An analysis of grain producers' labour cost : the case of South Africa versus Mozambique
Saayman, Maria Johanna Magdalena
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The South African agricultural sector is of great economic importance; not only does it contribute to Gross Domestic Product (GDP), it is also a significant provider of employment. On average, a South African producer feeds approximately 1 600 people compared to the average in Africa of only 26 people and, therefore, the South African agricultural sector is key in providing food security in South Africa. Over the last number of years, South African producers have experienced mounting pressure when it comes to producing profitably. A recent announcement of a 51% increase in agricultural minimum wages resulted in retrenchments by producers in an attempt to reduce production costs. Furthermore, rising production costs, including the cost of labour, have left producers considering alternatives such as mechanisation and/or diversifying into other sectors. Other more drastic measures include relocating or diversifying agricultural activities to other African countries in search of more profitable investments and other benefits such as affordable labour. However, when considering relocating, the cost of labour in the host country will be a determining factor. The main objective of this study was to determine the financial viability of producing in South Africa compared to Mozambique focusing on labour cost. In-depth, structured interviews with experts in this study field were conducted in order to determine the stability of the labour market in South Africa and Mozambique and also to examine the possibility of a link between higher wages and the level of development or mechanisation in the grain sector. The findings include that cheap labour is available in Mozambique and can possibly add value to the grain-producing value chain cycle. However, other factors including the lack of a properly developed market and insufficient infrastructure may counter the possible cost advantages that could be gained through cheaper labour costs. A decision matrix was developed for grain producers as decision-making tool when considering relocating or diversifying agricultural activities to another African country.