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Employment practices in the agriculture and retail sectors and implications on worker
(dis)empowerment: Evidence from literature and some empirical analyses
Nicholas Ngepah
School of Economics, University of Johannesburg
nngepah@uj.ac.za
Assisted by
Regina Conselho Mwiinga
School of Economics, University of Johannesburg
February, 2019
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Contents
List of Tables ........................................................................................................................................................ 3
Executive summary.............................................................................................................................................. 4
1. Introduction................................................................................................................................................ 10
2. Main structural factors of the horticulture value chain which disempower workers ..................... 11
2.1. Land tenure rights and shifts in land use ...................................................................................... 12
2.2. Race and gender norms .................................................................................................................... 16
2.3. Worker organization ......................................................................................................................... 19
2.4. Labour policy and legislation versus policy in practice .............................................................. 21
2.5. Technology, mechanization and production standards .............................................................. 25
2.6. Financialisation, Global Trade and Tax Evasion ......................................................................... 31
2.7. Market power, concentration and vertical integration ................................................................ 33
3. Practices undertaken across the supermarket types engaged in the horticulture value chain. ..... 34
4. Income generation within and between the horticulture production and retail sectors ............... 35
4.1. A comparative analysis between income generated by farm workers and retail workers ..... 35
4.2. A comparative analysis between the cost of production and income generated by
management (later should include share options) and owners .............................................................. 38
4.3. Inequality and wage distribution by casualization and managerial and seniority ................... 41
5. Possible formal and informal mechanisms to improve the working conditions along the
horticulture value chain ..................................................................................................................................... 44
6. Paving the way forward (find gaps in the literature presented that if filled can assist the second
phase of the campaign) ..................................................................................................................................... 45
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List of Tables
Table 2. 1: The structure of land ownership in South Africa ............................................................. 14
Table 2. 2: demographics of farm dwellers ............................................................................................. 19
Table 2. 3: Gender distribution by nature of employment ................................................................. 19
Table 2. 4: Amendments to the Labour Relations Act ........................................................................ 22
Table 2. 5: comparative scores of labour regulation ............................................................................ 24
Table 2. 6: Trends in retail trade payment methods ............................................................................ 28
Table 4. 1: inequality comparison in retail, agriculture and rest of the sectors 41
List of Figures
Figure 2. 1: Casualization trends in agriculture, retail and overall .................................................. 25
Figure 2. 2: Global structure of job changes due to technology ....................................................... 27
Figure 2. 3: Projected patterns of technology adoption in South Africa ........................................ 27
Figure 2. 4: Capital-labour ratio trends in various economic sectors ............................................. 29
Figure 2. 5: High-skill/low-skill structure in retail and agriculture ............................................... 30
Figure 2. 6: comparative wage rates by skills level in agriculture.................................................... 31
Figure 2. 7: comparative wage rates by skills level in the retail sectors ......................................... 31
Figure 4. 1: Comparative unit pay by sectors for skilled labour 36
Figure 4. 2: Comparative unit pay by sectors for semi-skilled labour .............................................. 37
Figure 4. 3: Comparative unit pay by sectors for low-skilled labour ................................................ 38
Figure 4. 4: Relative income shares of management and senior professionals’ vs casual
workers ...................................................................................................................................................... 40
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Executive summary
Persistently high unemployment and consequently inequality and poverty significantly jeopardise
South Africa’s inclusive and sustainable development. In the past 11 years, South Africa’s
unemployment rate has fluctuated within the 20% and 30% band, with a very clear upward trend over
time. This is too high relative to those in similar countries like Brazil (8.5% compared to 25.1% for
South Africa in 2015) and the rest of Sub-Saharan Africa with unemployment rate of 7.2% in 2015.
Over time, the employment shares of the agricultural sector reduced from 10.1% to 5.6% between
2001 to 2016. Over 4.3 million new jobs added to the economy during the period has been contributed
mainly by the tertiary sector, with the retail and wholesale trade sector employment expanding by
0.7%. It is noteworthy that the increase in employment is significantly less than the increase in the
GDP contribution, indicating some degree of jobless growth. However, high levels of casualization
coexisting with high-skilled labour demand implies that inequality would be in the rise in these key
sectors. In the last two decades there has been a rise in the shedding of unskilled labour in favour of
medium-skilled to a smaller degree and of highly skilled workers to a larger extent. As can be expected,
the greatest impact in job losses has been in the primary sector, especially in agriculture, which by
nature employs the largest volume of the unskilled labour force.
The loss of secure livelihoods, increased food insecurity and poverty are some of the examples borne
from such disparities. In the case of the previously disadvantaged natives and of women in particular,
the disparities enhance the constraints associated with the historical restrictions to land access and
secure land rights. This paper intends to guide Oxfam’s intervention in addressing inequality and
labour issues in the horticulture value chain and agriculture and retail in general, by providing evidence-
base recommendations. It focuses particularly on the structural factors that boost labour discord in
the horticulture and retail sectors. It concentrates on notorious issues such as intra and inter income
generation in the sectors and across gender lines. Added to that, it explores potential means through
which the current scenario can potentially be minimized. Hence, the results of the study will contribute
to the advocacy campaign on the alleviation of disparities amongst farm workers and in the retail
sector through the improvement of employment conditions both in the horticulture and retail sectors.
The methodology employed is twofold. First, it undertakes a literature review and complements with
some descriptive and trend analyses of data from various sources. The work also relies on a
decomposition analyses to explore inequality and income shares of various working groups within and
across the agricultural and retail sectors. The main points of the finding are as follows
Land tenure rights and shifts in land use
Key issues are:
(1) contradictory and fragmented policy framework; (2) the current ideological dichotomy between
capitalism and socialism masks the real solution, which ought to be focused on correctly enacted
constitutional provisions; (3) the inability to refocus attention on balancing individual property right
with public interest; (4) currently moving from high concentration of land to dismantling of large
farms to smaller units is neither socially nor economically viable, a mix of different farm types and
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sizes has been suggested; (5) reliance on legislation alone cannot succeed to drive change, even political
and social priorities, though a very important complement to legislation cannot bring about desired
change unless global socio-economic reality is taken to account; (6) final and most important is the
inefficiency of government institutions in implementing and managing the land reform process
singlehandedly.
Synergizing the process with the correct market mechanism will be more robust. Overall, unless the
land reform policies currently underway result in a new approach that does not built on the strategies
inherited from the previous governance regimes, the spatial disparities will persist consequently,
reinforcing current economic and cultural exclusions.
Race and gender norms
Black people, particularly women’s land rights are still a point of contention, specially, where cultural
regimes are concerned. Limited access to land has constrained most previously disadvantaged blacks,
who are mainly blacks farm workers, with little or no empowerment to access beneficial stakes in the
production value chain. The gender distribution of farm workers shows that only 32% of permanent
contract workers are females. Among workers with unspecified duration, 32% are also females,
compared to 53% of limited employment duration. Clearly, the burden of marginalization in
agricultural employment disproportionately falls on female farm workers
Intervention measures have to therefore target black female farm workers who are among most of the
informal farm dwellers, working as casual labourers with limited employment duration.
Worker organization
Overall, labourers in South Africa are considered to be highly organized through labour unions.
Although in the apartheid and immediate post-apartheid era, trade unions were the amplification of
the workers’ voice in South Africa, politicization has weakened this voice somewhat over the years.
Consequently, high power of unions has not corroborated the effective protection offered to workers
during collective dispute resolution. The wage premia as a result of unionization in South Africa of
7% on average is closed to the lower value of the global range of 5% to 16%. This suggests that the
high power of unions in South Africa does not necessarily translate to equally high wage protection.
Of significant concern is the fact the most of the casual workers, especially in the agricultural sector
are not unionized. The unionization rates were at only 1.7% for limited duration workers and 0.9%
for unspecified duration workers in 2014. Therefore, the low-wage casual workers are relatively less
represented by the trade unions.
Labour policy and legislation versus policy in practice
Labour regulation in the agricultural sector have a relatively short history. It was entirely excluded
from legislature in the most part of the apartheid era until the introduction of the Labour Relations
Act in 1995. A key loophole in the agricultural labour regulation is the fact that it does not apply to
contractors. Consequently, most employers in the sector have resulted to middlemen to circumvent
regulations. The practice of contractors providing teams of workers for particular tasks has increased
in the low skilled sector, not only in the agricultural sector, but also in the retail sector. In these cases,
workers are remunerated by contractors and not farmers. This practice also affects contract farming,
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where smallholder farmers are often contracted to supply corporate entities
The rise in competition, has been associated with adverse impacts for farm workers as farmers try to
stay competitive in the global markets. Over time more and more farmers have cut back on in-farm
accommodation for employees and changed employment terms, mostly from permanent jobs to more
casual and or seasonal jobs. This has had consequences not only on basic wages but on benefits that
were once tied to such jobs.
The regulatory environment in South Africa makes hiring more difficult than firing. South Africa’s
hiring difficulty is the highest among all the country groups, far higher than its upper middle income
peers. Contrasting this is the firing cost, which is lower than those of its upper middle income peers.
The issue is with the regulatory inflexibility in hiring workers. In trying to circumvent this inflexibility,
firms have resorted to the use of labour brokers or temporary employment service providers in
employment. Consequently, the proportion of temporary employment services have increased
significantly, especially in the services sectors as explained earlier on.
Minimum wage
Over time, a number of sectoral minimum wage laws have been instituted through union, business
and government joint negotiation processes. Three important findings are that minimum wage
policies: (1) do not exert any significant negative effect on the probability of being employed, (2) have
on the contrary, increased real hourly wage by between 5-20%, the increases were higher in district
councils where pre-law wages were lower than the set minimum wage, (3) have elicited a response of
reduction of weekly hours worked. However, the increase in hourly wage were found to outweigh this
effect. Consequently, minimum wage policies can have net positive effects on labour market and
workers’ welfare in South Africa.
The key bottleneck therefore has been the sluggishness over the years in rolling out the minimum
wage broadly. There is an associated question of the optimal minimum wage, given the increasing cost
of living and high levels of wage inequality in South Africa. This question has not received adequate
attention yet.
Technology, mechanization and production standards
Without doubt, the major current to long-term driver of changes in labour market dynamics and
structure of wages is technological progress with the advent of the fourth industrial revolution. There
is also the related casualization of labour, which is generally exacerbated by shifting employment
patterns that come with skilled-biased technology adoption.
Four key technological advances are on the cart in the immediate future that will alter the economic
and employment landscape. These are ultra-high-speed mobile internet, artificial intelligence, big data
analytics and cloud computing. These will contribute in advancing economic expansion by changing
employment patterns to the benefit of high and adaptive skills. Interestingly, while roles that may
enhance the human-machine synergy might expand, low skilled tasks for humans such as salespersons,
customer service representatives and a good part of retail management will contract. So far in the
South African retail sector, the biggest technological expansion that is already displacing a number of
jobs and contributing to casualization is ecommerce.
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Some evidence of skilled-biased technological progress is visible in the significant upward trends in
capital-labour ratios. These trends are significant in the agriculture and retail sectors as well. This trend
is increasing the structure of the employed labour force to the benefit of skilled labour, with low and
un-skilled labour pushed to casualization, informality and unemployment. For those employed, the
wage composition displays significant and increasing disparities, with wage rates for skilled labour
rising significantly relative to low and unskilled.
A comparative analysis between income generated by farm workers and retail workers
The unit pay rates for skilled labour are trending flat from 1993 to 2018 in the retail and agricultural
sectors. There is a significant gap between the agriculture and retail sectors such that skilled labour
wages in the retail sector are twice those of the agricultural sector. Both the retail and agricultural
sector wages for the semi-skilled are significantly below those of the rest of the economic sectors.
While wages in the rest of the sectors are trending upward, those of agriculture and retail have
remained flat over the years. Equally, semi-skilled labour wage rate in the retail sector are in general
about 2.5 times those of the agricultural sector.
