Executive director at Agri SA Hans van der Merwe.
Executive director at Agri SA Hans van der Merwe.

HANS van der Merwe is executive director at Agri SA.

SUMMIT TV: Since the 52% hike in the minimum wage for farm workers came into effect, we've started to hear reports of farmers laying off workers. Is it true that farmers are starting to lay of workers as a result of this pay hike?

HANS VAN DER MERWE: There is disbelief among farmers that this is happening. We see the same frustration amongst farm workers asking who among them now has to go? Some of the sub-sectors will have to make drastic changes — it's almost a tsunami of concerns and even anger about what's happened.

STV: What was Agri SA and organised businesses' involvement in determining this wage increase? If I read the reports correctly it doesn't seem you were involved.

HVM: One should understand that there isn't a central bargaining structure in agriculture — it's not an organised labour situation. Because of the diversity and vulnerability of workers, the minimum wage — which should not be the average — is determined by the sector. What labour wanted from us, through representatives of the labour community, is to establish the principle of central bargaining while they don't have the footprint for it and one couldn't do it, in terms of central bargaining arrangements by law. The only way you could do it was by providing input to the Department of Labour that should advise the Employment Conditions Commission with the relevant information for the Minister to decide on a minimum wage. Any other agreement would have had no legal enforcement possibilities. It was a perception that was created that we are not willing to negotiate but we could not negotiate but could provide information to be considered. What we did encourage all the time was that farmers should negotiate in a farm level with their workers on anything above the minimum wage.

STV: Now it's been decided and the minister has applied her mind but she did say if there were farmers with a particularly difficult situation, that they could apply for a reprieve and what sounds like a circumvention of this minimum wage. How does that work and is it practical?

HVM: We have had the experience — that is Section 50 of the Basic Conditions of Employment Act that says if unaffordability can be proved you can apply for exemption. That exemption goes along with a lot of pre-conditions and it's temporary in nature. You have to reapply the next year and everything that you have behind you must catch up in the following year. The minimum wage is supposed to be a minimum where, over the medium to long term, nobody should be exempted unless there are specific circumstances that require it. I've spoken to all our affiliates with their thousands of farmers that have said to us they've lost faith in the process in the past. My view is they should apply because that will also give an indication of the extent of the problem that we are experiencing on farm level, but they also engage as far as possible with the CCMA and inspectors of the Department of Labour in restructuring and lay-off discussions with their labourers so that government can see what the extent of the problem is.

STV: Do you expect they will reverse this decision? Presumably that's not going to happen and it's not going to be politically convenient for government...

HVM: I believe it will be difficult for them, but the reality is that the minister — and I don't want to doubt her credibility in this process — but the information that was submitted to her said, according to the Bureau for Food and Agriculture Policy Studies, that if you get to the level of R104 per day the wheels will come off agriculture. It will start from that level where you destruct agriculture from that level but the assumption was made in the submission to the minister that agriculture can actually afford it up to that level. That opens up the question whether the minds of all the people were correctly applied around this issue. We are going to re-open our discussions with the minister on that — we've already communicated it up to that level — and even the legal process may be possible to see if it was a fair and just decision.

STV: Can you tell us how much this will cost agriculture per year and what percentage of the current farm labour force may lose their jobs as a result?

HVM: It all depends on what transpires and what additional support can be rendered to the farming community as such. The latest figure we have is the farm wage bill was about R14bn.

STV: Is that the annual wage bill for farming in South Africa?

HVM: Yes, and all the wages are not at the minimum — that's the entry level wage. If you raise the bar at the lowest level you elevate all the other costs as well. This could cost an additional R5bn to R6bn. Wages already make up almost 13% of direct costs but, in certain sub-sectors wages, are up to 60% of direct costs. If you look at it in that context, certain sub-sectors are much more vulnerable to this situation.

STV: Which sub-sectors?

HVM: You can narrow it down to areas where there is irrigation. It's mainly horticulture and fresh produce industries that are directly affected, also sugar cane and forestry, the tobacco sector. Some areas can be wiped off the map immediately if this continues.

STV: What about viticulture? Would that be one?

HVM: Sure. That's part of the horticulture industry.

STV: Do you think as a result of this we are going to see increasing mechanisation of farming.

HVM: For sure. In Africa we have the most mechanised agricultural sector but in the global context we are still overemployed and understandably so. I think as a developing country we need to explore labour opportunities and maximise these. What objective research indicated is that the mid-size to smaller farmers in these sectors will not be able to survive in the long term and they will be taken over by bigger, more capital-intensive farms and we will have much more efficient agriculture with bigger farms. Government wanted to create a policy dispensation that broadened participation for mid-size and smaller enterprises and transformation.

STV: Do you think this goes the opposite way?

HVM: It goes directly the opposite way.