received from AL JAMA-AH..................................................................674.16 Inputs by workers in De Doorns.........................................................................684.17 Inputs by workers in Robertson..........................................................................694.18 Inputs by workers in Oudshoorn.........................................................................694.19 Inputs by workers in Vredendal..........................................................................695 Recommendations of the Department.....................................................................70Chapter Four...................................................................................................................744.1 Ability of employers to carry on their business..................................................744.2 Creation and the retention of employment..........................................................764.3 The cost of living................................................................................................774.4 Food Security Modelling.....................................................................................784.5 Poverty alleviation..............................................................................................804.6 Operation of SMMEs and new enterprises.........................................................81
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REPORT OF THE EMPLOYMENT CONDITIONS COMMISSION ON THEINVESTIGATION INTO THE FARM WORKER SECTOR, SOUTH AFRICA
Chapter One
As directed by you, the Employment Conditions Commission (ECC) has pleasure in
presenting you with a report on its investigation into the farm worker sector.
1. Background
The current sectoral determination for the farm worker sector was last reviewed in 2012
and provided for a three year wage dispensation which would have lapsed in February
2015. In November 2012, farm workers in the Western Cape went on strike demanding
R150 per day as the minimum wage. As a result, the CCMA1 intervened to tried to
resolve the matter but they were not successful, partly because employers argued that the
strike was politically motivated and unrelated to the minimum wage. This made an
intervention by the Department of Labour difficult as there was no indication that the
strike could be resolved through engaging with the parties. On 15 November 2012, the
Acting Minister of Labour published two notices in an attempt to get parties together to
negotiate a settlement. The two notices related to the intention to cancel the sectoral
determination and also the announcement to review the minimum wages in the sectoral
determination.
Subsequent to the publication of the notices, the Department of Labour met with Agri
SA2 and other employer organizations to coordinate a process whereby parties would
negotiate a solution to the strike. Prior to the commencement of the negotiation process,
the Department also met with COSATU3 and other worker representatives organization to
outline to them the process of reviewing the sectoral determination. During the meeting,
COSATU and other organizations were also informed that it would not, in fact, be
possible to review the sectoral determination before the 4 December 2012 as had been
1 Council for Conciliation Mediation and Arbitration2 Agriculture South Africa3 Congress Of South African Trade Unions
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previously indicated by the Department. They were also informed of the two notices
published in the government gazette by the Acting Minister, that the first notice
announced the intention of the Minister to cancel the sectoral determination and that the
second notice announced the review of the minimum wages in the farm worker sector.
They were further informed that parties were given 15 days to submit written inputs.
1.1 Collective bargainingIn the spirit of promoting collective bargaining, the Employment Conditions Commission
has always taken into consideration agreements reached by parties through voluntary
bargaining processes. Many of the sectors regulated through sectoral determinations have
established voluntary negotiating forums which negotiate conditions of employment
including minimum wages and make a joint submission to the ECC for consideration
prior to making recommendations to the Minister. In these sectors, representivity of
workers and/or employers is too low to permit the establishment of a bargaining council.
The objective of the Department in bringing the parties together was in the same spirit,
i.e. that parties in the agricultural sector should attempt to make a joint submission to the
Employment Conditions Commission when the sectoral determination is reviewed.
o The negotiation meeting arranged by the Department was facilitated by the
CCMA. The first meeting took place on 22 November 2012. The objective of the
negotiation meeting was to try and ensure that parties at the forum make a joint
negotiated and agreed submission to the ECC on the new level of the minimum
wages prior to the ECC making its recommendations to the Minister. The parties
who participated in the process were employer’s organizations led by AgriSA and
employee’s organizations led by COSATU. The meetings were held under the
auspices of the CCMA. On 22 November 2012, the following parties attended the
negotiation meeting facilitated by the CCMA
o AgriSA
o Agri-Sector Unity forum
o Afasa4
4 African Farmers Association of South Africa
6
o LWO employer’s organization5
o AWETUC
o Farm workers Dwellers Forum
o Food Sovereignty Campaign
o Women on Farms Project
o Mawubuye Land Rights
o United Democratic Front
o Food and Allied Workers Union
o Cosatu6
o Cape Agriculture Employers Organization and
o TAU-SA7
During the meeting the following was agreed to:
1.1.1 Overarching framework for conducting negotiations1.1.1.1. The negotiations will be conducted within the prescription of the legislation
framework as defined in the Labour Relations Act, of 1995 and the Basic
Conditions of Employment Act 75, of 1997.
1.1.1.2 Parties agreed that there is a sense of urgency in finding a solution to the
dispute, which also necessitates consideration of options outside of the
legislative framework in the Basic Condition of Employment Act but that are
within the Labour Relations Act.
1.1.1.3 That the challenges confronting the sector can be categorised into those that
can be addressed in the short term and those that can be addressed in the
medium to long term. 1.2 Issues for discussionDuring the meeting, Labour representatives tabled a list of demands for negotiation. The
meeting agreed that the list of issues should be broken down into those that can be
5 Landou Werkgewers Organisasie6 Congress of South African Trade Union7 Transvaal Agricultural Union of South Africa
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addressed in the short term and those that can that can be addressed in the longer term,
whilst understanding that they are interrelated. The meeting agreed to isolate two issues
to address as a matter of urgency; namely wages and dismissal/disciplinary
action/evictions/intimidation on the farms.
1.2.1 WagesLabour’s demand for a minimum wage increase of R150 per day for a 9 hour day was the
tabled and employers indicated that at that stage they were not able to put forward a
counter offer. The meeting agreed that in any wage model for the future, research relating
to the economic analysis of the sector should be undertaken to determine the viability and
the sustainability of any wage level. Furthermore the parties agreed that the analysis
process should also look at job retention and creation in the agricultural sector. As a
result of the agreements, the meeting agreed to establish a Task Team consisting of two
persons from each party to map the way forward.
1.2.2 Agriculture economic analysisThe two aside met on the 22 November 2012 and the following was agreed to:
That the task team would engage The Bureau for Food and Agricultural Policy
(BFAP) who would provide an agricultural economic analysis that would inform
the parties in their negotiations for a wage increase.
That the task team would commence its work on Tuesday, 27 November 2012 and
deliver a preliminary report on Thursday, 29 November 2012.
1.2.3 Disciplinary action/dismissals/intimidation/evictionsThe two aside further agreed to establish a mediation task team that would evaluate and
assess all complaints brought to it by workers and farmers regarding any of the above
issues. The task team would attempt to resolve these matters through a process of
facilitation and negotiations. In the event that a dispute remained unresolved, it would be
directed to the relevant and appropriate forum or institution that has the legal mandate to
address the complaint. The mediation task team would consist of one representative from
labour, business and the Department of Labour and would be coordinated by the CCMA.
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1.2.4 Other demands put forward by labourRegarding other demands, the meeting agreed to establish a two person team consisting
of Agri SA and labour representatives. The two representatives were to exchange the list
of demands and then classify or categorise the different issues into those that relate to
compliance and those that require other departments or institutions to address them.
These demands held within them the elements of agreements that could go towards a
short term solution, and would be part of the interim discussions.
The meeting agreed that the next plenary meeting was to be held on 29 November 2012,
in Cape Town, where the document by the BFAP would be discussed as a basis for
negotiations. On 29 November 2012, parties met but negotiations could not take place as
the BFAP report was not ready As a result Labour indicated that they would be going
back on strike.
1.3 Terms of references
The terms of reference for this investigation were published in the Government Gazette
No. 34339 notice No. R.737 dated 27 May 2011 as follows:
“to review wages and the conditions of employment in the Farm Worker Sector”
1.4 MethodologyA four-phased project framework was developed for the investigation.
1.4.1 Phase One – Administrative aspects
This phase commenced in November 2012 when the Department published notices
inviting interested parties to make written representations within 15 days to the Director-
General in relation to the review of the sectoral determination.
In response to the notices, written submissions were received from the following
organisations:
1. Agri SA
2. Cane growers Association
3. Free State Agriculture
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4. Agri Limpopo
5. TAU SA
6. LWO
7. East Cape Agricultural Research Project
8. Labour Research Services
9. Food and Allied Workers Union - KwaZulu Natal
10. SMB supplies
11. Sovereign Foods
12. Suiderland Plase
13. Agri-Seta
14. Desaci Investment
15. Honingklip Dryflowers
16. Pumula
17. Cape Agri Employers’ Organisation (CAEO)
18. CEASER
During the public hearings, further written submissions were received from the
constituents of the above-mentioned organisations at the provincial level, which were
similar to the submissions forwarded by their national offices. Furthermore almost all the
written submissions received, objected to the cancellation of the sectoral determination.
Given this and other advice, the Department decided not to pursue the cancellation
process.
1.4.2 Phase Two – Consultation with stakeholders
Parallel with the negotiation process by the parties, the Department commenced with
public hearings in all provinces. Invitations of such public hearings were forwarded
through employer’s organizations, trade unions and distribution of invitations to farm
workers by the Department officials. Due to timeframes in relation to the completion of
the investigation, one session was arranged in each province. The table below indicates
areas where public hearings were held in each province.
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Table 1 below indicates places visited together with the attendance profile of
stakeholders for each hearing. Day Month Province Area Attendance
Employers Employees
11 December Northern Cape Keimoes 60 0
12 December Northern Cape Keimoes 0 25
12 December Mpumalanga KwaMhlushwa 4 1806 December Limpopo Makhado 77 5123 November KwaZulu-
NatalBoston Farm 98 40
13 December Gauteng Bronkhorspruit 55 018 December Gauteng Boschkop
Primary School0 44
8 December Free State Bothaville 19 7
13 December Eastern Cape Barkley EastAliwal North
25 73
22 November Western Cape Worcester 5423 November Western Cape Worcester 137 09 December North West Ottosdal 0 6010 December North West Lichtenburg 8 2
Total number of attendees 133 211
In January 2013, further public hearings were arranged in the Western Cape area
targeting employees. This came as a result of the request by the employee organizations.
The public hearings were therefore held as from 14 January to 20 January as per the
schedule below:
Date Area Employee attendance
14/01/13 Grabouw 36
15/01/13 Paarl 283
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16/01/13 De Doorns 258
17/01/13 Robertson 52
18/01/13 Oudtshoorn 65
20/01/13 Vredendal 85
Total number of attendees 779
1.4.3 Phase Three – ECC Process
During this stage the ECC engaged with the inputs received and made its
recommendations to the Minister as contained in this report.
1.4.4 Phase Four – Publication of the new sectoral determination
This phase will see the publication of the amendments to the sectoral determination once
the Minister has decided whether or not to approve the recommendations of the ECC.
1.5 Structure of the report
The report consists of the following chapters:
Chapter 1 of this report gives a background of the sector and the methodology
utilised.
Chapter 2 of this report outlines the state of the agricultural sector.
Chapter 3 discusses the findings of the investigation and resultant proposals.
Chapter 4 discusses the proposals in light of the criteria that the ECC has to
consider.
Chapter 5 summarises the recommendations of the ECC.
Chapter Two
2.1 Sector Profile/ Agricultural economyAccording to the BFAP report, there is evidence that commercial farmers have shifted
from employing a large permanent workers to using more seasonal workers, and that
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many people who used to live and work on farms no longer do so, principally as a result
of the uncertain investment climate created by speculation around property rights as
illustrated in figure 1.
Here the Extension of Security of Tenure Act (No 62 of 1997) and other related
legislation has supposedly played the major role. At the same time the application of
labour legislation to agriculture has provided the motivation for farmers to increasingly
use the services of labour brokers in an attempt to avoid the hassle factor that comes with
employing large numbers of workers for short periods of time. The BFAP report argues
that both of these processes are open to exploitation by unscrupulous employers, whether
the farmers directly or the labour brokers.
Against this background, the following are the most important employment trends in South African agriculture over the past two decades: South Africa’s total agricultural production, agricultural exports and agricultural
imports have all increased in real terms since 1994. South Africa, which is the third
largest agricultural producer on the African continent (after Nigeria and Egypt) has
by far the most productive labour force (which includes owners, managers and
workers at all levels), with a value-added per worker almost four times the global
average, higher than that of any other Africa country, and second only to Brazil
amongst the BRICS countries. However, the growth in agricultural production in
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South Africa is considerably slower than the average for Africa, and is slower than
the other BRICS countries with the exception of Russia.
Agriculture’s share of GDP in South Africa has declined from over 3% in 1994 to
below 2% today, agricultural exports have declined from around a third in the 1970s
to less than 10% since the 1990s and agricultural imports have remained relatively
stable at around 3 to 6% of total imports over the past six decades. At the same time
agriculture’s share of formal sector employment has declined from above 15% in
2000 to around 5% today. These are all the normal signs of a modernising economy
where a more urbanised population becomes more involved in tertiary economic
activities. As agriculture becomes more mechanised, the unskilled labour force is
replaced by a significantly smaller skilled labour force. Note also that the share of the
manufacturing sector in South Africa’s GDP is also declining.
The agricultural sector is still one of the most labour intensive sectors of the South African economy, and is one of the more labour intensive agricultural sectors globally. For example, Japan uses 4500 tractors for every 100 km2 of arable land, compared to 270 in the USA and only 43 in South Africa.
The unit cost of labour (the labour cost of producing an additional Rand of farm output) has declined by some 70% since 1993. At the same time the share of labour remuneration in the agricultural value added has remained at around a third. This is largely because the unit cost of intermediate inputs (fertilizer, seed, agro chemicals, etc.) has increased, and their share of agricultural value added has increased. As a result farmers’ profits have declined as a share of the gross value of agricultural production.8
At the time of the first Sector Determination for agriculture in 2002 it was indicated in the ECC report that the mean and median real wages in agriculture were considerably lower than in other sectors of the economy. In 1997 mean farm worker wages were 13%lower than the wages of domestic workers, 63% lower than the wages of construction workers, 72% lower than the wages of manufacturing sector workers and a full 80% lower than wages in the services sectors. Nevertheless, the average wage of agricultural workers increased by 1.65% per year in real terms between 1970 and 1998. This was the second highest rate of increase in the economy, surpassed only by the increase in wages in the mining sector. Since 2000, the average remuneration of farm workers has grown
8 Source: BFAP report
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even faster in real terms, increasing almost twofold between 2003 and 2011. Note that the data on remuneration include salaries, wages and cash bonuses, i.e. they include remuneration to managers and skilled professionals as well. Since the introduction of the minimum wage at the beginning of 2003, the minimum wage of farm workers has increased in real terms by just more than 10% for workers in the farming areas contiguous to urban areas and by a more substantial 50% for workers in the more remote rural areas. Thus, the wages of skilled and managerial workers have increased faster than those of unskilled workers.9
Another study by DPRU has shown that the introduction of the minimum wage in agriculture did result in increased wages, especially among workers who had been earning the lowest wages, and in an increase in the proportion of workers who were covered by formal employment contracts. However, it also resulted in a decline in employment opportunities. However, because the minimum wage has been in implementation for less than a decade, the authors caution that more time must pass before the real impacts can be measured.
Finally, a farm owner has to produce a return that is sufficient to pay for i) the farming
requisites that are used in production (fertilizer, herbicides and insecticides), ii) the labour
that is used, iii) the capital that is used (working capital such as tractors; and fixed capital
such as land and the orchards on the land), and iv) have something left over as
remuneration for the entrepreneur. If the cost of one of these four factors increases
irrevocably, the owner generally has one of four choices:
Decrease the remuneration to one of the other factors of production (e.g. use less
borrowed capital and reduce the return to own equity);
Change the ratio of factors (e.g. use less labour and more capital in the form of
machinery);
Increase productivity (measured as the physical output produced divided by the
inputs used); or
Exit from farming, at least in those specific commodities.
Obviously these decisions are not independent: they can be taken together or in tandem.
What is true is that each of these choices can have large structural impacts on the specific
industry, on the farming sector as a whole and on the wider economy. So, for example, if
9 Source: BFAP report
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farmers were to react to a higher wage structure by trying to lower their unit costs of
production, farms would get bigger so that overheads could spread over the higher cost,
and the employment intensity of the industry (employment per hectare) would decline.
