Weekly Briefing, Vol. 39, No. 2 (MK), April 2021
The impact of Covid19 on agricultural producers
Summary
Agriculture is one of the most important sectors of the Macedonian economy. Between 1990 and 2019 it accounted for 10.03 percent of GDP on average. The latest available data is for 2019, when agriculture represented 8.05% of GDP and employed 13.9% оf the workforce. The sector as a whole is characterised by chronic disorganisation and the absence of structured planning, a situation which has only been aggravated by the pandemic. The enduring crisis caused a drastic fall in the prices of selected products, which has contributed towards the deterioration in the overall economic situation of small agricultural producers. It is estimated that nearly 21,000 jobs have been lost in agriculture since the start of the pandemic. At the same time, agricultural workers which were the worst affected by Covid19, were also the least protected category by the Government support measures.
According to the National Federation of Farmers, the coronavirus pandemic brought to the surface all the problems in agriculture that have been accumulating for many years. “We still haven’t established a stable system for planned production, we still haven’t resolved the problems with the purchase practices and the farm supplies. The cost of production is much higher than the sales prices”, says Biljana Petrovska Mitrevska, project-manager at the National Federation of Farmers (NFF).[1] At the same time, small agricultural producers remain the most vulnerable category. They are faced with the challenge to continue producing and selling their produce, whilst confronting the health and economic shock of the coronavirus.
The pandemic has resulted in the drastic fall in the prices of certain products, such as lamb, cabbage, grapes and tobacco, which has worsened the economic condition of small producers.[2] Finance Think estimates that 21 thousand jobs have been lost in this sector since the start of the pandemic: “In agriculture, production rose by 4,6% in the second and third quarters of 2020, but nearly 21 thousand jobs were lost. As a result, wage income decreased by 16%.”[3] Workers in this sector have been the worst hit category, due to the disproportionate support received through the Government support packages. Before the pandemic, a total of 107,656 workers were employed in agriculture. By the end of the third quarter of 2020, that number had shrunk by 19.3% to 86,879. Thus, a total of 20,776 jobs were lost in agriculture between the end of the first and the third quarter of 2020. By comparison, the number of lost jobs in the same period is just over a thousand in the processing industry, 2.5 thousand in construction and 2 thousand in transport. According to Finance Think the primary reason behind the disproportionate hit suffered by agriculture lies in the failure of the Government to support this sector. In 2020 the Government introduced four packages in support of the economy, which included one specific measure that was crucial for the support of the labour market – the allocation of subsidies of 14.500 denars (around 230 euros) per worker to all companies which had experienced a decline in income higher than 30% in the critical months of the pandemic, compared to their average in 2019. Finance Think estimated that around 60 thousand jobs have been saved by this measure in sectors such as trade, catering, entertainment and recreation, construction and the processing industry.[4] However, agricultural workers were not able to benefit neither from the measure “14.500 denars per worker” nor from the measure for subsidizing up to 50% of social contributions. The condition for qualifying for such support was formal employment in a company that experienced a turnover drop of more than 30% compared to 2019. Such conditions however could not be fulfilled by agricultural workers because of the structure of the sector. Namely, nearly half of all agricultural workers (48.3%) are independent farmers who pay personal tax and social security contributions in their own name and for their own account, in order to acquire the right to obtain agricultural pension after retirement. An additional third are unpaid family workers, while only 16.2% work for a paid employer. This means that 59.5% of employees are unregistered and do not possess contracts of employment. For the same reason, 49.4% reported that the small agricultural holding had no registered employees and 15.7% that they worked part-time.[5] Thus, the specific characteristics of the sector meant that agricultural workers failed to qualify for the government support packages. At the same time however, they were also negatively affected by the measures aimed at curbing the spread of the virus. The central and/or local Government closed off all the farmers markets at the end of March, which meant that the farmers had no place to sell their products for several months.
