South African Horticulture: Challenges for Economic and Social Upgrading in Value Chains - Case Study Example

South African Horticulture: Opportunities and Challenges for Economic and Social Upgrading in Value Chains Global Production Networks A global production network refers to a combination or two or more value chains spread across organizations and national boundaries, in which actors at different hierarchical levels are integrated into a single flagship firm. A value chain is a sequence of production activities giving rise to and supporting end user of a specific product or service. This sequence does not have to be necessarily vertical (Errasti, 6). Conceptual Global production networks are a major innovation in the organization of global business. They are driven by three forces: 1) Liberalization of markets, 2) rapid development and spread of information and communication technology, and 3) competition (Cooke, 81-84). Global Production Networks (GPNs) are related to Global Value Chains (GVCs), from the view that both concepts refer to integration and coordination several value chains across geographies (Coe, 17). However, a slight difference arises on scope of the two concepts. GPNs have a wider scope as explained by several literatures below. Global Value chains initially concentrated on commercial dynamics between organizations in different segments of the production chain. A seminal difference was made between a buyer-driven commodity chain and producer-driven chain. In producer-driven chain, integrated transactional producers and technology and capital intensive industries such as advanced electronics and automobiles controlled the producer-driven scope chains. Buyer driven chains emerged as developed countries established global sourcing networks to obtain labour intensive commodities from low-cost suppliers in Africa, Latin America and East Asia. The major aspect of buyer driven chains was that lead companies were large retailers such as Tesco and Wal-Mart and global marketers or brands like Gap and Nike who did not have direct ownership of factories , but they had control over production through their capability to set prices , process standards, product specifications and delivery schedules within their supply chains. They also took part in institutionalization of demand sensitive economies with lead companies or agents based in developing countries (Barrientos, Gereffi and Rossi, 2). The increasing complexity and extensiveness of global production and trade motivated diverse formulations. Global value chains attracted attention to the role activities such as addition of value, differentiation of value and value capture in coordinated production processes, distribution and retail. Global production networks (GPNs) encompass activities in GVC but puts more emphasis on the social or institutional context of inter-connected commercial activities (Henderson et al., 436-464). GPNs analysis focus not only on interaction between lead organizations and suppliers , but also on the whole range of factors that play a part in influencing and shaping production in the world, for example national governments, international trade unions, NGOs and multilateral organizations (Hess and Yeung 1193-1204). Global production Networks also emphasize more on institutional and social embeddedness of production and power associations between players, which vary as sourcing spread across developing countries (Barrientos, Gereffi and Rossi, 2). Thus, according to Coe (17) the different features of global production networks (GPNs) set against global value chains (GVCs) can be summarized as follows: GPNs are complex in that they encompass not only firm organizations but also a wide range of non-firm organizations, for example, national governments and labour unions GPNs are multi-scalar, from local to global GPNs lay emphasis on social and institutional context, in terms of rules and regulations and business cultures Economic and Social Upgrading of Workers in South Africa Labor Market Social u refers to the process of improving the rights and entitlements of workers as players in value chain. It adds to the quality of their employment which includes access to better work that may result from economic upgrading of the workers. For instance, an employee that has gained skill in one job can easily move to a better job elsewhere in the global production networks. Social upgrading also involves improving working conditions, rights and protection. The concept of social upgrading is based on the International Labour Organization framework which is made up of four pillars: Employment, social protection, social dialogues and standards and rights at work (Barrientos, Gereffi, and Rossi, 7-8). Social upgrading leads to work taking place under conditions of equity, freedom, and security. Social upgrading can also be subdivided into two parts: Measurable standards and enabling rights. Measurable standards refer to those features of employee well-being that can be easily observed and quantified. This includes features such as the level of employment (regular or irregular), wage level, working hours and social protection. Measurable standards are usually the result of complex bargaining processes, achieved through the enabling rights of employees. Enabling rights refers to the less quantifiable aspects such as non-discrimination, right to collective bargaining, freedom of association, voice and empowerment (Barrientos, Gereffi, and Rossi, 7-8). There is low economic and social upgrading for workers in South African labour market. In regards to agricultural sector and more specifically the horticulture sector, the low upgrading is mainly