BUDGET 2022: Key opportunity for government to use commodities windfall strategically for economic recovery and job creation
22 February 2022
Following the fiscally sound approach adopted in the Midterm Budget Policy Statement in November 2021, Agri SA eagerly awaits a similarly prudent approach in Minister Godongwana’s maiden Budget Speech address this Wednesday. The short-term revenue from high commodity prices in recent years must be directed towards interventions that will promote sustainable, inclusive, long-term economic growth and job creation. Government must broadly also continue to pursue fiscal consolidation and structural reform.
While South Africa remains in a difficult fiscal position, the public purse has received a short-term boost as a result of high commodity prices over the past two years. Agri SA is hopeful that government will allocate these funds in ways that aid the economy’s recovery, including the agricultural sector.
Agri SA eagerly awaits an update from Minister Godongwana on four strategic priorities to achieve this end.
First, the budget must prioritise investment in critical infrastructure. Working roads, railways and harbours are vital if the agricultural sector in particular is to continue on a firm footing and the economy more broadly is to recover, grow, and create more jobs for South Africans. This growth will in turn accelerate South Africa’s ability to address pressing fiscal challenges facing the country.
Second, government must continue to address the country’s debt to GDP ratio. The recent reduction from over 90% to below 80% by 2025/26 is encouraging but must be maintained over the long term to stabilise the economy. Agri SA will be listening for announcements addressing the public sector wage bill, and how government plans to fund the extension of the Social Relief Distress Grant to 2023. We also hope that the budget will not include any unbudgeted bailouts to failing state-owned enterprises.
Third, we would like to hear government commit funding to advancing the economy’s inclusivity through greater access to land and capital for emerging farmers. This means funding to implement meaningful land reform projects rather than continued reliance on the disastrous Expropriation Bill, and support for the Land Bank to carry out its critical function of providing capital to emerging farmers.
Finally, Agri SA would like to hear the detail of how government will action President Ramaphosa’s commitment to partner with the private sector for economic growth and job creation. Tax relief for hard hit businesses in particular will enable their growth and encourage job creation. This is fiscally feasible in light of the commodities revenue windfall. Other measures might include a no increase of the excise tax, to help the wine industry recover, and addressing the Health Promotion Levy which has a negative impact on the sugar industry. These are some of the interventions that would fast-track these industries’ recovery and promote job creation.
Agri SA shares in the belief that government, labour and business must work together for our economy to succeed. Our organisation and its members are committed to protecting existing livelihoods, creating more jobs in our country, and maintaining agriculture’s upward trends. We are hopeful that the Budget Speech on Wednesday will include announcements that will strengthen our efforts to create a sustainable, resilient, and inclusive agricultural sector that can guarantee South Africa’s food security for generations to come.
Issued by Kulani Siweya, Chief economist, Agri SA, 22 February 2022
