The Agricultural Business Chamber (Agbiz) applauds the Honourable Minister Praving Gordhan for, not only his presentation of the 2014 National Budget speech on 26 February 2014, but also a very successful term of office over the past 5 years.
True to his nature, Minister Gordhan presented a well balanced budget; delivering on spending and fiscal priorities and on productive assets that support sustainable economic growth, as there was a clear move from only consumption, to also capital spending. The budget did not include any surprise elements, which was very necessary in the uncertain global and local economic and political times. As was expected, the budget speech largely reflected recent policy declarations and positions, such as the ANC Manifesto and broadly endorsed the National Development Plan's objectives. The budget speech was fairly populist and slightly over optimistic, which was to be expected within an election year.
The Minister specifically indicated that the new economic order "cannot be built on populist slogans or unrealistic promises." Even though Minister Gordhan kept to his own words, the policy promises made, which are required to be supported by the budget, are rather plagued by over ambitious expectations. Most analysts are less optimistic about the tax base the South African economy provides and the fear exists that the fiscal deficit will not decrease from the current 4%, to the expected 2,8% in the medium term, as economic growth is expected to recover over the longer term. The Minister indicated that the current GDP growth rate of 2,7% is projected to increase to 3,5% by 2016 only. Accordingly, it is expected that inflation will only recover to within the target range between 2015 and 2016, which indicates that the immediate future will make it difficult to deliver on the said promises and could pressurize future budget space.
Agbiz welcomes the focus on the improvement of competitiveness and especially the investment on infrastructure. The intentions provided to address inefficiencies within government and corruption, which directly affect the delivery from the fiscal spending, is welcomed. It remains a concern that R105 billion allocated to address poor service delivery over the next 3 years, remains under the management of third tier government, as the lack of capacity within municipalities proved insufficient and water, sanitation, electricity and refuse removal were grossly neglected, especially in the rural areas.
Even though the Agribusiness sector welcomes the inclusion alternative energy sources, such as through the exploration for shale gas and the mentioned renewable energy projects, it is still concerned whether it might be too little too late according to the required demand, especially as expanded connections to the power grid are being promised.
Agbiz remains concerned by the fact that the budget speech emphasized how government considers itself as an employment creator, rather than to support business and private sector at large to employ people in a sustainable manner. It was promised to create 6 million working opportunities by 2019, largely through Expanded Public Works Programme. This is a concern, as the working opportunities are not defined as sustainable long term job creation, and could be defined to further promote unproductivity of the labour force. Agbiz believes the unemployment rate will not be sufficiently addressed until government realizes that its role is to support sustainable job opportunities in the private sector and through entrepreneurship. In the same context, Minister Gordhan did not do full justice in his speech to the need to cut red tape and reduce the cost of doing business, especially for the Small, Medium and Micro Enterprises.
Agbiz welcomes the renewed focus by government to support agriculture. However, Agbiz wants to urge that the respective allocations to boost food production, support programmes to increase land reform beneficiaries' output, the grants for subsistence farmers and small holders and to improve agricultural extension service be done with the objective of increasing the commercial output via enabling the productive environment and the general competitiveness. Agbiz specifically is very excited about the R10,3 billion to be allocated over the next three years to incentivize manufacturing development and hopes to see relevant agro-processing development evolving from it.
Considering the limited revenue extent available, the 2014 budget is very allowing, especially in a country with such high unemployment, social inequality, low economic growth projections, weak exchange rate and high inflation. Agbiz foresees opportunities for the agribusiness sector to benefit, if the relevant fiscal spending is done efficiently and enabling towards the sector.
For more information:
Lindie Stroebel
079 497 1594
lindie@agbiz.co.za
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