From 1993, low-skilled wages in the retail sector trended upward at the same rate on average with the
rest of the economy. However, from 2006, a decoupling started taking place, such that while wages in
the rest of the economy rose faster, those of the retail sector increased very sluggishly and finally
plateaued in around 2014 and began to fall thereafter. It is interesting that the decoupling also
coincides with the onset of the significant rise in the capital-labour ratio. It also ties with the trends in
the labour demand structure that we discussed earlier, suggesting that some degree of skill-bias
technology may be at the root of this trend. The pathetic picture remains for low-skilled labour wage
rate in the agricultural sector, with retail/agriculture wage gap far more than 10:1. These gaps are
clearly significant drivers of inter-sector income inequality.
Income shares of management and workers
Management and senior professionals’ share of income increased from just above 45% in 2005-2009,
to 60% in 2015-2017. While the income shares of the management and senior professionals in all
economic sectors have shown an increasing trend, the contrary is true for casual workers’ income
share. Casual workers in agriculture took just about 37% of the income in the period of 2010 to 2017.
Retail casual workers’ share decreased from 30% between 2010-2014 to about 28% in 2015-2017.
Finally, in the rest of the economic sectors, casual workers appropriated just less than 25% in 2010-
2014 period, before falling to 20% in 2015-2017. Casual workers are likely to be more marginalized,
leading to higher wage disparity in sectors like retail, where the management pay is significantly and
increasingly higher than those of the rest. These are certainly significant drivers of inequality as we see
below.
Inequality and wage distribution by casualization and managerial and seniority
In 2015, South Africa’s Gini coefficient was 0.63, the highest in the world, an increase from 0.61 in
1996. During the same period, real wage gini increased steeper than that of overall consumption
expenditure, from 0.58 to 0.69, while palma for wages also increased steadily from 5.11 in 1996 to
10.13 in 2014. The average for all economic sectors suggest that labour market wage inequality has
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remained higher than the expenditure inequality reported by the World Bank (2018). However, it was
at 0.64 (2010-2014), close to the World Banks 0.63 for expenditure inequality in 2014. This clearly
supports our conjecture that it is the labour market dynamics that fuel the high inequality in South
Africa. Currently consistent with the trends in the structure of labour market income shares in the
agricultural sector in Figure 6, the Gini coefficient fell significantly from 0.84 in the 2000-2004 period
to 0.55 in 2015-2017. In the retail sector, inequality rose from 0.70 in the first period to 0.75 in the
last period, though it fell somewhat marginally in 2010-2014 to 0.63. Inequality in the retail sector
traces inequality trends in the rest of the (non-agriculture) economic sectors.
The share of casual workers’ wages has been falling in both the retail and the other non-agricultural
sectors of the economy. In contrast, the share of wages that goes to managers and senior professionals
in the retail and other non-agricultural sectors of the economy has been increasing significantly over
time. This picture suggests that the gap between management and workers at the very low end of the
wage distribution curve has been rising. This trend is likely to exacerbate inequality over time.
Underlying causes
The combination of the key factors discussed above, including land reform issues, weaknesses in
unionization and regulatory reach, and above all, the skill-bias technical progress that comes with the
increasing adoption of new technologies of production are at the root of a possible worsening of
inequality in the closest future. The area of solution to these problems lies in skills development and
adaptation, which is also plagued with issues.
Weaknesses of the South Africa’s human capital development system
The problem with South Africa’s educational system that has been stubborn to redress is the highly
unequal structure along racial lines inherited from the apartheid era. The democratic government has
made significant efforts in access to education by the previously disadvantage groups, however, racial
differences in the quality of education still reproduces the old order to some extent in the labour
market.
While South Africa’s primary school enrolment stands at close to 100% , the weakness of South
Africa’s current human capital development efforts lies in the inability to reverse the poor quality
problem inherent in the educational system. Consequently, while South Africa is mobilizing efforts
for job creation, the journey is made more difficult given that the more than 27% unemployed South
Africans are largely medium-skilled to unskilled. These trends from the recent past show how near
impossible it may be to win the battle of creating low-skilled jobs to reverse the unemployment
challenges. The solution lies in the balance of job creation efforts and aggressive development of
relevant skills that can easily adapt to a technologically changing production environment. These
strategies together with ensuring the effectiveness of labour market institutions (unions, low-cost
hiring regulatory reforms) in protecting low wage workers and effective land reform are particularly
called for in the agriculture and retail sectors that have shed low and un-skilled jobs.
Hence, the study recommends the following interventions:
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Promote and encourage the upgrade and adaption of workers’ skills in response to changes
in the labour market skills demand;
Promote mechanisms to reduce the MNCs dominant influence in the host countries’ labour
markets in favour of improved workers’ welfare. This should include mechanisms to
minimize the shifting of incurred costs to suppliers and workers;
Strengthen labour unions’ ability to defend workers’ employment rights in the sectors;
Look into means of implementing decent wages across the agriculture sector, particularly the
horticulture segment. This should include greater research into ways to improve the working
conditions and income of non-permanent workers;
Address gender based inequalities including those resultant from historical disparities such as
the unequal access to production resources like land and capital for instance, and promote
equal employment opportunities and income for similar work;
Adapt land reform policies to reflect country specific factors and promote a more inclusive
redress approach.
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1. Introduction
South Africa’s biggest development challenge remains high levels of unemployment, inequality and
poverty. The recent release of the Statistics South Africa (Statssa, 2019) unemployment data shows an
increase in South Africa’s unemployment rate from 27.1% in quarter four of 2018 to 27.6% in quarter
one of 2019. In the past 11 years, the rate has fluctuated within the 20% and 30% band, with a very
clear upward trend over time. This is too high relative to those in similar countries like Brazil (8.5%
compared to 25.1% for South Africa in 2015) and the rest of Sub-Saharan Africa with unemployment
rate of 7.2% in 2015 (Bhorat and Khan, 2018).
The persistently high unemployment over time has been due to various factors including structural
change, skilled-biased technological progress, that have combined to reduce overall labour demand,
specifically for the low skilled, while increasing demand for skilled labour to match the rising capital-
labour ratio due to technology. Shifts in the economic structure have resulted in significant shedding
of jobs. Between 2001 and 2016, the primary sector shed about 400 000 jobs, 70% of which were in
agriculture. Consequently, the employment shares of the agricultural sector reduced from 10.1% to
5.6% in the same period. While the secondary and particularly the manufacturing sector has remained
flat in terms of labour demand, the over 4.3 million new jobs added to the economy during the period
has been contributed mainly by the tertiary sector, with the retail and wholesale trade sector
employment expanding by 0.7% (Bhorat and Khan, 2018). It is noteworthy that the increase in
employment is significantly less than the increase in the GDP contribution, indicating some degree of
jobless growth.
It is also noteworthy that the increase in employment in South Africa has been largely due to significant
rise in Temporary Employment Services (Casualisation), due mainly to labour brokering. Overall, the
TES share of total employment increased from 2,22% to 6.4% and from 26.64% to 47.36% in the
financial services sector. In terms of socio-professional categories, the rate of TES relative to total
employment is by far the highest among services and sales workers, standing at 46.1% in 2014,
followed by elementary workers (Bhorat et al., 2015). For the most in South Africa, household
income/consumption, at the basis of inequality and poverty calculations derive from labour incomes.
Hence, the nature of the labour market dynamics in South Africa can be a major contributor to poverty
and inequality.
The global expansion of supermarkets has been well documented over the years. Given South Africa’s
highly developed food retail sector locally and across neighbouring countries in comparison to other
economies in the continent, information regarding the local industry is relatively forthcoming.
Similarly, its widespread ownership of supermarket chains across the continent talk to its influence.
Consequently, practices successfully implemented locally may be expected to be adopted in most host
countries.
This study aims at reviewing some of the main structural factors of the horticultural value chains, the
practices in the retail trade sector, income generation in both the horticulture and retail sectors, and
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how these factors affect workers, as well as, mechanisms which can potentially further improve the
working conditions and welfare of the workers. The methodology employed is twofold. First, we
undertake a literature review and complement with some descriptive and trend analyses of data from
various sources. We also employ a decomposition analyses to explore inequality and income shares of
various working groups within and across the agricultural and retail sectors.
The rest of the study is outlined as follows. Section two explores some key structural factors in the
horticultural value chain in relation to worker empowerment. Section three looks at some differences
in employment practices of different retailers along the horticulture value chain. Section four explores
inequality in incomes generated by various players between horticulture and retail workers on the one
hand, and income by various skills levels, with an attempt to distinguish between management and
senior professionals, versus other employers. Section five suggests some formal and informal
mechanisms that can be employed to improve working conditions of the vulnerable farm and retail
workers. In section six, conclusion is drawn in terms of way forward and gaps to be filled.
2. Main structural factors of the horticulture value chain which
disempower workers
Historically, the agricultural sector in African countries has been one of the main pillars of the
economy. Rural economies have relied heavily on it for food security, poverty alleviation, employment
and livelihoods in general. One of the agricultural sector’s determinants of success in providing decent
employment, poverty alleviation and food security is access and ownership of land.
Like with many other African countries, access to land and to secure land rights in South Africa has
been marred by incidents dating back to colonial era, particularly for the natives. This was exacerbated
by the Apartheid regime, thus contributing to the current prevailing socio-economic inequality in the
society. In addition to issues of land access, worker organization in the agricultural sector, particularly
amongst farm workers, is still quite inefficient. This is a key challenge to ensure effective collective
bargaining in the sector.
Over and above, in light of the evasive and innovative strategies employed by conglomerates to
increase their profit margins, costs are shifted to suppliers who in turn offload the financial burden
on the workers. While acknowledging that the government has taken various legislative measures to
improve the plight of workers, those measures have been marred by very poor or absent enforcements.
A number of other factors interact to disempower workers. This section discusses these factors,
beginning with land issues, then race and gender norms, worker organization issues, labour policy and
practices, followed by technological issues before ending with financialisation, global trade and tax
evasion.
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2.1. Land tenure rights and shifts in land use
The historicity of the unequal land distribution which is currently characteristic of South Africa is
rooted in a key colonial legislation. This is the 1913 Land Act, which banned Africans from owning
land in ‘white areas’. This piece of legislation relegated African land access to what was then known
as ‘reserves’, mainly marginal land, which accounted for 7%, later increased to 13% of total South
African land (Bhorat et al., 2014). The effect of this Act became entrenched in the apartheid era. The
net consequence was an increasing restriction of indigenous populations’ access to and ownership of
productive land over time (Duvail, Medard, Hamerlynck & Nyingi, 2012; Odeny, 2013; NPC, 2017).
The Apartheid regime fostered land dispossession through its legal framework which made land
ownership by native Africans even more challenging (Akinola, 2018).
It is a well-known fact that agriculture is fundamental in inclusive economic development in Africa.
South Africa is no exception to this (DAFF, 2016). Land constitutes a crucial resource to the economy
and a factor of production, especially in the agriculture sector. In rural areas where agriculture is known
to constitute the largest sector of employment, access to land is not just essential for production but
the main source of income, livelihood and even food security (CGE, 2009; Odeny, 2013; AgriSETA,
2018; Akinola, 2018).
Over time the agricultural sector underwent various transformations which also contributed to the
undeniable inequality that is characteristic of South Africa. Some examples that led to these
transformations include changes in legislation, advancements in production technology and changes
in employment terms in the agricultural sector. There is a sentiment that the transformations have
resulted in the displacement of numerous people and loss of livelihoods, which in turn have done little
to reduce neither poverty nor inequality in both urban and rural areas (NPC, 2017). The legislation
promoted at the time, for example, the Natives Land Act (No. 27 of 1913) not only compelled the
indigenous Africans to migrate from their homelands to work in mines, but established strict
segregation areas between the whites and non-whites (NPC, 2017; Akinola, 2018). Hence, although it
can be argued that said legislation did not impede non-whites from buying land, the restrictions made
it very challenging for the natives to expand their land holdings. In more recent years, natives have
also been faced with a new phenomenon of land grab, characterized by the loss of land to foreign
investors (Duvail et al., 2012; Odeny, 2013), further worsening their respective access to land and land
rights.
