Industry Giants Comment On Special Adjustment Budget
FarmBiz|August 2020
Prof Johan Willemse, an independent agricultural economist, says the supplementary budget delivered by the minister of finance on 24 June was a real shocker. According to him, the government is spending an additional R145 billion on the COVID-19 issue. The real issue, however, is a record budget shortfall due to the economic meltdown, with wrong policy choices and corruption on the cards.
Claudi Nortje

Finance minister Tito Mboweni said during his address that the economy will shrink by 7,2% during 2020. The International Monetary Fund (IMF) currently estimates a decline of more than 8% for South Africa, which is the largest economic contraction in more than 90 years. However, other economic models suggest a much larger decline of up to 16%. According to Willemse, this will be a massive shock to consumer spending as unemployment also increased to above 30% in the first quarter of 2020. Market analysts expect unemployment to move close to 40% before it stabilises.

A decline in disposable income

According to Mboweni, the world economy is also in very bad shape and will shrink by more than 5% this year, resulting in the largest per capita income drop in more than a century. Willemse says the main problem is that South Africa’s exports have been curbed; earning extra income in the international market has thus become more problematic, as the world is getting poorer and the behaviour of populations and businesses are changing.

Willemse explains that this will result in a strong decline in disposable income and that it would be very naïve to think that the South African and world food market, as well as consumer behaviour, will not be affected.

The question, given this new economic outlook and the fact that many consumers in South Africa and the rest of the world are becoming poorer by the day, is how will spending on meat change? And how will it affect our business environment?

Record government spending

Willemse says the current reality is higher government spending of just above R2 trillion, compared to a meagre expected income (tax) of R1,12 trillion for the 2020/21 tax year. Spending has increased to a record level, while income (tax) has dropped significantly due to the economic meltdown being experienced.

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