Yet an increase in wages will not automatically result in increased mechanisation,
because the technology is not always available. This is especially evident in intensive
agriculture, where harvesting technologies, even where they do exist, are not suited to
high quality fruits and vegetables destined for the export market.
All of these choices are subject to influence by public policy. If the analysis contained in
this report were to teach any lesson, it would be that the South African authorities
responsible for agricultural policy need to anticipate such big changes in the strategic
environment that confronts agriculture, and to put remedial measures in place.
2.2 Trends in the expenditure: 2009 to 2011 10
Generally speaking, extensive livestock production uses less labour than dryland crop
production, which in turn uses less labour than the production of fruit and vegetables,
which is mostly done under irrigation. With crop production, more labour is generally
used in harvesting than in production itself (ploughing, weeding, etc.) because it is easier
to replace workers with machines in production than in harvesting. In the modern era
virtually all harvesting of dryland crops has become mechanised, while a substantial
proportion of harvesting activities of fruit and vegetables is still dependent on manual
labour. The rate at which labour is displaced by machines in these activities differs
between commodities and countries. It is a function of available technology as well as the
relative cost of capital and labour. South Africa ranks among the countries where primary
agriculture is still relatively labour intensive, but where the process of substituting out of
labour for machines is already far advanced, especially in the last few years where spikes
in commodity prices have boosted the profitability of crop production.
In the years after the Second World War employment on commercial farms in South
Africa exploded as the area ploughed for dryland production increased with the
introduction of tractors on a large scale – more workers were needed to harvest the crops
10 Source: Department of Forestry and Fisheries
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on the larger area planted. This continued until the 1970s, by which time combine
harvesters had taken over most of the harvesting process for dryland production of maize,
wheat, sugarcane, etc.
Because dryland production dominated employment during that time, total employment
in agriculture started to decline, from a level of between 1.6 and 1.8 million worker
equivalents in the 1960s to below a million by the early 1990s2. In the period after 1994,
when South Africa’s commercial farmers were able once more to compete in
international markets and the exports of labour-intensive fruit and wines started to
increase rapidly, employment stabilised for a while (until 2002) but has continued its
downward trend since then.
2.3 Private consumption expenditure on agricultural productsDuring the second quarter of 2012, private expenditure on food reached R100,5 billion,
an increase of 10,1% compared to the R91,3 billion reported for the second quarter of
2011. The main expenditure item was bread and grains with an increase of 15,8%. The
expenditure on milk, milk products and eggs also increased by 13,3% while the
expenditure on coffee, tea and other expenditure increased by 10,1% in the second
quarter of 2012. The expenditure on meat and potatoes increased by 8,5% and 4,1%
respectively, while the expenditure on fruit and vegetables increased slightly by 4,1%.
The expenditure on oils and fats recorded a decrease of 3,6% while the expenditure on
sugar also decreased slightly by 1,1%.
2.4 Review of agricultural market
2.4.1 Grain market review
Notwithstanding an increase in the 2012 maize output, higher exports together with
smaller than initially anticipated 2012 maize crop paved the way for significant reduction
in projected 2012 ending stocks after the completion of the 2012 harvest (BFAP, 2012).
During the second quarter of 2011, the average opening stock for white and yellow maize
was 1,7 million tons and 799 000 tons respectively, while the average total opening stock
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(white maize plus yellow maize) was 2,4 million tons. During the second quarter of 2012,
the expected production of maize was reduced significantly due to below-average rains
that negatively impacted on potential yields (Crop prospects and food situation, June
2012). Thus during the second quarter of 2012, the average opening stock for white and
yellow maize was 903 000 tons and 810 000 tons respectively, while the average total
opening stock (white maize and yellow maize) was 1,7 million tons, approximately 30%
less than in the second quarter of 2011. Consumption of maize in South Africa totalled
2,2 million tons in the second quarter of 2011. Of this total, 1,6 million tons were white
maize while 680 000 tons were yellow maize. Consumption of maize during the second
quarter of 2012 totalled 2,1 million tons, 4% less than in the second quarter of 2011. Of
this total, 1,1 million tons were white maize while 1,0 million tons were yellow maize.
The total maize exported during the second quarter of 2012 reached 370 000 tons which
was 439 000 tons less than 809 000 tons of maize exported during the second quarter of
2011. According to Grain SA, trade expectations indicate that maize exports may reach
400 000 tons between May and August 2012. Domestically, local wheat producers
planted a total of 605 000 hectares of wheat during 2011, which was 8% more than in
2010 due to an increase in wheat plantings in the summer rainfall area. The higher
acreage together with above trend yields resulted in a 33% increase in local wheat
production and fewer imports were needed to bridge the supply gap in 2011. However,
regardless of higher 2011 wheat prices and good yields, producers in the summer rainfall
area are expected to decrease plantings by 17% in 2012 because of the higher maize
planting and less favourable soil moisture conditions at the onset of the 2012 wheat
planting season. On the other hand, producers in the winter rainfall areas are expected to
keep wheat plant locally, due to prospective good returns on maize production and
unfavourable planting conditions during the 2012 summer grain planting season.
Soybean planting on the other hand increased by 13% due to strong soybean prices
obtained in 2011 and the superior crop rotation benefits of soybean. The decline in
sunflower plantings and the further increase in soybean plantings resulted in soybean
overtaking sunflower seed as the most important oilseed crop produced in South Africa in
2012 (BFAP, 2012). During the second quarter of 2012, the total opening stock of
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sunflower averaged 184 000 tons which was 29 000 tons (13%) less than the recorded
213 000 tons in the second quarter of 2011. Consumption of sunflower increased by 5%
from 167 000 tons to 176 000 tons between the second quarter of 2011 and the second
quarter of 2012. Imports of this commodity increased to 1 000 tons in the second quarter
of 2012 from no sunflower seed being imported in the second quarter of 2011.
Meanwhile, the average opening stock of soya beans averaged 373 000 tons in the second
quarter of 2012, approximately 55% more than 241 000 tons recorded for the second
quarter of 2011.
Consumption of soya beans increased by 39% from 114 000 tons to 158 000 tons
between the second quarter of 2011 and the second quarter of 2012. The domestic prices
of white and yellow maize averaged R1 685 per ton and R1 708 per ton respectively, in
the second quarter of 2011 while wheat, sunflower and soya bean prices averaged R 3
120per ton, R 4 001 per ton and R3 228 per ton respectively, during the same period. In
the second quarter of 2012, the price of white and yellow maize increased by 27% and
21% to average R2 136 perton and R2 061 per ton respectively. During the same period,
the price of sunflower and soya beans increased by 20% and 29% to average R4 786 per
ton and R4 166 per ton respectively. On the contrary, the price of wheat decreased by
10% to average R2 823 per ton. According to BFAP (2012), local maize prices have not
yet traded below export parity prices as was in 2011. Nevertheless, even with sufficient
ending stock levels, the average 2012 local maize prices are projected to be higher than
the 2011 averages as world prices are significantly higher. With regard to wheat, local
wheat prices will be dictated by the international wheat price and exchange rate
fluctuations. According to BFAP (2012), the SAFEX wheat price is projected to increase
in 2012 while oilseed prices are expected to remain at record levels in 2012.
2.4.2 Fruit and vegetable market reviewBetween the second quarter of 2011 and the second quarter of 2012, the average prices of
apples, pears and grapes increased by 7%, 8% and 5% respectively as per the BFAP
report, despite an increase in the quantities supplied to markets. During the same period,
the average price of bananas increased by 10% on a combination of reduced supplies and
good uptake across most markets. On the other hand, the average prices of avocadoes,
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oranges and mangoes decreased by 10%, 3% and 11% respectively, between the second
quarter of 2011 and the second quarter of 2012, on improved supplies across markets.
The quantity of selected fruits traded through Fresh Produce Markets increased
significantly between the second quarter of 2011 and the second quarter of 2012, except
for bananas which decreased by 8% due to limited supplies in markets. The quantity of
apples, avocadoes, oranges, pears, mangoes and grapes increased by 5%, 31%, 1%, 5%,
163% and 19% respectively during the period under review due to improved supplies
across markets. According to BFAP (2012), demand for grapes in the domestic market
remains strong as prices on average increased by 10% in 2010/11, despite the 10%
increase in volume traded. Supply to the local market is estimated slightly higher in
2011/12 compared to the previous season with price increases of roughly 6%. With
regard to apples, the area planted to bearing apple trees is projected to continue its
upward trend, increasing by 470 hectares in 2012. Total apple production is projected to
reach 790 830 tons in 2012, up 3% from the previous year. Meanwhile, the price of pears
sold locally is estimated to increase by 7% in 2012, supported by lower supply and
relatively high prices for processing pears. Growth in the quantities of mangoes supplied
to FPMs??? is on account of good weather conditions and higher yields expected per
hectare (ARC Economic outlook report, March 2012). Prices of a number of vegetables
traded through the FPMs decreased significantly between the second quarter of 2011 and
the second quarter of 2012 on sluggish demand, improved supplies and weak uptake
across most markets. The prices of beetroot, carrots, lettuce, onions, potatoes, spinach,
and tomatoes decreased by 9%, 24%, 34%, 5%, 1%, 24% and 13% respectively. During
the same period, the prices of cucumber, cabbage, green beans and sweet potatoes
increased by 63%, 36%, 7% and 13% respectively, due to a combination of reduced
supplies and good uptake across most markets.
During the period under review, quantities of most vegetables traded through FPMs
increased significantly with the quantities of beetroot, carrots, lettuce, onions, potatoes,
spinach, tomatoes, green beans and sweet potatoes increasing by 16%, 23%, 8%, 6%, 6%,
47%, 16%, 1% and 6% respectively, on improved supplies across markets. During the
same period, the quantities of cucumber remained the same as the second quarter of 2011
while cabbage decreased by 8% due to limited supplies across most markets.
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2.4.3 Meat Industry ReviewAccording to the FAO, the struggle for markets intensified in 2012 as increased
production in key importing countries slows down global meat trade expansion.
Global meat prices recovered significantly from the 2009 decline, following positive
economic signals. According BFAP, beef prices were the most affected by the economic
crisis, as consumers switched to cheaper animal protein, resulting in chicken markets
remaining relatively strong throughout the crisis. However, the recovery of prices has
been greater in the beef market due to a contraction in supply. World stock numbers have
declined and the US cattle herd numbers are at its lowest since 1960. Extremely dry
conditions in the US have prevented the industry from responding normally to the
recovery in prices. Higher profits over these past two years have allowed a number of
countries to rebuild herds. FAO on the other hand indicates that global meat output is set
to expand by nearly 2% in 2012. Locally, the domestic meat market remains vulnerable
to any significant drop in economic growth. According to BFAP, the price margins
between various types of meat changed continuously as the impact of key exogenous
drivers differed from one industry to the next.
The outbreak of the Rift Valley Fever in 2011 and more recently foot and mouth disease
has also influenced the behaviour of role players in the market. Between the second
quarter of 2011 and the second quarter of 2012, the gross production value of beef
increased slightly by 1% to R4,1 billion. During the same period, the average price of
beef decreased by 2% from R 25,94/kg to R 25,54/kg. While rising food prices have
constrained growth expectations for meat consumption, beef prices have been under
pressure due to seasonal weakness in consumer demand as a result of the winter period
(FNB, Agri weekly newsletter, 25 May 2012). In the Meantime, the number of cattle
slaughtered decreased by 1% between the second quarter of 2011 and the second quarter
of 2012 from 561 239 to 555 661.
Globally, according to the FAO, growth of the poultry sector is being dampened by high
feed prices and on going trade disputes. BFAP (2012) indicates that the profit margins of
pork and chicken farmers came under pressure in 2011 due to spiralling feed prices.
While pork prices grew strongly along with feed costs, chicken prices failed to keep up,
placing significant pressure on farmer’s margins. Domestically, commercial production
21
of poultry decreased by 26%, from 355 855 metric tons to 264 596 metric tons between
the second quarter of 2011 and the second quarter of 2012.
According to BFAP (2012), if increased consumption could be met with local production,
imports would be less. In the meantime, the import parity of imported whole birds
originating from Argentina and Brazil is still trading significantly below the domestic
price for whole frozen chicken and if this trend continues, increased imports are set to
continue. Between the second quarter of 2011 and the second quarter of 2012, the gross
production value of poultry increased by 11% from R 6,3 billion to R7,0 billion. During
the same period, the average price of poultry per ton increased by 9% from R 17 013/ton
to R 18 517/ton.
2.4.4 Eggs and dairy Industry Review
2.4.4.1 Eggs
Despite exceptional volatility in the domestic egg market, the producer price of eggs has
on average increased at a faster rate than feed costs (maize). This positive output-input
price ratio supports the expansion of the local industry in order to match the increase in
per capita consumption (BFAP, 2012). Between the second quarter of 2011 and the
second quarter of 2012, the gross production value of eggs increased by 9% from R 1,7
billion to R 1,9 billion. During the same period, the average price per dozen of eggs
increased by 4% from R 8,91/ dozen to R 9,26/dozen. Total production of eggs between
the second quarter 2011 and the second quarter of 2012 increased by 5% from 194,8
million dozens to 204,5 million dozens.
2.4.4.2 Milk
International dairy markets have been characterised by extreme volatility due to changes
in supply and demand balance. According to the FAO Food outlook report (May, 2012),
world milk production is forecast to grow by 2,7% in 2012, with dynamic domestic
demand being the main engine stimulating growth. Locally, a tight balance existed
between the production and the utilisation of fluid milk for many years. Recently,
according to the Milk Producer’s Organization (MPO), milk production increased by
3,1% during the first four months of 2012 as compared to the same period last year.
22
According to the MPO, the main reasons for higher production were the adverse
production conditions in 2011 and the more favourable climatic conditions during the
first four months of 2012. More specialised dairy farmers also contributed to the higher
production.
The MPO also reported that total dairy exports in May 2012 exceeded imports by 7 560
tons while total exports of milk from January to April 2012 exceeded imports. According
to MPO Economist, Dr Koos Coetzee, strong export performance together with strong
local demand will result in a favourable supply/ demand situation. Between the second
quarter of 2011 and the second quarter of 2012, the gross production value of milk
increased by 23%, from R 2,1 billion to R2,5 billion. During the same period, the average
price per litre of milk increased by 21% from R 2,89 to R3,50. Total production of milk
between the second quarter 2011 and the second quarter of 2012 increased by 2% from
713,7 million litres to 724,8 million litres. (BFAP, 2012).
Chapter Three
3. Submissions/inputs and recommendations by the Department
This chapter focuses on the inputs received from stakeholders both the written
submissions and the verbal presentations made during the public hearings.
23
3.1 Inputs from Agri SAIn a letter dated 29 February 2012 received by Agri SA from the Minister of Labour, she
indicated that the Employment Conditions Commission advised the Minister on two
issues, firstly on the appropriate level of the minimum wage, and secondly the wage
regime that should apply based on the wage level. The Minister also confirmed that
according to Section 55(2) of the Basic Conditions of Employment Act (BCEA) she
cannot amend the sectoral determination for a period of twelve months after the inception
thereof, a position that was recently re-confirmed by the Minister.
The most important aspect of the sectoral determination in the agricultural sector with
regards to farm labour is undoubtedly the minimum wage level. According to statistics
from the Department of Agriculture, Forestry and Fisheries agriculture’s wage bill
amounts to approximately R13 billion or 11.3% of total cost in 2011/2012.
Furthermore, some farmers provide some of their workers with other services, including
housing, transport, water and electricity, in many cases which are not fully factored into
the wage bill. The Department of Labour is also looking into the introduction of a
statutory provident fund for farm workers which could also have an influence on the
wage bill and on-farm cost structure. The fact of the matter remains that hidden costs in
relation to the full cost of labour in agriculture should be taken into account when dealing
with adjustments to wage levels. When setting minimum wages it is important to consider
the ability of farmers to pay higher.
3.1.1 Impact of minimum wage and methodology of determination by AgriSA
Agri SA indicated that the minimum wage has increased in 2009 by 13%, in 2010 by
6.9%, and in 2011 by 4.5%. With the amendment of the formula used to adjust the
minimum wage annually, the current formula used to increase wages is set on the lowest
quintile of the CPI as released by Statistics SA six weeks prior to the increment date, plus
1.5 percentage points which resulted in a 9% increase in 2012. This in fact allows for a
double adjustment for food inflation as the lowest quintile already compensates for this.