South Africa remains one of the greatest fresh fruit (largely citrus) producers globally with about 90%
of local production exported (estimated at US$ 2.9 billion in 2016). Main export markets are the United
States of America (USA) and the EU. Main fruits exported in 2016 comprised of oranges, table grapes,
apples, lemons and mandarins. In the same year, main imports into South Africa were bananas
(excluding plantains), almonds, cashew nuts, grapes and coconuts and the main import markets were
Mozambique, USA, Spain and Vietnam (NAMC & DAFF, 2017). According to AgriSETA (2018),
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between 2016 and 2017 the horticulture segment in particular contributed about 32% of total revenue
obtained from skills development levies generated in the agriculture sector, corresponding to R142
million. DAFF (2017), states that the total gross value of agricultural production for 2016/17, was
about R273 344 million, reflecting a 12.5% increase from the previous year. It is estimated that the
horticultural segment contributed 27.7% of this total value. Fruits and vegetables are essential for the
success of agro-processing. Both commodities are not only of high-value but characterized by large
labour multipliers (IPAP, 2011). South Africa’s competitive advantage in some fruits that are in high
demand in export markets further highlights the importance of the horticulture segment in the local
economy (IPAP, 2011). Despite the instability of the weather, the weak currency and the decline of
incomes in farms which affect the agricultural market negatively, it is forecasted that in the long run
the sector will grow by approximately 40%, as food consumption rises with the expansion of
disposable income and the middle class (AgriSETA, 2018). Access to this increasing prospect of
output and value by the underprivileged population cannot be guaranteed if issues of access and
security of right to land is not redressed.
The absence of successful land reform policies, underpinned by strong executing institutions even
puts the entire agricultural sector in jeopardy. This is because the inequalities created by land
dispossession threaten the existence of commercial agriculture, which is a key fundamental of the
South African economy and food security. Although a number of land reform and rural development
programs have been undertaken post-Apartheid era, these have not been entirely successful in tackling
the various challenges resulting from transformations in the agricultural sector. Of the 122.5 million
hectares of South African land, about 64% are in freehold farming (privately owned, mainly
individuals, corporations, trusts, companies, and partnerships), just under 15% in traditional holding,
under 9% in government control and another 9% or more constituting urban areas and villages while
the rest is accounted for by various land use changes (See Table 2.1).
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Table 2. 1: The structure of land ownership in South Africa
Land item
Hectares
% of total
State-owned land
10 566 215
8.62%
Nature conservation national parks etc.
7 448 764
6.08%
State forests
1 812 478
1.48%
Department of Water Affairs
575 723
0.47%
Department of Defense
688 127
0.56%
Correctional Services
41 123
0.03%
Urban areas towns and villages
11 357 935
9.27%
Farm land under traditional tenure
18 036 773
14.72%
Land use change due to urban sprawl, mining,
expansion of parks and forests since 1994
4 143 993
3.38%
Total area of farm land under freehold
78 413 227
64.00%
South Africa total
122 518 143
100.00%
Source: Calculated by authors using data from BFAP (2018)
One of the major challenges to the land redistribution endeavor is getting reliable statistics of the
distribution of the over 78 million hectares of farmlands under freehold. This is due to the fact that a
comprehensive audit of land in South Africa has not be undertaken. The best available statistics
indicate that since 1994, only 10.7% of the total freehold land has been redistributed or restituted
through the current land reform program. The figures of the DAFF (2018) places the share of land
transferred to blacks at 9.8%. BFAP (2018) estimates using deeds of transfer data suggest that a further
1.2 million, or 1.5% of the 78 million hectares’ freehold farmland has been privately acquired by blacks
without government support. Some communities elected to receive financial compensation in lieu of
land (3.7%). The government has acquired a further 2.8% of the original freehold quantity.
Consequently, to date, it is estimated that white farmers own about 80.6% of the 78 million hectares.
The sluggish nature of land redistribution is in a significant part due to the state’s inability to allocate
the land so far acquired, although the difficulty of obtaining further land on the willing-buyer-willing-
seller principle is also a challenge for a number of reasons.
Factors such as strong legislation, reflected in the property rights and provincial planning guidelines
give additional advantage to those who are relatively well-off as opposed to their poorer counterparts.
These legislations protect access to well-located land by the well-off, further pushing the displaced to
peripheral areas. The challenging access to suitable land is further enhanced by the forbidding prices
associated with said land (NPC, 2017). The ripple effects of these historical actions are arguably
reflected in the manner modern society continues to organize itself, as seen by amongst others, the
expansion of restrictive residential and retail communities. These enclosed communities are seen as a
modern manner in which public space, administration and service delivery have once again been
tailored for a selected few (Duvail et al., 2012).
15
The current challenge with land reform was also fueled by the oversight on policymakers’ side to
consider the individual interests of the natives with regards to other reasons they wanted access to
land, other than for agriculture (Hay, 2015). The pressure subsistence farmers endured to move out
of native agricultural lands is further pinpointed as one of the reasons why with time many men looked
to the gold mines for alternative employment whilst women focused on the agricultural activities. Hay
(2015), further argues that overlooking past experience has in part led to a shift in many instances
from the use of land from smallholder agriculture to more large scale and or commercial oriented
activities. As such, the author argues that the challenges currently faced are to a large extent due to the
South African government’s failure to adapt internationally accepted land reform recommendations
to the country’s specific context before adoption. In this regard, despite acknowledging that there are
those who believe that history is not crucial in informing future policy, Hay (2015), claims that the
opposite is true, and encourages policymakers to reflect on lessons learnt from previous land reform
policies.
As is, a substantial proportion of land in Africa (approximately three quarters) is under management
of customary regimes, characterized by a combination of traditional and customary rules. These are in
turn complemented by the two mainstream regimes through which property and land is passed on,
namely, the patrilineal and the matrilineal methods (Odeny, 2013). the prevailing land tenure and land
rights policies dictate that land allocation and respective management in communal zones are to be
strictly overseen by traditional powers. However, land in areas previously known as the ‘Bantustans’
will maintain the geographic boundaries passed on from previous regimes, as indicated by the unique
leadership of traditional authorities. The land obtained through the land acquisition programmes,
however, belongs to the state, who in turn lets it to the “redistribution beneficiaries” (NPC, 2017:18).
This implies that even though said measures were approved to benefit the previously disadvantaged,
they perpetuate inherited structures which caused current spatial allocation inequalities and cannot
thus be the solution to the problem. Therefore, currently a challenging factor around land reform
policies for the government remains obtaining the ideal equilibrium between upholding the rights that
are still considered vulnerable as per their task of custodian whilst also respecting the rights of those
who have a legal claim to specific pieces of land to autonomously decide how to develop their
respective land (NPC, 2017). Unless the land reform policies currently underway result in a new
approach that does not built on the strategies inherited from the previous governance regimes, the
spatial disparities will persist consequently, reinforcing current economic and cultural exclusions
(Duvail et al., 2012).
The Bureau for Food and Agricultural Policy (BFAP, 2018) give a succinct exploration of the key
failures and challenges of the current land reform program in South Africa. The key bottlenecks that
exist in the land reform endeavor is the issue of guarantee of land rights and security of tenure to
beneficiaries. A key related factor that has been less ventilated in addition to access to land is the
impediments of access to complementary capital and skills by land reform beneficiaries for effective
productivity. Besides, BFAP (2018) has highlighted a number of other factors that plaque the land
16
reform process. These are (1) contradictory and fragmented policy framework, (2) the current
ideological dichotomy between capitalism and socialism masks the real solution, which ought to be
focused on correctly enacted constitutional provisions, (3) the inability to refocus attention on
balancing individual property right with public interest, (4) currently moving from high concentration
of land to dismantling of large farms to smaller units is neither socially nor economically viable, a mix
of different farm types and sizes has been suggested, (5) reliance on legislation alone cannot succeed
to drive change, even political and social priorities, though a very important complement to legislation
cannot bring about desired change unless global socio-economic reality is taken to account, (6) final
and most important is the inefficiency of government institutions in implementing and managing the
land reform process singlehandedly. Synergizing the process with the correct market mechanism will
be more robust.
2.2. Race and gender norms
From the dawn of democracy in South Africa, numerous attempts have been made to reduce poverty
and inequality, as well as, to resolve the challenges of access to land and security of land rights by the
previously disadvantaged (Hay, 2015; Akinola, 2018). The key policy documents in this respect are the
1996 constitution of South Africa, the white paper on land reform (Akinola, 2018) and the National
Development Plan (NDP, 2030). These have made provisions for a more inclusive growth,
specifically, greater integration of women within society, access to property rights, amongst other
things. In fact, the land reform process in South Africa aims at dealing with inequalities within society
by minimizing effects resultant from apartheid, as well as, promote economic stability and reduce
poverty (Department of Land Affairs, 1997). Although it can be argued that such attempts have
minimized great obstacles in relation to access to land by race, discrimination against women is still a
factor of discord. That is, amongst the actions to revitalize land reform, one of the main factors is the
removal of restrictions to access to land and land rights along racial and gender lines (Department of
Land Affairs, 1997). Even though this strategy has not been a complete success, as discussed
previously in reports of displaced natives, more South Africans of other racial groups than the whites
now have access to land and to land rights compared to the period of the previous regime. Similarly,
it is undeniable that in general women have become more involved in agriculture and with respective
debates around land rights. Nonetheless, women’s land rights are still a point of contention, specially,
where cultural regimes are concerned. In other words, although legal frameworks have been put in
place to ensure a more equitable access to land and secure land rights for all, in practice the execution
and or implementation do not meet expectations (Department of Land Affairs, 1997; CGE, 2009;
Akinola, 2018). Consequently, the new round of land reform talks exploring the idea of the
redistribution of land without compensation (Akinola, 2018).
Trends in land allocation in South Africa suggest that white farmers bear an advantage over their non-
white counterparts, due to their financial clout. This is aided by the free market economy principles
through which the willingness of buyers and sellers determines the reallocation of available land
17
(Moyo, 2003). This mechanism not only disadvantages smallholder farmers but also inhibits females’
capacity to own, control and work the land, further widening the inequality gap (Akinola, 2018). As
argued by Yeboah (2014), the unequal allocation of land between gender lines is one of the main
causes perpetuating the continued high levels of poverty and underemployment.
Likewise, protected land rights play a major role in ensuring the security and sustainability of title
deeds holders. Although leased land can be used for various agricultural activities it stands to reason
that often lease or rental fees make such activities less profitable. In the case of most rural households
were income and or proceeds from other sources other than agricultural activities tend to be limited,
affordability of leased land is highly restricted. In the case of women, this situation is even direr with
more women in rural areas involved in subsistence farming, as well as, engaged with other household
tasks. Women’s unequal access to land and secure land rights is well recorded (Odeny, 2013). In line
with economic theory, according to the Commission for Gender Equality (2009), poverty is female
faced. In South Africa, the sidelining of females is deeply entrenched in the apartheid regime, which
transferred responsibilities of the everyday management of households in rural areas to females whilst
male household members took up employment in mines and urban areas. As an example, despite the
fact that females constitute the largest proportion of the rural population in South Africa, only a
marginal portion of community land is allocated to their ownership (Akinola, 2018). As noted by
Odeny (2013), whilst land is allocated to male family members as per their needs, land allocation to
female family members is handled through their respective male relatives. Nevertheless, such
experiences are not restricted to South Africa but can be traced to Africa at large. For instance, in
Kenya, the majority of land rights are recorded in male adults’ names even though in practice the laws
dictate that women can own land. Similarly, in Tanzania and South Sudan, whilst the laws allow women
to own land the customary laws are technically contradictory, generally restricting land ownership by
females. This inheritance method is additionally discriminatory to females to the extent that often,
once married, said access is revoked on the basis that they are expected to rely on their marital homes
for said access. However, one should bear in mind that if these women get divorced and or widowed,
they lose access to land as a result of expulsions from their former spouse’s homes. In addition to
that, Giovarelli and Tran (2013), state that compared to their male counter-parts females are less likely
to legally own land and when and if they do, it is likely to be of inferior size and quality. The authors
further relate how in Rwanda back in the days when women could not secure land rights in their
names they were also barred from accessing fertilizer of high quality and at subsidized rates distributed
through the government’s agricultural program.
