Scaled-down budget undermines agriculture as pivotal sector for growth!

22 July 2020

Scaling down of the budgets of core state departments responsible for recovery of the economy, such as the Department of Agriculture, Land Reform and Rural Development, and the channelling of funds towards interventions to combat the pandemic, hold serious implications for the Treasury’s promise to kick-start economic growth in the country.

Agri SA is of the opinion that the department’s salary bill rather than its programmes for food security, land reform, production aid (IlimaLetsema), infrastructure development (CASP) and rural development, should be cut.

President Ramaphosa has identified agriculture as one of the sectors with the potential to stimulate the economy. The budget cut for programmes promoting food security, land redistribution and restitution as well as agricultural support, by R1,89 billion, therefore makes no sense. Furthermore, the budget for the programmes IlimaLetsema and CASP has been reduced by R276,7 million. This has enormous implications for emerging farmers who depend on this aid.

The salary bill of the department, which amounts to R4,44 billion, was reduced by only R300 million. This is the elephant in the room which the government refuses to address. The government’s inability to cut its salary bill and its continued focus on welfare interventions rather than on unlocking wealth-creating opportunities, will cost us dearly because it is to the detriment of economic growth.

The expected budget deficit of R761,7 billion versus a deficit of R370,5 billion projected in February, serves as example. Gross tax revenue collected during the first two months of 2020/21 amounts R142 billion, while the initial forecast for the same period was R177,3 billion. SARS is already R35,3 billion short of the 2020/21 target. This has compelled the Treasury to revise gross tax revenue for the 2020/21 financial year from R1,43 trillion to R1,12 trillion, which means that SARS may miss its tax-collection target for this year by more than R300 billion.

Given the impact of the Covid-19 pandemic and accompanying lockdown regulations, a decline of 7,2% in GDP is predicted. At the same time unemployment is escalating.

Agri SA urges the government and all state departments to prioritise economic growth and to invest in programmes directly aimed at promoting economic growth rather than reducing the budgets of those programmes. This is what our country urgently needs now!

Issued by Christo van der Rheede, Agri SA, Deputy Executive Director, 22 July 2020