Employment conditions commission

Submission from Suiderland Plase in Tygervalley

Suiderland 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.

9. Inputs from Agri Limpopo

The 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 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
  
• 
  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
  
• 
  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
  
• 
  Service delivery
  
• 
  Corruption
  

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

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 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

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:

• 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.
  
• 
  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.
  

12.