Census figures show worrying trends

Higher wages were a direct cause of job losses in agriculture. Government will have to reconsider its agricultural employment policies.
Issue date: 20 March 2009

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Higher wages were a direct cause of job losses in agriculture. Government will have to reconsider its agricultural employment policies.

Stats SA recently released the preliminary results of the 2007 agricultural census, which indicates the industry is in dire straits.
Farming units have decreased from 57 980 in 1993 to 45 818 in 2002 and to 39 982 in 2007 – a decrease of 17 988 farmers, or 1 285/year. Gross farm income grew by 10,5%/year since 1993 while farm expenditure grew by 11,8%/year.

Fewer farmers, fewer jobs
Decreasing farming units have resulted in the loss of 296 459 jobs since 1993. Over this period, the loss of one farmer resulted in a loss of 16 jobs. But other factors also resulted in job losses, so it’s wrong to assume that all job losses were caused by the reduction in the number of farmers.
Farmers have a much closer relationship with their workers than mining companies, which easily lay off workers to protect their bottom lines.
But a plethora of regulations often leave farmers with no other choice but to reduce the number of labourers.
The remuneration per worker increased from R3 372 in 1993 to R10 807 in 2007, an increase of 10,3% per year. In terms of the inflation-adjusted rand, it increased by 4,9% per year. There’s a strong negative relationship between the number of employees and the average remuneration per employee. Statistically the increase in wages is a factor in more than 99% of lay-offs.
The recently announced 13% increase in farm wages will result in the loss of another 110 000 jobs. Clearly the labour department will have to take this relationship into account in future wage dispensations.

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A profitable year, but with challenges
The census year (2007) was a profitable one for farmers, with higher product prices and input prices that only increased sharply since mid-2007.
Total gross farm income grew by 8,3% per year from 2002 to 2007, while the number of farmers decreased by 2,7% per year. Gross farm income per farming unit therefore increased by 11,3%.
Total farm expenditure increased from R45,04 billion in 2002 to R54,07 billion in 2007 – an increase of 20%, or 8,9%/year. The increase in farm requisite prices during the same period was 5,6%/year.
Farmers had to use more farm inputs than in 2002 and will have to evaluate their use of inputs carefully in future. The increase in farm income was caused by higher production and higher prices. The prices received by farmers increased by 6,8% per year from 2002 to 2007. Higher production enabled farmers to increase gross farming income by 8,3% per year.
Nett farm income per farm increased from R180 995 in 2002 to R637 062 in 2007 or in real terms from R162 000 in 2002 to R443 945 in 2007. Farmers got an average 14,3% return on total investment in 2007, up from 8,4% in 2002.
Farm debt increased by R6,23 billion from 2002 to R37,09 billion in 2007. A sharp increase in asset values decreased farmers’ average debt ratio to 20,8% in 2007. A 20% debt loading is not excessive when a farmer gets a 14,3% return on his investment.
But if one adjusts the 2007 figures for the latest input and product prices, return on investment decreases to 8,5%. This isn’t enough to service a 20% debt.
Dr Koos Coetzee is an agricultural economist at the MPO. All opinions expressed are his own and do not reflect MPO policy.     |fw