Minimum wage increase: blessing or burden?

Minister of Employment and Labour, Thulas Nxesi, announced the new minimum wage in the Government Gazette on Friday. The national minimum wage, including for farmworkers, has been hiked to R27,58 per hour from 1 March 2024. That is an increase of 8,5% compared to the minimum wage of R25,42 per hour until the end of February. The increase is 2,5 percentage points higher than the average inflation rate for 2023, which was 6%.

“Although AgriSA has always supported decent wages, this wage increase cuts both ways,” says AgriSA chief executive officer Johann Kotzé. On the one hand, it has the potential to improve the spending power of households, but on the other hand it could mean job losses, especially in smaller farm businesses. “Because the higher wage
reduces farm businesses’ ability to hire, the increased wage could mean zero wages for some.”

“It is important to highlight that simply raising wages isn't enough to reduce poverty. We need a business environment that stimulates growth and investment as well as a comprehensive approach that supports other social and employment policies.” Kotzé stressed that without creating a favourable environment for farm businesses to
stay profitable, there is the risk off increasing unemployment.

He says many rural areas rely heavily on the sector for employment and economic stability. “If farmers are forced to cut back on labour or scale down operations due to increased labour costs, it can have a ripple effect on local economies. Reduced farm incomes may lead to decreased spending in rural communities, affecting businesses that
depend on agriculture-related activities such as equipment suppliers, food-processing plants, and transportation services.”

He added that the ramifications of increased operational costs extend beyond the immediate financial strain on farmers. “They set the stage for reduced competitiveness within the agricultural industry, where higher domestic labour costs may undermine the sector's ability to compete on a global scale. This scenario carries the risk of a
decline in exports, as the cost disadvantage could make locally produced goods less appealing in international markets.”

The combination of higher wages and higher spending on energy generation and farm inputs, could have a significant impact on the agricultural sector. “The concern for agriculture is particularly pronounced for the horticulture and export industries since they are generally more labour intensive. This suggests that the higher minimum wages combined with the impact of rising input costs could lead to job losses in exactly those industries that have been earmarked by the National Development Plan to drive job creation,” says Kotzé.

For more information:
Thea Liebenberg
Agri SA
Tel: 82 388 0008 or
[email protected]