Forestry: caught in the middle

April 30, 2013

A minimum wage for forestry workers is the subject of intense negotiation among stakeholders, seeking to find a balance between affordability and a living wage ...
by Jeanette Clarke


The upward pressure on forestry wages is sending shockwaves through the industry.


A new minimum wage for agriculture and forestry
On 4 February, the Minister of Labour, the Honourable Mildred Oliphant, announced a substantial increase in the minimum wage for farm workers with effect from 1 March. The wage increase was in response to strike action in the Western Cape towards the end of 2012 and into 2013, and workers' demands for R150/day minimum wage. After special public hearings carried out in January this year, and drawing on the findings of a study analysing wages in agriculture carried out for he Department of Labour (DoL) by the Bureau for Food and Agricultural Policy at University of Pretoria (BFAP), the Minister announced that the minimum wage for farm workers would increase from R69/day to R105/day.

The forestry minimum wage is directly linked to that in agriculture through the 2012 forestry Sectoral Determination (SD 12) amendment, that provided for parity between farm and forestry wages by 2014. The 2013 forestry minimum wage is set at 98% of the agriculture wage. This brings the minimum wage for forestry to R2 229.32 with effect from 1 April, 2013.

The announcement of the new agriculture mini- mum wage and its implications for forestry wages has caused shock waves through the sector. Prior to the announcement of the new wage, FSA and forestry employer representatives met with DoL officials, and subsequently with the Minister herself, to raise their concerns and seek to delink forestry wages from those in agriculture (see the FSA website for minutes of the first meeting). At the time of writing this article, submissions by the forestry employers are still under consideration by govern- ment and no decision has been reached. It is an opportune time, therefore, to look in more detail at
the key findings of the BFAP report on which the farm worker wage increase was based. Do these also apply to forestry, or is forestry a special case, as the employers attest?

How much can producers afford to pay workers?
Firstly, the report examines affordability. The new farm worker minimum wage is based on the BFAP estimate of the highest wage that most typical farms could afford to pay, and still be able to cover operating costs. The BFAP models found the tipping point to be R104,90/day. Beyond this "many of the typical farms will be unable to cover their operating expenses, and hence not be able to pay back borrowings or to afford entrepreneurs remuneration" (BFAP, 2012).

Is this wage level affordable in forestry? The FSA delegation presented financial models supporting their plea for a lower wage for forestry. In response, DoL has commissioned the BFAP to conduct a similar assessment for forestry to the one they did for agriculture. As with agriculture, there is likely to be huge variability amongst types of forestry operations. The size of operations is a key variable in profitability and the level of affordable wages. The new wage levels may well be unaffordable for smaller operations, and in particular those that rely only on timber production without the value- add of downstream industry. The larger, vertically integrated corporations that dominate the forestry sector, however, are operating at a different scale.

Another consideration is the potential of the new wage levels to address the dualism in wage levels created through corporate restructuring and labour outsourcing. The new wage level, if implemented, would bring the minimum wage in line with the aver- age wage of full time forestry workers employed directly by companies. In other words, this is the wage that contractor workers would be earning if they remained in direct employment and continued to engage in wage negotiations.

The new minimum wage would bring greater wage parity between contractor and directly employed workers, and between directly employed workers on fixed term contracts and permanent workers. The LRA Amendment Act, due to be passed this year, has provisions to address wage discrepancies aris- ing from 'casualisation' and provide greater protec- tion for workers employed on fixed term contracts to do permanent work (see Labour Column in August 2012 edition of SA Forestry magazine for details). In other words, even if the new minimum wage is not applied to forestry, other legal mechanisms will be coming into force intended to exert an upward pressure on minimum wages.

How much money do workers need to live on?
Secondly, the BFAP report looks at the other side of the equation: how much income does a worker need to survive and to support his/her family? The monthly cost of the most basic balanced diet has been calculated at R2 308/month (see box for further details of this index). Based on the Stats SA figure that the poorest households in SA spend R42% of their income on food, a family of four would therefore require a total income of R5 630/ month to afford the most basic food items required for a balanced diet. The current forestry minimum wage of R1 429/month is about a quarter of the income required to provide a 'balanced diet' for a family of four.

A structural crisis in agriculture, and forestry?
These findings reveal a sobering truth: under current modes of production, most farming enterprises cannot afford to pay workers a living wage. According to the modelling done by BFAP, the highest wage that the majority of farms can currently afford is still considerably below the income level required by a typical wage-earning household to meet basic nutritional requirements. Even a combined income of two wage workers at R105/day, and two child support grants, comes to less than that required to sustain an average family.

Whilst acknowledging the sobering facts of the current situation, the authors are upbeat about the potential for the agricultural sector to address the crisis in wage levels and employment in the long term through mechanisation, intensification andexpansion.

The way forward
Do the structural problems facing agriculture also affect forestry? This seems most likely. Mechanisation is rapidly taking place in the industry, where scale and operational parameters permit, and this is arguably one element of the structural change needed to address the current crisis. There is, however, an urgent need for government and employers to engage additional strategies to ensure sustainability of the industry, stabilise and increase the number of jobs, whilst at the same time improve wage levels and employment conditions to meet workers’ basic needs.

BFAP 2012. Farm Sector Determination Report Draft. BFAP%20farm%20sector%20determination%20report%20 draft%2017%20Dec.PDF

* Jeanette has worked for over 25 years in South Africa and the southern African region, with a focus on the developmental role that forestry and forests can play in poverty reduction and livelihood security.

Published in Feb 2013

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