THE RELATIONSHIP between farmers and the retailers they supply looks certain to come under the spotlight as farmers respond to the 52 percent hike in the minimum wage for workers in the agricultural sector that comes into effect on March 1.
And an initiative recently launched by Fruit South Africa will ensure that employment conditions of farmworkers remain under the spotlight.
Throughout the months of farmworker protests that kicked off in De Doorns last November, many farmers said they were price-takers in their dealings with the powerful local and international retailers and were unable to meet demands for higher pay.
In their report, “South African Horticulture: Opportunities and Challenges for economic and social upgrading in value chains”, Stephanie Barrientos of the University of Manchester and Margareet Visser of UCT lent support to this claim.
They pointed out that in the export market those farmers without packhouse facilities received just 18 percent of the final retail price for table grapes. Those with packhouses managed to capture 26 percent of the final retail price.
And as the international retail market consolidates into ever more powerful but fewer numbers of retail chains the tension with the suppliers has inevitably heightened. Reflecting that tension, farmers now commonly joke that the only difference between retailers and terrorists is that you can negotiate with a terrorist.
The recent appointment of an ombudsman in the UK to police the relationship between the 10 largest supermarket chains and their suppliers highlights the fact that the sense of disempowerment felt by farmers is not unique to South Africa.
According to British media reports the ombudsman will have the power to “name and shame” as well as fine retailers who break the rules governing how supermarkets treat their suppliers.
The appointment has been on the cards for some time and follows a recommendation from the UK competition authorities in 2008 that such a role should be created. The ombudsman will be responsible for enforcing the Groceries Supply Code of Practice, which was set up in 2010 and is designed to ensure that the large supermarket chains treat their suppliers fairly and lawfully.
Although the SA competition authorities looked into the major local food retailers some years ago their enquiries did not result in recommendations.
In addition to the increasing scrutiny of their relationship with farm suppliers, retailers are also under pressure to ensure that the relationship between those suppliers and their workers meet acceptable global standards.
In their report Barrientos and Visser noted that poor work conditions on supplier farms had exposed the industry and buyers to adverse publicity in their home market. “In response many European supermarkets have applied codes of labour practice requiring compliance with regulation.”
By requiring their supplier farmers to adhere to existing regulations these “ethical audits” by international retailers made up for the shortfall in the Department of Labour’s ability to police implementation of its own laws.
But as Barrientos and Visser argue, the drawback to increasing use of these sorts of private standards by international retailers is that the enormous costs attached to them are normally borne by the growers or the packhouses. This invariably adds to the cost pressure facing farmers, particularly if they have to undertake a different audit for each of the chains they supply.
In a bid to address the cost issue, while maintaining global standards, earlier this year Fruit SA launched an ethical trade programme, calling it the Sustainability Initiative of South Africa (SIZA).
Although the programme was initiated by the fruit industry, which exports more than 50 percent of its product, it is open to all agricultural industries in the country.
Colleen Chennells, who is co-ordinating the initiative, refers to a number of underpinning principles: the adoption of a single South African standard, audit process and methodology, which is aligned to international standards; non-duplication of audits and; support for ongoing improvement of labour practices on farms.
SIZA also aims to provide resources to support farms with their implementation of the ethical programme and with ongoing improvements of labour conditions on farms and in packhouses.
Chennells tells Business Report the initiative has been well supported by international and local retailers but says the critical issue will be ensuring the quality of the audit process.
She says while previous ethical audits were focused on the export market, local retailers are becoming much more aware of their importance.
Bronwen Rohland, the director of sustainability at Pick n Pay, said the goals set out by SIZA were in alignment with Pick n Pay’s policy to conduct regular audits of its suppliers in terms of ethical business practices. “We look forward to working with them in future.”
Woolworths said it was involved in the SIZA initiative, adding that its own audits would remain in place until it had fully studied the SIZA audit process.