Minister of Finance Tito Mboweni, tabled the Medium-Term Budget Policy Statement (MTBPS) in Parliament on Wednesday. Rarely has the annual MTBPS tabling drawn as much attention and been so critical to South Africa, as we currently face the very real prospect of a sovereign debt crisis and a default on our loans if we do not cut expenditure and grow the economy to raise revenue for the fiscus. Minister Mboweni and his National Treasury team have done a pretty good job in analysing the situation and in broad terms indicating where the main remedial action needs to be targeted. This includes an intention to cut the public sector wage bill and to reduce support to SOEs in general. This is with the exception of SAA and the Land Bank.

The Treasury is actively trying to manage South Africa’s debt to GDP ratio, which is estimated to peak at 95.3% by 2025/26. As soon as the debt to GDP ratio balloons over 100%, and interest payments exceed 25% of the total budget, a small open economy like South Africa’s ability to meet its obligations will be highly compromised and must be avoided at all costs. However, government must also restructure and reform the economy to stimulate economic growth, and Agbiz, as part of Business Unity South Africa (BUSA), has repeatedly called on government to create a conducive investment climate in all sectors of the economy, also in the agro-food sector.

While Agbiz was hoping that we would see greater detail on the Economic Reconstruction and Recovery Plan (ERRP), as announced by President Ramaphosa last week, this has unfortunately not materialized in the MTBPS to the extent that Agbiz was hoping for. For the agro-food sector there was the announcement of a R7 billion support package to the Land Bank over the three-year term of the MTBPS, but this will most probably be directed at meeting debt obligations and repayments, as well as shoring up the balance sheet, but will most probably not translate into much increased credit being made available to agribusinesses and farmers. The Land Bank is currently only servicing about 50% of the credit need/requirement of its clients. So the current tight liquidity situation in our broader industry will continue, but some private syndication initiatives are underway to make more capital available. This will probably be available at a higher cost (higher interest rate) to compensate for higher volatility and exchange rate risk. "We all need to be cognisant of the precarious economic situation we currently find ourselves in and develop strategies to overcome the headwinds that will inevitably be part of our new landscape," says Agbiz CEO Dr John Purchase.

In a media statement, Business Unity South Africa (BUSA) CEO Cas Coovadia said: "Unfortunately, the budget could only be bad news! Debt continues to increase; the revenue shortfall continues to increase and there is no sign of the structural reforms sorely needed to create an environment for investment." In the same vein, North-West University Business School economist Prof. Raymond Parsons said in a media statement: "With public debt strongly rising and funds often being diverted into what seem to be low-return projects, it is not evident that the MTBPS in itself will be able to lead job-rich growth in pro-active way."

The social and economic crisis generated by the Covid-19 pandemic has accelerated South Africa’s fiscal crisis. But the origins of the fiscal crisis are deeper. It is a structural crisis that will define public policy over the years ahead. Two decades ago, South Africa was confident about its economic future. Public expenditure was expanded to deliver on social objectives that had been deferred at the outset of the democratic transition in 1994. The expansion of public sector commitments was deliberate, warranted and well targeted. It included a permanent expansion of core public services (basic education, health and policing), an increase in pro-poor fiscal transfers, significant real improvements in the remuneration of public employees and a surge in public infrastructure investment. Prof. Michael Sachs, adjunct professor at the University of the Witwatersrand, discusses this subject in the linked article, first published on The Conversation.

The United Nations Conference for Trade and Development recently released the 2020 Trade and Development Report and presented a synopsis thereof to Nedlac Trade and Industry Chamber (TIC) last week. While there is a fair amount of consensus on the broad and general diagnosis of the economic challenges facing the world, and developing economies in particular, there is much debate on how to achieve the inclusive growth that is required to recover from both economic mismanagement over the past decade and the impact of government pandemic lockdown measures on the economy. The report contributes to that debate, but in the South African context there are in our view certainly shortcomings and questionable assumptions. Please click on UNCTAD 2020 report to peruse.

