Minister Nxesi reacts to the outcry on National Minimum Wage increase

The economics of the national minimum wage has divided the agricultural fraternity along union lines. 

Henry Geldenhuys, President of TLU SA, said his association had written to Minister Nxesi to dispute the R21.69 per hour wage for farm workers. 

“If a farm shows no profit, the farmer must make certain amendments – be it to decrease the wage bill or to move away from labour intensive branches like vegetables or wine. That will lead to an increase in demand, but a shortage in supply, which will lead to an increase in price.”

​Agri SA said the increase would mostly affect small scale and medium scale farmers especially still recovering from the effects of the drought.

“Most of the commissioners seem to have taken the incorrect view that the severity of the pandemic on the agricultural sector was minimal. Subsectors such as the wine industry have endured two bans on sales, whilst tobacco, wool and barley producers were not declared essential services during the hard lockdown and their activities were seriously hampered during the last months. These industries are yet to recover from losses suffered during the hard lockdown, which has severely impacted the demand from the agriculture sector,” Agri Sa said in the statement. 

However, Minister Thulas Nxesi was not budging nor backtracking on the announcement made. 

“As we have pointed out before, the minimum wage is really what it says it is. But it is not based on thumb suck but a well thought out process that allows all the interested parties to have a voice. I have noted with concern the objections from some stakeholders on the adjustment of the NMW and recognise the reality that the Covid-19 pandemic has had a harsh impact on most employers.”

According to the NMW Commissioners, they had taken account that agriculture was not affected during the lockdowns and going as far as stating that the measure was to ensure that vulnerable workers do not fall below the poverty line.

With the increase now in place, the Agricultural Business Chamber calculations concluded that the sector will shed 3 million jobs in formal and informal employment.

“Even if no further restrictions are imposed, even the most optimistic estimates for an economic recovery predict that the South African economy will only reach 2019 levels again by 2023/24. The recommendations made by the majority report is therefore, with respect, completely out of touch with the economic realities of the day,” lamented Agricultural Business Chamber in its submission last year. 

According to the department of employment and labour, the NMW wage increases was backed by researched conducted by the Development Policy Research Unit (DPRU) at the University of Cape Town and the Centre for Social Development in Africa (CSDA) at the University of Johannesburg.

“Research found that there has been no negative impact on employment as a result of the introduction of the national minimum wage but they added a caveat that the reason for that might be due to the fact that employers began adjusting almost two years prior to its eventual implementation or perhaps the timeframe analysed is too short,” said the department.

Statistics SA earlier in the week released labour survey which saw agriculture contributing 2000 jobs in the fourth quarter. The agricultural fraternity feared that sub-sectors such as grains and livestock, which were not labour intensive, would be not that affected in contrast to the horticulture industry.

“The horticultural subsector that accounts for the bulk of jobs in the sector already saw significant declines in 2020. These subsectors employ large quantities of unskilled and semi-skilled labour (including seasonal labour), which means that real costs to companies will be directly affected by additional labour costs,” said the Agricultural Business Chamber.

The minimum wage increased by the rate of inflation (3%) plus 1.5% from R20.76 for the year 2021, which will affect more than 40 000 jobs in the horticulture services.  

Again, Minister Nxesi reiterated that all inputs received from the various stakeholders were divided in their recommendation and unfortunately farmers would need to bear the brunt. 

“Indeed, some stakeholders were against the recommended adjustment based on impact that it will have on employment/ unemployment, low economic growth, the impact that Covid-19 has had on the operations of businesses as well as the high production costs for farmers who will have to bear the brunt of the increase,” said Minister Nxesi.

“The NMW Act however accordingly permits employers that are genuinely unable to pay the proposed adjustment to utilise the exemptions procedures in order to be exempted from the NMW,” said Minister Thulas Nxesi

In amending the national minimum wage this year, the department said the Minister had considered all the factors as required by the law, the report of the commission as well as the different submissions received from the stakeholders. 

“Based on those and the results of the initial research undertaken on the impact of the introduction of the national minimum wage, which found that the NMW did not place an undue burden on employers or led to job losses in its first year of implementation, reached the decision to accept the proposal of the Commission and increase wages accordingly,” said the department. 

The Black Farmers Union of South Africa (BFASA), speaking on Power FM, bemoaned about commercial agriculture paying workers slave wages and further said that such practice would continue regardless.

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