Cape Town – More attention should be paid to the agricultural sector in Budget 2018, to ensure food security and to optimise the output of the sector to drive economic growth, said an economist.
In a report ahead of the budget, to be presented on February 21, senior agricultural economist at ABSA, Wessel Lemmer, highlighted the different budgetary needs of agricultural industries.
He stressed that food security would be at risk in the case of a credit downgrade, and financial provision would be needed. Additionally, the agricultural sector is a driver of economic growth - it grew 44.2% in the third quarter of 2017 and contributed significantly to GDP.
“Agriculture contributed significantly to the latest positive GDP figures and has been pivotal in rescuing the country from the throes of a recession,” said Lemmer. “It is vital therefore that we continue to find ways to optimise the output of the agricultural sector.”
Specifically, in the poultry industry which suffered an outbreak of avian flu (H5N8), the budget should give guidelines for compensation for the affected commercial producers.
“Without compensation, South Africa cannot eradicate the disease as the cases are not reported in fear of losses without compensation,” said Lemmer.
Last week, the South African Poultry Association’s acting CEO Dr Charlotte Nkuna updated the Parliamentary oversight committee of agriculture, forestry and fisheries on the impact of bird flu. It has resulted in losses for the industry of R954m.
Lemmer explained that if the disease is not dealt with, the national food security status will be negatively impacted, and would lead to more job losses. Poultry products are becoming unaffordable for consumers. The price for eggs has increased R3 per dozen, mainly due to higher production costs and additional biosecurity measures.
“We need to improve the agricultural department’s capacity to deal with crises like avian influenza.
“It is needed to efficiently prevent future outbreaks through dedicated training and preventative biosecurity measures,” he said.
Lemmer also raised concerns for the wine industry. He noted that the return on a bottle of wine a producer receives is less than the VAT and excise duties on a bottle of wine. “We need to adjust the excise duties on wine lower in order to increase the sustainability of the ailing wine industry and wine tourism industry.”
Lemmer suggested a decrease in excise duties on wine will stimulate the economy more directly. This will lead to an increase in GDP for agriculture, and ultimately to the national GDP.
Lemmer called for “bold steps” to prevent further losses in production of wine and jobs. The industry is also facing challenges, given the drought in the Western Cape, Fin24 previously reported.
As for the horticultural industry, assistance is needed for the development of environmentally approved water infrastructure, said Lemmer. This includes additional storage capacity, sufficient maintenance of existing water irrigation infrastructure and efficient use and allocation of water.
He added that the aid and disaster management for climate events such as drought should contribute to reducing the socio-economic impact on those who lose their jobs. Government should also investigate affordable insurance against disasters such as drought or hail, he suggested.
Another area of concern is the property rights related to land restitution and land reform, which requires more certainty. “Sufficient budgets for proper agricultural training and education of new commercial producers is also needed to ensure success,” said Lemmer.
Further government assistance is needed to enable producers to expand to and serve new, international markets more effectively
“The long term permanent cropping nature of the horticultural industry requires a stable exchange rate.
“Producers cannot base the sustainability of long term investment decisions by depending on a weak exchange rate.”
The grain and oil seeds industry needs a crop insurance scheme to assist in dealing with climate change, said Lemmer.
Black grain producers need a government guarantee system to gain access to production loans as they do not have title deeds of the land they work, he explained.
“The budget for primary research and development needs to increase.” This is especially needed to develop drought tolerant grains.
Lemmer added that there should be provision for port facilities to improve to make South Africa competitive in exporting and efficient in importing.
The budget should also help improve the capacity against biosecurity hazards such as the Fall Army Worm.
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