They pointed out that it should be realised that generalised assumptions might not be
applicable throughout the sector as labour costs may vary between 5% and 40% of total
on-farm costs, depending on the type, level of mechanisation and size of farming
24
enterprises. In the case of labour intensive farming enterprises even marginal adjustments
in the minimum wage might lead to structural adjustments, especially by those utilising
casual/seasonal labour. Increased mechanisation could be one of the options considered
by such farmers to ensure future productivity and competitiveness.
3.1.2 Policy imperatives by AgriSAAgri SA in their submission referred to the New Growth Path, published by the Minister
of Economic Development, which indicated that “the central idea in the developmental
growth path is to enhance the labour absorbing capacity of the economy and to find ways
to connect knowledge and innovation to the challenge of jobs and growth,". They
indicated that a link must be drawn between environmental sustainability and poverty
eradication. They indicated that the aim of The New Growth Path is to create five million
jobs in the next ten years and Government identified six key sectors of the economy
including infrastructure development, agriculture, mining, green economy, manufacturing
and tourism that have the potential to unlock employment opportunities. In addition, they
pointed out that it must be noted that agriculture creates more jobs per R1 million
invested than most other sectors. However, employment in the sector declined
substantially in recent times. Referring to the diagnostic report of the National Planning
Commission, Agri SA stated that an evaluation was done of factors which affected
employment growth, the report indicated that between 1970 and 1995 employment in the
agriculture and mining sectors shrank by 46 percent or 1.4 million. In the context of
economic stagnation, there was not a concomitant opening of opportunities for low and
semi-skilled workers in new industries. With a view to exploiting employment
opportunities still available in agriculture it is of critical importance that a comprehensive
evaluation of all relevant policies (e.g land, tenure etc) including the impact of minimum
wages on new labour entrants into the sector should be scrutinized. According to Agri
SA, in the Commission’s final report it was envisaged that agriculture should create an
additional 1 million jobs by 2030, subject to an enabling policy environment and as such
wage dispensation is part of such a policy environment.
25
3.2 Inputs from “Landbou Werkgewers Organisasie” (LWO) Employers Organisation.
The LWO represents approximately 1800 farmers nationwide. The LWO has been
involved with all of the previous investigations and negotiations in respect of Sectoral
Determination number. In their submission LWO indicated that they share the same
concern with the President regarding unemployment in the country and appreciates the
realisation of the fact that it is the State's main priority to ensure job creation in the
Republic of South Africa. According to them, President has on numerous occasions
publicly announced and again recently told a COSATU central committee meeting that
Government was concerned about the growing unemployment in South Africa. They
indicated that the President vowed that his administration will work faster to build the
type of economy that will enable South Africa to eradicate poverty, unemployment and
inequality. President Zuma further stated that Government also that he wanted an
economy that would allow all South Africans to realise their right to an environment that
was not harmful to their wealth and wellbeing.
LWO raised concerns that the recent violent strikes in the Agricultural Sector had a
massive negative impact on job creation and job security in this Sector, but the fact that
Government is "dancing to the tune of illegal strikers", which strikers are by far not
representative of the Agricultural Sector at all, is of grave concern. They indicated that by
amending the Agricultural Sector wage determination after it has already been
determined for three years, ending on 28 February 2015, will proverbially speaking, open
the floodgates for employees and unions to cancel and amend any existing wage
determination of any Sectoral Determination, as well as that set in any Bargaining
Council Collective Agreement and create anarchy in the RSA.
In their submission, they also referred to the statement made by Gill Marcus, Governor of
the Reserve Bank, who recently stated that the Reserve Bank now, as a result of the
recent wave of strikes in the country, expects the economic growth rate to be lower for
2012 and for 2013.
LWO also indicated that in their view it became clear that minimum wages was not even
the main concern of those unions present at the national meeting in Cape Town, but
mostly socio-social issues concerns. They urged the Employment Conditions
Commission and the Employment Standards Directorate to allocate the appropriate
26
weight to the demands of the minority of farm workers, as opposed to the weight placed
in the opposite side of the scale by farmers and organised farm worker organisations and
non-profit organisations acting in their farmers' interest.
In addition, LWO indicated their concern that any increase in the minimum wages of
farm workers will unfortunately lead to large scale job losses due to retrenchment, which
will have a further negative cumulative impact on our economy. It is well known that
almost five persons are dependent on the income of one employed person in our country.
They therefore urged the ECC to seriously consider the impact of not only job losses on
all those persons involved, but also the "snowball effect" it will have on right of
occupancy and evictions, especially since the strike was an illegal, unprotected strike. It
would create concern among foreign, as well as local investors, if such a small percentage
of strikers, participating in an illegal strike were to succeed in forcing the hand of the
State" to give absolutely unaffordable wage increases. It would be a case of the "tail
wagging the dog".
In their submission, LWO argued that since the wage determination has been determined,
after an extremely comprehensive and expensive process of consultation with relevant
parties, until 28 February 2015, that wage determination should remain in force for many
reasons. The most important reason being that the ECC would set a precedent for all
other sectors in which there currently are determined wages. Furthermore the repealing of
the wages for the farming sector for the next two years, would lead to large scale anarchy
and a total distrust in the credibility and worth of the ECC and any State Department for
that matter. They alleged that this could lead to the country's economic downfall. The
ECC therefore has a crucially important function to fulfil, firstly, retain its credibility and,
secondly, to thoroughly and comprehensively advise the Minister of Labour of these
serious concerns.
They further submitted that farmers, in general, are already experiencing financial
difficulty due to the rising costs of diesel, fertilisers, machinery, etc. which impacts more
so on farmers than on any other employer, whilst especially the rising cost of labourers
cannot be set off against any increase in income. Farmers have minimal or no influence
themselves into the input costs of their farming operations. If there is to be any drastic
change, or any change whatsoever to one of the important components, which is in many
27
cases the highest input cost, namely wages of employees, then it will seriously affect the
ability of many farmers to continue farming. It is yet to be seen how our Government will
assist farmers as employers in any way, manner or form financially or otherwise. Farmers
are now arbitrarily targeted to pay an absurd increase of more than 100% in wages to
their employees.
They also submitted that financial and any other means of assistance should especially be
granted to farmers, who are the food source of the country and that the Government can
budget for and wisely utilise State Funds to alleviate the financial difficulties experienced
by the Agricultural Sector, which is currently placed under even more financial
difficulties.
They indicated that there should not be further increases on the minimum wages of farm
workers, which has already been set at a steady increase of 1.5% higher than the
Consumer Price Index. Furthermore, irresponsible increases in the minimum wages of
farm workers will inevitably lead to large scale retrenchments / downsizing of farming
operations. Job losses will escalate and socio-social problems and the national food
source security will be at risk if further increases are given. They also indicated that it is
their submission that any increase in the minimum wages of farm workers cannot be
afforded and that nationally their members stand opposed to such increases.
3.3 Submission from Transvaal Agricultural Union of South Africa (TAUSA)As price-takers, farmers are already confronted by increased input costs resulting from
fuel price hikes, the predicted tariff increases requested by Eskom and the anticipated e-
tolls on the Gauteng highways en route to the major markets where produce is delivered
to. As matters stand, labour costs represent the biggest single component of the farmers'
expenses. Any upward adjustment without some form of financial compensation in the
form of subsidies or guaranteed minimum prices for produce will only reduce
profitability which results in job losses and the eventual collapse of the commercial
agricultural sector. TAU SA has commissioned an independent economic study in this
regard and a professor of the post graduate business school of the University of Pretoria
could be approached to submit his study and findings.
28
3.3.1 Collateral privileges. Unlike current practice in all the other sectors of the economy, employers are legally
obliged to provide security of tenure as well as the provision of housing, services and
transport. As it is at the moment, many farmers are in fact providing services, support
structures and opportunities which in fact fall within the ambit of local government.
These aspects are seldom considered as part and parcel of the remuneration received by
employees. Irrespective of the eroding influence of a legally obtained property described
by a title deed, the net result of being obligated to accommodate persons with whom the
land owner has no binding contract, is the creation of tension caused by non-compliance
to mutually-agreed upon arrangements pertaining to the number of livestock, grazing and
areas to be cultivated.
3.3.2 Unrealistic expectations and the fabrication of false perceptions.It is obvious that deliberate efforts are underway to project farmers as being "very rich" in
comparison to the "very poor" people in their employment. An audit of the financial
institutions debt records will confirm that the vast majority of farmers are operating with
the credit made available to them based on acceptable securities and that current profit
margins in fact leaves very little leeway for increases in input costs. Furthermore, the
continuing promotion of a baseless accusation that farmers are in general responsible for
maltreating workers employed by them and for illegal evictions, is regarded as a
deliberate attempt to de-humanise farmers resulting in the continuation of violent crimes
committed against them. Reports by the Institute for Security Studies clearly indicates
that the murders per 100,000 reflects a ratio of 98,8 for farmers compared to 51 for SAPS
members murdered whilst the national murder average for 2011 is 30,9.
3.3.3 Mutual trust. For many decades a unique relationship existed in farming communities. It cannot be
ignored that a degree of separation brought about by the occurrence of violent crimes,
arson, theft, intimidation and agitation has destabilised the situation. It is imperative that
not only the rights and demands of employees be regarded within the current reality, but
equally the legal rights and legitimate options exercised by employers should enjoy equal
status in the eyes of the law as well as those who apply it.
29
3.3.4 Recommendations by Transvaal Agricultural Union of South Africa3.3.4.1 Individual exceptions. As already mentioned, an across-the-board increase reflecting a single wage level in the
agricultural sector does not take into account geographical and commodity-related
considerations. Therefore it is recommended that provision be made for individuals
unable to comply to submit representations requesting individual exception to the rule.
3.3.4.2 Open labour market. Not a single worker is forced by anybody to accept employment or remain employed on a
farm. South Africa's labour market is open and all seeking employment are free to pursue
their highest expectations. However it remains a fact that the vast majority of people
seeking employment will have to make a crucial decision somewhere along the line –
either accepting an appointment or looking elsewhere for something offering better
prospects. In the same vein, employers are free to decide what ratios of full-time and part-
time employees should exist within the parameters of their businesses. This reality needs
to be accepted by all involved.
3.3.4.3 Economic study. It is imperative that an encompassing economic study is jointly done by role players in an
effort to gauge the financial impact and potential social ramifications of wage increases.
It is furthermore suggested that this study should differentiate between the various
geographical areas within the RSA which has direct bearing on the nature of agricultural
activity made possible by climatic-, soil- and environmental factors as well as the
availability of water. The study should therefore also differentiate between the nature of
various commodities within the agricultural sector.
3.3.4.4 Service delivery. TAUSA also raised a concern that there is tendency, especially in farming areas, of
delegating service delivery issues (education, electricity, water, roads, etc) which are the
responsibility of municipalities and other departments of state, to land owners without
any financial support, should cease forthwith.
Agriculture differs from other sectors in the national economy in so far as the product it
produces, makes life possible - without food, life cannot be sustained. It is also the
30
biggest single employer of people in the rural area not only providing employment but
also accommodation and several related services without any support, either financial or
public acknowledgement, from government.
Notwithstanding these realities, a decreasing number of commercial farmers are
succeeding in feeding an ever-increasing population whilst providing an income for a
large portion of the rural population.
However, rising input costs, narrowing profit margins and the occurrence of violent crime
are causing severe pressures on sustainability. The sequential collapse of the agricultural
sector will have severe economic repercussions which will no doubt affect the national
economy in a most damaging manner.
Farmers throughout the country forwarded submissions as per the organizations under
which they affiliated.
3.4 Submission from KwanaluKwanalu which is the organization representing all farmers in KwaZulu Natal province
through the University of KwaZulu Natal (UKZN) made the following inputs. They
firstly argued that an increase in the cost of labour that exceeds the social cost of labour
amounts to an implicit tax on South African agriculture, which decreases the
competitiveness of the sector. They indicated that implicit tax can be off-set with a
subsidy or implicit subsidy. The least distortionary policy option is a wage subsidy that
reduces the wage rate net of the subsidy to equal the social cost of labour in the
agricultural sector. This implies that the fiscus (taxpayers), rather than farmers or
consumers, would finance the increase in farm workers' wages if government were to
institute a wage subsidy.
Kwanalu further submitted that its members have typically budgeted for a wage increase
in 2013 of CPI + 1.5%. They argued that wages comprise a high proportion of costs in
many farm businesses, so an unexpected increase in costs above budgeted wage rates will
drain liquidity from farms, increasing risks of bankruptcy. The present financial position
of many farm businesses is typically poor, which and they will have to delve into reserves
to stay afloat. Whilst some inputs noted that it is "almost impossible to predict the impact
31
of a wage level on [a farm] business", other inputs, including input from the SA Cane
Growers Association, projected that substantial increases in agricultural wages win wipe
out farm profits for the average farm. To quote one contribution from a farmer: "One only
needs to listen to the grapevine to know how badly it is going for [the agricultural sector}
with closures of enterprises who's age is counted in generations and other who are in
desperate financial straits". in the words of another: 'The farm will be able to handle a
moderate above inflation wage increase, to do so we will definitely reduce staff to remain
viable and existing staff will have to be more efficient. Kwanalu further pointed out that
if wage of R150 per day comes into effect this business will be done and 120 more people
will be unemployed as they cannot dictate the price of their products on the market. They
also indicated that by multiplying the wage bill by 2, the result is evident." Finally, a
banana farmer asked the Department to "bear in mind that they have to compete on the
market with importation of bananas from Mozambique, Swaziland and Zimbabwe, where
there is a far lower level of worker wages, far cheaper electricity for irrigation, and land
with better agricultural potential."
Kwanalu alleges that the average wage rate paid in the farming sector of KwaZulu-Natal
exceeds the minimum wage; however, this average includes wages paid to semi-skilled
and experienced farm workers. Wages of unskilled workers and casual workers, in
particular, tend to be similar to the current minimum wage rate. However, anecdotal
evidence indicates that sugarcane farmers in some sugarcane producing regions have
experienced difficulty in sourcing sufficient numbers of casual workers to harvest
sugarcane at the minimum wage, suggesting that market forces have increased the market
wage rate for that job to exceed the minimum wage.
Kwanalu indicated that the minimum wage includes a minimum cash-wage component.
The balance may be comprised of cash or non-cash benefits, e.g., housing, services and
rations. Some Kwanalu members' submissions on this matter indicate that many farmers
"over-provide" non-cash benefits to their employees, hence the full value of remuneration
exceeds the minimum wage. However, it is evident that many unskilled farmworkers
receive no more than minimum wages in return for their labour.
32
UKZN also indicated that there is little evidence to suggest that minimum wages can be
increased significantly without further distorting wage rates in the market. If minimum
wages are revised upwards, a reduction in the minimum cash wage proportion in the
minimum wage will soften the additional cost for farmers who currently "over-provide"
non-cash benefits to their employees.
3.5 Inputs from Agri East CapeAgri East Cape which represents about 3000 commercial farmers indicated that they do
not have the mandate to negotiate minimum wage increases. They alleged that the strikes
in the Western Cape were unprotected and were politically inspired and as a result, the
agricultural sector is being held to ransom. Agri East Cape argues that there is currently
huge pressure on financial sustainability in all sectors within agriculture. Employers are
forced to work according to well-planned budgets of which the stipulated increases as per
the sectoral determination were taken into consideration. They indicated that it would be
impossible for any employer in the sector in the Eastern Cape to even consider any
additional increases to those already published for three years until 2015. They argued
that if any additional increases were considered, there would be a large increase in
unemployment throughout the province. This is due to the huge increases in electricity
and fuel and therefore increases in the minimum wages would create an additional
challenge. They also indicated that they have been hit by devastating floods which took
their toll on the farming sector. In addition they also argued that approximately 50% of
all commercial farmers in South Africa have a gross annual turnover of less than
R300,000. In the Mohair Industry, labour costs currently add up to around 30% of their
production costs and this is similar to the wool industry. In the Chicory industry, between
2001 and 2002, about 128 producers who collectively employed about 6500 casual
workers per year had to reduce to 1100 casual workers which is 83% less. Agri East
Cape also indicated that the National Planning Commission vision 2030 has ambitious
targets of job creation within the agricultural sector however that will not be achievable
with unrealistic labour legislation including the increasing of minimum wages above the
already published determination. In addition, they alleged that farmers provide other
benefits beyond a basic wage- for example, in many areas, they provide for grazing,
33
housing, electricity, water, transport to mention a few for their employees. They indicated
that in their view, the market should be allowed to determine the wage in workers in the
sector. They also requested that the Department look into a two tier wage structure which
provides for a basic entrance wage to afford them the opportunity to learn the trade before
being placed on par with experienced workers.
