Employment conditions commission

Submission from Kwanalu

Kwanalu 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 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.

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.

5. Inputs from Agri East Cape

Agri 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, 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.

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