State to assist drought-hit farmers financially
This year’s budget speech was special for me as I was in a workshop with farmers at the time, which provided me with the opportunity to relay to them in layman’s terms what they can expect from the government.
In conversations with these farmers, their serious concern about the state of our economy struck me deeply, particularly because, for many of them (and for many other farmers in South Africa), the financial assistance offered by the government could make or break their businesses, which are suffering from the detrimental effects of the current drought.
In the morning leading up to the budget speech, I was upbeat that there might be some significant increases in allocations to agricultural financial institutions, such as the Land Bank, to assist farmers at this challenging time.
That turned out to be a semi-fulfilled wish.
The opening of the minister’s speech sounded encouraging and pragmatic, suggesting that the nation must be frank about the way to address its current challenges, the drought being one of them. Pravin Gordhan’s speech offered some glimpse of hope for the agricultural sector: R15-billion will be allocated over the next three years to the Land Bank’s concessionary loan facility to help farmers to recover from the current drought.
But the key concern is whether all those affected will be able to access this money so that they can continue farming and ultimately contribute meaningfully to the economy.
What was encouraging, though, was the show of support for small-scale farmers, in particular emerging black farmers. Gordhan allocated R2.8-billion for small-scale farming and to help develop agri-parks in rural economies.
This is of great importance as some small-scale farmers have been hit extremely hard and have lost all their crops and livestock, and will struggle to get back into production next season.
Last week, Grain SA said emerging black farmers (small-scale farmers) will need at least R1-billion in soft loans in order to cope with the drought.
If the amount allocated to them is used efficiently and spent
strategically, it will do a lot to ease the burden of the drought. This money could also help facilitate market access through the agri
-parks. The timing of this will be essential.
At the end of the budget speech, one of the farmers in our workshop remarked that “the word drought was mentioned a number of times in the budget speech, but allocations to address it fell below our expectations”.
I share his view to some extent but, given the financial constraints on our economy, I can understand some of the restrictions and reservations made in certain budgetary allocations.
It is important to remember that the effects of the drought are not only limited to agricultural production, but have also affected the economy as a whole.
In fact, the knock-on effect of the drought is one of the key constraints to South Africa’s economic growth, which has been acknowledged by institutions such as the International Monetary Fund, which forecasts our gross domestic product growth this year will be 0.7%.
But the aforementioned allocations will aid and add value to the agricultural sector, although more could have been done given the risk posed to South Africa’s food security, jobs and economic development.
I base this view on the recent reports of AgriSA, which indicate that the agricultural sector will need at least R12-billion to address the challenges posed by the drought.
This is of critical importance as it would help farmers to get back into production in the next season if climatic conditions permit it.
More importantly, at a micro-level, primary agriculture contributes to national food security and creates more than 800?000 jobs, a significant number in a country that is grappling with a high unemployment rate of 25.5%.
Going forward, I am positive that organised agriculture and the government will work together to ensure that the country does not lose its current agricultural production capacity and we are once again the bread basket for the region.
Wandile Sihlobo is an economist at Grain SA. These are his own views. Follow him on Twitter @Wandile-SihloboMore could have been done, but loans and other measures will offer local agriculture some relief