3.6 Inputs from Free State AgriFS-Agri is a-political, non-racial member's organisation representing 4300 commercial
farmers in the Free State Province, who employ ±30000 fulltime and ±25000 seasonal
employees. According to FS-Agri to be successful they need to compete with other global
players (producers). There is a need to access global markets and compete within those
markets locally and abroad. Currently the South African farmer can’t compete evenly
with other global producers because their governments subsidize them and protect their
markets. The South African Farmer does not receive this type of protection from our
Government even within our own markets locally. This comes with a price in terms of
profitability and long term sustainability in the Agriculture sector. FS-Agri further argues
that productivity and profitability through mechanisation is a given globally and the
sustainable agriculture need to utilize this to be competitive and to survive.
They indicated that this does not need to be a threat in terms of employing people but
rather an opportunity to get more skilled farmworkers. They alleged that the reality
remains that within this scenario, less employees are needed on farms. In addition they
argued that the profit margins of agricultural products as a result of rising input costs and
product prices that does not absorb input costs lead to very low profit margins/losses and
that the return on investment in agriculture is risk for investors as they can invest
elsewhere with better returns.
Regarding the long term trends FS-Agri argues that the agriculture sector is very
susceptible to risk of drought, fire, etc. and also markets commodity price volatility,
farmers are price takers and don’t set prices for their products:
Example: The milk price – The consumer pay +- R9 per litre, the milk producer get
between R2.80 and R3.20 per litre milk. During 2012 one of the major milk buyers
34
arbitrarily lowered their price by 50 cents a litre. Because of the small profit margins a
lot of farmers closed their dairies as a result of this lowering of the price.
Another example is the red meat industry. The current price that farmers get for their
product is the same price they received 5 years ago, this is while input cost rise year to
year with between 10 – 20%.
FS-Agri further argues that the affordability of rising wages differs between different
commodities and regions. Most farms in the Free State are mixed farms in order to spread
the risk factor in agriculture.
FS-Agri further indicated that the cost to company for a farmworker is 33% more than
just the minimum wage. They alleged that wages coupled with joint impact of ESKOM
and Diesel increases further limit new and small entrants. FS-Agri submitted that
according to StatsSA data, the number of farming units per income group in SA were:
2007 – 54% turnover < R500 000 per year
2002 - 52% turnover < R300 000 per year
Lastly, they indicated that farm worker wages have risen faster than inflation since wages
were determined by utilizing the CPIX+1% (i.e. > food price inflation). They also pointed
out that it should be noted that the basic cost of living far less on farms than in urban
slums because of,
Free fire wood, water, and often also electricity;
Housing (costs max 10% of wage);
ESTA access to land for livestock not deductible from wages (average of 2 head
livestock which have access to 12ha of land);
No transport costs to get to work;
Occasional / seasonal free food from farm ( payment in kind); and
More than one person per household often work on farms earning additional
social grants adding to average household income.
35
3.7 Inputs from the Cape Agri Employers’ Organisation (CAEO)CAEO is a registered Employers’ Organisation representing employers in the agricultural
value chain, mainly farmers. The CAEO currently has about 500 members, employing
more than 70 000 employees. It is based mainly in the Western Cape Province, with a
few members in the Eastern and Northern Cape provinces. Members are largely involved
in the fruit, wine and citrus sectors, which are mainly labour intensive sectors, apart from
being subject to a high level of seasonal activity. For a number of reasons explained
further on the proposed cancellation of the present determination and the review of wages
in the agricultural sector could have a serious impact on the sustainability of farming
enterprises and therefore lead to huge job losses.
In relation to the proposed cancellation of the current Determination and the review of the
minimum wage, CAEO indicated the following.
All sectoral determinations come into existence through the proper investigation and
consultation processes prescribed by the Act and only once these have been appropriately
completed do the Minister issues a sectoral determination for a particular sector. The
mere fact that the Minister has indicated the need to cancel the current determination,
within the context of the events of the last few weeks, is problematic and for the
following reasons:
• Whilst the LRA makes room for strike action to be deployed as a means of collective
leverage, the legislature is less tolerant towards unprotected action, especially those
that is further evidenced by immense violence, intimidation and damage to property.
• Cancelling the SD on the back of these events seems to support the notion that the
Government will particularly intervene in the status of a sector or industry,
irrespective of whether the conduct that lead up thereto was legal or not. This not
only sends the wrong message of "what you can do to get what you want", but
further destroys the statutory mechanisms designed to facilitate constructive debate
and review of a determination.
• It also flies in the face of the principles acceptable within an open democracy and
within the context of the freedoms that our constitution caters for.
36
• At best, the Minister must ensure that the current determination remains in full force
and effect, until it can be replaced by conditions of a revised/new determination of
which the latter, as agreed on 22 November 2012, has been appropriately studied,
researched, assessed and of which the Ministers final decision has met the
requirements of section 54 of the Act.
• It is now crucial that whilst the Minister has indicated the need for the determination
to be reviewed, that such be done within the confines of the process requirements
that gave way to the establishment of the current determination.
• Any form of premature cancellation will be nothing more than an endorsement of
unruly and criminal behaviour.
• The role of the Government is to govern, thus it is crucial that all stakeholders be
brought back to the governing and regulatory processes at play.
Should the current determination be cancelled as proposed and a new minimum wage be
determined, what happens to all the other provisions regarding conditions of service.
CAEO further indicated that in improving wages and living conditions of farm workers,
over the time CAEO has actively advanced the cause of the social development and
upliftment of specifically farm workers, and championed enlightened labour practices,
including paying employees well in excess of statutory minimum wages; this within a
region known for its more liberal stance on these matters. They therefore fully support
the Governments’ drive to reduce unemployment, to create more jobs, to facilitate growth
to “decent work”, to provide for the prohibition of exploitative labour practices by
employers, and the promotion of equal pay for equal work. CAEO alleged that this is
illustrated by the result of a wage survey that they conducted two months ago amongst
members with a sample of 6380 workers that shows that the average basic wage now
being paid is 40% higher than the minimum wage. When other cash benefits are added
the average increases to 53% above minimum wage. The participants in the survey are
decidedly amongst the more progressive and affluent farmers, but it illustrates the
willingness of farmers that can afford it to pay more.
37
Regarding profitability of farming businesses, CAEO believes that it is common cause
that no two farms have the same level of profitability. It differs from sub-sector to sub-
sector, from region to region, from year to year, from farm to farm. In view of the fact
that one of the primary factors that the Minister has to take advice on when considering
making a decision on minimum wages, is to take into account “the ability of employers to
carry on their business successfully” – Sec 54(3) (b), the CAEO fully supports the
agreement reached at the consultations between business and labour at Cape Town on
Thursday, 22nd November 2012. In terms thereof an evidence-based and academic study
will be conducted by independent experts/service providers. The study would engage
different wage models and scenarios to assess, inter alia, the effect of any increase in
minimum wages on farm viability. The study will be undertaken as a matter of urgency
and be completed by the end of December for consideration by the parties.
On the likely impact on current employment and job creation, CAEO indicated that as
farmers largely have no control over the price they sell their products at, or the prices of
essential input costs such as fuel, electricity, chemicals, etc. their only way of managing
input costs is to use less. Unfortunately they deal with labour costs in the same way,
opting rather to mechanise. It can be safely predicted that any above the norm increase
will have a devastating effect on current employment and the creation of job
opportunities. In conclusion, CAEO indicated that as progressive organization they are
deeply concerned about the devastating effects of the huge unemployment situation in our
country, and the resultant effect it has on the apparently increasing pool of the poor and
destitute. The social ills that are inflicted upon our populace in consequence of the
scourge of this phenomenon are all too clear and they agree that all citizens and
organizations should join hands in addressing this problem. They also indicated that they
believe that agriculture is ideally positioned to play a very important role in providing job
opportunities, even if only seasonal to a large degree.
CAEO therefore made an appeal to the Minister to carefully weigh the economic data to
be submitted regarding the profitability of the various sub-sectors of agriculture as any
minimum wage fixed outside these parameters is clearly going to exacerbate the problem.
38
3.8 Submission from Suiderland Plase in TygervalleySuiderland Plase is a privately owned company involved in growing, packing and
exporting fresh fruit mainly citrus and table grapes and earning +/- R250 million in
Foreign Currency per year. They employ +/- 2 500 people of which 200 are permanent
employees and +/- 2 300 seasonal workers per year. All permanent employees earn
substantially more than the minimum wage and all seasonal workers earn at least the
minimum wage but are incentivized to work five days a week and get compensated extra
for achieving a minimum target. For working a full week (5 days) they earn an extra
R6.00 per day (R30 per week) and by exceeding the minimum target can earn extra. At
least 70% exceed the target and can earn as much as an extra R40 per day.
3.1.8.1. How an increase will affect the ability to carry on with business
In their submission they indicated that wages comprises between 30% to 40% of their
total running costs (production costs) and that any increase in wages will have a huge
impact on our production costs. Many orchards will become uneconomical and will
simply have to be left and not farmed any further. As +/- 3.2 labourers are needed per one
hectare of table grapes there will unfortunately have to be job losses. They further argued
that as 90% of fruit is exported in their view they have no "bargaining power" to increase
their selling prices to compensate for the increased production costs. Fruit farmers will
have no option but to mechanise where that is possible, stop farming certain labour
intensive varieties and make use of chemicals instead of manual labour to get the desired
effect. They alleged that this is done in California and in Chile so it can be done.
Chemicals can do the job, but not as well as manual labour and if the chemical route is
followed then the quality of the fruit sold in the market will not be of the same quality as
at present which will make customers source from South America rather than RSA which
will lead to further job losses.
3.9 Inputs from Agri LimpopoThe Limpopo province has the character of mainly a rural area. A large proportion of the
population live in rural communities and make their living by working on farms, in towns
or the males move to bigger cities and mines to earn a bigger income. Since 1994 we see
39
the development of a black middle class in the bigger towns and cities. During the same
time we see that the gap between the haves and have-nots increases. This is the root of
the current instability in the labour force of South Africa.
Mines are the biggest provider of job opportunities and agriculture is second in line. The
mines are concentrated in the southern and the western parts of the province. Therefore
people who work on the mines are forced to leave their families behind. For a better
income they sacrifice their family life. Although the agricultural sector pays less than the
mines the workers can stay with their families. Agri-Limpopo argued that the agricultural
sector brings stability to rural communities. Employment provided by agriculture is the
only employment available in most of the municipal areas the only employment
available. A large number of workers and their dependants are reliant on farmer’s
goodwill and generosity. Employers provide far more than wages namely housing,
electricity, water, food, transport and health services. It will be a huge shock to the rural
communities if these systems collapse because of increased minimum wages and
pressures from outside.
During the past decade the grant system has developed. This further stabilized the rural
communities but Agri Limpopo argue that one of the consequences is that people depend
only on these grants and do not want to work. Agri Limpopo indicated that this system is
not sustainable on the long-term. Minister of Finance already indicated during the budget
speech in February that the country cannot sustain this system ad infinitum. The fact that
only 5 million people are paying taxes and 13 million are receiving grants is not
sustainable. Agri Limpopo further indicated that the agricultural sector is a major
contributor to the food security of the country and also a earner of foreign currency. The
primary and secondary sectors contribute 25% to the GDP of RSA on a national basis. On
the provincial level it will be higher. They pointed out that the latest research conducted
shows that Limpopo produces:
40% of RSA's citrus
50% of RSA's avocados
60% of RSA's mangos
20% of RSA's grain
50%+ of game in RSA
40
50%+ of RSA's vegetables (Mainly during winter)
Most of the above sub sectors are highly labour intensive. These sub sectors depends on
the rural communities to provide labour. They believe that farmers foster good
relationships with the labour force. They also pointed the following as the challenges
which the farming sector in South Africa faces:
Unfriendly labour legislation
Unfriendly economic environment
High and inelastic costs due to Government regulated prices (Fuel, Electricity,
Minimum wages etc)
Subsidised global produce
Dumping of inferior products in RSA
Junior and incompetent Ministers of Agriculture
Land claims
Farm murders
High levels of theft of farm produce
Agriculture is furthermore a price taker and not price maker.
Therefore agriculture must absorb increase in input costs. It is not possible for a
producer to lift the price of the products.
Profitability is therefore always under pressure.
Agriculture competes globally against highly subsidised agricultural producers.
They therefore indicated that they believe that Government must look at trade barriers,
tariffs, input costs etc. to make it possible for us to compete effectively on the global
playing field. They further alleged that the Research done by the Institute of Race
Relations showed that the number of farms in RSA declined from 57 987 in 1993 to 39
982 in 2007, a decrease of 31%. However the biggest decline was in Limpopo where the
number of farms dropped by 47% from 5053 in 1993 to 2 657 in 2007. The reason for
this decline is amongst other;
High input costs
High labour cost
41
Economies of scale needed to survive
Agricultural minimum wages
They indicated that a vast majority of farmers do pay minimum wages and they regard
prescribed minimum wages as the entry level wage for new workers hence most of the
workers earn more than the minimum wages.
They also indicated that labour unrest situation in the Western Cape involves much more
than minimum wages but also various social concerns which needs to be addressed.
Agri Limpopo further indicated that it became evident that the wage and related
challenges are not exclusively, but mainly that of seasonal workers who have to earn their
annual income over a period of a few months."
"Agriculture thus stands before a choice that will influence and be of significance to the
rest of South Africa. The big gap in social wellbeing and prosperity between communities
hold great risks for sustainability that have to be addressed as a matter of urgency. The
question, however, is how to address this challenge. A narrow minded and short sighted
focus on the minimum wage only denies the issue's complexity and holds the potential to
destroy job opportunities rather than to constructively contribute to broad based economic
and social development. In these circumstances agriculture and South Africa have to deal
with a fundamental challenge: is pressure applied by means of anarchy the way by which
disputes are to be resolved, irrespective of the longer term consequences thereof, or
should a value based approach, respecting the rule of law, be the preferred option?" (Agri
SA media release 3 Des 2012).
The agricultural sectors believe that the alleviation of poverty and the creation and
retention of employment is a joint responsibility of Government, formal employment
(This includes agriculture, industry and mines inter alia) providers and the rural
communities.
Agri Limpopo highlighted the following as social concerns which needs to be addressed:
High level of dependency on grants
Loan sharks abusing people by charging high interest rates
Inequality and poverty
The cost of living
42
Service delivery
Corruption
3.10 Inputs from Transvaal Agricultural Union (TAU)
Transvaal Agricultural Union in Makhado made the following submissions during the
public hearings. They firstly indicated that the process of reviewing the sectoral
determination by the Department is illegal and outside the law. They argued that the
current determination has been in place for 8 months and farmers had already budgeted in
relation to the government gazette published early during the year. They in addition
argued that although the current determination stipulates that workers should be paid
R1503,90 per month, there are workers who earn above the prescribed amount and they
do not understand what has changed as from 1 March 2012 which persuade the Minister
to review the determination. They argued the only changes which has been seen in the
market since March 2012 are,
• The rand has weakened;
• The price of diesel has increased;
• The price of maize has increased
• Electricity tariffs have increased by 15%
• Profit margins have definitely not increased
• Government has not supported the sector financially;
• Increase in strike action as a result of poor service delivery
TAU further indicated that as a result of the weak education system in South Africa, there
is an increasing numbers of poorly educated school drop outs and Agriculture is one of
the few sectors that can redress this situation by employing these school drop-outs. They
also indicated that commercial agriculture skills hundreds of workers on an annual basis
and is thus the ideal sector to be protected in order to allow both unskilled and semi-
skilled workers access to a workplace.
