South African agriculture and the 2017 National Budget

The South African National Budget provides a clear signal of the government’s plans for the country in the year to come, as well as a look at the big picture of South Africa’s economic performance.

What should the agricultural sector, from small-scale farmers to large commercial operations, take note of from this report? And what can farmers take advantage of to improve their circumstances? Here are some notable features related to agricultural in the 2017 Budget Review document.

The CEO Initiative

The CEO Initiative is a partnership effort between the public and private sectors aimed at boosting growth in eight labour intensive sectors of the economy, among which is the agricultural sector. Since its 2016 launch, R1.5 billion has been gathered to fund small business’s development. This mean smaller farms and small businesses that serve the agricultural sector have the opportunity to acquire grants from this programme to fund the growth of their operations.

Agricultural sector posts second year in decline

Four years of strong growth in the agricultural sector, with a peak growth rate of 6.9% in 2014, ended in 2015, in which South Africa’s agriculture, forestry and fishing declined by 5.9%. 2016 saw the sector face greater troubles — 7% decline in real value added. This was largely due to the severe drought that South Africa has endured over the past two seasons.

Agriculture’s post-drought potential is huge

The outlook for South African agriculture is more positive than suggested by the past two years. Good rains recently have signalled (tentatively) that the drought period is at an end. If this holds, and agricultural output climbs back, this will have a positive effect on employment.

The Treasury uses an economic measure called an employment multiplier to describe the relationship between increased output in a sector, employment, and the effect on overall output in the economy. For the agricultural sector, this shows that for every R1 million increase in output, 3.9 jobs are created, and the overall output in the economy increases by R1.7 million. This is the largest multiplier effect of the nine major sectors.

Poor farmers may get government insurance

Among the more exciting proposals in the 2017 budget review is the news that poorer farmers may have the option of government-backed insurance, to protect them against economic shocks, such as currency volatility, and natural disasters, such as drought and flood. While nothing is set in stone so far, the National Treasury is presently putting together a feasibility study for the scheme, and have plans to launch a pilot programme in the third quarter of 2017.

The Comprehensive Agricultural Support Programme (CASP) and One Household One Hectare

Subsistence and smallholder farmers can expect more access to funding over the next three years, with R5.5 billion in grants available through CASP. These funds are earmarked for 435,000 small-scale farmers, which amounts to R 12,644 per farmers across the three years. These grants will help smaller farmers buy key agricultural equipment like fertiliser spreaders, build fencing, buy seeds and fertiliser, and make repairs to damaged infrastructure.

The One Household One Hectare programme aims to provide land to those without, and has been granted R4.3 billion in funding for this initiative over the medium term. Since 2008/09, 4.7 million hectares of land have been acquired for redistribution, with 1,496 farms created as a direct result of the programme. In areas where land has been distributed under this programme, the government will provide irrigation systems and other agricultural inputs.