Agribusiness Perspective: Reflecting on the mini budget and what it means for farming

Last month, Minister of Finance Tito Mboweni tabled the Mid-Term Budget Policy Statement (MTBPS) in Parliament. The MTBPS reports on the efficient management of government expenses and containing government debt. Depressing economic growth coupled with an increase in expenses and debt have led to a weakening exchange rate. However, it is important that South Africans focus on the steps set out in the budget to achieve future economic growth.

The MTBPS was an honest reflection of the situation in South Africa. It is commendable that government is clamping down on corruption and inefficiencies, and aims to restore state-owned entities to health. Equally commendable is that Treasury sees the need for clear, consistent policies in order to rebuild confidence in the economy as a prerequisite to unlocking much-needed investment.

Agriculture is a priority

The MTBPS refers to many things that directly and indirectly affect the agriculture and agribusiness sectors. The acknowledgement of agriculture as an important driver of the country’s economic recovery should put farmers at ease as this is a reaffirmation that government sees agriculture as a strategic sector for economic growth. Moving forward, we need to industrialise the secondary agriculture sector, improve access to the latest technologies to increase productivity and competitiveness, and ensure that we broker preferential market access to grow our agricultural economy. With the MTBPS’s focus on attracting young graduates, agriculture must make sure that the sector also prioritises attracting young talent as well.

During his presentation of the MTBPS, Mboweni highlighted the importance of the expert panel elected by President Cyril Ramaphosa in the discussion on land reform. He also said that land reform should occur without resulting in a decline in agricultural output or the country’s self-sufficiency in food production. This increases policy certainty, and producers should therefore focus on production and reinvestment in the sector.

Too little funding

However, despite the importance of agriculture being discussed in the MTBPS, the financial allocation for the sector did not reflect this. Compared with other sectors, agriculture still receives the lowest allocation of funds. The budget for the sector should thus be increased to reflect its significance in stimulating economic growth. Lastly, Mboweni firmly touted partnership building as necessary to solving the development challenges facing the country. In this regard, some stakeholders in the agriculture sector have already initiated the process for the establishment of an Agricultural Development Agency for South Africa (APAP). The agency aims to ensure that land reform can be accelerated in a manner that brings about greater equality in society, while stimulating the agriculture sector to create employment, wealth and social justice.

During the recent Jobs Summit, industry stakeholders committed to support various value chains in APAP by creating partnerships between farmers, input suppliers, offtakers, financial institutions and government to stimulate growth in these value chains. Banks have also had discussions with government on blended finance models for agriculture. Some of these initiatives are coming to fruition, but more needs to be done to support the development of emerging farmers in South Africa.

producers need to focus on production and reinvestment in the sector

Agribusiness perspective by Hamlet Hlomendlini Hamlet Hlomendlini is an agricultural economist at Absa AgriBusiness. Email him at Hamlet. Hlomendlini@absa.co.za.