Agriculture could go same route as Eskom without investment - FNB economist

2019-02-25 06:25 - Lameez Omarjee
 Commercial farmers say land redistribution should
iStock

Lack of investment in infrastructure that supports agriculture could see the sector follow in Eskom's footsteps, an economist has warned.

In response to the National Budget tabled by Finance Minister Tito Mboweni on Wednesday, FNB senior agricultural economist Paul Makube said that roads, ports and rail which support agriculture needed "serious upgrading".

For this reason, he added, measures to improve private sector investment in agriculture are welcomed. Government has allocated R1.8bn for the implementation of 262 on priority land reform projects over then next three years. There is also a R3.7bn allocation to assist emerging farmers seeking to acquire land to farm, Makube noted.

Government has also allocated R456m for the employment of newly graduated veterinarians within rural areas as part of compulsory community service.

Drought 

However, there is a drawback in that the budget has "no clear mention" of measures for the current drought affected parts of the North West, Free State, and Northern Cape, Makube said.

Overall the budget had been positive for agriculture, but it is important to ensure implementation of the measures, he said.

Agri SA was also disappointed in the lack of measures to deal with drought and its impact on farming communities, head of economics and trade Dr Requier Wait said.

Agri SA also warned that increases in the sugar tax would affect the sugar industry. Agri SA believes that a portion of the revenue generated from carbon tax, which comes into effect from June 1, should at least be used for drought relief. But government has not outlined any climate change initiative for the potential revenue.

Agri SA is also of the view that the increase excise taxes could have an adverse impact on the wine industry.

However, Rico Basson, MD of wine industry body Vinpro, said that inflationary increases to the excise tax were welcome as these were in line with the 2014 policy framework.

Basson added that the sustainability of the industry should be a priority to government as it supports more than 290 000 jobs and contributes R36.1bn to GDP. "The wine and brandy industry relies on government support and cooperation to improve its value proposition in the international arena," he said.

Basson called for "continuous and transparent" engagement between industry and various government departments on the challenges to the industry.

Similarly, Agri SA stressed that the sector can build the SA economy and increase its fiscal stability. Agri SA is hopeful that government would give it the necessary support it needs, given its potential.

Hamlet Hlomendlini, agri-specialist at Absa Retail and Business Banking, also encouraged partnerships with government, and not just with development financial institutions, as a way forward.