In addition, they argued that in the past 10 years, minimum wage increases in the farm
worker sector have resulted in large scale retrenchments, because the increases were
much higher than inflation. They pointed out that low productivity of workers has not
43
kept the same pace with the wage increases and wage costs, resulting in a move to large
scale mechanisation and thousands of farm workers losing their jobs as a result of the fact
that employers can no longer afford to sustain their wage bill.
In their submission TAU pointed out that the following needs to be considered when
dealing with the minimum wage issue,
That the Sector does not determine the price of products, but it is prescribed
• Over the past year there was no substantial increase in the price of products.
• The price of compost, fuel and electricity increases annually to as much as 25%,
which is much higher than the inflation rate;
• Commercial agriculture does not receive any subsidisation or support from the
government, not even in the event of drought-relief.
Instead the sector is subjected to water, land, import tax on compost and
chemicals to protect plants, tax on tractors and carbon tax.
• The motor industry with only 200 000 workers is currently subsidised by
government to the tune of billions of rand and tax concessions although the
industry determines its own price.
• Profit margins in agriculture average 9%, according to Stats SA.
• As a result of the minimum wage increase in March 2011, a total of 125 000
employees lost their jobs, according to Stats SA,
• Since 1994 there has been a decrease in employment in the Agricultural sector
from 1.2 million to 500 000.
• Labour costs amount to 35% of a farmer’s budget with packaging the second
largest cost. Labour cost will increase sharply if wages are doubled.
• With the proposed new laws, government is currently not creating an agricultural
friendly sector.
• Climate change has had a devastating impact on agriculture, a factor that farmers
have no control over.
• According to Agricultural statistics, 70% of farm owners have a turn-over of less
than R300 000 per annum, and a doubling of wage will result in employees
44
earning more than the profit an employer will make and therefore result in a
shedding of at least 200 000 workers in the next 12 months.
• Moves to mechanisation will increasingly become more viable at the expense of
labour if the wage bill escalates as mechanisation is more reliable than manual
labour.
TLU therefore proposed that:
• That CPI be utilised to determine minimum wage increases;
• Individual wage negotiations between employers and deserving employees for
higher wage rates will take place;
• The reintroduction of task-based work;
• Introduction of seasonal workers or short term contracts, especially because some
tasks are seasonal in nature.
• Introduction of a minimum wage for new entrants pegged at R 750 per month for
the first year of employment in order to create jobs. This should be regarded as a
probationary period.
• To increase the profitability in the Agricultural sector, which will result in
improved wages, they proposed that pressure be applied on Government to grant
tax concessions and end levies in the Agricultural sector.
• Increased import tax in order to promote the use of South African products,
because of the increase of weaker, and cheaper imported products.
• Introduction of subsidisation of the Agricultural sector similar to the motor
industry
3.11 Inputs from Honingklip Dryflowers
In their written submission, Honingklip Dryflowers indicated that apart from trained,
literate workers that they employ as sorters/packers, they also employ a number of
illiterate, unschooled labour (mainly from the Eastern Cape) who are slow workers, but
who can clean and cut product. There are currently only a number of workers who earn
the minimum wage. They alleged that they have a grading system for various functions:
45
• General workers fall into the minimum wage category for which they have 3 grades
ranging from R69.42 to R73.64 per day.
• Sorters are on higher grades earning between R79.60 to R83.77 per day.
• Packers and Farm Workers (field work) earn between R83.77 to R104.35 per day.
• Drivers and Supervisors earn between R83.77 and R104.35 per day.
In addition, everyone who has a service record of 5 years receives R2.00 per day for
every 5 years worked, to a maximum of R8, 00 long term service bonus per day.
They indicated that if the minimum wage were to increase, wage earners who earn more
than the minimum wage will demand a proportional increase, as they will no longer earn
more than the unskilled labour. They also pointed out that their wage bill is at present 31
% of their operating costs, but the actual cost per worker is the daily wage plus 1/3 due to
the cost of services like transport, medical transport and basic medicine held on the farm
as well as UIF and other statutory charges. In addition, they indicated that all their
workers have the option to join a pension scheme where the business pays 6% of the
wage and the worker pays 6% of the wage.
In their submission, they also pointed out other costs increases to be considered are
proposed increased electricity costs, fuel costs and general expenditure (due to inflation),
and they argued that it is clear that in the current financial climate both locally and on the
overseas market, they will drastically have to curb their social services.
There will be a considerable influence on producer prices, farmers from whom we buy
the majority of raw material for processing. They added that if their cost of labour and
other costs increases, it will cause raw material prices to increase, and it is extremely
difficult to recoup such increases from an overseas market that does not know the word
inflation (inflation is not an exportable commodity).
They also indicated that it is not possible to mechanise their operation and therefore in
worst case scenario, the owner might have to close his business in which case the
following will unfold:
A small core staff would be kept to run the alternative crops, to manage the road
system, to eradicate alien plants and perhaps to harvest a small quantity of flowers
for onward selling to other parties, or on the local market.
46
This will leave approximately 80% of their labour force unemployed. This
includes their line management who earn between R5000 and R7500 per month,
as well as a number of office staff.
3.12 Submission from CANEGROWERS CANEGROWERS is the national organisation representing the 27 000 cane growers who
produce approximately 20 000 000 tons of sugar cane in an average season off about 378
000 hectares. The cane growing regions are situated through the Eastern seaboard and
midlands of KwaZulu-Natal, into the Pongola region of Northern KwaZulu-Natal and in
the Komati and Malelane regions of Mpumalanga.
According to CANEGROWERS, the scale of operation of individual cane growers range
from less than one hectare to extensive large-scale operations. Cane farming is
undertaken on freehold, leasehold and communal tenure land holdings. Cane farming
operations employ approximately 80 000 persons on a permanent, seasonal or temporary
basis. As an organisation, CANEGROWERS also indicated that they have actively
promoted labour intensive production, as opposed to mechanisation. Cane growers have
generally shown a willingness to follow a practice of providing employment
opportunities in the rural areas.
3.12.1 Determination of the Minimum Wage Level
The Sectoral Determination provides for the minimum wage levels to be determined for a
period of time, currently three years. The objective of the Department to achieve one
level of minimum wage in the agricultural sector has been achieved as at 1 March 2008.
It is CANEGROWERS’ understanding of the comments made by the then Minister of
Labour, Mr MMS Mdladlana MP, at the inception of the Sectoral Determination for Farm
Workers, that once the course of adjustment to minimum wages at rates significantly
above prevailing rates of inflation had achieved this purpose, that factors influencing the
farming business would be taken into account in future minimum wage level
determinations.
47
They indicated that agricultural sector has faced significant increases in its farm input
costs such as fertiliser, fuel, transport and herbicides. Electricity tariffs were also raised
significantly above inflation levels by Eskom in recent years and there is a further
proposed 16% per year increase for five years on the tariff currently under consideration.
Canegrowers indicated that Cane farmers are unable to pass on increased production and
labour costs through to the consumer, as can be done with many manufactured products.
They argue that these factors must be taken into account in determining wage levels
which impact substantially on the sustainability of a business. In relation to the minimum
wage increases, Cane growers indicated that although it is difficult to accurately predict
inflation rate levels in advance, future minimum wage levels should be realistically linked
to the Consumer Price Index (CPIX) determined by Statistics SA as this provides a
degree of consistency and credibility to the process.
Furthermore, they pointed out that it is acknowledged that in many of the farm labour
categories, the farm worker earns in excess of the published minimum wage. However, it
is a reality that the adjustment of the level of minimum wage has a domino effect on other
wage levels. It is very difficult to implement differentiated levels of increase for the
various job categories within the farming business. This adds increased pressure on the
sustainability of the farming operations as the percentage of labour costs increase
significantly ahead of inflation and revenue levels.
On the value of deductions, cane growers indicated that whilst deductions are not directly
related to the minimum wage level, the value of deductions has a significant impact on
labour costs. They indicated that the principle of a clean wage being paid to employees is
encouraged by CANEGROWERS. This is understood to mean that an employee will
receive a cash wage, with only statutory or authorised deductions being processed by the
employer. The employee assumes payment responsibility for accommodation, food,
services, etc. However, while this concept may work in theory, it does have many
practical difficulties, particularly in the more rural environment. This has meant that
payment in kind has remained a reality in the farm worker sector.
48
CANEGROWERS argued that the current levels of permissible deductions stipulated in
the sectoral determination are unrealistic when compared to the actual cost of provision
of the benefit. A consequence of this provision has been for many employers to consider
not to provide benefits, such as food, loans and services, but to rather pay the minimum
wage in cash. As stated, this does lead to practical problems for the employee, which may
be summarised as follows:
• Logistical difficulties and high transport costs related to shopping in the rural
regions.
• Loss of security of supply of food for the employee’s household.
• Inability to secure short-term loans.
• Much limited credit facilities at conveniently located stores near the farm
• Lack of services, e.g., electricity, direct into the household.
Furthermore cane growers, indicated that whilst a level of protection must be provided
for the employee against potential exploitation by the employer, it must be balanced
against the unintended consequences of the intervention imposed by the sectoral
determination related to deductions. They therefore submitted that any deduction that is
made from an employee’s wage that is not required by other legislation or order of court,
should be authorised by agreement between the employee and employer. This will allow
the parties to negotiate practical and realistic remuneration packages, whilst retaining the
option for the employee to receive the wage in cash, or a portion of the wage in a
specified benefit.
In addition, they indicated that if it is considered necessary to limit the maximum
permissible level of deduction, consideration must be given to determining a maximum
total percentage and allow the parties to agree how this will be allocated between the
various benefits on offer. Cane growers also submitted that the provision of credit or loan
facilities by the employer to the employee should be in the form of written agreement
between the parties and that the terms of repayment be stipulated in such agreement.
They further pointed out that objective of the review by the Employment Conditions
49
Commission should be to reduce the instances of practical difficulty for the employment
relationship in the farm worker sector and thereby minimise the need for employers and
employees to apply for ministerial variation in this regard.
According to the study conducted by CANEGROWERS in relation to Cost Survey
Proportions of Operating Expenditure for the period 2010/11 farm staff and mechanical
costs continue to dominate the average grower budget, together accounting for 53% of
Operating Expenditure. They argued that the overall proportion was marginally higher
than in 2009/10 due to above inflationary growth in expenditure on farm staff.
CANEGROWERS pointed out that given the high proportion of expenditure on farm
staff, farm expenditure and thus profitability is highly sensitive to increases in farm staff
costs through either higher wages or reduced productivity. Furthermore they indicated
that the study revealed that on the long-term trend in labour productivity, labour
productivity has improved as indicated by fewer labour units per 1 000 tons of cane
produced. Short-term variability is mostly due to changes in seasonal cane yield which
has a direct impact on labour productivity. In addition, they indicated that for the past 15
year period, the trend shows that much of the gains in labour productivity have been
achieved and that the rate of improvement has slowed or even stagnated. This could be
due to prior adoption of labour saving technology – i.e. mechanization and/or improved
herbicide technology and usage. However, mechanization beyond the current level
requires significant capital investment (e.g. mechanical cane harvesters etc) and may be
implemented when the relative cost of labour is higher.
CANEGROWERS further indicated that sugarcane farmers are faced with an extremely
concerning scenario with higher key input prices, as well as pressure to increase wage
rates. The proposed increase in electricity tariffs will also have a marked impact on
growers’ profitability. In conjunction with the review of minimum wages, these outcomes
could create a dire situation for sugar cane farmers. The following table provides an
indication of the impact to an average sugarcane farm monthly wages by labour type.
Staff type 2010/11 2011/12 2012/13 2013/14
General staff R3948 R4086 R4331 R6078
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Drivers
Cutters and stackers
Other harvesting staff
Harvesting staff out of season
Field workers permanent
Field workers seasonal
Other staff
R2475
R1802
R1602
R1690
R1444
R1317
R1667
R2562
R1865
R1661
R1749
R1503
R1376
R1726
R2716
R1993
R1789
R1877
R1631
R1504
R1854
R4463
R3740
R3536
R3624
R3378
R3251
R3601
Weighted Average R1843 R1912 R2051 R3798
Increase % on farm staff cost 103.7% 107.3% 185.2%
They indicated that the above scenario is based on the mooted increase from R70 per day
to R150 per day. The net effect is that other staff earning wages at rates which are higher
than the current minimum wage will need an appropriate increase to reach levels above
the proposed new minimum wage such that their relative skill levels receive
commensurate remuneration. CANEGROWERS in their submission indicated that the
table above provides an estimate of monthly wages obtained by the annual labour survey
undertaken by SA Cane Growers Association. The surveyed data (2010/11) is then
escalated in-line with the previous minimum wage requirements an inflationary trends,
and the 2013/14 wage levels take into account a minimum wage of R150 per day.
They also indicated that other inputs are anticipated to increase at above current inflation
levels (assumed to remain at 6% next year). Fertilizers and Herbicides are likely to
increase by 12% as advised by Coastal Farmers’ Co-operative. If the fuel price remains at
the current level for the entire year next year (i.e. no increase or decrease), then the
average percentage increase compared with the current season will be at 6.4%. Cane
Transport and Contracting services will also be impacted by minimum wage increases
and thus are likely to rise at a rate which is higher than inflation. Contracting in particular
will be heavily affected as a large proportion of contractor costs are labour wages. In
addition to these inputs, the increase in electricity tariffs has been proposed at 16% per
annum for the next 5 years.
Canegrowers argued that the proposed increase of R150 per day would put these farmers
back into considerable debt and/or disinvestment in their farming activities. It will also
51
result into contractors to small-scale growers transferring the cost to the small-scale
growers. The small-scale growers have in turn had to rely on an industry “grant” called
the supplementary payment to carry them through the past seven years.
They strongly argued that the implication is that given this scenario many farms will
quickly go out of business or, where possible, invest additional capital in labour saving
technology/machinery if economically feasible. In some areas, ignoring the capital and
economic feasibility, current mechanisation technology conversion/adoption cannot be
utilized due to unsuitable terrain such as steep slopes and technology will not be an
option. The latter farms will undoubtedly go out of business given this scenario. At any
rate there will be an extremely high degree of labour retrenchment in order for farm
businesses to attempt to survive.
In addition they also argued that on a farm level, assuming an average farm size (of
surveyed farms coastal, inland and irrigated combined average) of 208 hectares,
harvesting 152 hectares (73%) to yield almost 11 000 tons per annum, the scenario
outlined above would translate to a total additional (nominal) cost of R 900 000 for the
farm (R 850 000 in real terms accounting for inflation at 6%). This means that a farm of
this size would post a loss of approximately R 600 000 for the 2013/14 season.
It is clear that given the described parameters of this scenario, the average sugar industry
farm will become unprofitable and farm businesses will have to take drastic measures if
they are to survive, and in many cases may not be feasible to implement.
3.13 Inputs from Lichtenburg employers
In Lichtenburg, employers indicated that workers get paid more than the minimum wages
prescribed in the sectoral determination. They alleged that the payment in kind provided
for by the farmers significantly exceed the minimum wage . They also indicated that farm
workers’ lives are better that workers working in the retail sector because of the benefits
which the farmer provides, this includes amongst others, transport to hospital located 600
kilometres away from the farm; rations which the farmer provides to farm workers; and
wood which farm workers get from the farm. Farmers also argued that if government
regards the current minimum wages as low, why pay pensioners almost the same grant.
They strongly argued that should the minimum wage be increased, farmers will opt for
52
mechanization and many workers will be retrenched. They therefore indicated that the
current sectoral determination which prescribes minimum wages until 2015 should be
considered and not be reviewed.