As stated previously, the discussion around access to land and secure land rights is crucial as it
pinpoints the importance of land as a factor of production, poverty alleviation, food security, as well
as, its contribution to wealth generation as a whole. The discriminatory allocation thereof not only
constitutes an impediment to their economic opportunities such as agricultural production and
contribution to the economy as a whole (CGE, 2009), but also constrains their contribution at the
18
household level. In other words, the discriminatory access of land afforded to women plays a vital role
in maintaining gender inequality, food insecurity and poverty, to mention a few. Hence, women’s
inclusion in land reform initiatives should not be limited to superficial nominal numbers but ensure
their active participation and contribution, including at decision-making levels (Odeny, 2013).
That said, some progress in inverting this situation has been made. Although land ownership has
historically been influenced by patriarchy regimes - which would in some instances overlook widows
in favour of male off-springs for inheritance of property, land included – recently some communities
have begun to abolish said practice, thus allowing widows to inherit property and own land. However,
said practices and or laws differ with regards to the categories of females, with married women facing
the most obstacles (Akinola, 2018). A number of African countries have made some progress in land
reform, resulting in the achievement of different levels of legal and political commitments. However,
it has been seen that laws on their own are not sufficient. There is a need to consolidate customs and
traditions to the legal framework, in effect removing the barriers that bar females’ equitable access to
land and secure land rights. Added to that, is the need to guarantee the execution of said rights and to
create awareness amongst society at large, and females in particular of their respective rights (CGE,
2009; Odeny, 2013), and to incorporate them in activities and decision-making roles relating to land
management (Garvelink, 2012). Concurrently, a number of non-governmental organizations have
joined the quest to improve access to land and land rights by women in sub-Saharan Africa. Examples
include but are not limited to efforts by international bodies like the United Nations Development
Programme (UNDP), the Food and Agriculture Organisation (FAO), UN Women, the World Bank,
USAID, DFID, OXFAM GB in countries like Ethiopia and Somalia, as well as, local organisations
operating in countries such as Malawi, Namibia, Uganda and Zambia, to name a few (Odeny, 2013).
Limited access to land has constrained most previously disadvantaged blacks, who are mainly blacks
farm workers, with little or no empowerment to access beneficial stakes in the production value chain.
Table 2.2 presents the distribution of farm dwellers based on the data from the 2011 national census.
Clearly, majority of all farm population are blacks. Majority of the blacks are in the informal and
traditional dwelling categories, while whites and Indians are mostly within the formal areas. 91% of
those living in collective living quarters are blacks. 96% of commercial farm dwellers are blacks, who
are mainly labour reserves for predominantly white farm owners.
19
Table 2. 2: demographics of farm dwellers
Black
African
Coloured
Indian or
Asian
White
Other
Total
Formal residential
69.7%
6.4%
4.3%
19.2%
0.3%
26970
Informal residential
98.0%
1.2%
0.2%
0.3%
0.2%
47071
Traditional residential
98.8%
0.3%
0.4%
0.4%
0.1%
344753
Farms
65.9%
19.7%
0.5%
13.5%
0.4%
2078723
Parks and recreation
65.4%
10.0%
0.7%
23.1%
0.9%
25213
Collective living quarters
91.2%
3.6%
0.6%
4.2%
0.3%
33990
Industrial
87.4%
1.6%
0.9%
9.9%
0.2%
17111
Small holdings
54.7%
6.5%
0.7%
37.5%
0.7%
157523
Commercial
96.2%
0.9%
0.5%
2.1%
0.3%
1250
Total
70.5%
15.7%
0.5%
13.0%
0.4%
2732605
Source: Visser, M and Ferrer, S. (2015)
The gender distribution of farm workers shows that only 32% of permanent contract workers are
females. Among workers with unspecified duration, 32% are also females, compared to 53% of limited
employment duration. Clearly, the burden of marginalization in agricultural employment
disproportionately falls on female farm workers (see Table 2.3).
Table 2. 3: Gender distribution by nature of employment
Work status
Male
Female
Total
Limited duration
47%
53%
95112
Permanent nature
68%
32%
192254
Unspecified duration
68%
32%
88785
Source: Visser, M and Ferrer, S. (2015)
Intervention measures have to therefore target black female farm workers who are among most of the
informal farm dwellers, working as casual labourers with limited employment duration.
2.3. Worker organization
The historical context of the South African labour market institutions, especially worker organization
begins from another colonial piece of legislation, the 1911 Mines and Works Act. The effect was the
reservation of skilled mining jobs for whites only. Another set of associated apartheid policies were
the Pass Laws, which restricted the free movement of African labour force, forcing them into low-
wage sectors and occupations. The combined effects of this was significant racial schism in the labour
market to the disadvantage of black Africans.
Bhorat et al. (2014), give a succinct historical review of the genesis of labour market institutions in
South Africa. The 1924 Industrial and Conciliation Act provided for the voluntary establishment of
collective bargaining institutions, however, these excluded the blacks and accorded negotiation rights
20
to non-Africans only. This marked a further perpetuation of wage inequality along racial lines. Various
changes took place following the significant growth of the economy in the 1960s and the consequent
increase in the demand for labour, with blacks still reserved for less-skilled tasks. However, following
the economic sanctions and the recognition that the system of job-reservation, trade union processes
and collective bargaining that favoured whites were at the center of significant socio-political unrest,
led to some easing of the restrictions. This culminated in the legalization of the black trade unions and
the abolition of the job-reservation policies through the 1979 Industrial Conciliation Amendment Act.
These changes paved the way for various post-apartheid labour legislation amendments, which led to
the proliferation of trade unions and the formation of the Congress of South African Trade Unions
(COSATU).
Overall, labourers in South Africa are considered to be highly organized through labour unions. When
and if well-organized these unions are quite influential, inherently imposing barriers to entry to any
organization that does not have the right political backing. As a rule, only the unions that are duly
registered have the right to negotiate on the members’ behalf. Some of the main unions currently
existent in South Africa include COSATU, FEDUSA and NACTU. However, with the exception of
agri-processing, the agriculture sector in South Africa is the opposite of this, considered to be relatively
weak and characterized by poor working conditions and very limited worker organization. This is
particularly true with regards to farm workers, reported to be the weakest group in the agricultural
sector. This is largely attributed to the specific and restrictive nature of their employment conditions
such as accommodation that is tied to their occupation, nature of relationships with their employers
and seasonality of jobs, the small numbers of workers employed by the individual farms, as well as,
difficulty in communication or organization due to the large distances between the farms and the
challenges in accessing the farms.
Over and above, union membership do little for these workers, as they are popularly known for not
making additional contact once new members have been signed up and respective fees collected. This
is worsened by the belief that it is not easy to distinguish between the various unions as they tend to
be similar. With regards to women in particular, the related circumstances are even more discouraging
given that seasonal workers – a job usually awarded to women - are not usually catered for by the
majority of unions despite their inclusion, at times, during the negotiation of wages (SANPERI, 2008).
The production of horticulture commodities occurs country-wide but is relatively concentrated in the
Western Cape, KZN and Limpopo provinces, mainly due to the climatic conditions and types of
products that are typical of these provinces (AgriSETA, 2016). Although not representative of the
country’s farmer population, AgriSETA data shows that the largest group of horticulture employers
registered with them are located in the Western Cape, followed by Gauteng and Mpumalanga with
50%, 10% and 10%, respectively. However, the largest groups of employees (permanent and
seasonal/temporary) are found in the Western Cape (51%), and then Limpopo and Gauteng, with
14% and 9,7%, respectively (AgriSETA, 2016).
21
In the Western Cape in particular, due to mounting pressure from respective unstable international
markets, farmers have been reported to take measures to maintain their gains. They do this by
transferring costs to their employees. Such measures include cutting down in on-site housing, making
jobs seasonal and or temporary, sub-contracting and even ‘externalisation’ – a situation where the
labour is supplied by third party contractors (SANPERI, 2008; Kritzinger, Barrientos & Rossouw,
2004; ActionAid, 2005; Barrientos, 2013). Moreover, in many instances the labour contractors take on
the managerial tasks in the farms and the farmers are part of large groups of employers and AgriSA,
whose collective bargaining power is a force to be reckoned with. As an example, although AgriSA is
not officially registered as an employers’ association or organization, it is well structured at a nation-
wide level with provincial representations, and provides a number of various services to the members
including technical and financial assistance. Additionally, it interacts directly not only with government
but with other sectors of the local and international economies, symbolizing a high level of influence
and or lobbying power. This speaks not only to the farmers’ level of organization but also the collective
bargaining power resultant thereof. Given agricultural workers and in particular farm workers’ already
vulnerable position, this further weakens their bargaining power. Over and above, in the midst of all
this, women’s plight is direr, with most of the casual and seasonal tasks allocated to them and an
increase in their rivalry with men as jobs become more and more scarce (SANPERI, 2008).
Although in the apartheid and immediate post-apartheid era, trade unions were the amplification of
the workers’ voice in South Africa, politicization has weakened this voice somewhat over the years.
Nevertheless, labour union power in South Africa remain significantly high, at 0.714 in South Africa
compared to 0.49 in other upper middle income countries. However, this high power has not
corroborated the index of effective protection offered to workers during collective dispute resolution.
This index stands at 0.33 in South Africa compared to 0.47 for upper middle income countries (Bhorat
et al., 2014).
There is evidence that labour unions offer significant protection of wages. The wage premia as a result
of unionization in South Africa is estimated by Bhorat et al. (2014) at 7% on average. This value is
within the estimated range of 5% to 16% globally. The fact that it is closer to the lower end of the
range suggests the high power of unions in South Africa does not necessarily translate to equally high
wage protection. Of significant concern is the fact the most of the casual workers, especially in the
agricultural sector are not unionized. Visser and Ferrer (2015), find that in the agricultural sector, the
unionization rates were at only 1.7% for limited duration workers and 0.9% for unspecified duration
workers in 2014. Therefore, it is likely that the low-wage casual workers are relatively less represented
by the trade unions.
2.4. Labour policy and legislation versus policy in practice
Labour market policies in South Africa is rooted in the historicity explored above. The post-apartheid
labour reforms has focused on undoing the ills of the past. No doubt, various World Bank doing
Business surveys suggest that the South African labour market is overly regulated. Three key
legislations were introduced from 1995, which collectively laid the fundamental regulatory framework
22
that currently governs the domestic labour market. The first was the Labour Relations Act No. 66 of
1995, whose aim was to cater for the advancement of economic development, social justice, labour
peace and workplace democratization through the observation of the labour standards set by the
International Labour Organization (Oosthuizen et al., 2017). This Act provided the regulatory
architecture for collective bargaining among stakeholders around wages and conditions of
employment. Table 2.4 shows the various amendments to this policy.
Table 2. 4: Amendments to the Labour Relations Act
1996
1998
2000
2002
2014
To facilitate and
regulate the
organisational
rights of trade
unions.
To promote and
facilitate collective
bargaining.
Made provisions
for pension and
medical schemes.
To adjust the
requirements for
extending any
collective
agreements
concluded in a
bargaining council
to non-parties.
Specified the laws
around bargaining
council registration,
extension
agreements, and
council agents.
Gave bargaining
councils the power
to provide
industrial support
services to
participating
parties.
To enhance the
enforcement of
collective
bargaining
agreements.
Extended services
and functions of
bargaining councils
to the informal
sector.
To provide greater
protection for
workers placed by
temporary
employment
services by:
Regulating the
employment of fixed
term contracts and part-
time employees earning
below the earnings
threshold;
Specifying the liability
for employer’s
obligations;
Limiting temporary
employment to genuine
temporary work that
does not exceed six
months.
Source: Oosthuizen et al. (2017).
