After surveying 577 participants among member companies, industry association Agri SA has found that a potential 4 384 jobs could potentially be lost in 2021/22 as a result of the increase in the national minimum wage (NMW) for farmworkers.
Agri SA reports that 549 of the 577 participants will exceed their budgeted wage expenses in the 2021 financial year, owing to the increase in the NMW, while 456 of the participants foresee retrenchments of some of their farmworkers as a direct result thereof.
This means that 9.6 farmworkers per participant run the risk of losing their jobs, in a country that already has an unemployment rate, including discouraged work seekers, of 43.1% (the official unemployment rate is closer to 30%) and with a government that paid 18-million social grants in July 2020.
The Agri SA survey was conducted after Employment and Labour Minister Thulas Nxesi earlier this month announced that the NMW for each ordinary hour worked has been increased from R20.76 to R21.69 for 2021, effective March 1.
This time around, the farmworkers wage has been aligned with that of the NMW rate, increasing from the current R18.69 an hour to R21.69 an hour.
Agri SA believes the immediate equalisation and increase in wages for farmworkers will be unsustainable for the agriculture sector.
Although Agri SA takes the needs of farmworkers and their families seriously, the poorest households are still in need of access to employment and to retain those in employment – which may be put in jeopardy with the wage increase, it states.
“If farmers cannot produce food affordably and employ agricultural workers on a large scale, this will result in a food crisis and large-scale social upheaval as food insecurity and unemployment start to take root.
“The government will need to decide whether it is serious about addressing unemployment. The Covid-19 pandemic continues to wreak havoc and unemployment is on the increase. To approve of a 16% increase therefore does not make sense,” Agri SA executive director Christo van der Rheede argues.
In a prior statement, industry organisation Agricultural Business Chamber CEO John Purchase agreed, stating that the wage increase may well lead to job losses and that the equalisation of farmworker wages amounts to an increase close to 16%, which he said no sector could be expected to absorb in a single financial year.
Agri SA has therefore called on government to at least relax onerous procedure requirements that businesses have to comply with to apply for exemptions, as well as calling on government to rather focus on job creation on a large scale.
Van der Rheede believes that farmers are already struggling to keep up with rising electricity costs, fuel prices, water tariffs and other increasing input costs. On top of that, the industry has been recovering from a drought and weather conditions continue to change yearly owing to climate change, which brings about unforeseen or increasing costs to maintain yields.
Besides, Van der Rheede adds, a higher rate of unemployment in rural areas will lead to an increase in social unrest and therefore likely also an increase in damage to property and even people, which, considering a rise in attacks on farmers in recent years, cannot be ignored.
This is not even mentioning the pressure that will be put on food security.
“NMW is not the answer and it will be rendered ineffective in the absence of a holistic approach, including housing programmes and infrastructure provision, aimed at improving the lives of the most vulnerable households in society.
“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, everything must be done to free up the economy. Remove policy constraints, implement economic recovery strategies, and implement a holistic rural development strategy. Focus on infrastructure development, service delivery and quality education. Create a more conducive environment for businesses to operate profitably and create more jobs,” Van der Rheede urged.
The agricultural sector currently employs 800 000 people, which has been dwindling in light of rising costs.
For example, the sector spends R8-billion a year on energy.
Agri SA has written a letter to Nxesi, as well as engaged with Business Unity South Africa, in the hopes that the impact of the increase in farmworker wages will be brought to the attention of the Presidency.
Agri SA labour centre of excellence head Lebogang Sethusha explains that the NMW exemption system has been designed to grant or reject the exemption application upon submission, which will take about 30 days.
An application may be subjected to audit review, which will take a further 30 days.
An exemption may be granted when the employer cannot afford to pay the NMW and every representative trade union representing one or more of the affected workers has been meaningfully consulted, or the affected workers have been meaningfully consulted. This process must be evidential and include detailed minutes or recordings of meetings.
The determination of whether an employer can afford to pay the NMW is assessed based on an affordability test. The test looks at the profitability, liquidity and solvency of the business.
An employer must submit comprehensive financial statements of the business for three years, which include the current year predictions and previous two years.
Employers need to provide information on the businesses including various registration numbers, the number of workers in the workplace and their employment status, the number of workers to whom the application is related, and full details of current wages in respect of workers.
Sethusha says it is important that employers be compliant with the Unemployment Insurance Fund, Compensation Fund and any other applicable bargaining council agreement to be eligible for the exemption.
Notably, if the exemption is granted, employers are only allowed exemption from 10% of the NMW and such exemption is only valid for 12 months from the date of application.
The effective 16% increase to existing wages would then be restricted to a 4.2% increase.