The future of the Western Cape farm worker?

The farm strikes and social unrest in the Western Cape over the last week has created considerable emotional distress on both sides. Farm workers complain about their R70-a-day wages, while farm owners are aggrieved about the loss of output (remember, we are close to harvest season), threat to their security and destruction of capital (hundreds of vineyards and several buildings have been burned down). And then there are the other interest groups, the trade unions, the political parties (the DA governs the Western Cape, the only province not to be governed by the ruling ANC), and the media with their own vested interests and polarised audiences.

As always, emotive politics dominate the debate. COSATU, headed by the charismatic Tony Ehrenreich, calls for mass action against the “exploitation” of farm workers. The national Minister of Agriculture, Forestry and Fisheries, Tina Joemat-Pettersson, has said that through the strikes, the workers have shown that they will not be “oppressed”, that they won’t be “treated like slaves”, that they deserve “basic human rights” and that “we cannot have a province where there is still Apartheid” (these quotes are all from her spokesperson’s twitter account).  The Eastern Cape branch of the ANC has even called for a wine boycott, even though De Doorns produces table grapes, not wine.

The South African wine (and grape) industry has a notoriously bad history of labour relations, principally because it was built on slavery. Abolished in 1838, de facto slavery – in-kind payments, often with liquor (known as the dop system) – continued on many farms until the end of the twentieth century. A relatively recent book – Grape, by Jeanne Viall, Wilmot James and Jakes Gerwel – summarises this history very well (I reviewed it here). The practice does not continue today, of course, and is illegal: farm workers are now paid a minimum wage of R70 per day, although in-kind payments, like free accommodation, food and transport, are still often provided in addition to the minimum wages. (Helen Zille, premier of the Western Cape, has invited anyone that have proof of the dop system persisting to contact her personally and she will prosecute.)

References to “slavery” and “Apartheid” therefore does little to address the two core economic issues that are hidden behind the political posturing: 1) that R70 per person per day is, in fact, a higher than median wage given South Africa’s income distribution, and 2) that improving farming technology is increasingly allowing farm owners to substitute capital (harvest machines) for labour.

According to Treasury, 55.1% of South Africans earned below R1720 per household (in 2006 prices). If we assume that two members of the household work (and that there are no pensioners that earn a grant), then R70 a day would equal a minimum of R2800 a month. Farm workers in De Doorns are therefore NOT in the poorest 60% of South Africa’s population. Which is the reason for another tension: the massive migration of workers from the Eastern Cape and other rural areas where most of the poorest live without income opportunities, to towns in the Western Cape. The 8000 permanent workers in De Doorns are supplemented annually by 8000 temporary workers that are either from other provinces or from neighbouring countries. In economic jargon, the supply of labour is outstripping the demand, which forces prices down.

Secondly, better technology allows farm owners to produce more output with fewer inputs. Labour used to be the most crucial input, but it isn’t any more, as anyone attending a recent farm fair would know. Incredible harvesting machines (see picture) now allow farm owners to substitute the work of hundreds of labourers. And as an anonymous De Doorns farm owner recently noted, these “machines don’t complain, work all day, don’t ask for wage increases and don’t burn down your place.” Instead of employing 200 farm labourers, a harvesting machine and 20 farm labourers (now earning a much higher salary because they are much more productive) is a much more lucrative option for farm owners.

So what will happen? The farm workers, supported by the trade unions and the Minister, will request national government to increase the minimum wage to R150 a day.  Anyone with Economics 101 should be able to predict the consequences: a minimum wage creates a price floor, which creates unemployment. Thus, I suspect that if 16000 workers work this year, several thousand less will be required next year. And these numbers will continue to decline over time. Even if they still “only” receive R150 per person per day, those lucky enough to have a job will be in the top 30% highest income earners in South Africa. But what prevents them – or those that organise them – to demand for even higher wages? This risk will further encourage farm owners to switch labour for capital.

More sadly, those that won’t be able to find a job next year, won’t be able to find any work anywhere else in South Africa for below R150 per day, because it will be illegal for farm owners to appoint them at a lower wage, even if they would be willing to work for one. I suspect this will only cause greater tensions between existing farm workers and migrant arrivals. Perhaps this is what Joan Robinson referred to when she said: “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.”

Instead, we should be realistic about the job prospects in the agricultural sector. Job creation can only happen if output expands: redistribution (between capital and labour) will only result in substitution (of labour with capital). For rural salaries to keep track with urban salaries, rural productivity will have to improve and this usually happens slower in the agricultural sector than in manufacturing and services (which are mostly urban industries). Urbanisation will fasten. The best any politician can do is to ensure that the kids of these workers have access to excellent schools, so that they can profit from their own productivity.

Increasing the minimum wage is a short-term solution. In the medium run, a higher minimum wage will only destroy jobs. If Minister Joemat-Pettersson and Mr Ehrenreich really want to benefit farm workers, they should rather worry about another legacy of Apartheid – the poor performance of rural schools, especially in those provinces where many of the migrants come from – and less about government policies to change the minimum wage. Unfortunately, the latter is much easier to do, and popular to sell.