The agricultural sector – which contributes just under R270 billion annually to South Africa’s gross domestic product and which is already under pressure from the ongoing drought – could be hard hit by the recent introduction of a minimum wage increase. This is according to Jahni de Villiers, labour and development head at AgriSA, following the announcement by the Department of Labour (DoL) of a 5.6% increase in the minimum wage for farm and forestry workers. The increase kicks in on March 1 and is valid until February 28, 2019. She pointed out that the agricultural sector had shed 109 000 jobs so far in the last quarter of the 2017/2018 financial year and was 71 000 jobs down from the same quarter in 2016/2107. “Various factors contributed to this decline, one of which is the drought affecting labour-intensive fruit farms in the Western Cape. Fruitgrowing organisation Hortgro estimates that a further 45 000 jobs could be lost directly due to the drought,” De Villiers said. It was a “fair assumption” that the introduction of an increased minimum wage could lead to further job losses and, ultimately, a decline in production which would affect exports, she added. The National Minimum Wage Commission acknowledged in its final research findings published in 2016 that 200 000 jobs had been lost due to the first implementation of a minimum wage in 2013, and that employment levels had never returned to the levels they had been before the minimum wage. De Villiers pointed out that agriculture was considered a low-threshold sector, where even small changes could have a significant impact on employment levels. “One of the reasons is small profit margins in farming operations, which means that fixed-cost pressures have a significant and immediate impact on the cash flow of a farm,” she explained. Chief director of labour relations at the DoL, Tembinkosi Mkalipi, said the department had not received any complaints on the inflation increase, adding however that employment rates would have to be monitored to determine whether the minimum wage had a negative effect on the sector after its implementation. “Farmers that are of the view that they cannot afford the minimum wage can apply for exemption,” Mkalipi said. Chief economist at AgriSA, Hamlet Hlomendlini, acknowledged the importance of paying farm workers a “fair wage” but said it needed to be approached carefully, with the “bigger picture” in mind. “It is important for government to make the development of agriculture a national priority,” he commented.
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Fixed-cost pressures have a significant and immediate impact on the cash flow of a farm. – Jahni de Villiers