attributed to exploitation of labor by global production networks players who include giant farms and international organizations. The government and labour unions have also failed workers in South Africa. Apartheid legacies can also be partially blamed for the low social- economic conditions of South African farm workers. Conflicts of interest in global production networks in South Africa are the major causes of exploitation of farm workers. The main actors who include the international organizations, in particular supermarkets and the giant farms in South Africa are caught in between commercial dynamics and the consequent need for competitiveness. The struggle between these two actors culminate to low socio-economic status of farm workers (Barrientos, Gereffi, and Rossi, 8-9). This conflict can be traced to the period immediately before and after 1994. According to a report by Institute for Poverty, Land and Agrarian study 2013, before 1994, South Africans farmers had high bargaining power in the international market. The high bargaining power was attributed to vehicles such as cooperatives, Agricultural Credit Board and the Land Bank that provided particular resources and production benefits, capital loans and subsidies. These bodies also provided substantial market support for farmers as marketing boards could negotiate effectively on behalf of South African farmers with export markets mainly in Europe. However, the apartheid regime systematically phased out these benefits. The new ANC regime in 1994 established deregulations in the agricultural sector, market liberalization and labour legislation. From that moment, South Africa experienced significant reduction in number of farmers, the remaining farmers became more market oriented, they consolidated their lands, mechanized and subsequently reduced their labour force and changed the farms’ management. At the same time, the power of supermarkets increased significantly and they dominated the market as price makers that lead to farmers being price takers(safeguard by cooperatives was no more), under great pressure. These changes that affected farmers had a direct adverse effect on different classes of workers. European supermarkets, such as Tesco, are notorious of squeezing South African farmers who are the major suppliers of fruits and other horticultural products. They fix low prices and demand greater flexibility under the JIT production plans and more unpredictable trading conditions. They also set very high technical standards encompassing food and agricultural products which fall into four major categories: Health control (food law, microbiological criteria, hygiene, contaminants and pesticides), plant health control (harmful organisms), marketing standards(general or specific) and other requirements(food contact materials, food additives, novel foods, food radiation, quick frozen foods, radioactivity, labeling, GMO’s and organic products). The European markets have historically paid the best prices for South African horticultural products hence the farmers cannot easily cut-off links with these markets irrespective of the very high standard requirements (Barrientos and Visser, 36). There has also been a rapid increase of supermarkets in South Africa and development of markets in other areas in the global south in particular Asia, the Middle East and Sub- Saharan Africa. These markets also set standards, although more flexible than those set by European markets (Barrientos and Visser, 36). Given the intense pressure on South African farmers exerted by the European markets and to an extent local, Asia and regional markets, there is need for the farmers to respond to this pressure, there is need to lower costs, increase quality of products, productivity and be able to deliver products on short notice and with greater flexibility. To meet these objectives, farmers have cut off permanent workers as well as withdrawing other privileges previously offered to farm workers. They are increasingly turning to the less costly seasonal, contract, and migrant workers mainly from the poor neighbouring Zimbabwe and Mozambique. For example, the number of permanent workers fell from 28% of the aggregate workforce of the table grape sector in 2007 to 20% between 2010 and 2011 (Barrientos and Visser, 21-22). The temporary workers are economically feasible to the farmers in several ways. First, they are paid low wages.In fact in some cases, they are paid below the set minimum wage. A research by ActionAid carried out on five Tesco’s accredited farms in South Africa found that significant number of workers in fruit industry were receiving a fortnightly wage of 378 Rand which is substantially below the minimum wage of 419 Rand. These workers also worked for unreasonably high hours, some reporting to work from 6:30 am to 5pm. Secondly, the temporary workers do not belong to provident funds as there is no legislation compelling farms to afford such workers such a benefit. Further, since as stated majority of these temporary workers are desperate immigrants from the poverty torn neighbouring countries, they don’t demand a lot in terms of accommodation (Alex, 4). Further, to save on their production costs and meet the requirement from the international supermarkets on top of the global supply chain, farmers have withdrawn basic requirements for the farm workers. Workers in the horticulture farms work with no protective gear thus being exposed to hazardous farm chemicals. They are also provided with dismal housing, if any all. Even under this kind of housing, they pay rent that is deducted from their meager wages. As concerns housing, resident workers were traditionally provided