23.02.2017

Agbiz response to Minister Gordhan’s Budget Policy Statement

The National Budget Speech presented a fairly positive and optimistic outlook, projecting economic growth of 1.3% in 2017, up from 0.5% in 2016.
- Dr John Purchase, Agbiz CEO

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“From an agribusiness perspective, this year’s budget speech comes against the backdrop of high food price inflation, a recent positive upturn in agribusiness confidence, and a convergence of factors that are now generally more favourable to agricultural production. This follows on severe drought conditions over the past few years that resulted in the agricultural sector going into an extended and severe recession since early 2015,” Dr John Purchase, CEO of Agbiz said today.

 “That said, the budget speech itself presented a fairly positive and optimistic outlook, projecting economic growth of 1.3% in 2017, up from 0.5% in 2016; and a declining consolidated budget deficit of 3.1% of gross domestic product (GDP) in 2017/18, down from 3.4% in 2016/17. However, interest on gross debt will still amount to a significant R169 billion,” Dr Purchase stated.

Of particular interest to agriculture and agribusiness, is the extent to which the budget speech reflected the new emphasis on “radical economic transformation” and inclusive growth, vis-à-vis, land reform (redistribution and restitution). Spending on agriculture, rural development and land reform will increase by 2% from just under R26 billion in 2016/17 to R26.5 billion in 2017/18, and amounting to nearly R30 billion in 2019/20. 

Of this amount, the budget allocated for land redistribution has declined by 3%, from R1.23 billion in 2016/17 to R1.19 billion in 2017/18. Meanwhile, the allocation for restitution increased by 2.5%, from R3.17 billion in 2016/17 to R3.25 billion in 2017/18. In light of the fiscal discipline required by Minister Gordhan there is limited evidence to suggest a new radical transformation agenda in light of the budget allocations outlined in his speech.

However, the budget speech seems to offer some scope for improved sector transformation through farmer support and development, with budget allocation increasing by 10% to R3.79 billion, from R3.43 billion in the previous fiscal year. Important to note that the effectiveness of this quantum increase will largely be contingent on how efficiently the departments utilize and implement their line programmes.      

“So, while the message of radical economic transformation has been emphasized, both in the budget and the SONA, it appears the sector will likely experience more of the same. In that sense, in the medium term – where budget allocations for agriculture, rural development and land reform are set to increase by an average annual rate of 4.7% up to 2019/20 – we can expect a modest pace in the sector’s transformation. Obviously, transformation of the sector is not incumbent on the public sector only, and the private sector also needs to implement sustainable transformation, including through the long-awaited new AgriBEE Sector Code.  But to transform sustainably, economic growth is an absolute imperative, as Minister Gordhan correctly emphasized,” Dr Purchase added.

Of concern to the agribusiness sector is the above inflation rate increases in excise duties on alcohol, specifically wine, and tobacco. A further concern is the introduction of a tax on sugary beverages, including for both intrinsic and added sugar beverages, this year. While the indication is of a reduced rate of tax, the impact on the industry, including potential job losses, will need to be assessed as a matter of urgency.

“All in all, Minister Gordhan and his team have done an exemplary balancing job under extremely difficult economic and political pressures. Under the circumstances, he has inspired and shown courageous leadership and statesmanship,” said Dr Purchase.

ENQUIRIES:

Dr John Purchase
CEO: Agbiz
john@agbiz.co.za
082 441 2308

Agbiz Members

  • Absa AgriBusiness
  • Afgri Operations Ltd
  • Afrivet
  • Agri Expo
  • AFMA
  • Agrifusion
  • Agri Mega Group
  • Alltech (Pty) Ltd
  • Association of Agritourism South Africa (AASA)
  • AVCASA
  • Barloworld Handling Materials
  • Bathopele
  • Beefmaster
  • BKB Ltd
  • Capespan
  • Certisure
  • Citrus Growers Association
  • Durban Fresh Produce Market
  • East London Industrial Development Zone
  • Engen
  • Farmwise Grains (Pty) Ltd
  • FNB
  • Fraserburg Koöp Bpk
  • Fresh Produce Exporters' Forum (FPEF)
  • GWK Limited
  • Highveld Egg Co-op Ltd
  • Hans Merensky Holdings
  • Humansdorpse Koöp Bpk Trading as The Co-op/Die Kooperasie
  • Industrial Development Corporation
  • Institute of Market Agents of SA (IMASA)
  • John Deere
  • Kimech Agri Tractor and Machinery CC
  • Kaap Agri Bedryf Ltd
  • KLK Landbou Bpk
  • Land Bank
  • Marsh Africa
  • Monsanto
  • Mosstrich Ltd
  • Mutual & Federal Agri
  • National Agricultural Marketing Council (NAMC)
  • Nedbank
  • Netafim
  • PMI SA
  • NWK Ltd
  • Obaro
  • Old Mutual
  • Overberg Agri Bedrywe (Edms) Bpk
  • OVK Operations Ltd
  • Pioneer Hi-Bred RSA (Pty) Ltd
  • PwC South Africa
  • Rovic Leers
  • SA Agri Academy
  • Saltcor
  • San Miguel Fruits SA
  • Sansor
  • Santam Agriculture
  • Senwes Ltd
  • Signa
  • Standard Bank Agriculture
  • SSK
  • Suidwes Agriculture Ltd
  • Sundays River Citrus Company (Pty) Ltd