Agriculture and the NMW increase quandary

Agriculture is one of the biggest employers of unschooled labour. Over the past ten years, the minimum wage has been amended substantially and rightly so, but as a sector, already under duress, with high input costs, global trade challenges, logistical problems at our ports, and loadshedding, this financial knock comes at a bad time.

The national minimum wage (NMW) for farm and domestic workers was increased from R25,42/hour to R27,58/hour (Government Gazette, 2 February 2024). The NWM was once again increased higher than a CPI adjustment of 5.5%, to 5.5% plus 3%. That is an increase of 8.5%. An above-inflation adjustment was also made in 2023.

Over the last ten years, the minimum wage has increased by 122.24%. This, linked to other challenges and production costs, will lead to a further structural adjustment in labour trends with less permanent employment in the sector.

The question is whether these amendments will solve South Africa’s poverty woes which are exacerbated by urbanization and several other factors such as a struggling economy given the implosion of public services and collapse of infrastructure.

South Africa is one of the most unequal countries in the world, with the current unemployment rate at 32.8%.  The current inflation rate (as of November 2023) is 5.5% and 47% of the population relies on monthly grants to survive.

On-farm jobs can only increase if profitability on the farm level increases; the alternative is that the current structural employment trend – leaning more towards seasonal than permanent employment – will likely accelerate and the sector will no doubt start moving towards automation and mechanising key practices.

During the annual review process, the Minimum Wage Commission called for public participation in 2023. Several reports were made illustrating the negative impact that another above-inflation increase in the minimum wage could have on the economy and specifically employment rates.

It seems that these inputs were not considered when recommendations were made to the minister, with eight of the twelve Commissioners voting in favour of a substantial increase.

This raises questions about the composition of the Commission and whether the reports from various sectors were even considered. Seemingly a box-ticking exercise where rational and logical arguments are merely ignored in favour of a populistic and politically inspired decision.

Especially, since the amendment is much higher than the current inflation rate. This will have an impact on employers’ ability to maintain and create jobs for the uneducated. The increase in the minimum wage will also have a knock-on effect on other on-farm salaries, which will have to be amended above levels of affordability. To add insult to injury productivity on farms has been a worry of late.

Agriculture, the backbone of rural economic stability, is burdened heavily by subsidising housing, crèches, schools, clinics, and transport. These benefits could be a thing of the past.

South Africa needs to implement creative and targeted social strategies to alleviate poverty and eliminate food insecurity in highly vulnerable groups.

The focus areas in addressing social inequalities should be to improve the economy and the education system. Increasing the minimum wage, above what is affordable for employers, will not solve South Africa’s problems, but could have the opposite effect and further increase inequality.