Influence of Covid19 from the perspective of the farmers
In the period May-June 2020, the National Federation of Farmers conducted an online study which collected 70 responses from farmers aimed at assessing the impact of Covid19 on the agricultural sector. The analysis confirmed that the pandemic had a significant impact on farmers across the country. Namely, over 61% of farmers have said that the pandemic influenced the scope of their work. For most of the Macedonian farmers (52.9%) the pandemic had a negative impact on their work, due to the cancellations of product placements and changes or cancellations to the agreed purchase of agricultural and livestock products. Moreover, farmers were also affected by the uncertainty over whether the virus is transmitted only through drops, air or also through unprocessed food. For 30% of the farmers, a significant problem has been the increase in the prices of raw materials, as well as the difficulty in accessing them due to the closed borders as a result of measures taken to prevent the spread of the virus. For 10% of farmers, the virus resulted in a reduced workload, primarily as a consequence of the emergence of new responsibilities within the home (such as care for children and the elderly). Almost 46% of farmers believe that the crisis caused by Covid-19 has greatly affected their earnings.[6] It is worth noting that the situation caused by the pandemic has contributed to an increase in the responsibilities of farmers in the household. More than 21% of women say that they have reduced the workload in agriculture due to the need to provide additional care in the home. This mainly affects women because of the gender roles that still exist, which are particularly pronounced in the rural population.[7]
In response to this situation, many have criticized the Government’s failure to support the agricultural sector. Marija Ristevska, executive director of the Center for Research and Policy Making stated: “Farmers were not and are not on the agenda of the Government. For example, there were no measures for individual farmers, which represent a large share of all agricultural producers in the country. Due to historical discrimination, women farmers own less property and have fewer chances of accessing finance, but also fewer savings, making them more vulnerable to surviving the crisis. Regardless of this none of the government’s measures directly and specifically address them. This must be corrected.”[8] Similarly, Despina Tumanoska from Finance Think stated that the workers in the agricultural sector were the worst affected, but remained the least protected by the Government measures: “It is necessary to rethink the design of the measure “14.500 denars per worker” in order to make it accessible to farmers. Moreover, it is essential that the measure targets registered farmers more directly, through the use of administrative registers, for instance, in order for support to reach them”. Furthermore, she recommends that the one-off grants provided to the hospitality and service sectors, should also be made available to small agricultural producers.[9] Such recommendations however do not seem to have been integrated in the Fifth Economic support package which was announced by the Government on 16.02.2021.[10] Only the 21st measure focuses on agriculture, but it is targeting only tobacco producers, which will be supported with 307,5 million denars in 2021.
The chronic disorganisation and the absence of structured planning in agriculture has only been aggravated by the pandemic. The agricultural sector has been amongst the worst affected sectors of the Macedonian economy with nearly 21,000 jobs lost between the end of the first and third quarter of 2020. The main reason behind the disproportionate impact can be located in the inability of farmers to qualify for the Government support measures aimed at curbing the economic effects of the pandemic. Due to the structure of the agricultural sector, and the absence of formal working contracts, farmers have not been able to benefit from the measures in the four economic packages passed in 2020 aimed at supporting the labour marketing. What is more, the fifth economic package introduced by the Government in February 2021, seems to have failed to rectify the shortcomings of the previous four packages. Similarly, it is unlikely to offer sufficient and appropriate support for the agricultural sector. As a consequence, it is to be expected that agriculture will remain one of the hardest hit sectors as the pandemic continues to inflict a multifaceted challenge to the economy and the country as a whole.
[1] Nova Makedonija (2021). How to minimize the shock of the pandemic on agriculture, published on 11.02.2021, available at https://www.novamakedonija.com.mk/ekonomija/%D0%BA%D0%B0%D0%BA%D0%BE-%D0%B4%D0%B0-%D1%81%D0%B5-%D0%BC%D0%B8%D0%BD%D0%B8%D0%BC%D0%B8%D0%B7%D0%B8%D1%80%D0%B0-%D0%BF%D0%B0%D0%BD%D0%B4%D0%B5%D0%BC%D0%B8%D1%81%D0%BA%D0%B8%D0%BE%D1%82-%D1%88%D0%BE/ accessed on 13.04.2021
[2] Ibid
[3] Finance Think (2021) Policy Brief N. 46 ”Agricultural workers- a silent victim of the pandemic?” available at https://www.financethink.mk/wp-content/uploads/2021/02/PB-46.pdf?fbclid=IwAR3UPQ2GKhgP7hqo_CjlllX8OIXUc3I9jloVNU2jcsKRZL15IBHX2rVJTKY accessed on 13.04.2021
[4] Ibid
[5] Ibid
[6] National Association of Farmers (2021) Presentation of results of the analysis „The influence of Covid 19 on agriculture, including gender based analysis” published on 06.04.2021 available at https://www.nff.org.mk/2021/02/18/%d0%bf%d1%80%d0%b5%d0%b7%d0%b5%d0%bd%d1%82%d0%b0%d1%86%d0%b8%d1%98%d0%b0-%d0%bd%d0%b0-%d0%b0%d0%bd%d0%b0%d0%bb%d0%b8%d0%b7%d0%b0%d1%82%d0%b0-%d0%b2%d0%bb%d0%b8%d1%98%d0%b0%d0%bd%d0%b8%d0%b5/ accessed on 13.04.2021
[7] Ibid
[8] Ibid
[9] Finance Think (2021) Policy Brief N. 46 ”Agricultural workers- a silent victim of the pandemic?” available at https://www.financethink.mk/wp-content/uploads/2021/02/PB-46.pdf?fbclid=IwAR3UPQ2GKhgP7hqo_CjlllX8OIXUc3I9jloVNU2jcsKRZL15IBHX2rVJTKY accessed on 13.04.2021
[10] Government Press Release (2021) Zaev: We have brought the fifth package of economic support measures to the value of 160 million euros, published on 16.02.2021 https://vlada.mk/node/24245 accessed on 13.04.2021