Business

Narrowing the farmer-worker gap

Tracy van der Heijden

A new approach that favours justice, equity and access is required

An alternatively structured food economy is the only solution to the farming problem. (David Harrison, M&G)

Labour unrest in the agricultural sector and farm worker demands for R150 a day have raised a contradiction: the Bureau for Food and Agricultural Policy was requested by representative bodies to investigate the feasibility of the R150 a day wage demand.

Their recently released report contains two key findings. Firstly, many farms would become unprofitable if required to pay the R150 a day minimum. Secondly, even if workers did receive the R150 a day wage, they would probably still be unable to afford a nutritious basket of food.

I have no issue with the bureau's methods or conclusions but I do believe that there is a glaring omission in the analysis and the resulting media reporting: Why is it that farmers are unable to pay farmworkers a fair wage and, at the same time, why will these workers still go hungry even if they succeed in their wage demands?

Answers to both questions become clearer if we start thinking about the broader food economy within which farmworkers and consumers find themselves. This systemic approach is generally absent from both agricultural policymaking and popular discussions of the agricultural sector.

When we consider the entire food system, from the farm to the consumer's plate, a different picture and different solutions emerge. A food-economy approach shows that outcomes in land reform, rural poverty and retail food prices are both interrelated and the result of particular systemic policy choices rather than any "inevitable" workings of the market. A modern, industrialised food system, the dominant system in South Africa, is characterised by distance between farmer and consumer, and long supply chains. Farmers and consumers no longer deal directly with each other but through intermediaries, such as processors, wholesalers and supermarkets. In these supply chains, the basic economic assumptions of demand, supply and equilibrium price seldom apply in neatly predictable ways. Instead, value-sharing and cost-sharing along the supply chain are determined to a considerable degree by who has power and who does not.

And, increasingly, it is neither consumers nor farmers who have power but the intermediaries (processors and supermarkets) that stand between them. Smaller farmers and poorer consumers tend to have the least power of all. Long supply chains in themselves add costs – logistics, marketing and the profit imperative of many stakeholders. This food-economy structure is the main reason many farmers cannot afford a decent wage, why small and emerging farmers struggle to make a living, and why the majority of South Africans cannot afford to buy basic, nutritious food, even when they are employed.

Food economy

Food price reports issued by the National Agricultural Marketing Council illustrate clearly what is happening in our food economy, if only we would pay attention. The council reports on farm value share (the value of the farm product's equivalent in the retail price) and the farm to retail price spread (the difference between the consumer price and the value of the farm product). These figures provide insight into how our food economy allocates value, costs and benefits to the detriment of both producers and consumers. Milk is a good example: the farm-gate price of fresh milk is about R3 a litre but the average consumer price is close to R9 a litre – a farm-retail spread of almost R6 a litre. The farmer share is only a third of the consumer price, although minimal processing is involved, and the farmer carries all the costs of producing raw milk. Between 1998 and 2012, about 5 000 dairy farmers went out of business, with estimated farm-worker job losses of 50 000. Many (mostly lower-income) consumers cannot afford this basic food item: research indicates that fewer than 60% of South Africans consume dairy products on a daily basis.

The current farm share of maize meal is about 45% of the retail price. Once again, the farm-retail price spread is substantially higher for consumers who can only afford to buy small packages and for those who live in rural areas.

A similar story can be told about most basic food items – a food economy that keeps farm incomes under pressure while pricing food out of reach of most South Africans. When land reform beneficiaries struggle to produce and sell maize for R2 000 a tonne and then travel to a supermarket to buy maize meal for R4 600 a tonne, it is not hard to see how the food economy is working against them and undermining land reform.

The reality is that many small farmers hardly earn enough from agriculture to feed their families. Falling farm incomes and the declining share of producers in food prices are the main reason why the number of farms in South Africa is declining, and why the average farm size is on the increase. Paper-thin margins mean that only the biggest farming units can survive.

Even if we accept the (almost guaranteed) response that retailers and processors are not making excessive profits, the reality is that we cannot afford a food economy that delivers these outcomes. And we didn't end up in this situation by accident: almost all policy that impacts on the food economy – from agricultural development to spatial planning, infrastructure spending and local economic development – is biased towards entrenching the status quo and undermining alternatives.

Current contradiction

A food economy that works against both farmers and consumers is not a South African phenomenon but a global one. Declining farm incomes alongside rising retail food prices are seen in many places, including the United States and the European Union. The difference is that, all around the world, consumers, agrarian activists, farmers and governments are fighting back. But, in South Africa, where the results of the dominant food economy – widespread food insecurity and deepening rural poverty – are truly shocking, there is little public outrage and apparent policy apathy, despite the fact that the right to food is enshrined in section 27 of the Constitution.

If we consider the food economy rather than just the agricultural sector or retail food prices, it provides an explanation for the current contradiction that farmers cannot afford to pay a decent wage and farmworkers cannot afford to eat on those wages.

There are thousands of examples of alternative and successful ways of structuring food economies that promote justice, equity and access rather than the maximisation of profit for a few stakeholders. The national development plan states that high food prices are an important factor putting upward pressure on labour costs and undermining our economic competitiveness.

Lower food prices for consumers and more equitable access will reduce hunger and food insecurity, and increase the purchasing power of both wages and social grants. Higher farm-gate prices will facilitate higher wages for farmworkers and create better opportunities for smaller farmers and land reform beneficiaries. Both can be achieved in an alternatively structured food economy but we won't find better answers until policymakers start asking better questions.

Tracy van der Heijden is a PhD fellow at the Public Affairs Research Institute. Visit pari.org.za or email [email protected]

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