Employment conditions commission

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.

1. Inputs from Agri SA

In 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.

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 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.

2. Policy imperatives by AgriSA

Agri 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.

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 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 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.

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