As the economy grows, like in many other growing economies of middle- and high-income developing countries, the agricultural sector’s share of growth domestic product (GDP) is declining as a percentage yet the sector may be growing in value and/or volume terms.
This is particularly the case as other sectors, such as services, are growing faster than agriculture.
This has also been the case with employment in the agricultural sector over the past 10 years, as the graph shows, and has been for over 100 years.
Actual employment levels have been on the decline for all sorts of reasons, including the effect of the 1997 “big bang” trade liberalisation and consequent mechanisation and retrenchments emanating from loss of government subsidy and reduced share of export markets.
Except for the loss of government subsidy and of tariff and other trade-related protection, the agricultural sector, as price takers in the value chain, is squeezed by retailers, receiving anything between 7c and 25c from every rand of retail price, depending on the product type.
As if that is not enough, farmers are then faced with high non-labour input costs, from energy costs of fuel and electricity (administered prices) to fertilisers and chemicals (largely monopoly prices). Usually, these factors are beyond farmers’ control and they become price takers on the input side as they are on the output side.
With the above factors at play, the “only option” available for farm owners/operators is to deal with a variable they can influence on the input cost side. This is the price and the quantity of labour. Because farmers cannot do much on the wages, given the legislated minimum wages, the “real option” becomes the decision on the quantity of labour.
This option is not an obvious or easy recourse as it is itself affected by factors such as quality of the product type and requisite number of workers needed as part of timeous delivery and other requirements for such stock.
These factors could be the expected volumes for export markets such as delivery of table or wine grapes and could be the Safex-required commitments on delivery of maize or wheat. It also could be factors such as compliance requirements on taste, grade and hygiene or such technical and other standards.
The February 2013-announced minimum wages were adjusted by about 52 percent following the De Doorns-inspired farmworkers’ strike action. This did not have the impact on job losses as feared by some commentators. In fact the 52 percent hike has not pulled workers out of poverty.
According to the August 2010 research paper, the Department of Agriculture, Fisheries and Forestry, which extensively quoted researchers in the field of agricultural economics and policy disciplines, there has been a long-term decline in employment levels, from a high of about 1.4 million in the early 1990s to about 650 000 in 2010.
While statistics are still unreliable, it is estimated that about half of the workers, 330 000, are seasonal employees with 60 percent likely to return to the same farm in-season.
Referring to Simbi and Aliber, the department’s paper points out that “… the adoption of labour-saving technologies does not appear to be motivated by the relative increase in the cost of labour, but rather it represents cost savings that farmers find practical and attractive…” and referring to Vink and Kirsten “… the decline in the number of people employed… has been exacerbated by bad policies that inhibited export opportunities… and actively encouraged capital-intensive farming practices…”
What was, and still is, ignored by many analysts and commentators is the fact that labour is the third-biggest input cost after energy and chemicals for many farm operations before the hikes last year, and this fact may still hold true even after the hikes for some farming enterprises.
This means the profit margins in farms are squeezed by all kinds of input costs and as farms are price takers in the value chain. Given this situation, it can only be compelling for the government to make interventions that will assist farmers, through subsidies and other support measures, in order to allow them to not only survive against imported competition and to gain export market share but to be able to even improve farmworkers’ wages.
Further, government intervention should also be on how best to get the abuse of power exercised in the food production and supply chain, especially by retailers but also by manufacturers, to be tackled in more effective ways than has been the case. Some legislative framework must be considered to deal with this situation farmers are faced with, and ultimately consumers are forced to reckon with.
Perhaps, competition authorities could play a role in ensuring that duo/monopoly pricing on the supply of chemicals is addressed. This can only be through decisive proposals, such as geographic divestiture by both big agricultural chemical suppliers so as to allow entrants into the market for purposes of increased competition.
On the administered prices, the government must consider some exemption to farmers in paying the going rate applicable to commercial electricity end-users. This intervention may be difficult to apply in the supply of fuel (diesel/petrol) but remains an option to be pursued, whatever form and content it takes.
Farmers should be assisted to provide facilities and services, ranging from decent shelter with electricity and running water to schools and recreational amenities, for those workers who dwell on farms with their families.
The interventions above must be based on the imperatives of food security, employment retention or growth, and retaining a platform for food processing and beverage manufacturing to expand downstream. This will also prepare the agricultural sector for the increase in aggregate domestic demand for food, especially staple, from influences such as the rise of incomes as a result of the national minimum wage or the expanded social grants or even a possible basic income grant for every South African.
We all know that unionisation levels are quite low in the sector, the same way they are in the developed economies because of these jobs being occupied by immigrants more than by locals among other reasons.
If farmowners were to heed a call for engagement with unions and to some extent with the government, they will realise the value in dialogue on both the working and living conditions of farmworkers but, even more strategically, on the issues of sector support, food security and economic growth and development.
For this to happen, we call on farmers to open their farm gates for unions to organise farmworkers without placing unnecessary obstacles for this to succeed.