Minimum wage could alleviate poverty but increase unemployment — Agri SA

While Agri SA is not opposed to the minimum wage increase, effective from March, it has raised some concerns about the rising cost of running sustainable farms as financial pressure on farmers mounts.

In a recent statement, Agri SA executive director Christo van der Rheede said the wage increase was a double-edged sword that would contribute to the alleviation of poverty and inequality, but could also possibly lead to job losses.

“It is vital to stress that the alleviation of poverty does not solely rely on the increase in wages but should be designed in a way to supplement and reinforce other social and employment policies.

“Therefore, without an enabling environment for farms and farming businesses to remain sustainable and profitable, we run the risk of increasing unemployment and threatening food insecurity,” Van der Rheede said.

The department of employment and labour announced that the minimum wage would increase by 6.9%, from R21.69 to R23.19.

And while that might not seem exorbitant, in the Eastern Cape it comes against the backdrop of extended periods of drought, followed by flood damage in places and outbreaks of locust swarms.

Add to that the rising input costs of farming as fuel and electricity rates have increased continuously in recent months.

On top of all this, Van der Rheede said farmers needed to contend with dilapidating roads, making it increasingly difficult to transport goods like crops, produce and animals products, which might have knock-on effects such as temporary supply problems and a decrease in quality.

“Farmers cannot bear the additional cost of repairing these gravel roads,” he said.

“South African farmers do not enjoy the production support that their counterparts in the US and Europe enjoy.

“Farmers, in general, are price takers who often have to contend with an average profit margin of 5.97% depending on the type of activity.

“The likelihood of our farmers operating at a loss is becoming more evident day by day and the government must create a conducive policy, cost and infrastructure environment to ensure profitable farming in SA.”

He said the alternative was for farmers to explore the possibility of adopting technology.

This could have high initial costs, but would reduce labour costs in the long run and have a devastating impact on the low and semi-skilled workforce.

“As mechanisation leads to improvements in processes, productivity and a reduction in labour intensity, this may prove devastating in a country with an unprecedented unemployment rate.”

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