Agriculture central to job creation

Analysts have largely welcomed the National Treasury's Budget allocation on agriculture, but also outlined what they regard as key areas of potential investment to unlock value in the sector.

Finance Minister Pravin Gordhan announced a total of R19 billion to be spent on rural development and agriculture in 2011-12, rising to R21 billion in 2013-14.

The minister allocated R250 million to the Industrial Development Corporation (IDC) to support agro-processing businesses.

Marthinus Loock, senior manager for agri-business support at Standard Bank, said in an industrial policy action plan (or IPAP2) that the agro-processing sector had been identified as one of the sectors with high employment multipliers and therefore financial support to the agro-processing sector should support the creation of jobs, one of the key objectives of the New Growth Path.

"Agro-processing has strong linkages both up and down the agricultural value chain and therefore will not only make a contribution to job creation, but also stimulate growth in rural areas.

"In agriculture we should add more value to our products before they are being exported. One such example includes soybeans, where SA exported 156 tons of soya and imported 925 tons of soya cake during 2009," he said.

According to the IPAP2, these interventions were estimated to retain 216,000 jobs and create an additional 66,180 jobs over the next 10 years, he added.

The Agricultural Business Chamber (ABC) said it believed that the development of agribusiness and agro-processing industries would enable growth and employment, especially in rural areas.

"The much appreciated announcement of support for infrastructure development, research and development and trade facilitation, is considered by the ABC as among the most important factors towards enabling the agribusiness environment to succeed and to enhance competitiveness of the sector.

"The proposed investment in infrastructure development and road maintenance can have a significant effect on decreasing the cost of transport and overall cost of doing business in SA," said CE John Purchase.

Ernst Janovsky, head of Absa AgriBusiness, said that, while he had hoped for more budgetary allocation to agriculture, he was optimistic about the value measures such investment in infrastructure would unleash.

"The R19 billion to R21 billion expenditure announced by the minister is less than 1% of the total SA GPD, which is a little disappointing than the 5% to 10% that was bandied around just recently. I just hope the authorities can find new ways of attracting more allocation directly into agriculture," Janovsky said.

Loock said potential growth areas in agriculture included import substitution such as the expansion of the poultry industry, manufacturing of soya cake, edible oils and wheat production, even red meat.

"The potential of the bio-fuel industry, not only to create jobs, but also as a market for agricultural products is largely untapped. One of the most important factors to enable unlocking this value is sufficient investment in research and development, to ensure our agricultural industry is able to benefit from the latest technologies and improving our competitiveness.

"According to the Maputo Declaration of 2003, of which SA is a signatory, at least 10% of our national budget should be spent on agriculture while it is alleged that less than 2% is currently being spent on agriculture."