Lay-offs, mechanisation on the cards after wage hike

Farmers surveyed by AgriSA foresee having to lay off as many as 10 workers each to absorb the impact of a 16% hike in the minimum wage.

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Eight out of every ten farmers surveyed by Agri SA foresee laying off workers to keep within their wages budget. Labour costs are set to increase drastically over farmers’ turnover due to the hike in the national minimum wage for farmworkers

On average the surveyed farmers foresee letting go about ten workers each. Farmers plan to let mostly seasonal and casual workers go and to curb job creation initiatives to keep labour spend in check. Farmers in more labour intensive industries indicated that they are looking at increased mechanisation to avoid the escalation in their wage bill.

Christo van der Rheede, the executive director at Agri SA. Photo: Supplied
Christo van der Rheede, the executive director of Agri SA. Photo: Supplied

Agri SA’s Centre of Excellence on Labour revealed several key findings from its nationwide survey of 577 farmers on the immediate impact of the 2021 national minimum wage on the agricultural industry.

According to the survey report, farmers foresee a 24% increase in wage costs over their turnover for 2021 and expect to exceed their allocated budget for wages in their current financial year.

A new wage of R21.69 was gazetted and comes into effect on 1 March. The wage is a 16% increase from the R18.68 and means that farm workers will earn an extra R350 every month.

The session led by Agri SA’s, executive director, Christo van der Rheede, explored the need for large-scale job creation and highlighted the impact of the increases in both the national minimum wage and Eskom tariffs on job security.

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In his opening remarks, Van der Rheede called on government to free up the economy immediately and relax the strict procedural requirements, which Agri SA believes are too onerous.

This includes the national minimum wage legislation, the labour relations act, basic conditions of employment act, as well as the employment equity act.

“We need to get as many people as possible into a job as soon as possible. Unemployment is the biggest driver of poverty. However, the state’s ability to continue supporting the poorest of the poor with grants is not sustainable,” said Van der Rheede.

Impact of new increased national minimum wage

According to the Agri SA report, 549 out of the 577 agricultural participants indicated they would exceed their allocated budget for wages in the 2021 financial year.

In total, an amount of R1 703 437 920 per annum was allocated to wages in the year 2020 and these farmers foresee a 24% increase in wage costs over turnover for 2021.

Furthermore, 456 of the participants foresee retrenchments of their farmworkers as a direct result of the increased national minimum wage. Mostly seasonal and casual workers will be retrenched, and job creation initiatives are likely to be halted.

‘government cannot remain ignorant to the need of the poorest households to have access to employment.’

Van der Rheede remarked, “this indicates that there is the potential of 4 384 jobs to be lost amongst the 456 participants, meaning that 9,6 workers per participant run the risk of losing their jobs.”

Subsectors that remain labour intensive will according to the survey consider mechanising processes that will reduce staff numbers and shorten working hours of retained workers. 

Unemployment, social assistance not sustainable

Meanwhile President Cyril Ramaphosa in his 2021 state of the nation address announced that the special Covid-19 grant of R350 will be extended by a further three months. The Covid-19 TERS benefit has also been extended until 15 March for sectors that were not able to operate.

However, Van der Rheede wants to know what will happen after this extension.  “An expectation is being created. It is not affordable or sustainable for Government to continue all these kinds of social assistance to the unemployed.”

He says looking at the unemployment figures, government should be worried.

The unemployment rate, which includes discouraged work seekers, continues to rise, increasing from 42,0% in Quarter 2 to 43,1% in Quarter 3 in 2020. According to the latest Quarterly Labour Force Survey released by Stats SA, 11,1 million working-age people are unemployed

More hoops for farmers to jump through

Van der Rheede said the national minimum wage is not the only problem. Despite this, farmers also have to contend with electricity tariffs, fuel prices, water tariffs, and a stronger Rand which diminishes farmer income.

Luckily, farmers who cannot afford to pay the minimum wage may apply to be exempted from paying it.

Minimum wage: Lebogang Sethusha, a labour specialist with Agri SA. Photo: Supplied/Food For Mzansi
Lebogang Sethusha, a labour specialist with Agri SA. Photo: Supplied/Food For Mzansi

However, according to Lebogang Sethusha, labour specialist at Agri SA, farmers will have to jump through various hoops to be excused from the increase.

“The determination of whether an employer can afford to pay the minimum wage is assessed based on an affordability test. The test looks at the profitability, liquidity and solvency of the business,” she said.

Sethusha explained that farmers will have to submit the comprehensive financial statements of the business for three years, which include the current year predictions and previous two years.

“If your application has been subjected to an audit review by the department of employment and labour, the outcome of your application must be received within thirty (30) days from date of application,” she explained.

The national minimum wage exemption system is publicly accessible here:

What’s the way forward?  

In his closing statements van der Rheede said, “government cannot remain ignorant to the need of the poorest households to have access to employment. The alleviation of poverty does not solely rely on an increase in wages. It is aggravated by a lack of employment opportunities.”

In this regard, he believes everything must be done to free up the economy.

Van der Rheede seeks the removal of policy constraints and the implementation of economic recovery strategies, as well as holistic rural development strategies.

“Focus on infrastructure development, service delivery and quality education in particular. Create a conducive environment for businesses to operate profitably and create more jobs. This is the greatest need at this point in time,” he said.  

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