with free housing, water and electricity. However, the pressure exerted by the giant supermarkets buying practices, rendered farmers to subjecting the farm workers to miserable housing conditions (Alex, 5). Other benefits withdrawn include closure of farm schools and clinics (Institute for Poverty, Land and Agrarian Studies, 5-6). Therefore, with respect to global production networks, the low economic and social upgrading for South African horticulture farm workers is caused by pressure exerted downward from up the supply chain. The European supermarkets being the main buyers of South Africa’s fruits and other horticultures, and having so much bargaining power have set standards for the agricultural products so high, besides their poor buying habits characterized by Just In Time inventory method and low prices. The high standards which farmers have to comply with, and the low prices demand measures to reduce production costs. Farmers, having no better markets have been compelled to cope with this pressure and have channeled it to the person down the supply chain, the farm worker. The overall effect is exploitation of the latter in all economic and social dimensions. The current conditions in South African horticulture global production network can be anticipated on any production network where there is a wide disparity in power of the actors. In this vein, South African farm companies’ exploitative tactics which amount to economic and social downgrading with respect to workers can be anticipated. The government has fundamentally contributed to the perpetual exploitation of workers by global production networks in several ways. The South African government has expanded legislation on labour and employment rights to the hitherto marginalized groups such as all farm workers, including seasonal and casual workers. These labour rules are founded on International Labour Organization standards but, although in effect, the government has not fully enforced them and they have been almost meaningless as far as protection of contract and other informal workers is concerned( Alex, 5). Precisely, the government has abandoned workers to the fate of Global production networks and the latter have employed exploitative tactics in pursuit of their economic interests. This failure of the government has been revealed by several empirical studies. Whereas it is not in contravention of any South African law to employ workers on seasonal or contractual basis, farmers have devised unsuspected ways to continue exploiting workers. Barrientos and Visser (23) found that in large farms, seasonal labour rises to as high as 80% of the total labour force during high season, nothing wrong with that. However, while seasonal labour is transitory, a significant number of seasonal workers worked throughout the year. In some of the firms studied, managements confessed that they preferred to employ a particular number of workers on fixed-term contracts regardless of whether they work throughout the year so that they could give the firm more flexibility. This is utter exploitation since workers can work for several years without claiming the various employment benefits under the employer’s cloak of contract or seasonal employment. The government, through the ministry of labour has ignored this visible trend of exploitation. The law that could shield workers from this economic and social downgrading is there but has rarely been appealed to due to laxity or collusion of political powers with the large agricultural companies (Institute for Poverty, Land and Agrarian Studies, 5). Further, the government has overlooked other blatant violations of labour laws and human rights. In the wake of the occasional strikes by farm workers, the employers have always made punitive responses that further complicate the lives of the already oppressed workers. These punitive measures include changing workers on full time weekly rates to piece labour rates without the worker’s consent. Farms have also unilaterally increased working hours. In other cases, work week has been reduced, meaning that workers have little take home wages. Medical services have been with-drawn. Further, some workers’ houses are apparently below the standards stipulated by labour legislation. The relevant legislation fails to be enforced despite all these oppressions being in the public light (Institute for Poverty, Land and Agrarian Studies, 5). Low wage rate is the major cause for the miserable economic and social conditions of workers. In what has come to be perceived as a political move by the government, the minimum wage was set. However, the latter has scarcely been enforced by most farmers in what appears to be machinations with political powers in the government through the Department of Labour. Without clear criteria and involvement of workers, the Department of Labor has exempted some farms from paying the minimum wage. Workers have been compelled to sign exemption applications forms thus rendering irrelevant the minimum wage agreements. In other cases, farmers have been exempted from paying the minimum wage for certain periods. However, the Department of Labour does not monitor the exemption periods hence employers rarely comply with the exemption agreement. Precisely, some government officials have colluded with the large agricultural companies to the detriment of the poor workers (Institute for Poverty, Land and Agrarian Studies, 5-6). In addition, the legacy of the apartheid government lives on and is reflected in some workers present socio-economic conditions. The social context in the horticulture industry is characterized by rising shortage of more educated and skilled labour