Agri SA has called on government to limit any increase in the National Minimum Wage to an inflation-related increase. The sector has faced significant headwinds in recent years which threaten the viability of many farms. Agri SA also recognises the cost pressures on all consumers in South Africa. and therefore, while the need for an increase is clear, it needs to be sustainable for the country’s farming operations to ensure food security for consumers.
Agri SA has proposed an increase in the national minimum wage of consumer price inflation (CPI) minus 2%. This represents a substantial increase while also accounting for the especially difficult economic context in which the sector finds itself.
The agricultural sector currently employs around 874 000 workers. The sector has grown employment to above pre-pandemic. These figures clearly indicate the critical role of agriculture in creating employment opportunities in South Africa, but this capacity will come under pressure if the increases in the national minimum wage continue to be untethered from economic reality.
According to data from the Bureau for Food and Agricultural Policy (BFAP), the average annual inflation on farm labour has risen by 11,6% since 2012, while the general CPI was around 5% over the same period. Until now, the sector has been able to absorb these increases largely due to the boom experienced by labour-intensive horticultural industries in the pre-pandemic years. But these industries now face significant pressures too, with BFAP projecting price decreases over the next decade.
The trend of above-inflation increases in the national minimum wage has short- and long-term ramifications for the future economic contribution of the sector to South Africa’s gross domestic product (GDP).
In the short-term, an above-inflation increase in the national minimum wage in an already difficult economic climate would threaten the financial viability of many agricultural operations. Farmers already face rising input costs like fuel and fertiliser, and declining delivery of critical services like transport, logistics, and electricity. Farmers in parts of the country are also still recovering financially from torrential rainfall earlier this year and now face another potentially record-breaking locust outbreak. Under these circumstances, farmers cannot withstand an above-inflation increase in the national minimum wage.
In the long-term, a rapid rise in labour costs that is not accompanied by a rise in productivity will threaten South Africa’s global competitiveness. As it stands, many of our local markets are threatened by the dumping of cheap products. At the same time, our exporters face growing global competition from more productive countries with cheaper labour such as Chile and Peru, two rising South American fruit-producing countries. South Africa’s ability to compete globally, grow its export market share, and once again increase the agricultural sector’s contribution to GDP will depend in large measure on how well we strike the balance between wages, productivity and the ability to produce enough healthy food for local markets at affordable prices.
Given the inflationary pressures on the agricultural sector as well as the prolonged period of above-inflation wage increases in the sector, Agri SA has proposed an increase in the national minimum wage of CPI minus 2%.
Agri SA will continue to engage government on this issue to ensure that the pronouncement that is made represents a sustainable increase that improves workers’ lives and also protects the food security of South Africa by maintaining a sustainable, growing agricultural sector for current and future generations.
Enquiries
Johan Wege
Chair of Agri SA’s Centre of Excellence: Labour
C: 082 337 4520
Christo van der Rheede
Agri SA, Executive Director
C:: 083 380 3492
