AbstractsEconomics

Implications of new labour legislation for commercial agriculture in KwaZulu-Natal.

by Robert Anthony. Newman




Institution: University of KwaZulu-Natal
Department: Agricultural economics
Degree: MS
Year: 2015
Keywords: Agricultural economics.
Record ID: 1479890
Full text PDF: http://hdl.handle.net/10413/11898


Abstract

New labour legislation was introduced to agriculture in September 1993. This study examines the effects of the new legislation on agriculture, mainly in terms of increased farmers' transaction costs when dealing with labourers. The new legislation introduced to agriculture includes the Basic Conditions of Employment Act (BCEA), Unemployment Insurance Act (UIA) and Agricultural Labour Act (ALA). Data were collected via a postal survey of 450 commercial farmers in KwaZulu-Natal (including 150 sugar-cane farmers, 150 dairy farmers and 150 beef farmers), of whom 135 returned usable questionnaires. The questionnaire dealt with the financial and labour structures on the farm, implementation of the new legislation, use of contractors, impact of minimum wages, education and trade unions. The supply of labour to agriculture in South Africa is relatively elastic, due to the high percentage of unemployed people. An increase in the cost of labour may cause farmers to use more substitutes, such as machinery, new technologies and contractors. The study examines machinery and labour contracting in commercial agriculture in KwaZulu-Natal and to what extent new labour legislation may affect farmers' attitudes towards the use of contractors. Descriptive statistics show employment of contractors, impact of enterprise type on use of contractors, and farming activities which are contracted out. Logistic regression suggests that on-farm implementation of new labour legislation, enterprise type, age of the respondent and turnover (farm size) influence a farmer's decision whether or not to contract in machinery contractors. New labour legislation has affected the structure of labour on commercial farms in KwaZulu-Natal by increasing transactions costs between labourer and farmer, and by raising wages; for example, farmers now have to pay overtime rates for work after-hours and on Sundays. Survey respondents indicated that, if minimum wages were imposed, cash wages would be paid and perquisites would be charged for. If the minimum wage was set above present wages, labour would be replaced with machinery and contractors. Respondents would prefer an industrial council to determine minimum wages (if they are imposed), accounting for enterprise and regional differences. Study results show that average cash wages for general (unskilled) farm labour are negatively related to distance between the farm and nearest large town or city, and positively related to turnover (farm size) and application of the new legislation. Enterprise type influenced the cash wage, value of rations paid to general farm labour and the provision of land rights for workers. Substitution of cash for non-cash benefits, and capital for labour may occur if the new legislation is strictly enforced. Farmers feel that there are a number of management problems they face in the future, involving labour, unions, government and finance. Future opportunities include marketing, export of produce, and labour upliftment and training.