3.14 Inputs from Bronkhorspruit employers In Bronkhorspruit, farmers indicated that it would be irresponsible for them to agree on
R150 per day as demanded by the workers in the Western Cape. They indicated that the
situation in the Western Cape is politically motivated and therefore should not influence
the sectoral determination which was promulgated early in 2012. Regarding the
determination of the new minimum wage, farmers proposed that the new wage should be
pegged at CPI plus 1,5%. The CPI for the lowest quintile be utilized. Farmers indicated
that should the wage be pegged at a higher level than what is proposed, it would lead to
job losses as they strongly feel that by considering the CPI to determine new wages,
already the cost of living issues have been addressed.
4 Inputs from trade unions and workers
4.1 Inputs by the Food and Allied Workers Union (FAWU)FAWU in its submission and also presentations during the public hearings, made the
following inputs.
4.1.1 New minimum wages level:FAWU argued that the 'battle-cry' by farm workers for R150 per day is noble and needs
to be supported. This will essentially mean doubling of wages If 21 days per to be used
but most 'permanent' farm workers work a Six-day a week. FAWU argued that the word
'doubling' sounds scary but that this constituted a “doubling of virtually nothing”. So the
R150 per day (assuming a-hour day) demand remain a clarion call for members to be
raised during submission in public hearings.
4.1.2 Provident Fund:FAWU indicated that, farm workers upon retirement or even just before then, die
destitute with no retirement savings because only about 30 000 farm workers belong to
retirement funds leaving about 320 000 of permanent workers and about 380000 of
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seasonal workers uncovered. Some lie for months in mortuaries and others are given
pauper burials , especially those from outside the country, and FAWU even contributed to
buried a few. Therefore, a compulsory contribution based Provident Fund, in which an
employer and workers contribute, is a must-achieve in the review of Sectoral
Determination.
4.1.3 Social Conditions:FAWU indicated that a process is needed to negotiate a package of measures for a Social
Plan in which housing/Shelter, Education, Health, Recreational and other facilities and
services are provided to farm workers and dwellers, either on farms and In settlements
next to those. Some, if not most, must be provided by Government, with cooperation of
Farm owners in some cases, and some by Farm Owners themselves. For instance on
housing, farm owners must give land for such human settlement by government to occur
without claiming ownership of such piece of land and the same could apply to other
services such as water, electricity, sanitation and amenities of recreational and burial
purposes.
4.1.4 Conditions of Employment:Knowing the weather and other conditions under which farm workers work, health and
safety is paramount and protective clothing against all sorts of weather patterns is key.
Also, safety against harmful pesticides and other chemicals in the sector, is an issue that
needs to be addressed. Hours of work, or lack of daily fixed hours, and no overtime
calculations is unacceptable as is the lack of rest or paid leave for farm workers. Child
labour must be eradicated and there must be an enabling environment for the education
for children. The lack of direct delivery of education on farms or in close proximity is
unacceptable.
FAWU therefore submitted that in a short run, the wages must be increased, rather
adjusted, by a figure speaking to the sentiments of R50 per day and not a R10 or R20. In
a post-minimum wages adjustment period, expedited talks must unfold in the creation of
a nation-wide compulsory contribution-based provident fund for farm workers, both
permanent and permanently seasonal, such that this is part of the 2013/14 Sectoral
54
Determination pronouncement and application. The same referred period must also
address conditions of employment of health and safety and on leave and bonuses among
others. Furthermore, FAWU proposed that during 2013, negotiations must be embarked
on to conclude a Social Plan, in which a package of measures and their financing and
roll-out is agreed on for implementation In the 2014/15 Sectoral determination and
beyond.
The processes above and the platform of conducting those can be best handled at a
national level (National Bargaining Council) while deviation, especially on the
improvement side, can be tackled at local level (Local Bargaining Councils). The latter
will allow for issues such as profitability of lack of it to be entertained should the need
arise. The idea of a negotiated outcomes or collective even if it was to be trilateral in
character.
4.2 Inputs by the Labour Research Service (LRS)According to the inputs received from the Labour Research Service R150 is not enough
but it is a good place to start on. Labour Research Service argued that in a household of
five members, the current monthly minimum wage would result in an average of R10 a
day for a person to live on (slightly less than one Euro and slightly more than one Dollar
at current exchange rates). LRS indicated that while nominal wages have been rising
from year to year there are at least three instances where the nominal percentage wage
increase was below inflation resulting in a lower real wage. This means that there were
three years when workers could actually afford to buy less than they were able to the
previous year they became poorer. In the period of March 2007 to February 2008,
workers were Rl0 per month poorer than in the previous year. The following year they
lost a further R61 per month. Again In the year March 2011 to February 2012 they were
R21 per month poorer than the previous year. Below is the table forwarded by LRS that
shows how wages have been determined. According to LRS, the table also calculates
inflation over a period of the wage so that the real wage can be determined.
Year/s Monthly
Minimum
Wage
Minimum
Wage
increases
Minimum
Wage
increases
Inflation
Increases:
Mar- Feb
Real
increase
Real
Wage
Real
Increase
55
Rands Rands Percentage Percentage Percentage Rands Rands
1/03/06- 28/02/07 994.00 5.7
1/03/07-29/02/08 1041.00 47.00 4.7 10.6 -1.0 984 -10
1/03/08 – 28/02/09 1090.00 49.00 4.7 8.6 -5.9 980 -61
1/03/09 – 28/02/10 1231.70 141.70 13.0 5.9 4.5 1139 49
1/03/10 – 28/02/11 1316.69 84.99 6.9 3.7 3.2 1271 39
1/03/11 – 28/02/12 1375.94 59.25 4.5 6.1 -1.6 1295 -21
1/03/12 – 28/02/13 1503.90 127.96 9.3 6.5 2.8 1414 39
1/03/06 – 29/02/12 509.90 51.3 47.9 3.4 1074 80
According to the table, there were three years when workers could afford to buy less than
they were able to the previous year.
LRS further argues that between March 2006 and February 2012 the nominal wage of a
farm worker Increased by R509.90 but inflation over this period eroded most of these
gains. The net result was a real increase of R80 over 6 years. The real monthly wage of a
farm worker, therefore, increased by an average of R13.33 per annum during this period.
In addition, they also indicated that the conditions of employment in SD 13 are sub-
standard. It condones a 45 hour working week and an additional 15 hours of overtime. It
allows for unpaid maternity leave and for children between the ages of 15-18 to be
employed. Paid annual leave amounts to about 15 days and sick leave of no more than 12
days per annum (36 days over three years). There is a maximum of 3 days per annum of
family responsibility leave entitled to a farm worker when a child is sick or there is death
in the family.
LRS further indicated that numerous studies have documented the living and working
conditions of farm workers' families. There is no doubt that democracy has not brought
freedom to farm workers. While the end of apartheid has opened up new markets for the
industry allowing farmers to export and obtain foreign exchange, the majority of farm
workers do not enjoy the right to assemble, the right to organise and the right to bargain -
fundamental rights in a free society. Their living and working conditions are almost the
same as they were under apartheid. Poor education, high unemployment, hunger, lack of
housing and healthcare are dominant characteristics of farm workers lives. If anything,
56
work is more precarious due to the ability of farmers to source labour from other areas.
That social protection from the state is inadequate and enforcement of rights by the
Department of Labour is limited, farm workers remain at the mercy of farm owners and
management. While solutions to the stubborn problem of apartheid's legacy remain
elusive, the De Doorns farm workers realise that there can be no solution without them.
They have begun the struggle to right the wrongs and raise the dignity of farm workers.
While R150.00 a day is not enough, it is a good place to start. Below are minimum
recommendations that would at least prove to farm workers that their dignity is important
and that they have a role to play in the transformation of the farming sector and the
economy of the country as whole.
Recommendations for urgent and immediate amendment to the sectoral determination 13:
A fixed hourly rate of R20 an hour (this works out to R160 for an 8 hour day)
A 40 hour working week
Abolish work for children under the age of 18.
Fully paid maternity leave
Paid annual leave of 21 days
Annual legislated public hearings in all provinces
4.3 Submission from the East Cape Agricultural Research Project (ECARP).ECARP is a non-profit organisation which strives to promote the human and socio-
economic rights of farm workers, dwellers and rural communities by positively
transforming their working and living conditions. ECARP is committed to providing
support to rural workers and communities in their endeavours to address inequalities and
injustices, and to ensure that they are active agents in the reconstruction and development
processes.
According to ECARP, their submission to the Department of Labour (DoL) is based on
the on-going research programme into labour and land terms and conditions on
commercial farms as well as on the interactions and feedback from workers. According to
ECARP, despite the introduction of the minimum wage for farm workers and the annual
adjustments that have accompanied it over the past ten years, farm workers’ wages
remain very low. As a result the purpose of the minimum wage as an instrument for
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reducing poverty levels and improve the standards of living of farm workers has not been
realised. They indicated that perhaps an opportunity to overcome historical legacy of
inequalities between farm workers and farmers has been missed and a call for a review of
the minimum wage comes hardly nine months into the three-year cycle ending in
February 2015. ECARP argue that this came as a result of actions by farm workers in De
Doorns and surrounding areas have undertaken, and further suggest that perhaps this
offers an opportunity to reflect on how the system has and continue to fail farm workers
and dwellers. According to ECARP, there seems to be a general acknowledgement that
farm workers’ wages, in particular, are exceedingly low, however, a lot of focus has
being placed on how business may be affected by higher wages and less on the social
aspects and eroding wage inequalities in South Africa. South Africa, at a Gini co-efficient
above 0.64, is the most unequal society in the world.
ECARP alleged that the huge inequalities are also reflected in the fact that the poorest 20
per cent of the population earns about 2.3 per cent of national income, while the richest
20 per cent earns about 70 per cent of the national income. The inequalities can again be
reflected in terms of race. They also indicated that in 2008, median expenditure per capita
for Africans was R454 a month compared to whites at R5 668 a month (the diagnostic
Report Planning Commission 2010). The setting of prescribed minima ought to be
assessed in the context of corroding wage inequalities and not only in relation to
employment levels as is so often the case.
In their submission, they following salient points are highlighted:
The low levels at which the minimum wage is set and its inadequate upgrading
mechanisms.
The context of farm workers and dwellers necessitates an inter-departmental
approach, more particularly a synergy between the Department of Labour (DoL),
Department of Agriculture (DoA) and Department of Rural Development and
Land Reform (DRDLR).
A need to pair the minimum wage with other potential sources of social
protection such as land access, food security and access to basic services in rural
communities.
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Efforts towards a ‘high road’ approach to labour relations and agricultural
production.
Furthermore ECARP in their submission indicated that they recently conducted research
which looked at the movement of farm workers’ wages between March 2010 and
February 2012. In their research, a total of 460 farm workers were interviewed over the
two year period. The findings of the study revealed that a total of 73 workers were paid
below the amount of R1000.00 between March 2010 and February 2011. Workers
earning between R1001 and R1500 declined from 243 to 188. There was an increase in
terms of the number of workers within the ranges of R1501 to R2500 and above R2501
with increases of 63 to 75 and 13 to 18 respectively. From the results of the study, it is
clear that the nominal increases in the wages of farm workers are very low and applying
to a small number of workers. According to ECARP, the average wage has increased
with R89.21 over the two year period between 2009 and 2011. Over the same period,
differences can be noticed in terms of the status of employment. For full-time workers the
average wage has increased by R141.83, for casual/part-time workers it increased by
R24.00 and for seasonal workers it declined by R162.02.
ECARP also submitted that some of the key findings of their research regarding the
implementation and the enforcement of the sectoral determination have been:
That the sectoral determination particular the minimum wages have failed to undo the
historical legacy of the poverty, inequality, paternalistic practices, gender and race
discrimination;
That compliance with the determination is selective and affects workers
differently based on their gender, status of employment and the product markets;
That the introduction of the minimum wage has not led to the improved housing
and access to basic services by farm workers; and
There have not been positive changes in relation to labour relations
In line with LRS, ECARP indicated that between 2006 and 2012, the nominal wage of a
farm worker increased by R509.90 but inflation over this period eroded most of this gain.
59
They indicated that the net increase in the minimum wage minus what has been eroded by
the inflation translate to an increase of R80 in six years or an average annual increase of
R13.33.
In their recommendations, ECARP submitted that:
The uprating mechanisms of a minimum wage be widened from its narrow focus
on the cost of living to incorporate other factors that play a role in securing a
dignified quality of life. The minimum wage provisions to be implemented
alongside land and service delivery to farm workers and to arrive at this position,
ECARP calls for the establishment of an-intergovernmental committee to explore
different forms of uprating mechanisms and the integration of land and service
delivery with the minimum wage provisions
That there is a need to assess the distribution of power and economic gains along
agriculture value chains
That there must be a concerted effort to help farm workers to establish formations
that they feel comfortable with that are suitable to their circumstances and that
they own and control.
4.4 Inputs from farm workers in WorcesterWorkers and trade unions who attended the public hearing in Worcester indicated that the
minimum wage should be pegged at R150 per day as per the demands of workers in other
areas of Western Cape. They indicated that the current level of the daily wage is too little
for them to address the challenges posed by the cost of living. They alleged that on the
little R70 per day which they get, farmers still deduct for electricity and workers have to
still take their kids to the doctor, pay school fees, buy groceries, and other household
expenditures which they cannot afford.
A farm worker further alleged that if one looks at the minimum wages paid to them, it is
less than what the farmers spends on monthly basis for his dog’s food. Workers also
indicated that farmers can afford to pay them even more than R150 per day due to the fact
that they export their production and make lots of profit. In addition, they indicated that
considering the current level of the minimum wage, it suggest that farm workers should
survive on R12 per day which is impossible considering the price of bread alone.
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4.5 Inputs from farm workers in LimpopoIn Limpopo, Makhado workers indicated that they are still subjected to apartheid in the
farms where they working. They alleged that farmers still call them names and that
farmers do not even pay the prescribe minimum wage. Workers indicated that they feel
that the introduction of the sectoral determination was a mistake by government because
farmers say that it is the government that allows them to deduct for accommodation
which does not meet the standards and electricity amounts which are unreasonable. Farm
workers indicated that they support the cry by the Western Cape farm workers of at least
R150 per day although it is not sufficient for them to survive on. They further argued that
the buy groceries from the same shop where farmers are buying and they pay same prices
for all the goods they buy.
4.6 Inputs from farm workers in Eastern CapeIn the Eastern Cape FAWU in their verbal and written submissions raised the fact that the
“battle-cry” by farm workers for R150 per day is noble and needs to be supported. This
will essentially mean doubling of wages if 21 days was to be used but most “permanent”
farm workers work a six day week. The word “doubling” sounds scary but it is a doubling
of virtually nothing. They argued that the R150 per day (assuming 8-hour day) demand
remain a clarion call for members to raise during submission in public hearings.
FAWU pointed out that wages needs to be increased by at least R50 per day to R120 per
day and not a R10 or R20.
They further expressed that in a post-minimum wages adjustment period, expedited talks
must unfold in the creation of a nation-wide compulsory contribution-based provident
fund for farm workers, both permanent and permanently seasonal, such that this part of
the 2013/ 14 Sectoral Determination pronouncement and application. The same referred
period must also address conditions of employment of health and safety and on leaves
along with bonuses among others.
They also suggested that in the 2013 period, negotiations must be embarked on to
conclude Social Plan, in which a package of measures and their financing as well as roll-
out is agreed on for implementation in the 2014/ 15 Sectoral Determination and beyond.
61
One lady claiming to be representing her husband alleged that the proposed R150 per day
will result in high job cuts. She further stated that she does not support the proposed per
day increase and believes that should this increase be considered by the Minister, that will
certainly mean hikes in poverty levels but did not put forward an alternative proposal on
the increase on the current rate per day.
There were however employees who indicated that the public hearing process is a waste
of their time since employers currently pay less than R1 500 per month and does not see
how the R150 per day can be realistic.
4.7 Inputs from farm workers in Free StateIn Bothaville employees during the meeting didn’t say much but indicated that they stand
by the R150.00 which has been proposed by the union FAWU. They indicated that they
are the members of FAWU and FAWU has made a written submission representing their
inputs in relation to all issues. They further indicated that the R150.00 is still too little as
compared to their basic needs after the deductions for housing and others. Employees
also indicated their concerns regarding the utilization of the CPI to determine minimum
wage increases as they believe that it doesn’t reflect the realities of the situation faced by
the employees.
