Agri SA expects the Medium-term Budget Policy Statement (MTBPS) to make adequate resources available to boost agriculture’s competitiveness and to support farmers, especially in drought-affected areas.

Minister Tito Mboweni will table the MTBPS in parliament on the 30th of October. The MTBPS is an opportunity to report back and set out the context and assumptions that inform the following year’s budget. 

High government debt halting economic growth

The balance between government income (tax revenue) and expenditure is at the heart of the budget. The past decade shows a trend of low economic growth and rising government debt, where slowing growth reinforced the increase in government debt.

In addition, the high level of government debt is now placing a further damper on economic growth.

Key factors the MTBPS will have to consider include:

  • The outlook for economic growth and tax collection: Slowing economic growth has a negative impact on the amount of tax revenue collected relative to the targets that were set in the February budget. Current market expectations point to the South African Revenue Service (SARS) missing these revenue targets.
  • Rising government debt: The interest payments for government debt is one of the fastest growing expenditure items in the budget. As the government budget deficit persists, the pressure from rising government debt necessary to cover the shortfall increases.
  • Limited scope for increasing taxes: Personal income tax is reaching a point where higher tax rates will start showing decreasing returns in tax revenue. Increasing value added tax (VAT) would be unfavourable in a slowing economy where consumers’ budgets are stretched thin. In the context of South Africa’s investment drive, higher company tax rates could deter much needed foreign direct investment (FDI).
  • Government expenditure and guarantees: Balancing expenditure against weakening revenues will require significant cost savings. However, the rising public sector wage bill along with support to struggling state owned enterprises (SOEs), especially Eskom, make this a difficult task.
  • Growth reforms: More detail on the roll-out of growth reforms proposed in the recent economic policy paper released by the National Treasury.

Resource availability

Considering the important role of agriculture in the South African economy, Agri SA expect the MTBPS to make adequate resources available to support the sector.

This will enable the sector to continue producing quality food for the country. It will also contribute towards job creation and poverty alleviation as envisaged by chapter six of the National Development Plan (NDP). – Press release, Agri SA