This week, Finance Minister Tito Mboweni, delivered a Supplementary Budget which placed an emphasis on near-term spending reallocations to combat the Covid-19 pandemic and the associated economic shock. However, it also stressed the rapidly deteriorating debt dynamic and the need for active policy measures to ensure sustainable public finances. The Finance Minister also explained the tough economic conditions South Africa is currently in partly because of the Covid-19 pandemic. The National Treasury expects the South African economy to contract by 7.2% y/y in 2020, which is the largest contraction in nearly 90 years. From an agriculture perspective, the Finance Minister indicated that "government will also be allocating R3 billion to recapitalise the Land Bank. This bank holds 29% of South Africa's agricultural debt. The National Treasury is supporting the Land Bank to find a solution to its default and craft a long-term restructuring plan. The full Budget document is linked here.

The North-West University Business School hosted a Think Tank where Dr Azar Jammine, director and chief economist of Econometrix, presented his assessment of Finance Minister Tito Mboweni's Supplementary Budget. Please click here to access Dr Jammine's presentation.

"The Supplementary Budget presentation by Finance Minister Tito Mboweni was inevitably going to be a 'bad news' one, with a bleak economic outlook.," writes Prof. Raymond Parsons of the North-West University Business School. "It confirmed that the country is facing its biggest budget deficit on record and the largest GDP contraction since the 1930s. The impact of Covid-19 globally and domestically, the prolonged lockdown of the local economy - combined with South Africa's weak economic pre-preconditions and universal 'junk' status - have made a new fiscal plan imperative for South Africa in view of drastically changed economic circumstances." Please click here for a media statement with Prof. Parsons' comments.

One of the key questions that consistently arises amid the Covid-19 pandemic impact on the economy is about the effects on employment.  In agriculture, there could be some resilience compared to other sectors of the economy because of the major two reasons.  First, the sector was largely operational even during the strict level-5 lockdown, except a few subsectors such as the wine, tobacco, wool and floriculture industries, amongst others. These subsectors subsequently opened when the country's lockdown moved to level 4 and 3, except for the tobacco industry whose sales remains prohibited, while harvest and fieldwork are permitted. Second, South Africa expects its second-largest grains harvest in 2019/20 season, a harvest process that in fact started recently. Also, there is an expectation of a record citrus harvest, general improvement in output in other fruits following drought years, and also a recovery in wine grapes output. Agbiz chief economist Wandile Sihlobo discusses this subject in the linked article, written for and first published on Fin 24.