Involvement of Unions Key to Agricultural Growth FARM ECONOMICS

Cape Times (South Africa), February 21, 2014 | Go to article overview

Involvement of Unions Key to Agricultural Growth FARM ECONOMICS


BYLINE: Katishi Masemola

As the economy grows, like in many other growing economies of middle- and high-income developing countries, the agricultural sector's share of growth domestic product (GDP) is declining as a percentage yet the sector may be growing in value and/or volume terms.

This is particularly the case as other sectors, such as services, are growing faster than agriculture.

This has also been the case with employment in the agricultural sector over the past 10 years, as the graph shows, and has been for over 100 years.

Actual employment levels have been on the decline for all sorts of reasons, including the effect of the 1997 "big bang" trade liberalisation and consequent mechanisation and retrenchments emanating from loss of government subsidy and reduced share of export markets.

Except for the loss of government subsidy and of tariff and other trade-related protection, the agricultural sector, as price takers in the value chain, is squeezed by retailers, receiving anything between 7c and 25c from every rand of retail price, depending on the product type.

As if that is not enough, farmers are then faced with high non-labour input costs, from energy costs of fuel and electricity (administered prices) to fertilisers and chemicals (largely monopoly prices). Usually, these factors are beyond farmers' control and they become price takers on the input side as they are on the output side.

With the above factors at play, the "only option" available for farm owners/operators is to deal with a variable they can influence on the input cost side. This is the price and the quantity of labour. Because farmers cannot do much on the wages, given the legislated minimum wages, the "real option" becomes the decision on the quantity of labour.

This option is not an obvious or easy recourse as it is itself affected by factors such as quality of the product type and requisite number of workers needed as part of timeous delivery and other requirements for such stock.

These factors could be the expected volumes for export markets such as delivery of table or wine grapes and could be the Safex-required commitments on delivery of maize or wheat. It also could be factors such as compliance requirements on taste, grade and hygiene or such technical and other standards.

The February 2013-announced minimum wages were adjusted by about 52 percent following the De Doorns-inspired farmworkers' strike action. This did not have the impact on job losses as feared by some commentators. In fact the 52 percent hike has not pulled workers out of poverty.

According to the August 2010 research paper, the Department of Agriculture, Fisheries and Forestry, which extensively quoted researchers in the field of agricultural economics and policy disciplines, there has been a long-term decline in employment levels, from a high of about 1.4 million in the early 1990s to about 650 000 in 2010.

While statistics are still unreliable, it is estimated that about half of the workers, 330 000, are seasonal employees with 60 percent likely to return to the same farm in-season.

Referring to Simbi and Aliber, the department's paper points out that "... the adoption of labour-saving technologies does not appear to be motivated by the relative increase in the cost of labour, but rather it represents cost savings that farmers find practical and attractive..." and referring to Vink and Kirsten "... the decline in the number of people employed. …

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Involvement of Unions Key to Agricultural Growth FARM ECONOMICS
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