4.8 Inputs from farm workers in MpumalangaIn KwaMhlushwa, employees supported the demand of R150.00 by FAWU, citing that it
will make a difference in their lives as workers will be able to buy basic needs like foods
although that doesn’t mean it will cover everything. They indicated that currently
employees are earning way less than what is stipulated in the law. They further said that
employers are still not complying with the law. They also claim that farmers are making
money at the employee’s expenses by deducting for electricity and houses that does not
meet requirements and when approaching farmers about unauthorized deductions
employers respond by saying that they are paying in accordance with the sectoral
determination. They proposed that there should be a fixed monthly salary, and the hourly
rate and weekly should be removed as it allows employers to exploit them.
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4.9 Inputs from farm workers in North WestIn the North West, Ottosdal area, FAWU indicated that they stand by the R150.00 which
has been proposed. FAWU indicated that employees working on the farms are exploited
and they are not even earning what is prescribed by the sectoral determination. FAWU
further indicated that the situation of living standards in the farms for these employees is
terrible and needs an intervention. According to FAWU R150.00 is too little to address
these poor conditions that employees are faced with. As in other areas, employees in
general raised concerns in relation to the utilization of the CPI to determine minimum
wage increases as they believe that it is not the realistic economic indicator for the farm
worker sector as wages are still very low.
4.10 Inputs from farm workers in KwaZulu-NatalWorkers in Boston indicated that R70 per day is too little for them to survive on. They
argued that farmers supply the whole world with food and cannot understand why is it
difficult to ensure that the food producers being workers are taken care of. They alleged
that irrespective of the challenges relating to Trading Agreements which farmers raise as
an obstacle to them having to conduct their business successfully, farmers can still afford
to better the wages for farm workers. They further indicated that the fact that farmers
have already bought huge tractors to work on their farms, it’s an indication that farmers
can afford and that also farmers do need workers in the farms since the machines needs to
be operated by the workers. Workers in Boston argued that as workers they cannot
demand something which will have negative impact on the employment levels and that
the R150 demand is achievable without any negative impact on the employment levels.
4.11 Inputs from farm workers in GautengIn Bronkhospruit, workers indicated that situation on farms is very difficult to survive on
the current level of the minimum wage. Workers indicated that farmers do not see them
as assets in their farms hence they do not even care about paying them decent wages.
They further indicated that farmers export their production to the whole country and
cannot argue that they cannot afford to pay them decent wages. They further raised
concerns regarding the safety standards under which they are working in one of the farms
around the area. They therefore supported the R150 per day as the appropriate minimum
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wage but urged the Department to conduct inspections to ensure that farmers comply and
that they are protected by the law.
Workers further indicated that farmers grow their businesses but do not think of farm
workers. They also alleged that farmers buy expensive tractors whilst workers do not
benefit anything. They indicated that as part of the motivation for R150 is that their kids
have to go to Universities and they also have the responsibility for building houses for
their families, and they cannot achieve that if they continue to receive the level of the
wage which they currently earn.
The COSATU representative who attended the public hearing also raised concerns
regarding the level of the minimum wage in the sector. He requested that the Department
seriously consider the issue of ensuring that a decent wage is paid to farm workers. He
further pointed out that South Africa cannot have a situation where workers are paid
wages equal to the old age grant. In addition, COSATU pointed out that the provident
fund for farm workers need to be established in bettering the lives of farm workers.
4.12 Inputs by workers in GrabouwIn line with the demand of R150 per day, workers indicated that the agricultural sector
uses labour brokers especially during the harvesting period. They further indicated that
the Department needs to relook at the minimum wage as it is not appropriate for workers
to earn lower wages than pensioners. Workers further alleged that the reason why farmers
pay low wages it is due to the fact that the sectoral determination prescribes the low
wages and therefore farmers do not want to pay more. In support of the R150 per day,
workers indicated that it’s better for them to be unemployed instead of earning low wages
which they cannot afford to survive on. One farm worker indicated that if the Minister
after considering all the information received sees that R150 will have a negative impact
on the employment levels, the Minister should lower it to ensure that workers do not
loose their jobs.
4.13 Inputs by workers in PaarlIn Paarl, a representative from Workers Against Regression (W.A.R) trade union
indicated that the Minister and the ECC did not comply with the requirements of the
BCEA when determining minimum wages. He indicated that the BCEA requires the
64
Minister to consider cost of living and poverty alleviation issues and further argued that
the level at which the current wages are pegged does not attempt to address the situation.
In addition, it was also indicated that South Africa as a member State of the ILO does not
seem to promote the ‘decent work’ agenda as adopted and advocated by the ILO.
Workers indicated that the current wage level is a slave wage also considering the
intensity of the work in the sector.
Workers gave different scenarios based on the current level of minimum wage that on top
of the little which they earn, farmers still deduct for electricity, accommodation; and
water and therefore are left with nothing to sustain their families.
Workers further indicated that in 2004, Statistics South Africa conducted a study which
revealed that in order for workers to survive and make a living, they need to be paid at
least R2600 per month. Workers argued that as this study was conducted in 2004, it
therefore mean that the acceptable wage is more than R3000 per month if that was a case
in 2004. They in addition indicated that R150 per day is too little for them to survive on
and to be able to educate their kids but at least it will be able to address some to the
challenges which they faced with. In general farm workers indicated strongly the demand
for R150 and that they know that farmers can afford to pay them. A worker gave an
example where she indicated that every day she on behalf of her employer, receives a
cheque of R60 000, and therefore R150 is nothing to farmers. Workers further indicated
that R1500 per month as legislated is even more than the money which the farmers spend
to buy food for their dogs.
In addition to the R150, there was also an outcry that the determination should prescribe
that seasonal workers be provided with accommodation by the farmer since they are not
permanent and spent most of their wages on transport.
4.14 Inputs received from Workers Against Regression (W.A.R) trade union The WAR in their submission requested the following to be included in the sectoral
determination:
A minimum wage of R200 a day and that no farm worker should earn less than
R4000 per month
That working hours should be less than 45 hours per week
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That there should be 3 weeks paid annual leave
That the CCMA should chair all disciplinary hearings where alleged offences are
dismissible and that workers should remain in employment until a final
termination is made by the CCMA.
That shop steward be entitled to be represented by the trade union and that a
reasonable hearing date applies.
A provident fund to be established where the employer contributes 12% and the
employee 5%.
A bonus of 1 paid week per year
Electricity and water to be guaranteed
A productivity agreement to enable workers to share the profits
4.15 Inputs received from AL JAMA-AHAL JAMA-AH a political party indicated the following in their written submission:
That the Director General of the Department of Labour should consider the socio-
economic report when advising the Minister on the level of the minimum wage. They
argued that this is due to the fact that the BCEA requires that the Department should set a
minimum wage that provide a minimum acceptable standard of living for farm workers;
domestic workers; and security guards working on farms. In their submission they further
argued that the minimum wage should be able to eradicate poverty and reduce
inequalities. They alleged that the Minister did not consider the requirements of the
BCEA in 2012 prior to publishing the amendments as they consider the current minimum
wage as that which supports the farmers to become richer. They further argued that the
Department in essence replaced the dop system with slave wages and they regard that as
an insult to farm workers.
4.16 Inputs by workers in De DoornsWorkers in De Doorns alleged that the current farm worker strike came as a result of
government’s failure to listen to farm workers’ demands three years ago. They indicated
that if government implemented the resolutions of the summit held in Cape Town in
2010, the strike would not have happened. Workers further indicated that minimum
wages failed workers considering the fact that prices of petrol, electricity, transport, food
66
have been increased on several occasions and minimum wages gets increased once in a
period of twelve months. Workers further indicated that their call for R150 per day is
informed by the fact that on the current R69, farmers still deduct for electricity, UIF,
accommodation and at the end of the day they find themselves earning R30 per day. In
addition workers indicated that they demand R150 which they argued that it is still low
but would at least contribute to their affordability to sustain their families. An example
was made where a farm workers who earns R1500 per month has to pay 10% for
accommodation, 10% for food and has to pay almost R1000 on transport for himself to
get to work and the kids to go to school. This farm worker will be left with R50 after all
the expenditures and statutory deductions and still has to buy food, pay electricity, buy
clothing, and have money to take kids to the doctor.
They further argued that the current minimum wage suggest that the farm workers’
household should survive on R12 per day and therefore this is impossible considering the
price of bread currently.
Prior to the commencement of the public hearing, COSATU had through the media
announced that farm worker strike is suspended in the other parts of the Western Cape
where workers have agreed to accept R105 as the daily rate. Regarding the R105 per day,
workers indicated that they won’t accept R105 but could consider at least R120 per day.
In addition, workers demanded that the compulsory provident fund should be establish
for the farm worker sector which will ensure that at the termination of employment, farm
workers receive a lump sum which they will utilize to build houses for their families and
educate their kids.
4.17 Inputs by workers in RobertsonIn Robertson, workers who attended the hearing raised their support for R150 per day.
Again it was based on the challenges which they faced with posed by the cost of living.
Workers indicated that farmers will afford to pay R150 because they work in the farms
and are aware of their production and the income which the farmer generates.
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4.18 Inputs by workers in OudshoornIn Oudshoorn, workers also demanded that the R150 should be promulgated in the
sectoral determination. Workers further indicated that farmers currently are paying R69
per day which is legislated and it will be the same situation with the R150 per day. In
addition they also indicated that the R150 will also be deducted by the farmer for
electricity and other deductions which will end up not being R150.In addition, workers
raised other issues relating to the treatment they receive from farmers.
4.19 Inputs by workers in VredendalIn Vredendal, workers called for the implementation of the R150 in the sectoral
determination. Workers indicated that they cannot survive on the current level of the
wages paid to them. An example was given of the worker who got paid R300 on Friday
and the farmer deducted R250 from the worker’s wage and the worker only got R40 from
the bank. Workers indicated that on the current level of the wage, they cannot afford to
even pay school fees for their kids and also can hardly buy food because they cannot
afford.
In relation to the possibility of mechanization, workers indicated that farmers had already
mechanized some of the functions and the kind of the work which they perform, cannot
be mechanized and therefore they regard the mechanization as an empty threat to
government. Furthermore, workers called on government to consider their situation as
farmers are deliberately exploiting them and with their exports, they know that farmers
are making huge profits at their expense.
5 Recommendations of the DepartmentDuring the strike of the farm workers in the Western Cape, the Department initiated a
negotiation process facilitated by the CCMA in which the first negotiation meeting took
place on the 22 November 2012. The objective of the negotiations was to first try to find
a solution to the on-going strike in the Western Cape and secondly to try and ensure that
parties make a joint negotiated agreed submission to the ECC in relation to the new level
of the minimum wages prior to the ECC making its recommendations to the Minister.
During the negotiation meeting parties agreed that the research process need to be
undertaken by an independent institution to analyse the impact of the R150 in relation to
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the job retention and creation in the agricultural sector. Furthermore the research
institution had to provide information relating to the impact of different scenarios which
the minimum wage increase would have on the job retention and other factors as required
by law. Parties agreed that the Bureau for Food and Agricultural Policy (BFAP) should
be given the responsibility of producing such a report. BFAP is a network linking
individuals with multi-disciplinary backgrounds to a coordinated research system that
informs decision making within the food production system. The core analytical team
consists of independent analysts and researchers who are affiliated with the Department
of Agricultural Economics, Extension and Rural Development at the University of
Pretoria and the Department of Agricultural Economics at the University of Stellenbosch.
BFAP has become a valuable resource to government, agribusiness and farmers by
providing analyses of future policy and market scenarios and measuring their impact on
farm and firm profitability.
In its report, BFAP applied economic modelling tools to simulate the impact on the total
wage bill of agriculture if the minimum wages were to rise to R150 per day. The total
impact of an increase in minimum wages to R150 per day amounts to an increase in the
cash costs of labour of R3.5 billion for the top ten agricultural industries ranked in terms
of total employment. The impact of an increase in the minimum wage to R150 per day
will increase the total compensation bill of agriculture from R13.6 billion to R20.8
billion. This represents an increase of 53% or R7.2 billion.
From the farm level analyses it is evident that the labour intensive farms will not be able
to pay a minimum wage of R150 per day according to BFAP. The report argues that most
industries could absorb an increase of approximately R20 per day without any major
implications on the employment levels. The report further argues that the gap between
what farmers can pay and what workers require to make a basic living is large, and a
creative policy framework together with extremely efficient management on farms is
required to avoid shedding of jobs in agriculture. BFAP further argued in their report that
the process of mechanisation in any industry is a given, but the way in which this
materialises is key to unlocking the growth potential of the particular industry. With the
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given time frame in the current wage negotiations, representing industries may not have
enough time to respond to the sudden cash flow shock due to a rise in wages, whilst the
demand for an increase in compensation is unlikely to be accommodated by increased
returns, efficiency, productivity and profitability in agriculture.
They further argue that industries could argue that equity spend on increased wage rates
should rather be spend to increase efficiency, whilst increasing human capacity (more
skilled labourers), this in turn could result in higher returns.
The BFAP report argues that the average base wage for farm workers is R84.90 per day
and according to the current sectoral determination, the base would have been increased
as from 1 March 2013 with the CPI, lowest quintile plus 1,5%. Secondly, the report
further argues that if the current base was to be increased with R20 per day, the impact on
job retention would be minimal and not comparable to an increase of R70 to R150 per
day.
The Department also supports the report in arguing the fact that if wages were to be
pegged at R150 per day, the impact will be huge as this will translate to more than 100
percent increase and it would result in job losses.
According to BFAP, there was a significant increase on food inflation from October 2010
to October 2012 (+18% on CPIF and +23% on basic food basket; +28% on BFAP Poor
person’s index). The report argues that in actual values the cost of the basic food basket
increased from R394 to R486 during this period, while the weighted food plate of ‘5 most
commonly consumed food items’ increased from R3.33 to R4.26 per person per day.
The report further argues that during the period 2010 to 2012, the inflation experienced
by poorer consumers (as measured by the basic food basket index and the weighted ‘5
most commonly consumed food items was more severe than the trend of the CPIF,
mainly attributed to the significant inflation on staple foods (maize meal and bread). The
spike in the weighted ‘5 most commonly consumed food items’ index around late 2010 to
early 2011 can be attributed to particularly high bread prices during these months and this
affected farm workers.
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BFAP in its report also surveyed a typical rural Western Cape wage earning households
where they discovered that a household with two adults earning a wage of R150 per
worker per day cannot afford a relatively diverse daily food intake (‘balanced daily food
plate’), which only provides about 61% of ideal energy content.
Considering the findings from BFAP report and also inputs by workers during the public
hearings, it is clear that workers have a strong argument in demanding R150. However;
consideration should be made on how the worker’s demands could have a negative
impact on both job retention and also the ability of employers to continue operating.
In addition, during the public hearings, it was also clear that some farmers are not aware
of the Ministerial Determination process which they can utilize when facing difficulties
in paying the prescribed minimum wage as they argue that the economic scales of the sub
sectors within the broader agricultural sector are not the same as ostrich sector was cited
as an example. This process if utilized would ensure that those farmers, who cannot pay
the prescribed minimum wages during difficult times, will get temporary relief from the
Minister to pay lower than the prescribed wages.
Under the provisions of the current SD for farm workers, the increase as from 1 March
2013 would have been determined by CPI (December quintile 1), which is 7.1%, plus
1.5% - an increase of 8.6% in total. The new wage would have been R75.35 per day.
Considering the inputs received during the public hearings from the workers who
demanded R150.00 per day and the result of the report from BFAP which argues that the
average wage base currently paid by farmers is R84.90 per day and further that if wages
were to be increased to more than R105.00 per day, there will be negative implications on
the employment levels and the sustainability of the sector, the Department recommends
that the new minimum wage as from 1 March 2013 be pegged at R105.00 per day.
Compared to the recommended increase of the wage as per the current determination, the
DoL’s recommended wage of R105 is an increase of 29, 65%.
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It is therefore recommended that the new minimum wage for the farm worker sector be
pegged as per the table below.
