27 July 2020
Scaling down the budgets of core state departments that are responsible for the 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 National Treasury’s promise to kick-start economic growth in the country.
Agri SA is of the opinion that the department’s salary bill should be cut instead of its programmes for food security, land reform, production aid (Ilima/Letsema), infrastructure development in the form of Comprehensive Agricultural Support Programme (CASP) and rural development.
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 R1,89bn, therefore, makes no sense. Furthermore, the budget for the programmes Ilima/Letsema and CASP has been reduced by R276,7m. This has enormous implications for emerging farmers who depend on this aid.
The salary bill of the department, which amounts to R4,44bn was reduced by only R300m. This is the elephant in the room that 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 R761,7bn versus a deficit of R370,5bn projected in February serves as an example. Gross tax revenue collected during the first two months of 2020/21 amounts R142bn, while the initial forecast for the same period was R177,3bn. The South African Revenue Service (SARS), is already R35,3bn short of the 2020/21 target. This has compelled National Treasury to revise gross tax revenue for the 2020/21 financial year from R1,43t to R1,12t, which means that SARS may miss its tax collection target for this year by more than R300bn.
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 invest in programmes that are directly aimed at promoting economic growth rather than reducing the budgets of those programmes. This is what our country urgently needs now.