Agriculture’s ‘new’ role in national growth requires more coordination

Finance Minister Pravin Gordhan said his budget policy framework was informed by the requirements of the new growth path (unveiled on 26 October), which identified the agriculture and agro-processing sector as one of six key sectors with potential to scale back the country’s unemployment problem.

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Agricultural Business Chamber (ABC) president Dr John Purchase welcomed the news, but with reservations, saying details were still “very sketchy at best”. Agro-processing has also featured in government’s Industrial Policy Action Plan II (IPAP 2), but the focus there was on peripheral and marginal industries, such as aquaculture and honeybush tea, and not on mainstream agro-processing industries that have the potential for greater growth and job creation, he pointed out.

In addition, government is in the process of developing IPAP 3, and the indication is that mainstream agro-processing will feature much more strongly there. However, there’s still a marked lack of communication and coordination between government and agribusiness as to what needs to be done and what incentives government should provide, said Dr Purchase.

“Government keeps on talking about the agro-processing sector, and not to the sector, and this should therefore be the starting point. “The forum for such engagement could be the National Agricultural Marketing Council, a government entity that’s shown a good understanding of what’s necessary,” he added.

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Gordhan said agricultural output had declined by 3,2% in 2009, a trend that needs to be reversed. He also addressed concerns over the strength of the rand. “We believe international cooperation is needed to achieve a more stable international financial environment,” he said, and proposed several adjustments to the country’s financial and foreign exchange regulatory arrangements.

These include the implementation of “foreign exchange swaps” to “sterilise” foreign direct investment inflows and the amendment of exchange control and offshore investment limits on individuals. Exchange controls on domestic companies will also be reformed to remove barriers to their international expansion from a domestic base.Dr Purchase said the ABC fully supported this. “We believe the relaxation of the controls will certainly facilitate the flow

of direct investment from South Africa into the agro-food industry in Africa,” he explained. “It will also help the many multinationals seeking to use South Africa as their base for African expansion.” Dr Purchase said the matter was raised by the ABC with Reserve Bank governor Gill Marcus in a bilateral meeting two weeks before the mid-term budget statement, which was announced on 27 October.