Employment conditions commission

Inputs from Free State Agri

FS-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 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,

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  Free fire wood, water, and often also electricity;
  
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  Housing (costs max 10% of wage);
  
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  ESTA access to land for livestock not deductible from wages (average of 2 head livestock which have access to 12ha of land);
  
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  No transport costs to get to work;
  
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  Occasional / seasonal free food from farm ( payment in kind); and
  
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  More than one person per household often work on farms earning additional social grants adding to average household income.
  

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.

• 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.

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.

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