regardless of the high rates of unemployment in rural areas, a situation that originates from factors such as social embeddedness of pertanalist culture and norms established during the apartheid period. In this era, white farmers deemed black employees to be inferior and subjected them to gender and race-based discrimination. They were also provided with little social investments including skills and education. Some effects of the impoverishment of workers by the apartheid regime are reflected in form of poverty of some households today, making them easy victims of exploitation by global production networks. Further, paternalist attitudes are still rife among many farmers in the horticulture industry. The off-farm casual workers are the most susceptible to social problems. They are more likely to have low levels of education, live in poor conditions, and have low self-esteem and experience problems such as alcoholism (Barrientos and Visser, 37-38). The workers unions are also to blame for the exploitation of the workers. In the event of failure of the government to protect the workers from exploitation, conventionally, the workers unions have a fundamental role to play. However, in the case of South Africa, the unions have failed in their mandate. While some have made no serious attempts to organize workers, some have given various reasons for their inaction while others have limited their representations to urban worker thus ignoring farm workers who are usually found in rural areas. Some unions have succumbed to intimidation by farm owners, and there have actually been cases where organizers of workers have been shot when they show up in private farms. Some other unions have cited the remoteness of most farms and devoid of legal infrastructure in the rural areas as the greatest hindrance to unionization of workers (Journal of Socialist Renewal). Whether or not the unions have concrete reasons for their inadequacy to safeguard workers from economic and social degradation, the main thing is that they have failed and farm workers continue to languish under the capitalist actors in global production networks and corruptible government labour sector. In an empirical study, Barrientos and Visser, (26-27) found that out of the ten companies studied, only two firms where workers were found to be organized. However, in these two companies, the union only covered the permanent employees. Seasonal workers, with migrants as the majority, were not part of the bargaining unit. In firms where there were no representative trade unions, the employees were represented by workers committees that were found to be dysfunctional on several grounds. Whereas they provided an avenue for channeling individual grievances to the management, workers committees appeared to be at best grievance mechanisms rather than negotiating forums. They seemed not to have power other being a symbol of managements goodwill to fulfill workers demands. In addition, supervisors who were members of these committees reported that they were too scared to face the management directly about workers’ demands (Barrientos and Visser, 26-27). In conclusion, the main cause of South African low economic and social upgrading for workers in horticulture industry is a culmination of pursuit of economic interests by European supermarkets and South African giant agricultural firms, political interests by players in the government sectors and failure of labour unions in their mandate to organize workers. Apartheid legacy has also played a role in the current plight of workers. There is need for multiple strategies to neutralize the dominance of international supermarkets in South African horticulture sector. Labour unions and other workers movements need to be strengthened; farmers must concert their power against the supermarkets; the government must restructure its various departments to drive out officials with vested interests in exploitation of workers by value chains and ensure enforcement of labour regulations. Works Cited Barrientos, Stephanie, and Margareet Visser. Capturing the Gain: South African Horticulture-Opportunities and Challenges for Economic and Social Upgrading In Value Chains. 1st ed. 2012. Web. 21 Nov. 2014. Barrientos, Stephanie, Gary Gereeffi, and Arianna Rossi. Capturing the Gains; Economic and Social Upgrading In Global Production Networks: Developing a Framework for Analysis. 1st ed. Manchester: N.p., 2010. Print. Coe, Neil. Global Value Chains/Global Production Networks: Organizing the Global Economy. 1st ed. National University of Singapore, 2013. Web. 21 Nov. 2014. Cooke, Philip. Global Production Networks and Global Innovation Networks: Stability versus Growth. European Planning Studies 21.7 (2013): 1081-1094. Web. Errasti, Ander. Global Production Networks. Boca Raton, FL: CRC Press, 2013. Print. Henderson, Jeffrey et al. Global Production Networks and the Analysis of Economic Development. Review of International Political Economy 9.3 (2002): 436-464. Web. 21 Nov. 2014. Hess, Martin, and Henry Wai-Chung Yeung. Whither Global Production Networks in Economic Geography? Past, Present, And Future. Environ. Plan. A 38.7 (2006): 1193-1204. Web. Institute for Poverty, Land and Agrarian Studies,. Farm Workers Living And Working Conditions. 1st ed. Institute for Poverty, Land and Agrarian Studies, 2013. Print. International journal of Social renewal,. South Africa: Harvesting Discontent -- Farmworkers Rebel; Stop Rural Slavery! Respect The Farmworkers! | Links International Journal Of Socialist Renewal. N.p., 2013. Web. 28 Nov. 2014. Wijeratna, Alex. Rotten Fruit-Tesco Profits As Women Workers Pay A Higher Price. Actionaid, 2005. Print. Read More