The Basic Conditions of Employment Act No 75 of 1997 aims to regulate the right to fair labour
practice. It also outlines the rights and duties of employers and employees in matters of working hours,
leave, remuneration, dispute resolution, trade union membership and dismissals. The Employment
Equity Act No. 55 of 1998 was rather introduced to deal with issues of discrimination, through
affirmative actions at the work place. This measure aims to redress the disadvantage of the previously
disadvantaged groups.
However, it is worth noting that labour regulation in the agricultural sector have a relatively short
history. It was entirely excluded from legislature in the most part of the apartheid era until the
introduction of the Labour Relations Act in 1995. A key loophole in the agricultural labour regulation
is the fact that it does not apply to contractors. Consequently, most employers in the sector have
resulted to middlemen to circumvent regulations. The practice of contractors providing teams of
workers for particular tasks has increased in the low skilled sector, not only in the agricultural sector,
but also in the retail sector. In these cases, workers are remunerated by contractors and not farmers.
This practice also affects contract farming, where smallholder farmers are often contracted to supply
23
corporate entities (Visser and Ferrer, 2015).
The liberalization of the South African market brought about some new dynamics to the economy,
amongst which the deregulation of the fruit export sector in 1997. According to Vink and Van Rooyen
(2009), prior to 1993 there was no legal framework giving farm workers in South Africa any kind of
labour protection and or the right to negotiations as groups. This changed in 1993 with their inclusion
under the Unemployment Insurance Act (63 of 2001), under the 1993 Agricultural Labour Act, under
the 1997 Extension of the Security of Tenure Act, as well as, as a result of the fixation of a minimum
wage in 2003. Thereafter, the agriculture sector became guided by minimum labour standards, like
guidelines regarding minimum wage and working hours, overtime payment, vacation and sick leave
provisions, for instance. As can be expected, the transformations resultant thereof have been a
combination of opportunities and challenges.
The rise in competition, for instance, has been associated with adverse impacts for farm workers as
farmers try to stay competitive in the global markets. Over time more and more farmers have cut back
on in-farm accommodation for employees and changed employment terms, mostly from permanent
jobs to more casual and or seasonal jobs. This has had consequences not only on basic wages but on
benefits that were once tied to such jobs. Although exemplary labour laws and employment rights -
based on the International Labour Organization guidelines - have been put in place for the protection
of all agricultural workers, including seasonal and casual workers, in practice implementation is lacking.
This has left contract and other casual workers vulnerable (ActionAid, 2005).
Other key policies that has often been debated to affect the labour market are the minimum wage
laws. The minimum wage policy was introduced in 1999. Over time, a number of sectoral minimum
wage laws have been instituted through union, business and government joint negotiation processes.
The question of the effect of these laws on unemployment and wages has been tackled in Bhoral et
al. (2014). Three important findings are that minimum wage policies (1) do not exert any significant
negative effect on the probability of being employed, (2) have on the contrary, increased real hourly
wage by between 5-20%, the increases were higher in district councils where pre-law wages were lower
than the set minimum wage, (3) have elicited a response of reduction of weekly hours worked.
However, the increase in hourly wage were found to outweigh this effect. Consequently, minimum
wage policies can have net positive effects on labour market and workers’ welfare in South Africa.
The key bottleneck therefore has been the sluggishness over the years in rolling out the minimum
wage broadly. There is an associated question of the optimal minimum wage, given the increasing cost
of living and high levels of wage inequality in South Africa. This question has not received adequate
attention yet.
Overall, Bhorat et al. (2016), present the labour market rigidity indicators based on the regulatory
environment for South Africa relative to various groups of countries. The indicators are based on the
employment protection legislations developed using the World Bank’s Doing Business survey of 2013.
These are presented in Table 2.5. The regulatory aspects covered are difficulty of hiring, firing, rigidity
24
of hours, an aggregate employment rigidity index, non-wage labour cost and firing cost.
Table 2. 5: comparative scores of labour regulation
Area of regulation
Low
income
Lower-
middle
income
Upper-
middle
income
High-
income:
Non-OECD
High-
income:
OECD
South
Africa
All
countries
Difficulty of hiring
50.89
35.28
30.40
17.79
27.72
55.67
33.13
Difficulty of firing
36.88
33.96
25.60
16.25
22.26
30.00
27.95
Rigidity of hours
19.38
18.33
14.00
16.67
24.52
20.00
18.16
Aggregate rigidity of employment
index
35.71
29.19
23.33
16.90
24.83
35.22
26.41
Non-wage
Labour costs
12.40
16.01
17.31
21.43
10.17
2.40
15.62
Firing costs
65.32
50.91
44.63
31.32
54.64
24.00
51.34
Source: Bhorat et al. (2016)
As expected, hiring and firing costs fall while non-wage labour costs rise with a country’s level of
income. Interestingly, South Africa’s hiring difficulty is the highest among all the country groups, far
higher than its upper middle income peers. Contrasting this is the firing cost, which is lower than
those of its upper middle income peers. As Bhorat et al. (2016) explain, the issue is with the regulatory
inflexibility with the legislated procedures of hiring workers. In trying to circumvent this inflexibility,
firms have resorted to the use of labour brokers or temporary employment service providers in
employment. Consequently, the proportion of temporary employment services have increased
significantly, especially in the services sectors as explained earlier on.
This trend agrees with the high levels of casualization over the years. We combine various household
and labour force survey data (the Quarterly Labour force Surveys from 2000 to 2007; the five waves
two-yearly National Income Dynamics Study Survey 2008 to 2016; and the annual Labour Market
Dynamics surveys 2010 to 2017). Using these datasets, we compute levels of casualization as the
proportion of workers not covered by formal contract. The trends are shown in Figure 2.1. The figure
suggests that casualization is highest in the agricultural sector, being higher than the average for all
sectors, followed by the retail sector. Although the levels have been falling over the years, they still
remain too high, currently just below 20% in retail, down from about 25% in 2003. The level in the
agricultural sector is about 35% currently, down from about 50% in 2003.
25
Figure 2. 1: Casualization trends in agriculture, retail and overall
Source: Based on computations by author from various survey data
2.5. Technology, mechanization and production standards
Historically, the agricultural sector’s large labour multipliers have been associated with rudimentary
production methods. As has been witnessed overtime, mechanization and technological upgrades in
this sector have in many countries, been one of the main causal factors of increased production and
productivity. However, this has been linked to the shedding of jobs, especially, of unskilled labour,
which as discussed above often constitutes the majority of the labour force engaged in agriculture.
Despite these challenges if one is to remain competitive at international levels, investments in skills
building need to accompany the technological advances. Statistics relating to labourers engaged in the
horticulture segment by gender indicate quite an equal distribution between men and women, at
approximately 53% and 47%, respectively.
In regards to age distribution, about 49% of the employees were under the age of 35, 46% between
the ages of 35 and 55, and the remaining 5% were older than 55. Skills-wise, statistics suggest that the
majority of workers are engaged in basic tasks (64%), with the lowest percentages recorded for clerical
support at approximately 1%, professional (4%), technicians (4%) and managerial (10%) posts
(AgriSETA, 2016). Given that many African economies’ battle with high levels of unemployment, this
could be one of the main reasons why mechanization levels remain the lowest worldwide. South
African, however, has proven to be one of the exceptions to the general African tendency, reported
to have the largest sales of new tractors in combination with Morocco and Tunisia (BMI, 2016).
10
15
20
25
30
35
40
45
50
55
60
2000,1
2000,2
2001,1
2001,2
2002,1
2002,2
2003,1
2003,2
2004,1
2004,2
2005,1
2005,2
2006,1
2006,2
2007,1
2007,2
2008
2010
2011
2012
2013
2014
2015
2016
2017
overall_lfs agric_lfs retail_lfs
overall_nids agric_nids retail_nids
26
Food standards too have faced a number of changes. With the transformation of the dynamics in the
food retail sector, standards have become more stringent. These changes have been felt both in terms
of public legislation and private guidelines. The bar has been set higher in aspects such as hygienic
concerns, labelling, marketing and tracking the origin of goods (Maertens et al., 2018). Other than
health concerns, this rise in requirements is resultant from higher incomes, environmental and ethical
concerns and the expansion of supermarkets – which are associated with a higher demand for quality,
freshness and safety of food (Henson & Humphrey, 2008).
Without doubt, the major current to long-term driver of changes in labour market dynamics and
structure of wages is technological progress with the advent of the fourth industrial revolution. There
is also the related casualization of labour, which is generally exacerbated by shifting employment
patterns that come with skilled-biased technology adoption.
In all the sectors of the economy and in the agricultural and retail sectors, the advent of the fourth
industrial revolution carries both opportunities and challenges. The countries that would benefit from
the opportunities will be those with the requisite skills composition who are adaptive enough in terms
of reskilling and upgrading to match changing patterns of skills demand. Mckinsey (2017), reports that
about half of the paid jobs globally could be replaced by new technologies through automation, either
partly (60%) or entirely (5%). Four key technological advances are on the cart in the immediate future
that will alter the economic and employment landscape. These are ultra-high-speed mobile internet,
artificial intelligence, big data analytics and cloud computing. These will contribute in advancing
economic expansion by changing employment patterns to the benefit of high and adaptive skills. The
World Economic Forum (2018), reports that 85% of firms in a sample of countries representing more
than 75% of global value are likely or very likely to expand the adoption of key technologies by 2022.
Up to 50% of the companies surveyed report that they expect some reduction in full-time workforce,
while 38% expect some workforce extension to new productivity-enhancing roles by 2022.
The structure of job gains and losses due to technology is depicted in Figure 2.2 below. Interestingly,
while roles that may enhance the human-machine synergy might expand, low skilled tasks for humans
such as salespersons, customer service representatives and a good part of retail management will
contract. Figure 2.3 shows the percentage of firms that expect to expand the adoption of various types
of technologies in South Africa.
27
Figure 2. 2: Global structure of job changes due to technology
Source: WEF (2018, p20)
Figure 2. 3: Projected patterns of technology adoption in South Africa
Source: Author, based on data from WEF (2018)
96%
90%
88%
81%
78%
76%
68%
64%
61%
60%
57%
54%
54%
54%
51%
49%
38%
32%
24%
0% 20% 40% 60% 80% 100%
User and entity big data…
Machine learning
App- and web-enabled…
Cloud computing
Internet of things
Augmented and virtual…
Digital trade
Encryption
New materials
Wearable electronics
3D printing
Stationary robots
Distributed ledger…
Autonomous transport
Quantum computing
Non-humanoid land robots
Biotechnology
Humanoid robots
Aerial and underwater…
88% 83% 75% 72% 67% 62% 62% 56%
9% 12% 17% 19% 27% 28% 23% 30%
3% 5% 8% 9% 6% 10% 15% 14%
0%
20%
40%
60%
80%
100%
120%
Hire new permanent staff with
skills relevant to new…
Look to automate the work
Hire new temporary staff with
skills relevant to new…
Expect existing employee to pick
up skills on the job
Retrain existing employees
Outsource some business
functions to external…
Hire freelancers with skills
relevant to new technologies
Strategic redundancies of staff
who lack the skills to use new…
Likely Equally likely Unlikely
28
The high degree of expected expansion in technology adoption also corresponds to various impacts
on jobs. For example, up to 56% of firms report that they are likely to adopt strategic redundancy,
and another 30% equally report the likely redundancy, while only 14% foresee an unlikely redundancy.
So far in the South African retail sector, the biggest technological expansion that is already displacing
a number of jobs and contributing to casualization is ecommerce. The Bureau of Market Research
(BMR, 2018) report shows the trends in traditional forms of payments versus online payments that
go alongside ecommerce. Table 2.6 reports these trends in consumer payment structures.
