Agricultural body warns of potential job losses in wake of minimum wage hike

In the wake of the latest increase in the national minimum wage, agricultural industry body Agri SA has warned that farmers are likely to accelerate the adoption of technology and mechanisation in a bid to cut labour costs.

This could prove disastrous for the government’s drive to cut the soaring unemployment rate, and tackle poverty and inequality. The agricultural sector contributes about 3% to GDP and is responsible for nearly 900,000 jobs.  

“The looming alternative of the adoption of technology for farmers to reduce costs and remain afloat is becoming more attractive,” Agri SA executive director Christo van der Rheede said in response to the nearly 7% hike in the minimum wage to R23.19 an hour.

He said as mechanisation leads to improvements in processes, productivity, and a reduction in labour intensity, this may prove devastating in a country with an unprecedented expanded unemployment rate of nearly 47%.

“More concerning is the risk this presents to the employment of low-skilled workers,” Van der Rheede said.

The department of employment & labour published the increase of the national minimum wage this week, which will be effective from March 1. This as the government battles to reduce widespread and persistent poverty, and an extraordinarily high level of inequality.

But according to Van der Rheede, while it is important to ensure that workers earn a wage that contributes to the alleviation of poverty, and the reduction of wage differentials and inequality, “the alleviation of poverty does not solely rely on the increase in wages but should be designed in a way to supplement and reinforce other social and employment policies.”

“Therefore, without an enabling environment for farms and farming businesses to remain sustainable and profitable, we run the risk of increasing unemployment and food insecurity,” he said.

“The increase in the minimum wage draws concern to the ability of many farmers to continue operating their businesses profitably and contribute towards employment creation in labour intensive subsectors. Reflecting on the sectors financial resilience, farmers have absorbed extraordinary increases in input costs ranging from fertilisers, fuel prices, electricity price hikes and the double-digit increase of the minimum wage in 2021.”

Van der Rheede  said this is against the backdrop of the dilapidating conditions of rural and some provincial roads which have been rendered impassable.

“Farmers will struggle to get their crops to the silos, which may have knock-on effects such as temporary supply problems and a decrease in quality. Farmers cannot bear the additional cost of repairing these gravel roads.”

To add to their woes, large-scale locust outbreaks have occurred in parts of the Northern Cape and Western Cape. Torrential flooding and hailstorms in provinces such as North West, Free State, Limpopo, KwaZulu-Natal and Mpumalanga had a devastating impact on some farmers who have lost in some instances 100% of their crop, Van der Rheede  said.

He said SA farmers do not enjoy the production support that their counterparts in the US and Europe enjoy.

“Farmers, in general, are price takers who often have to contend with an average profit margin of 5.97% depending on the type of activity. The likelihood of our farmers operating at a loss is becoming more evident day after day and the government must create a conducive policy, cost and infrastructure environment to ensure profitable farming in SA,” he said.

Trade union federation and key ANC alliance partner Cosatu welcomed the increase in the minimum wage saying  it will make a positive difference in the lives of many workers.

“It will mean a significant increase for the 892,000 domestic workers who are overwhelmingly women and will also improve the lives of 800,000 farm workers,” said union spokesperson Sizwe Pamla.

phakathib@businesslive.co.za