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Eastern Cape farmers brace for new national minimum wage

Feb 27, 2017
Eastern Cape farmers brace for new national minimum wage

Agri EC concerned about potential rise in unemployment in drought-hit region

Agri Eastern Cape has called on drought-hit farmers to review their business finances and brace themselves for the implications of the new national minimum wage, which was announced by President Jacob Zuma during his 2017 State of the Nation Address (SONA) earlier this month and will come into effect on May 1 next year.

Speaking after a two-day workshop hosted by national body Agri South Africa this week (ed: Feb 14-15), Agri EC president Doug Stern said his organisation had a number of “serious concerns” regarding the potential effects of the new R20 hourly wage on the agricultural sector, including potential unemployment.

“As farmers, we want to create sustainable employment in our sector, which is already struggling due to the ongoing drought conditions in the Eastern Cape. Many farmers will be unable to absorb the costs of two wage increases, to get to the prescribed amount, in 2018 alone.”

Stern said the agricultural industry, under the auspices of Business Unity South Africa, had been an indirect party to the national minimum wage agreement signed at the National Economic Development and Labour Council (Nedlac) in early February. Only Cosatu did not sign the agreement between business, labour and national government.

“We did manage to secure a number of concessions, which I feel is quite a breakthrough,” said Stern.

“Our representatives successfully negotiated a phasing-in period for farmers, which will see them paying 90% of the agreed minimum wage for a period of two years. Agriculture has also been acknowledged as a fragile sector, which means that we will be allowed to present research demonstrating the negative impact of wage increases on our sector ahead of any proposed adjustments down the line.”

Until the signing of a proposed minimum wage act, which should be drafted for public comment by June next year, Stern said the agricultural sector would remain subject to Sectoral Determination 13, which sets the minimum wage for farm and forestry workers.

“On March 1 this year, the minimum wage will be adjusted upwards by inflation plus 1%. This equates to an 8% increase, which has been the norm for a number of years.”

Based on an average 45-hour workweek, this translates to an hourly rate of R15.39 or R3 001 per month.

“In March next year, we anticipate another increase of approximately 8%. That takes us to R16.62 an hour or R3 241 per month.”

Stern said the difficulty would arise with a further 8% increase, to R18 an hour or R3 500 per month, just two months later in May. “This will be the 90% payment of the R20 hourly rate, in line with the Nedlac agreement.”

The good news, he said, was that there were currently no planned increases for 2019 and 2020.

“We essentially have a full year to revise our businesses. If we can’t absorb this in 2018, then we’ll have to look at alternatives. Let’s hope by then that the drought will have broken.”

While the majority of Agri EC members were stock farmers, employing limited numbers of workers, Stern said the local citrus industry would be more seriously affected by the increases, as it relied heavily on both permanent and seasonal labour.

He said struggling farmers had only three options – to apply for a renewable 12-month exemption from the Department of Labour, or retrench or dismiss unproductive workers.

“Agriculture is the biggest employer of unskilled labour in the country. Unfortunately, we are not rewarded with increased productivity with every wage hike, so we will be engaging with the State on the issue of skills development, which can only benefit all South Africans in terms of food security.”

Stern said the increase in the wage bill would not be passed on to consumers.

“As primary producers, we are price takers and not price makers. We absorb all additional increases in costs and cannot pass them on to the consumer.”