Labour laws put the squeeze on farmers

SA farmers naturally have to operate within the confines of labour law. Yet our legislation is onerous and erodes our international competitiveness, says Pieter Breytenbach, general manager of LWO, an employers’ organisation that offers labour advice to farmers. Peter Mashala spoke to him.

Pieter Breytenbach

When was the employers’ organisation LWO launched and how is it structured? The LWO was established in 1990 to provide employers with advice on South African labour law. It is a non-profit members’ organisation and only members sit on the board. Current membership stands at about 3 500, of whom 70% to 75% are from the agricultural sector – the LWO’s particular area of expertise. The organisation is represented in all nine provinces.

What type of services does the LWO offer to agricultural employers?
The organisation offers pro-active labour-related services, such as training on the latest labour issues. Representatives in the nine provinces also stay in touch with members, helping them as required. For example, members are assisted to ensure that they comply with legal requirements in time for Department of Labour inspections.

What are the main problems that agricultural employers currently have to deal with?
Farmers are businesspeople, and like so many others, are trying to make a profit in a struggling international and local economy.
Economists originally predicted 3,4% growth this year, but have since downscaled this to 2,8%. In this environment, managing profitability is a real challenge – and employees are part of the equation. For example, absenteeism is highly problematic, and if a single machine operator is absent, this affects production and possibly the bottom line.

How will the new minimum wage increase affect employers?
Any increase in any cost component of a farmer’s business has an impact on profit, and therefore whether that farmer stays in business. LWO clients regularly terminate their membership because they are closing shop – first-hand evidence that farmers’ profitability is under tremendous stress. 

The recent 9,52% increase in wages is much higher than that of the previous two years. Furthermore, the increase from 1 March 2013 to 28 February 2014 and from 1 March 2014 to 28 February 2015 will be based on CPI + 1,5%, so a further 0,5% increase has now been added – the previous two years’ increase was CPI + 1%. It’s going to be problematic for farmers to deal with such a high increase, because wages are normally their second-highest cost.

How is the minimum wage determined?
The increase was set according to the advice of the Employment Standards Commission, apparently after following a consultation process and public hearings. But SA’s economy operates on the free market system, and the LWO does not agree with any involvement from government, whatever the intention. The free market system should let the free market dictate the levels of payment for labour.

Is there a trend to use casual labour in order to save money?
Well, the biggest general trend now seems to be that farmers are mechanising more of their operations. As far as labour goes, because labour costs are generally the second-highest expense on a farm, employers (just like any other business owner) need to contract wisely to ensure they utilise seasonal contracts effectively.  The LWO assists its members in the most effective, legal way of contracting.

How does the Security of Tenure Bill affect farmers’ ability or willingness to house farm workers on their property?
They are becoming more negative about accommodating their employees, and would rather transport their workers to and from work.
But this is also not cost-effective as this is expensive and wastes time. LWO members feel extremely strongly about this negative, discriminatory and intrusive legislation.

What is the level of compliance among your clients?
The law insists on compliance, and the LWO is not aware that any of its clients are not fully compliant.

But how do you make sure?
The LWO checks that all its members are informed on labour issues and work within the limits of the law. The organisation also operates a legal assistance fund to ensure that all its members receive free legal assistance, as far as possible and if required.

Why is it important that farmers pay a minimum wage, provide accommodation, and ensure the health and safety of their employees?
Non-compliance is a criminal offence, and the guilty farmer could receive a fine. Unfortunately, some farmers simply cannot afford to comply with all the demands of the law.

What is the LWO’s position on the recent Parliamentary Committee on Labour’s findings after visiting 21 farms in Western Cape?
The LWO believes that 21 farms is not representative of all farms in the province. No LWO members were among those visited.

Are SA labour laws friendly to employers when compared with those of other countries?
Not too friendly! The Global Entrepreneurship Monitor (GEM) surveyed 59 countries and placed South Africa at the bottom of the pile due to the destructive impact of its labour practices. Moreover, the World Economic Forum’s global competitiveness report ranks South Africa 135th out of 139 countries on the ability to hire and fire, and 131st out of 139 in labour flexibility. This puts the country in a disadvantaged position in terms of global competitiveness.

And because of our relatively high labour costs, South Africa is unable to attract investment in the labour-intensive sectors. The government should start looking at labour legislation and asking if this will benefit the country in the long run. At this stage, it does not appear that South Africa is moving in the right direction.

Contact Pieter Breytenbach on 012 664 2703 or at [email protected]