Table 2. 6: Trends in retail trade payment methods
Method of payment
% contribution to
total income from
sales of goods and
services 2012
% contribution to
total income from
sales of goods and
services 2016
% contribution to
total income from
sales of goods and
services 2017
Cash
46.8
42.9
39.7
Debit card
15.7
20.7
22
Credit card
21.4
13.7
13.8
Retail card
5.5
7.5
7.8
Transfers (including internet transfers)
10.6
15.2
16.7
Total
100
100
100
Source: BMR (2018)
Although cash payment method is currently the highest share of payment method, the share has been
dropping from 46.8% in 2012 to 39.7% in 2017. Similar falling trend is noticed with credit card
payment. Significant increasing trend is noticed for transfers, which is usually employed in online
purchases. Some rising trend is also noticeable for debit and retail card payment systems, both of
which can also be employed for online transactions.
29
Figure 2. 4: Capital-labour ratio trends in various economic sectors
Source: Computed by authors using data from Quantec
Note: the x-axis is in millions of Rands
Some evidence of skilled-biased technological progress can be captured by the trends in capital-labour
ratios. Evolution of capital-labour ratios can indicate the degree to which the economy replaces jobs
with capital and machines. Figure 2.4 shows the capital-labor ratio trends in the overall, agriculture
and retail sectors. There is evidence of labour substitution with capital in the overall economy, with
the trend increasingly steeper from about the year 2002. Similar tendencies are also clearly visible in
the agricultural and retail sectors. For example, in the agricultural sector, the ratio rose from as low as
0.01 in 2000 to a peak of 0.03 in 2013 below falling marginally to about 0.02 in 2017. A similar but
steady trend is recorded in the retail sector from about 0.015 to 0.025 within the same period. The rise
in capital-labour ratio has also corresponded to a steep increase in the share of high-skilled
1
labour in
the agriculture and retail sectors as shown in Figure 2.5 within the same period.
1
Low skills refer to those qualified at pre-matriculation National Qualifications Framework (NQF) levels (1 to 3) or no
schooling (less than level 1), while intermediate skill levels are those qualified at NQF levels 4 to 5, and high skills refer
to those qualified at NQF levels 6 to 10. (DHE, 2019)
0
0,01
0,02
0,03
0,04
0,05
0,06
K/L_f_all K/L_f_agr K/L_f_retail trade
30
Figure 2. 5: High-skill/low-skill structure in retail and agriculture
Agriculture
Retail and wholesale trade
Source: computed using data from Quantec
Note: the light-shaded area represents skills share, while the dark-shaded one represent unskilled proportion
Over time, the structure of formal employment has remained fairly constant in the agricultural and
services sectors from the immediate post-apartheid era up to about 2003. Data from Quantec shows
that low skill (including semi-skill) constituted about 80%, and skilled employment 20% in the
agricultural sector. A similar structure of 65% versus 35% is noticeable in the retail sector for the same
period. However, high skill composition began to rise significantly in both sectors from 2004 onwards.
This increasing trend certainly marks the increasing requirement for skill-bias technical change, as
corroborated by the capital-labour ratio trends in Figure 2.4.
The wage composition in the agricultural sector has also changed significantly as shown in Figure 2.6
The steep increase tendency in the skilled wage rate began in about 2007 from an annual wage rate of
0.3 of a million Rands, to above 0.6 of a million Rands before attenuating to just under 0.5 in 2018.
Meanwhile, low-skilled, semi-skilled and informal wages in agriculture have remained under 10% of a
million Rands per annum. The average annual pay of low skilled workers in the agricultural sector
hardly get up to 50 000 Rands in real terms.
Interestingly in the retail sector, low skilled wage rate had been higher than semi-skilled wage rate, but
lower than high skilled, earlier on in the beginning of the series (Figure 2.7). However, the low-skilled
wage trend caught up with the high skilled around 2012, while the wage rate for semi-skilled remained
very low, at more or less the informal wage level. If we combine low skilled with semi-skilled as it is
usually done, we see a marked difference with high-skilled wages. The distinction between low and
semi-skilled employment can be quite fluid in the retail sector, hence, the plausibility of combining the
two categories. Besides, as discussed previously, most of the semi-skilled requirement such as sales
person and sales manager in the retail sector can be classified as those tasks that are most at risk of
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1993199519971999 2001 2003 2005 2007 20092011201320152017
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
31
being taken over or displaced by technology. As such, we expect low demand and high supply of these
in the retail sector, and hence dampened wage rates.
Figure 2. 6: comparative wage rates by skills level in agriculture
Figure 2. 7: comparative wage rates by skills level in the retail sectors
Source: Author using data from Quantec
2.6. Financialisation, Global Trade and Tax Evasion
The topic of financialisation and its links to the agro-food industry in South Africa is still lacking in
empirical evidence. Nonetheless, financialisation is on the rise within the economy in various ways,
0
0,05
0,1
0,15
0,2
0,25
0,3
0,35
0,4
0,45
0,5
0,55
0,6
0,65
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
x R1 000 000 per annum
wage rate_low skill_agr wage rate_semi-skill_agr
wage rate_skill_agr wage rate_inf_agr
0,05
0,1
0,15
0,2
0,25
0,3
0,35
0,4
0,45
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
x R1 000 000 per annum
wage rate_low skill_retail trade wage rate_semi-skill_retail trade
wage rate_skill_retail trade wage rate_inf_retail trade
32
amongst which the proliferation of firms investing in agri-business (Greenberg, 2017). The
deregulation path undertaken by South Africa, particularly the privatization of cooperatives and
termination of marketing boards aided the ease with which large food retail organizations emerged
and expanded within the economy. As clearly noticeable these have taken over the dominant role in
food retail. In addition to that, have sidelined numerous competitors thus leaving the industry at the
mercy of a few giants. Financialisation is a universal concept, however, in South Africa’s case in
particular it was promoted to counter the decline in profits in light of the changes that resulted from
liberalisation. To this effect, recently, policy measures have been taken to facilitate the capture of
capital into SA and in some instances through SA into other African countries with the aim to facilitate
the ease of doing business. Some examples of traditional financialisation include Afgri’s
financialisation of the agribusiness segment, licensed to sell John Deere tractors throughout Africa, as
well as, providing financial assistance and the expansion of banks like Standard Bank and ABSA into
other countries not only within the continent but beyond. On the other spectrum, there has been
increased funding of agricultural activities by a diversified group of local and international private
investors through the financialisation of “pension funds, hedge funds, sovereign wealth funds, banking
institutions and agribusiness and private equity funds” (Hall & Cousins, 2015: 5).
There are two types of forces that have contributed to increased competition in the retail industry in
recent years. There is the traditional expansion of global retail giants such as Walmart with
multinational footprint and significant economies of scale and scope. This expansion of global giants
introduced fierce competition in the local market. A related source of fierce competition is the
expansion of online trading, where customers are able to access best prices in real time and at time
globally. This phenomenon does not require the local presence of multinational, but simply their
online presence. Increasing competition generally drives out inefficient retailers with high operating
cost, as such, to stay competitive, firms have to remain innovative in developing new ways of cutting
costs. Retail firms generally respond to fierce competition with cost-cutting measures which include
labour-reducing technological adoptions as explained above. In such an environment, with over
supply of low skilled labour, the wages also fall and remain low. This is depicted in the wage trends
presented in Figures 3a and 3b.
Global trade, investment and tax regimes are highly entwined making it difficult to discuss either one
separately. Tax policies are a determining factor in the attraction of foreign investments and the
investors in turn contribute to the tax based revenue of the host country through fiscal obligations.
That said, the transactions carried out by these international firms often lack transparency as the firms’
intrinsic inner workings, especially, the cross-country operations, and tax regimes of the different host
countries are taken advantage of. That is, the firms’ ability to trade within themselves with subsidiaries
based in different countries allows them to manipulate information regarding their operations such
that greater tax evasion occurs in those countries with the heftiest penalties and vice versa. Efforts to
tackle tax avoidance include greater cooperation between countries and tighter tax policies but
33
conflicting interests between the various countries in relation to individual benefits that can potentially
be accrued has made it difficult for consensus to be reached on the way forward. As countries compete
to attract investments their tax regimes also become more competitive resulting in tax havens and in
some cases special economic zones, including in developing countries. This has been the case of
Mozambique, for instance, where despite attempts to increase the income tax revenue to boost overall
domestic revenue, special economic zones have been established to attract FDI. All the same, with
the changing nature of international markets from the trade in goods to that in services, the tendency
has been for these measures to redirect the focus to counter the new trends. For instance, it is
estimated that back in 2000 trade between developed countries accounted for 50% of global trade in
goods and developed countries accounted for about 90% of worldwide foreign direct investment
stock. However, by 2016 the former had declined to 37% whilst more recently developed countries’
stock investment declined by about 15% to about 75% with both transition and developing countries
having become greater shareholders. Owens and Zhan (2018), further state that over the last 20 years
“global value chains” (GVCs) (Owens & Zhan, 2018: 2) have become one of the main developments
in trade and investment, increasing interdependency between countries to the extent that the
composition of any given country’s production and or exports consist of a mean of 30% of imported
materials (Owens & Zhan, 2018).
2.7. Market power, concentration and vertical integration
Worldwide the trade in agricultural commodities, including horticultural goods, has increased greatly
over the past 2 decades. This growth has concurrently been characterized by transformations such as
greater value addition, widespread of stricter standards, substantial investments in the retail sector and
the noticeable takeover of the food retail networks by multinational companies (MNCs). Huge stores
and conglomerates such as supermarkets have become the face of food retail worldwide in general,
and in sub-Saharan Africa in particular (Greenberg, 2017). In many cases this has led to the side-lining
of traditional market places and caused the concentration of a few key players (Maertens, Minten &
Swinnen, 2012). This consolidation of market power amongst a few key players can not only dispel
competition but provides an environment in which the dominant players get to manipulate and or
dictate the rules of the game due to their purchasing power. Given the suggested preference for vertical
transactions this consolidation of power affects operations not only in the high-income economies
and or export markets such as the European Union (EU) but in the production markets or countries
of production too, as the conglomerates restrict their network of suppliers (Maertens et al., 2012). For
instance, UK’s largest buyer of fruits of South African origin was reported to not only pass on a
substantial portion of its costs to producers but also stipulated high technical requirements. Although
such conglomerates engage in corporate social responsibility programs, on the ground there is
evidence suggesting that not enough is being done to protect workers at large. Wages below the
minimum threshold, food insecurity, contact with pesticides and women, specifically, not being
considered for benefits are some examples of the hardships faced by the workers despite these
organisations’ reported commitment (ActionAid, 2005). In extreme cases of vertical integration
34
production at primary level is fully incorporated into the lower structures of the mother firm such as
at the processing and trading phases (Maertens et al., 2012).
3. Practices undertaken across the supermarket types engaged in the
horticulture value chain.
The food retail industry has become highly competitive and concentrated. Supermarkets have become
the respective dominant market attracting consumers with the convenience of a wider array of
products (food and non-food), often better prices of processed products, as well as, the diversity of
other services (Basker & Noel, 2013). Continuous efforts by supermarkets include marketing/
advertising, branding, packaging, store layout, loyalty programs, promotional events tailored to
customers’ habits and recently even in-store financing efforts, as means to gain a competitive edge
over rivals (Reardon & Gulati, 2008; Greenberg, 2017). Over the years concerns with regards to listing
fees, payment period terms, strategic shelf space, promotion fees and rebates have also surfaced
(Reardon & Gulati 2008). Additionally, private label products in particular are on the rise, enabling
retailers to broaden their profit margins through branding (Euro-monitor, 2015b). Over and above,
supermarkets are known for imposing stringent or restrictive measures on suppliers, especially, with
regards to the quality standards of products and using their buyer power to further increase their
profits while passing on costs to the suppliers (das Nair & Chisoro, 2016). In South Africa,
supermarkets’ strategic behaviour has been extended to include exclusivity contracts with mall
developers, thus, limiting competition within these physical markets (das Nair & Chisoro, 2016;
O’Brien, 2017).
