by Bennie van Zyl, General manager: TLU SA
It would appear the question is not whether farmers want to pay the increase in the minimum wage but if they can afford to.
It is crucial to have a cohesive understanding of the current economic climate in agriculture. Each farm has to operate as a profitable business entity within itself. It must produce revenue so that it can become, and stay, an agricultural role player. Subsequently, the business owner finds himself driven to manage daily operation elements so that sustainability and profitability can be the only acceptable outcome.
Factors such as human resources (the farmer himself and his workforce), natural resources (the actual farm) and financial resources (capital) have to contribute to the overall success of the organisation and, most importantly, its bottom line. Should elements within operations be ineffective or costly, the owner finds himself confronted with the task of adapting those daily operations so that it can, once again, serve and support the overall profit margins of the business.
In a study conducted by Professor Koos de la Rey, it became apparent that farmers can expect a mere 3% yield on capital invested in agriculture. Thus, there is little room for error.
The South African economy was downgraded to junk status well before the COVID-19 pandemic had its full effect. Further regulations and restrictions during the prolonged lockdown period had dire economic implications for most industries throughout our country. This resulted in unemployment statistics of 42,6% — the same statistics that show little sign of improvement under the ANC regime.
The debate regarding the minimum wage is becoming even more complicated. In an ideal economic climate, the country would try to create prosperity to such an extent that all South Africans would be employed at the highest possible salary. Such an ambitious undertaking cannot be attained by just announcing it during a State of the Nation Address (SONA).
But it might improve if the following guidelines were adhered to:
- Create an environment in which entrepreneurs can manage a profitable business without fear of loss personally or professionally. Fear such as land expropriation without compensation. Fear of damages to property and other assets required to complete daily operations. Fear for the loss of life due to farm murders (59 murders per day) and the crippling livestock and general produce theft. These issues not only influence general investment in agriculture but also get in the way of any real return on any such investment.
- Create policies that prohibit our government from overextending its role in the operations of landowners. The government should merely be present when stabilisation is needed or assist in the hedge of specific risks.
- Create and maintain an “abled” workforce within the agricultural sector. It will ensure that upcoming entrepreneurs have skilled employees that can genuinely contribute to operational procedures.
- No business owner can be productive and efficient if strikes and destruction to infrastructure are recurring events. Put an end to it.
- Factors that play a role in production must be extended and improved. Business owners, including farmers, must freely have access to additional capital. The mismanagement and inefficiency at the institutions that should provide capital (such as the Land Bank) slow down the process.
Our country is in urgent need of economic growth. Sadly, our government only touch on the subject in the annual budget and SONA but make a minimal actual effort to bring tangible changes to the table. In the meantime, ongoing mistakes cost roleplayers in the economy dearly as market powers take note of our ever-fluctuating economic climate and continue to downgrade the country.
There is a unique relationship between a farmer and his workforce due to most farms’ living arrangement. It would appear that both parties have a healthy (and mostly happy) understanding of the co-dependent relationship created by the proximity of working together daily. Unfortunately, exceptions to this rule are generalised as a common occurrence.
The increase in minimum wage will harm jobs in industries that require an extensive workforce. Retrenchment will become apparent in the wine and fresh produce industry (vegetable cultivation) and lead to an even greater socio-economic crisis than we currently face. Subsequently, one could argue that adding financial strain (like an increase in minimum wages) on farms will significantly affect both the country and its workforce. TLU SA believes that it is more important to provide citizens of actual employment than asking them to make due with social grants given harsh current economic realities.
Should South Africa enjoy a small margin of unemployment, a growing economy and overall prosperity be evident in most businesses, one might have supported the concept of employers providing these wages. We, however, are far from such an economic climate, and employers will have to respond to the growing pressures and realities of a struggling economy. It would be of far greater value if the market regulated the work discrepancy. In effect, our government discriminates against the population’s unemployed masses by not allowing them to earn wages that the market regulates and can afford. The question rightfully remains: Who is the voice of the unemployed?
TLU SA thinks that the government is having a destabilising effect in this regard. When one considers the ever-growing number of people reliant on social grants to the ration of employed citizens, this action is extremely short-sighted. It would appear that our government is purposefully providing grants, ensuring the masses depend on it and, in turn, vote for the ANC come election time. It will have a crippling fiscal effect and is a waste of the taxpayers’ money. We have to allow factors within the market to regulate itself, even with regards to wages. The current policy holds no advantage for the unemployed. They should be encouraged to fill positions in the workforce, thereby expanding economic activities. It will provide employees who are hardworking and reliable the opportunity to earn higher wages.
The opportunity for roleplayers to get involved and address this dilemma is still on the table. All members of the value chain should be heard to find a comprehensive and dynamic solution.