Job warning in one of South Africa’s most important sectors

Staff Writer 1 March 2023

Businesstech

The KwaZulu Natal Agricultural Union, Kwanalu says that the new national minimum wage (NMW) that kicks in from Wednesday (1 March) will add even more pressure to businesses and employers in the province who are already struggling from a multitude of economic headwinds.

This is a serious threat to agricultural jobs and the sector as a whole, it said.

Kwanalu – which represents rural and agricultural sectors in KZN – said that employers can scarcely afford the hike, noting that it will place tremendous strain on an already challenging economic climate for the country’s agricultural sector.

“The increase in the national minimum wage will have a negative impact on the livelihoods it aims to serve, as the agricultural sector struggles to keep afloat following other recent, key contributing factors,” said Kwanalu CEO, Sandy La Marque.

This will be felt particularly hard in KwaZulu Natal, she said, where the province has to contend with an increasingly narrow economic production climate; an abnormally high cost of inflation; severe incidences of flooding; the impact of the July 2021 unrest; Foot and Mouth disease; deteriorating road and infrastructure conditions; and ongoing and increased load shedding.

The new NMW, set by the Department of Employment and Labour, will see hourly wages hiked by an inflation-busting 9.6%, coming in at R25.42 per hour.

According to the department of labour, most jobs earning the minimum wage – including farm workers – will see their wages increase to R1,144 a week (45 hours) or R4,957 a month (195 hours).

“Kwanalu believes that there is insufficient evidence to equitably enforce a greater than Consumer Price Index (CPI) inflation on rural employment – a 0% base rate should have been the departure point,” La Marque said.

“This is relevant as the rural cost of living is lower than the urban cost of living, so it may well be prudent to give agriculture its own minimum wage determination.”

Before the announcement, Kwanulu recommended that an increase of less than CPI is more realistic of the industry position and the impacts on the livelihoods of rural employees and dwellers, she said.

Job losses

The latest data from Stats SA’s quarterly labour force survey (QLFS) for the fourth quarter of 2022 shows that South Africa’s agricultural sector continued to bleed jobs, with the industry losing 12,000 jobs since Q3, and a net loss of 7,000 jobs year on year.

According to Stats SA, the sector employs approximately 860,000 people.

While the Bureau for Food and Agricultural Policy (BFAP) has previously pointed to discrepancies between industry data and the data presented by the QLFS, the latest figures appear to align with industry estimates (ie, above 800,000 workers).

However, it is not only the agricultural sector that is throwing up red flags over the above-inflation minimum wage hike.

The Consolidated Employers’ Organisation (CEO), which represents the interests of small and medium businesses in South Africa has also issued warnings over the unsustainability of the increase for many smaller companies in the country.

The group’s attorney and National Collective Bargaining Co-ordinator, Daniel van der Merwe, said that the NMW wage increase has sparked concern for the sustainability and possibility for survival of Small to Medium Enterprises (SMEs) across South Africa.

This sector is collectively the country’s largest employer, he said, and the size of the increase has left many feeling like inputs from the sector in finding a fair level for the hike were ignored.

The main point of contention, as is the case with Kwanalu, is the scale of the increase. At 9.6%, the hike is far above inflation, and out of step with the current economic situation in the country – where inflation is easing, and projected to settle between 5% and 5.5% in 2023.

“In these tough economic times, this is inexplicable. With our ongoing electricity crisis and other problems besetting the operating environment, a lot of businesses, especially small and medium-sized firms, are not likely to absorb the shock of such a high increase. Unfortunately, jobs and employment opportunities will be lost,” Van der Merwe said.