Minister of Trade, Industry and Competition Ebrahim Patel participated in the Informal World Trade Organisation (WTO) Trade Ministers Meeting earlier this week. The Trade Ministers Meeting discussed ways to narrow differences and generate consensus to drive the WTO fisheries subsidies negotiations towards conclusion and the contribution of the WTO to global economic recovery post-Covid-19. The negotiations on fisheries subsidies are at a critical stage and the WTO has a role to deliver on Sustainable Development Goal (SDG) 14.6 which aims to prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, and eliminate subsidies that contribute to IUU fishing, and refrain from introducing new such subsidies, recognising that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the WTO fisheries subsidies negotiation by 2020. Please click here to peruse.

The good news keeps pouring in for South Africa's agricultural sector, at least from a production perspective. Figures released on October 28 by the Crop Estimates Committee (CEC), a government crop forecasting body, show that South African farmers intend to increase the area planting for summer grains and oilseeds in the 2020/2021 production season 5% year on year to 4.15-million hectares. This comprises maize, sunflower seed, soybeans, groundnuts, sorghum and dry beans. There is an intention to increase most of these crops’ plantings except for sunflower seed, whose area could fall 4% year on year, in part because of an anticipated shift to white maize planting. Agbiz chief economist Wandile Sihlobo discusses the latest data in the linked article, written for and first published in Business Day.

The sentiment around 2020/2021 global grain and oilseed production is now somewhat less optimistic due to a possible downward revision to the respective harvests. This comes amid doubts over the potential size of South American and Black Sea grain and oilseed harvests because of dryness threatening crops. In Brazil and Argentina, which account for 14% and 50% of global maize and soya bean production respectively, there are reports of persistent dryness that has caused delays in plantings. It seems the rains of last week in parts of this region did not much improve soil moisture. On October 20 about 47.2% of Brazil’s maize had been planted, compared with 58.8% in the corresponding period last year, according to AgRural, Brazil’s commodities consultancy. On the same day, AgRural stated that only 6.1% of Brazil’s 2020/2021 soya beans had been planted compared with 19.5% on October 20 2019. Wandile Sihlobo discusses this subject in the linked article, written for and first published in Business Day.

South Africa’s 2020 large agricultural output, coupled with higher commodity prices which were precipitated by the weaker domestic currency, coupled with growing global demand improved farmers’ finances somewhat. The benefits of this improvement were also observed through robust agricultural machinery sales, with tractor sales for the first nine months of this year up slightly from the corresponding period in 2019. Yet, the challenge of growing farm debt in the sector persists as it will not be solved by one good harvest like the one, we recently recorded, which was preceded by years of poor output in various provinces of the country. Agbiz chief economist Wandile Sihlobo explores this topic in the linked article.

Agriculture, land reform and rural development minister Thoko Didiza’s announcement that 700 000 ha of agricultural land will be released for distribution is a positive step for agricultural expansion and inclusive growth. However, the fact that so much land is owned by the state, mainly due to the government’s Proactive Land Acquisition Strategy, confirms the global experience that governments tend to be good at acquiring land for the purpose of redistributive land reform, but lack efficiency and effectiveness in redistributing it to beneficiaries. Read more in the linked article by Wandile Sihlobo and Prof. Johann Kirsten of the University of Stellenbosch, written for and first published in Business Day.

The mere mention of trade unions makes some employers’ hackles rise, even in 2020. This is partially due to an outdated, adversarial relationship between trade unions and employers as well as assumptions about one another and generally poor communication. Poor communication is at the root of almost all workplace conflict situations. Trade unions worldwide are seeing declines in their membership numbers. Cosatu was dealt a blow by declining numbers in the once vast National Union of Mineworkers (NUM), which has seen membership decline from around 309 000 in 2011, to around 230 000 in 2020. The descent was fueled by the birth of the Association of Mineworkers and Construction Union (AMCU), preceding the Marikana massacre in 2012. NUM has not been able to recover their membership losses, and has reportedly been operating at a financial loss since 2013. Jahni de Villiers of Labour Amplified discusses this subject in the linked article.

The Covid-19 pandemic represents an unprecedented health and economic crisis for sub-Saharan Africa. Within months, the spread of the virus has jeopardized years of development and decades-long gains against poverty in the region while threatening the lives and livelihoods of millions of people. In the International Monetary Fund's (IMF) latest Regional Economic Outlook, the IMF projects -3% growth in sub-Saharan Africa’s GDP in 2020, representing the worst outcome on record for the region. The drop will be even larger for economies dependent on tourism and commodity exports. Growth in the region should rebound modestly in 2021 to 3.1 percent, but for many countries, a return to 2019 levels won’t occur until 2022–24. Read more in the linked IMF blogpost.