Table 1:Minimum wages for employees in the farm worker sector
Minimum rate for the period Minimum rate for the period Minimum rate for the period
1 March 2013 to 28 February
2014
1 March 2014 to 28 February
2015
1 March 2015 to 28 February
2016
Monthly Weekly Daily Hourly Monthly Weekly Hourly Monthly Weekly Hourly
R2274.82 R525.00 R105 R11.66 Previous years Minimum wage
+CPI Q3 + 1.5%
Previous years Minimum wage
+CPI Q3 + 1.5%
According to the table above, farm workers hourly rate will increase from R7.77 to
R11.66; daily wage from R69.39 to R105.00, weekly wage from R347.10 to R525.00;
and the monthly wage from R1503.90 to R2274.82.
The Department therefore recommends that the current approach of setting wages for
three years be maintained and that the minimum wage increases be determined by
utilizing CPI (quintile 1 as published by Stats’SA six weeks prior to the increase date)
plus 1.5 %.
Chapter Four
4 EVALUATION IN TERMS OF ECC CRITERIA
4.1 Ability of employers to carry on their business successfully
The main purpose of the analysis conducted in the BFAP research was to provide
information that is useful to those role players in deciding on what to do next. In this
regard, the results are sombre. While the situation of permanent farm workers is not cause
for immediate concern, especially on the intensive fruit farms that were analysed, the
reality is different when it comes to seasonal workers. Permanent workers seem to earn
more than the current minimum wage on these farms, and on potato and the mixed
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wheat/sheep farm that was analysed. The position of seasonal workers seems to be
different, however, and even on the fruit farms they earn at most around R84 per day
compared to the minimum wage of just less than R70 per day. Recall, however, that these
are wages as paid on a ‘typical’ farm, and are not recorded wages. Nevertheless, where
recorded wages are available the results seem to support this contention.
So there is some scope to increase the minimum wage. From the analysis, however, it is
evident that if average wages increase by more than R20 per day (i.e. to around R104.00
per day), many farms will be unable to cover their operating expenses, and hence not be
able to pay back borrowings or to afford entrepreneurs remuneration. On the other hand,
however, even at what seems to be an unaffordable minimum wage of R150.00 per day
most households cannot provide the nutrition that is needed to make them food secure.
It is also evident from the BFAP analysis that the fact that a negative net farm income
(NFI) is generated under scenarios where wages rise by more than R20 per day from the
base case scenario does not imply that there will be no farming in South Africa in years to
come. What it does mean is that structural adjustments will be made to accommodate the
higher wage rates. These structural adjustments include mechanization and consolidation
of farming units to become more efficient. For example, in the case of potatoes, the
BFAP model shows that a potato farm needs to be at least 150ha in size to achieve a
positive NFI under a R150/day wage scenario and then principal payments; income taxes
and family living cost still need to be deducted from the net farm income. Thus a typical
potato farm that is smaller than 150ha will not be financially sustainable. This does not
imply that the larger farms are always more cost efficient, but the larger farming units
have the ability to mechanize and as wages rise, mechanization becomes more attractive.
On-farm mechanisation will in most cases result in the shedding of seasonal labour. It
was calculated that approximately R3.7 billion is annually spend on seasonal agricultural
labour wages. If 50% of these workers are taken from the system, the economy would
lose R1.8 billion annually. But if agriculture were to intensify and expand under a
favourable economic and political environment, it could result in increased efficiency and
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productivity due to mechanisation. The seasonal labourers could be placed in the
permanent labour position, increasing the remuneration bill, which will have vast positive
spill off effects in rural communities – more entrepreneurs due to more buying power
from the local communities, stimulating the entrepreneurial economy. There would be
more emphasis on the workers’ value to the farm, rather than just the idea of wages. The
reverse of this is also true, that under correct conditions, agriculture can adjust, grow,
increase employment and pay better wages.
4.2 Creation and the retention of employmentBFAP in its report indicated that it is difficult to estimate how much labour will be shed
throughout the industry if minimum wages are increased, since there are a number of
factors that have to be taken into consideration that could not be covered in this study due
to time and budget constraints. One important factor raised to be considered, is the
mechanization threshold for each industry that many of the role players have already
calculated and considered as an option. The study highlighted some cases of the costs of
mechanization. Yet, not all industries can mechanize and therefore one can anticipate that
for highly labour intensive industries that cannot mechanize, the structural adjustments
will be greater and the loss in job opportunities will be significantly higher.
In addition, BFAP argued that if wages are increased by either R30 or more from the
baseline, the demand for unskilled agricultural labour will decrease notably (decline of
between 7.8% and 10.5% depending on the province), whereas the demand for capital,
land and skilled labour remain constant because of the assumption of full employment.
Demand for unskilled non-agricultural labour will slightly decrease because of the
general dampening of the economy (decline of between 0% and 0.05%).
They further indicated that because of the minimum wage increase, the income of all
unskilled agricultural labour increase (by 18.9%), whereas incomes of skilled agricultural
labour generally decrease (changes between 1.0% and -3.2% depending on the province).
The wage rates of non-agricultural skilled labour also decrease negligibly because of the
general dampening of the economy (between 0.05% and 0.08%).
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BFAP also indicated that there is a general contraction of the agricultural industries and
that it is reflected by the decrease of production of all agricultural products (between
0.1% and 1.4% depending on the product) and the general decrease in output of
agricultural industries (changes between 0.4% and -3.3% depending on the industry).
They also in their report indicated that there is a decrease in exports of all agricultural and
food products (between 0.8% and 2.8% depending on the product) and an increase in
imports of all agricultural and food products (between 0.2% and 1.5%). There is therefore
a negative impact on the trade balance.
4.3 The cost of livingAccording to BFAP, at a wage of R105.00 per day, overall household incomes of poor
households increase (between -0.04% and +2.63% depending on the household), whereas
household incomes of rich households decrease (between -0.44% and +0.1%). Household
expenditures follow a similar pattern if wages are increased by the baseline to more than
R104.00
They also indicated that welfare estimates for poor agricultural households increase
(between 0 and 0.04), but it decreases for all other households (between 0 and 0.17),
including poor non-agricultural households (between 0 and 0.03) because they now face
higher food prices without wage increases.
When the substitutability between different factors such as different labour groups and
between labour and capital is increased modestly, the decrease in demand for unskilled
agricultural labour could be as high as 28%. It is recognised that not all industry can be
mechanised to the same extent or substitute unskilled labour for skilled labour, so the real
decrease in demand for unskilled agricultural labour when the minimum wage increases
by R20 could be between 10% and 28%. Agricultural and food price increases are also
larger if there is a greater level of mechanisation or switch to skilled labour.
What BFAP find to be an interesting result is that all households (poor and rich,
agricultural and non-agriculture) experience a decrease in household income. Returns to
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land still increases slightly, but incomes for capital and all labour groups decrease.
Welfare estimates also confirm that all households are worse off if the minimum wage
increases in the presence of greater substitutability between different factors of
production.
4.4 Food Security Modelling11
The concept of the ’basic food basket’ 12(used in the quarterly NAMC Food Price
Monitor) was explained above, as a selection of food items representing the dominant
food items purchased by middle income to poor consumers which includes items within
all the major food groups. It should be noted that this ‘basket’ of food groceries was not
compiled based on nutritional quantity and quality considerations, but rather to serve as
an index value to monitor food prices of a variety of food items over time. In October
2012 the cost of the ‘basic food basket’ amounted to R485.90.
According to the results of the study most of the income earners can afford at least one
‘basic food basket’, with the following range of results:
A poor household with an income level of R1 200 per month (i.e. food
expenditure of R499) can afford roughly one ‘basic food basket’;
On the upper end of the spectrum a household with an income level of R6 860 per
month (i.e. food expenditure of R2 854) can afford roughly six ‘basic food
baskets’ per month;
A household with a monthly income level of R2 015 (i.e. the average monthly
household income of the poorest 50% of rural Western Cape households
according to the General Household Survey 2011) can afford 1.7 ‘basic food
baskets’ per month.
Furthermore, BFAP argued that in order to develop an understanding of poorer
consumers’ inflation experience and impacts the ‘basic food basket’ index weighted ‘5
most commonly consumed food items’ index were included in their study.
11 BFAP report12 As calculated by Statistics South Africa
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In their report they indicated that in order to analyse food affordability from the point of
view of low income consumers in the Western Cape it was necessary to construct a
number of potential household income scenarios. The scenarios were based on different
potential income sources (e.g. child grants, old age pension and wages) and different
potential daily wage levels.
According to Statistics South Africa’s official Consumer Price Index (CPI) 2008 weights
for the total country (StatsSA, 2008) the poorest 20% of consumers in South Africa
(called the ‘very low expenditure group’ with annual expenditure of up to R14 564 or R1
214 per month in 2005/2006) spent around 41.61% of their total expenditure on food and
non-alcoholic beverages. Thus, is this section the assumption was made that the target
consumer group spends 41.61% of their total income on food and non-alcoholic
beverages.
As a low income household in the Western Cape were used in the study as the basis for
calculations and assumed to consist of 2 adults and 2 children, the calculations indicated
that:
44% of rural Western Cape households have 4 or 5 members (average household
size of 4.7);
61% of rural Western Cape households have 2 adults (average number of adults
1.7);
67% of rural Western Cape households have 2 or 3 children younger than 18
(average number of children 2.3).
Regarding the food affordability for low income consumers in the Western Cape, BFAP
discovered that poor persons’ food index’ is based on a particular daily food plate,
representing poor South African consumers’ typical daily portion sizes of the five most
widely consumed food items in South Africa: maize porridge (532g cooked portion),
brown bread (150g portion), sugar (22g portion), tea (2.5g portion) and full cream milk
(56g portion) (the typical portion sizes were obtained from reputable scientific sources as
explained above). The cost of a ‘typical daily food plate’ for the poor is calculated by
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combining official StatsSA food price data with the actual portion size weights obtained
from literature.
In October 2012 the cost of the daily food plate of the BFAP Poor persons’ Index
amounted to:
R4.26 per person per day; or
R127.80 per person per month; or
R460.08 per household of 2 adults and 2 children per month.
As evident from the report, most of the income scenarios can afford a food expenditure
level of R460 per month. However, the problem is that this food plate only provides
around 2500kJ of energy (thus only around 40% of recommended energy intake) and
furthermore it is extremely inadequate in terms of nutrient diversity. A household with a
monthly income level of R2 015 (i.e. the average monthly household income of the
poorest 50% of rural Western Cape households according to the General Household
Survey 2011) could have only R378 per month available for further food expenditure
after purchasing this food plate, in order to increase their energy intake and / or improve
the dietary diversity of the people in the household.
4.5 Poverty alleviationThe ECC is of the view that the minimum wage level agreed on, although it will not
eradicate poverty, is a big step forward in dealing with poverty alleviation. Poverty
alleviation will only be defeated when all stakeholders address this issue in a coherent
manner. Nevertheless the level will set a higher base from where future levels will be
based and assist in reaching our goal.
4.6 Operation of SMMEs and new enterprisesIn deciding on the new minimum wage level for the sector the ECC considered the effect
of the level on emerging farmers. The ECC reiterated its decision in the previous report,
on the impact that the new minimum wage level will have on SMME’s. The ECC is
confident that the proposed new minimum wage level will not have a significant negative
impact on SMME’s since those who employ less than five employees are exempted from
paying the minimum wage.
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Chapter Five
Recommendations of the Employment Conditions Commission
Minimum wages
With regard to the level of the new minimum wage, the majority of the Commissioners
supported the recommendation of the Department that the new wage be pegged at R105
per day as from 1 March 2013. Although Commissioners supported the recommendation,
they felt that the policy dilemma was well captured in the BFAP report. Even at a much
higher wage of R150, large numbers of farm workers households would not have a
sufficient income to meet their basic need. However, as highlighted in the BFAP report,
at a wage above R105, it is likely that there will be a significant negative impact on
employment. The Labour Commissioner argued strongly that R105 takes farm workers
nowhere near a decent living wage, and that this remains unacceptable. Furthermore,
Commissioners agreed that prior to the next review process of the determination, a
similar study conducted by BFAP has to be undertaken to provide an indication of impact
of the new wage in the farm worker sector so as to better inform the review process.
Business’ representative in the Commission did not agree with the R105 as the new level
of the minimum wage. Instead the Commissioner was of the view that the new wage be
pegged at R94.90. He indicated that the average base wage of R84.90 per day as per the
BFAP report be utilized plus an additional R10. This would be a minimum wage, with the
parties able to negotiate collectively for higher wages appropriate. He felt that the
proposed level was appropriate as a minimum wage, given the reality that it would be
much higher than the previously determined minimum of R75.35 per day, which would
have taken effect from 1 March 2013. The commissioner was also concerned about the
message being sent to parties in this sector and in other sectors about the need and
reasons for reviewing sectoral determinations. Specifically, the commissioner
acknowledges the right to strike by employees in order to improve their conditions, but
counselled against rewarding such behaviour by increasing minimum wages in the
sectoral determination.
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Forestry wages
The ECC was concerned that since the SD for the forestry sector set minimum wage
linked directly to the level of the farm worker wage, increasing the wage for farm
workers will have a direct impact on the forestry industries. This link arose because the
SD for Forestry brings the forestry workers’ wages in line with the farm worker’s wages;
nevertheless the commission felt that it is important that the link between forestry and
farm worker sector should be maintained.
The business representative argued very strong that consideration has to be made on the
possible impact which mixed farmers could be faced with if farm worker’ wages are
substantially increased.
Recommendation for a NEDLAC full review of the agricultural sector
Some of the Commissioners felt that it was important to address the long term structural
issues in the agriculture sector, which was both declining rapidly and based on a low-
wage model. The majority of ECC believed the government, labour and employers, and
other interested parties needed a social pact of some form to address the growth, wage
and employment issues in the sector. Without this, workers will continue to earn wages
below the poverty line and the sector will employ fewer and fewer workers. The ECC,
majority proposed that NEDLAC be charged with the responsibility dealing with the long
term issues relating to the transformation of the agricultural sector. NEDLAC should set
up an urgent review of the sector with a view to developing an Agricultural Charter (or
similar) which addresses the long term sustainability and growth of the sector. The
review should address inter alia, job creation and retention, agricultural trade and tariff
issues including dumping, social conditions on farms etc. The review could be conducted
as part of the Decent Work Country Programme. They also recommended that the report
done by the BFAP be forwarded also to NEDLAC.
Duration of the sectoral determination
The majority of the Commissioners recommend that wages be determined for a period of
three years, until February 2016. In terms of determining the wage increases for the two
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subsequent years, the ECC recommends that wages be increased by CPI (quintile 1 as
published by Stats’SA six weeks prior to the increase date) plus 1.5 %.
The labour representative did not agree that the determination should be for three years.
Labour argued it should be a one year interim determination, with all conditions being
reviewed in the course of 2013, in parallel with the proposed NEDLAC review. The
majority of ECC felt that a 3-year determination would both provide certainty about
labour costs in the industry and provide the parties with a sufficiently long period to
address the structural transformation of the sector.
The business representative did not agree to the CPI plus 1,5% for years 2 and 3 of the
sectoral determination. Instead, he proposed that wages be increased by the headline CPI.
The Commissioner argued that if the Minister approves the recommendation of R105 as
recommended by the majority members, utilizing CPI, (quintile 1) plus additional
1.5 % would have serious negative impact on the agricultural sector, especially in light of
the fact that this huge increase was far exceeds the budgeted increase that would have
taken effect on 1 March 2013.
The following table summarizes the ECC’s recommendations: Table 1:Minimum wages for employees in the farm worker sector
Minimum rate for the period Minimum rate for the
period
Minimum rate for the
period
1 March 2013 to 28 February 2014 1 March 2014 to 28
February 2015
1 March 2015 to 28
February 2016Monthly Weekly Daily Hourly Monthly Weekly Hourly Monthly Weekl
y
Hour
ly
R2274.82 R525.00 R105.00
*
R11.66 Previous year’s minimum
wage + CPI** + 1.5%
Previous year’s
minimum wage + CPI*
+ 1.5%
* For an employee who works 9 hours per day
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** The CPI to be utilized is the available CPI for the lowest quintile as released by Statistics South
Africa six weeks prior to the increment date.
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