In South Africa, about 70% of food is sold through the modern retail sector. This includes
“convenience drugstores (called cafes), small general dealers, exclusive boutiques, chain stores
(groceries, clothing, toiletries, household goods), department stores, cash and carry wholesale-retail
outlets, and co-operative stores serving rural areas” (USDA, 2015:2). Shoprite, Pick n Pay, Spar,
Woolworths and Massmart are the top largest food retailers in South Africa (Euromonitor, 2015a;
USDA, 2015). The first 4 account for approximately 90% of the supermarket retail industry and more
than 80 percent of the goods sold in these supermarkets are sourced locally (USDA, 2015). South
Africa’s food retail industry is considered to be one of the most developed both in the Southern
African Development Community (SADC) region and in Africa as a whole (Emongor & Kirsten,
2009; USDA, 2015). Consequently, these additional practices and/or costs can most likely be observed
in neighbouring countries that host these supermarkets, given their dominant position (das Nair &
Chisoro, 2016).
35
4. Income generation within and between the horticulture production
and retail sectors
Many developing countries continue highly dependent on the agricultural sector. This is particularly
true with regards to employment and poverty alleviation in rural areas. Worldwide women account for
a substantial proportion of the labour force engaged in agriculture. Although statistics vary throughout
the world, this proportion has been recorded to be even higher in developing countries. In Africa,
particularly, sub-Saharan Africa for instance, it is estimated that approximately 50% of the labour
involved in agriculture are women (FAO, 2011). Nonetheless, the fact remains that statistics regarding
the nature and level of women’s involvement in the agricultural sector in the various African countries
may be similar but not necessarily exactly the same across the board. This trend can be seen in South
Africa too (Commission for Gender Equality, 2009). One thing that can be said about the agricultural
sector in most developing countries is that compared to other segments of the economy it tends to
account for the largest share of women employed. Unfortunately, despite their significant contribution
to rural economies, discrimination against these women’s rights continues to be considerable. The
extent of women participation in the rural economies is challenging to quantify. This is partially due
to the fact that a lot of the tasks they undertake may vary across different countries and are not
categorically considered formal employment even though they contribute to the welfare of the
household and the economy. Examples include, household tasks (FAO, 2011). Generally, the returns
resultant from women’s participation in rural economies tend to be quite minimal in comparison to
men. Whilst the men are associated with ownership of land and farms, women are usually relegated as
farmer workers and with poor pay (Akinola, 2018). Statistics hint that apart from being given the jobs
associated with lower remuneration, even when they do the same job as men, women tend to be less
paid. This occurrence, is particularly true in sub-Saharan Africa and or in certain sectors characterized
by unskilled labour (fruit, vegetable and cut-flower export sector) (FAO, 2011), as seen in the Western
Cape where women are recorded as being sidelined into casual work with no benefits (SANPERI,
2008). The fact that a number of women engaged in agriculture farm on hired land, implying that they
have to part with a portion of their earnings as rental fees to respective landlords (usually men), further
aggravates their economic plight (Akinola, 2018).
4.1. A comparative analysis between income generated by farm workers and retail
workers
While the pay rates are generally lower in the agriculture and retail sectors compared to the average
for all sectors, there are also a great deal of differences in pay between the agricultural and retails
sectors. The set of graphs from Figures 4.1 to Figure 4.3 show trends in wage rate for all sectors,
agriculture and retail sectors comparatively, and respectively for the high skilled, semi-skilled and low-
skilled. The distinction by skills level in comparison across the key economic sectors is important
given the envisaged change in the structure of labour demand following key technological drivers.
36
Figure 4. 1
: Comparative unit pay by sectors for skilled labour
Source: Based on computations by author from various survey data
The unit pay rates for skilled labour are trending flat from 1993 to 2018 in the retail and agricultural
sectors, while there is somewhat increasing trend in wage rate in the rest of the economy (Figure 5a).
The significant gap between the agriculture and retail sector is clearly noticeable, where skilled labour
wages in the retail sector are twice those of the agricultural sector.
Similar trends are also observed for semi-skilled labour wages as shown in Figure 5b. Both the retail
and agricultural sector wages for the semi-skilled are significantly below those of the rest of the
economic sectors. While wages in the rest of the sectors are trending upward, those of agriculture and
retail have remained flat over the years. Equally, semi-skilled labour wage rate in the retail sector are
in general about 2.5 times those of the agricultural sector. From 2007 to the present, semi-skilled
labour wages in agriculture have risen marginally, but still remain below those in the retail sector and
far below the level in the rest of the economic sectors.
0
0,02
0,04
0,06
0,08
0,1
0,12
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
wage rate_t_all wage rate_t_agr wage rate_t_retail trade
37
Figure 4. 2
: Comparative unit pay by sectors for semi-skilled labour
Source: Based on computations by author from various survey data
The interesting picture is however in the comparative trends of low-skilled labour wages. From 1993,
low-skilled wages in the retail sector trended upward at the same rate on average with the rest of the
economy. However, from 2006, a decoupling started taking place, such that while wages in the rest of
the economy rose faster, those of the retail sector increased very sluggishly and finally plateaued in
around 2014 and began to fall thereafter. Clearly, something began to happen at this juncture. It is
interesting that the decoupling also coincides with the onset of the significant rise in the capital-labour
ratio as we saw in Figure 3. It also ties with the trends in the labour demand structure that we discussed
earlier, suggesting that some degree of skill-bias technology may be at the root of this trend.
0
0,05
0,1
0,15
0,2
0,25
0,3
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
wage rate_semi-skill_all wage rate_semi-skill_agr
wage rate_semi-skill_retail trade
38
Figure 4. 3
: Comparative unit pay by sectors for low-skilled labour
Source: Based on computations by author from various survey data
The pathetic picture remains for low-skilled labour wage rate in the agricultural sector. This time, the
gap of retail/agriculture wage is far more than 10:1. We still notice the meager increase in the level
similar to that we observed in the semi-skilled labour wages around 2007. These gaps are clearly
significant drivers of inter-sector income inequality.
4.2. A comparative analysis between the cost of production and income generated by
management (later should include share options) and owners
As discussed previously, in many developing and transitional economies agriculture plays a substantial
role through its contribution mainly in the rural economies. In countries like Rwanda, the agriculture
sector counts with the participation of about 70% of the population (FAO, 2019) and accounts for
about 31 - 33% of the GDP (Musafiri & Mirzabaev, 2014; FAO, 2019). Historically, land and labour
have been pinpointed as the main determinants of agricultural production (Cornia, 1985). Over time
this theory expanded to include other elements such as capital or technology, seeds, fertilizers
(McArthur & McCord, 2017) and population growth (Boserup, 1985) as additional determinants.
Implying that with the exception of land the determinants of production tend to vary from country
to country according to respective specificities (Rada & Fuglie, 2019). This is in line with economic
theory, which dictates that optimal output is attained at the equilibrium between minimum costs and
maximum profits. In recent years, the role of information communications technologies (ICTs) in
influencing agricultural output has also taken center stage, with various countries across continents
relying on ICTs to facilitate access to information (Muto & Yamano, 2009; Aker, 2010; Beuermann,
McKelvey & Vakis, 2012). However, this element is still a relatively new concept in many African
0
0,05
0,1
0,15
0,2
0,25
0,3
0,35
0,4
0,45
0,5
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
wage rate_low skill_all wage rate_low skill_agr
wage rate_low skill_retail trade
39
countries and in some cases believed to be only affordable for a selected few. As concluded by Kabbiri,
Dora, Kumar, Elepu and Gellynck (2018), despite the benefits that could be accrued from utilizing
mobile phones to improve access to market information many dairy farmers in Uganda only use their
phones for basic operations such as communication.
Liebenberg and Pardey (2010), attest to the fact that land and labour are the main determinants of
agricultural production in South Africa, with labour registering higher productivity levels over the past
2 decades in comparison to land. Annual land and labour productivity levels are estimated at 1.46%
and 2.67%, respectively, which although seemingly small, are reported to be higher in relation to other
countries in the African continent (Wiebe et al., 1998, in DAFF, 2011). South Africa’s agricultural
sector performance is highly dependent on the weather conditions - mostly characterized by droughts
– as well as, prices in international markets and international trade in general, particularly the exchange
rates (Vink & Van Rooyen, 2009). Overall, over the past few decades agricultural production has
fluctuated. This fluctuating trend has been associated with changes in the policy framework,
deregulation (Kirsten & Vink, 2003), and transformation in the structure of the sector as a whole
(Liebenberg & Pardey, 2010). Despite all this, horticultural output in particular, has registered higher
productivity compared to livestock and field crops production since the early 1900s (Liebenberg &
Pardey, 2012). In recent years, productivity has risen as a result of greater productivity of capital,
labour and land. In other words, greater efficiency in capital use and what can be deemed as a trade-
off between falling employment levels and an increase in the absorption of more skilled labour into
the economy and higher output per hectare of land. Despite all this, the net farm income has been
stagnant (Vink & Van Rooyen, 2009).
Like other segments of the economy, the retail and consumer sector is influenced by a variety of
factors. These factors can generally be classified into micro and macroeconomic influences. According
to PWC (2016), some macroeconomic factors that have influenced the state of the retail sector in sub-
Saharan Africa in recent years include the relatively fast economic growth rate, improved governance
and democracy. Nonetheless, there have been some constraint factors too, mainly lower demand, a
decline in the price of commodities, as well as, some security concerns. This last factor is particularly
true of Kenya and Nigeria. African economies have also been adversely hit by weakened currencies in
comparison to the US dollar and poor infrastructure such as poor logistical networks like roads and
ports, for instance. In the case of Ghana and South Africa, there have also been obstacles in the
generation of electricity, all of which make the cost of doing business more expensive. South Africa’s
retail sector is already characterized by private labels, loyalty programmes, retail credit (PwC, 2016), as
well as, other marketing strategies which as indicated in preceding sections also increase costs of
production. However, given that such costs are usually shifted to suppliers, in essence, they are
associated with higher profits for the retailers.
40
Figure 4.4 depicts the income share that goes to management and senior professionals compared to
the share that goes to casual workers in retail, agriculture and the rest of the economic sectors. The
data is presented in five-year averages and the last three-year average from 2015 to 2017. Management
and senior professionals’ share of income increased from just above 45% in 2005-2009, to 60% in
2015-2017. A similar trend but at a lower level is depicted for the rest of the economy, from below
45% to about 58%.
Figure 4. 4
: Relative income shares of management and senior professionals’ vs casual workers
Source: Based on computations by author from various survey data
The share of managerial wages in the agricultural sector also saw a marginal increase from 40% in the
2010-2014 period, to about 47% in the 2015-2017 period. Comparatively, management and senior
professionals take a relatively smaller share (though significantly high in absolute terms) of income
compared to those in the retail sector. However, an interesting trend is visible on the income share
trends of casual workers. While the income shares of the management and senior professionals in all
economic sectors have shown an increasing trend, the contrary is true for casual workers’ income
share in the respective economic sectors. From 2010 to 2017, there was an average fall in the income
shares of casual workers in all economic sectors. Casual workers in agriculture took just about 37% of
the income in the period of 2010 to 2017. Retail casual workers’ share decreased from 30% between
2010-2014 to about 28% in 2015-2017. Finally, in the rest of the economic sectors, casual workers
20%
25%
30%
35%
40%
45%
50%
55%
60%
2000-2004 2005-2009 2010-2014 2015-2017
overall casual workers overall managers & snr professionals
agric casual workers agric managers & snr professionals
retail trade casual workers retail trade managers & snr professionals
41
appropriated just less than 25% in 2010-2014 period, before falling to 20% in 2015-2017. Casual
workers are likely to be more marginalized, leading to higher wage disparity in sectors like retail, where
the management pay is significantly and increasingly higher than those of the rest. These are certainly
significant drivers of inequality as we see below.
4.3. Inequality and wage distribution by casualization and managerial and seniority
Most South African citizens derive their livelihood from labour supply. The issues in the labour market
in South Africa discussed above are very crucial for the evolution of poverty and inequality in South
Africa. By any measure, South Africa remains one of the most unequal countries in the world (World
Bank, 2018). The World Bank’s (2018) analysis of consumption expenditures from the 2014/2015
Living Conditions Survey finds that in 2015, South Africa’s Gini coefficient was 0.63, the highest in
the world, an increase from 0.61 in 1996. During the same period, real wage gini increased steeper
than that of overall consumption expenditure, from 0.58 to 0.69, while palma for wages also increased
steadily from 5.11 in 1996 to 10.13 in 2014 according to the same dataset from World Bank (2018).