European farmers, responding to urbanisation and growing demand for food in the 19th century, banded together to form not only agricultural co-operatives, but financial ones. Today, African farmers are in a similar position, but they now have the opportunity to organise themselves in a different fashion, integrate value chains to their benefit and develop their businesses. With technology, these farmers can shape their own solutions. Using simple mobile phones they can make payments, order farm inputs or sell their produce. As agri value chains become increasingly digitised, we need to ensure they remain inclusive, which requires careful data design with smallholders’ interests at its heart. Please click here to read the complete article first published in Financial Times.

This BUSA Covid 19: Cargo movement update — the 12th of its kind — contains a consolidated overview of the South African supply chain, as well as the current state of trade internationally. In terms of Covid-19 infections, the country’s curve has levelled off in recent weeks, with new diagnoses of Covid-19 amounted to a daily average of just over 1 762 last week. The daily average of newly reported cases has remained within similar bounds since the second week of August, but it must be said that there is now some evidence of some resurgence. In global terms, South Africa dropped to 12th position globally, with the United Kingdom overtaking South Africa in the last seven days, as was predicted last week. Total cases in South Africa now amount to approximately 717 500 recorded at the time of writing. Please click here to peruse.

Mthatha airport in South Africa’s Eastern Cape might one day be a place from which produce from the fields of one of the country’s poorest yet most agriculturally promising provinces is sent out. But for now, the recent planting around the airport of about 50 hectares of teff as livestock fodder points to how, even in the most industrialised and well-connected African economy, developing a new farming frontier and connecting it to markets is literally a tough grassroots battle. The linked Financial Times article discusses how a lack of clear land ownership rights for farmers is hampering efforts to open up the region to the wider market. Please click here to peruse.

Corteva Agriscience, John Deere, Global Communities, and the United States Agency for International Development (USAID) announced earlier this week the Zambia Emerging Farmers Partnership, a project designed to help increase the productivity, incomes and sustainable farming practices of 10 000 emerging farmers with 20 to 60 hectares of land. This project will enrich the lives of farmers and their communities and will contribute to building a resilient global food system. Agriculture in Zambia is a key sector for employment and is critical to local and regional food security. Maize is the primary source of calories for many rural people and a significant contributor to Zambia’s economic and social development. However, farmers face many challenges, from climate variabilities to fall armyworm. In addition, traditional practices for preparing the land, weeding and harvesting require significant manual labor, much of which is endured by women. Please click Corteva media statement to read more.

The Industrial Development Corporation's (IDC) 2020 Integrated Report covers the IDC's strategy and performance for the period 1 April 2019 to 31 March 2020.The report includes both financial as well as non-financial performance against their strategies, activities, outcomes, and risks. "The report includes our key stakeholders, and we define them as those who have a significant influence or considerable interest in the IDC’s ability to achieve its mandate. We strive to increasingly include a broader set of stakeholders in our decision-making and make every effort to preserve and enrich our credibility through transparent reporting practices." Please click here to peruse.

The South African Table Grape Industry (SATI) released the first crop estimate for the 2020/2021 season with intake volumes estimated to be between 65,0 million and 69,8 million cartons (4.5 kg equivalent). This signals an expected return to normal industry volumes and reflects a marginal growth in hectares planted over the last six years. The earliest northern provinces region is expected to start a week later than normal, i.e. week 45, while indications are that the Orange River region is likely to start about five days later due to cooler spring weather. It is still too early to predict exactly when the remaining three South African production regions based in the Western Cape will start harvesting. Read more in the linked media statement.

Justin Chadwick, CEO of the Citrus Growers' Association of Southern African, shares the latest news in the citrus industry in his weekly update - From the desk of the CEO. Please click here to peruse.

Read more about the latest developments and news in the pork industry in the South African Pork Producers' Organisation's (SAPPO) newsletter, SAPPO Weekly Update.

For more information and to register, please visit the Agbiz website. 

For more information, please visit the congress web page.