Table 4. 1
: inequality comparison in retail, agriculture and rest of the sectors
2000-2004
2005-2009
2010-2014
2015-2017
Gini coefficients
All sectors
0.75
0.68
0.64
0.76
Agriculture
0.84
0.74
0.54
0.55
retail and wholesale trade
0.70
0.65
0.63
0.75
Palma ratios
All sectors
18.97
10.90
8.97
21.32
Agriculture
48.56
37.70
17.64
10.31
retail and wholesale trade
14.68
10.61
13.28
9.57
Share of income to non-contract (casual) workers relative to workers with formal contracts
All sectors
24%
23%
25%
20%
Agriculture
34%
34%
39%
37%
retail and wholesale trade
29%
30%
35%
28%
Share of income to management and senior professionals relative to the rest of employees
All sectors
50%
44%
44%
58%
Agriculture
53%
46%
38%
47%
retail and wholesale trade
57%
46%
50%
60%
Source: Author’s calculation based on various quarterly labour Force surveys, Labour Markets
Dynamics and the NIDS database
Table 4.1 compares the trends of two types of inequality measures, across the agriculture, retail and
average of the rest of the economic sectors in South Africa. The indices are computed from various
nationally representative labour market and income dynamics surveys. The datasets comprise the
sixteen waves of biannual Labour Force Surveys of Statistics South Africa (2000-2007); the eight waves
42
of Statistics South Africa’s (2010-2017) labour market dynamics and the five waves of the National
Income Dynamics Study of Southern Africa Labour and Development Research Unit (SALDRU,
2008, 2010, 2012, 2014 & 2016). The indices were computed using appropriate methodological
approaches with the application of relevant survey weights for national representativeness of the
statistics. The results are presented in five year averages.
The average for all economic sectors suggest that labour market wage inequality has remained higher
than the expenditure inequality reported by the World Bank (2018). However, it was at 0.64 (2010-
2014), close to the World Banks 0.63 for expenditure inequality in 2014. This clearly supports our
conjecture that it is the labour market dynamics that fuel the high inequality in South Africa. Currently
consistent with the trends in the structure of labour market income shares in the agricultural sector in
Figure 6, the Gini coefficient fell significantly from 0.84 in the 2000-2004 period to 0.55 in 2015-2017.
In the retail sector, inequality rose from 0.70 in the first period to 0.75 in the last period, though it fell
somewhat marginally in 2010-2014 to 0.63. Inequality in the retail sector traces inequality trends in the
rest of the (non-agriculture) economic sectors.
The Palma ratio measures the ratio of the richest 10% to the poorest 40% and is an indicator of
extreme inequality. While the Palma index for all other sectors has increased from 19 to 21.3 in the
period of consideration, it fell significantly in the agricultural sector from 48.6 to 10.3. The fall was
somewhat marginal, howbeit from and lower base of 14.7, to 9.57. The suggestion here is that the
high inequality we have experience is mostly from the lower top class, through the middle to lower
class of the wage distribution spectrum. It is worth noting that the type of analysis and data we employ
in this work cannot adequately capture extreme inequality. This is because the wealth of the very top
earners is hardly reported in the usually available survey data. As such, relying on the Palma ratios may
be slightly misleading, nevertheless, it is clear that the wage inequality recorded in Table 6 is for the
most part contributed by wage disparities in the mid upper to lower income class.
Table 6 also gives the share of wages that go to workers with no formal contract. This group of
workers can be classified as casual. The share of wages to this group has been falling in both the retail
and the other non-agricultural sectors of the economy, while rising marginally over time in the
agricultural sector. In contrast, the share of wages that goes to managers and senior professionals in
the retail and other non-agricultural sectors of the economy has been increasing significantly over
time. The increase has also been noticeable in the agricultural sector, though at a slower pace. This
picture suggests that the gap between management and workers at the very low end of the wage
distribution curve has been rising. This trend is likely to exacerbate inequality over time.
The combination of the key factors discussed above, including land reform issues, weaknesses in
unionization and regulatory reach, and above all, the skill-bias technical progress that comes with the
increasing adoption of new technologies of production are at the root of a possible worsening of
43
inequality in the closest future. The area of solution to these problems lies in skills development and
adaptation, which is also plagued with issues.
The problem with South Africa’s educational system that has been stubborn to redress is the highly
unequal structure along racial lines inherited from the apartheid era. The democratic government has
made significant efforts in access to education by the previously disadvantage groups, however, racial
differences in the quality of education still reproduces the old order to some extent in the labour
market. South Africa’s primary school enrolment stands at close to 100%. However, a comparison of
the scores of standardized Mathematics and Reading for Grade 6 from the Southern and Eastern
Africa Consortium for Monitoring Educational Quality (SACMEQ III) places South African learners
at below the African average, and also below many other countries like Botswana, Kenya, Swaziland,
Tanzania and Zimbabwe. The standardized Mathematics and Science tests for Grade 8 from TIMSS
data also suggest unfavorable performance for South Africa relative to comparator countries like
Botswana, Chile and Turkey, with overall scores below the international benchmark score (Bhorat et
al, 2016).
The weakness of South Africa’s current human capital development efforts lies in the inability to
reverse the poor quality problem inherent in the educational system. Consequently, while South Africa
is mobilizing efforts for job creation, the journey is made more difficult given that the more than 27%
unemployed South Africans are largely medium-skilled to unskilled. Bhorat et al. (2016), record that
between 2001 and 2012, the economy shed half a million medium-skilled and 175000 unskilled jobs
from the primary sector to which agriculture belongs, with no significant change in high skilled jobs.
In the same period, output expanded in the agriculture and mining sectors, suggesting some skill-bias
production expansion at the root of these changes. The secondary and tertiary sectors’ employment
expanded during this period. In the services sector where retail trade belongs, 70% of the new jobs
were high and medium-skilled workers, with the unskilled jobs recording a marginal decline.
These trends from the recent past show how near impossible it may be to win the battle of creating
low-skilled jobs to reverse the unemployment challenges. The solution lies in the balance of job
creation efforts and aggressive development of relevant skills that can easily adapt to a technologically
changing production environment. These strategies together with ensuring the effectiveness of labour
market institutions (unions, low-cost hiring regulatory reforms) in protecting low wage workers and
effective land reform are particularly called for in the agriculture and retail sectors that have shed low
and un-skilled jobs.
44
5. Possible formal and informal mechanisms to improve the working
conditions along the horticulture value chain
Changes in global market dynamics over time have also been felt in South Africa. Both farm and retail
workers have seen transformations in their respective industries, some of which have not been easy
to adapt to. Examples include changes in employment conditions and benefits. Although employment
legislation has been adjusted and labour unions have emerged in response to the need for champions
to fight for employees’ rights, empirical evidence suggests much more can still be done for the benefit
of workers.
A “transformative” (Moyo, Rutherford, Amanor-Wilks, 2000: 194) approach to improve farm
workers’ working conditions in particular, points out the value of acknowledging that these individuals
are not inferior to other kinds of workers to begin with. Consequently, they deserve to be afforded
some consideration and dignity. In this regard, Moyo et al. (2000), recommend that farm workers be
given access to land, as well, as enhanced social welfare. In this context, communal settlements with
dignified living conditions, can be established for the farm workers for which they would have free
access and or lease at subsidized rates. It is recommended that such housing projects be integrated
into existing communities near and around farms, where ideally basic infrastructure and services
already exist and that they be funded not only by the farmers but through public-private partnerships
including NGOs.
Similarly, there is a need to ensure continuous training of the farm workers in accordance with the
changing skills demand from global markets. Casual farm workers and local unions should therefore
be strengthened and be one of the main forums through which these workers’ interests may be voiced.
Given the less constrained access to these settlements as opposed to the farms, worker organization
should ideally be less challenging. ActionAid (2005), further recommends that governments should
not settle for the implementation of voluntary guidelines of legal corporate responsibility standards
but should establish minimum standards at local and international levels. As an example, it is
recommended that the government should adopt the UN Human Rights Norms for Business –
establishes legal obligations for MNCs to respect and secure the human rights of all workers within a
company’s sphere of influence.
There is also a need for government to implement measures to counter the abuse of buyer power by
supermarkets. However, as stated by Vander Stichele and Young (2009), often the technicalities of
supermarket-supplier relationships are not transparent and hence, cannot be easily tackled if
contractual conditions and any subsequent changes are not readily available for scrutiny. In countries
where these exist, competition commissions may be used to put buyer power into check through
investigations but said investigations will mostly not succeed without the cooperation from relevant
suppliers. Over and above, ActionAid (2005), advocate for decent remuneration for farm workers
across the spectrum. As of the 1st of January, 2019, the South African government established a
45
minimum wage of R18 per hour in the farming/ forestry industry (LWO, 2019), which is 90% of the
national benchmark. However, it is still to be seen how effective the enforcement of the new wage
rate will be, especially, for the casual labour. Moreover, there is a lesson to be learned from the mining
industry regarding the potential for joint ventures as a means to moderate labour conflicts between
farmers and employees. For instance, Arnot coal mine in Middelburg was reopened almost 4 years
after its closure, resultant from an agreement to make former employees shareholders of the mine
with a total stake of 50% (eNCA, 2019).
6. Paving the way forward (find gaps in the literature presented that if
filled can assist the second phase of the campaign)
The discussion in the preceding subsections have zeroed in on a number of transformations recorded
in the food retail sectors over the years and the resultant impact on the horticultural segment and on
farm and retail workers in particular. As expected, this has not only included the opportunities but the
challenges and or threats as seen by the undesirable effects spread out across the spectrum. In this
regard, despite some of the recommendations presented as potential strategies to further improve the
working conditions of workers, additional insight and research is forthcoming into a number of
factors:
Identify sustainable ways to adapt and improve workers’ skills in accordance to the increased
demand for skilled labour;
Determine a sustainable manner to adapt land reform policies to the local context and involve
potential beneficiaries in the process;
The implementation of an ideal minimum wage across the various sectors of the economy continues
to be challenged by the ambiguity surrounding what the ideal minimum wage would be given socio-
economic factors;
As indicated earlier, labour unions are accused of disappearing once they have signed up new farm
workers and secured the payment of membership fees. Further research of means to invert this
situation should look at potential ways of making labour unions more effective and or liable in
defending the interests of farm workers who are their respective members;
Externalisation has become characteristic of contractual regimes in agriculture. This relies on
employment brokers to intermediate between farmers and farm workers. Despite the approval of
labour policies, this has resulted in increased casualisation of the horticulture labour force as current
policies do not cover these contractors. Further assessment of strategies to reduce these brokers’
influence on the labour force is needed;
ecommerce has evidently been on the rise, leading to a surge in the capital-labour ratio. This suggests
that there is a need to evaluate how best to counter rising unemployment levels by integrating existing
labour force into this new sector;
The intrinsic workings of financialisation, tax evasion and globalization have become dominant in
dictating the dynamics of economic production in numerous countries. Nonetheless, empirical
guidelines on how to achieve a sustainable balance between continued investments and improved
46
welfare for relevant workers is still lacking;
Globally, supermarkets’ buyer power is indicated as one of the main factors that facilitates the
continued abuse of their suppliers and subsequently the worsening off of workers. This is
inclusive of the impact of loyalty programmes and branding. Although it has been suggested
that governments can mitigate the adverse effects of buyer power more research into ways in
which this can be done effectively and in a sustainable manner should be explored;
Given the repeated reports of the shortcomings of the enforcement of labour
legislation, in particular, that which is extensive to farm workers, more research should
be dedicated to identifying means through which these workers’ existing rights can be
implemented; and,
Human capital development in South Africa is reported to be challenged by poor
education standards. Research into approaches to redress the education system’s
shortcoming specifically to improve the quality of human capital is still under studied.
47
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