By Maile Matsimela
After the 2025 budget was broadly rejected due to VAT increase, the Minister of Finance, Enoch Godongwana, has come back to present a new budget in the National Assembly on 21 May.
Godongwana announced a consolidated government spending allocation of R29.4 billion specifically for agriculture and rural development in the 2025/26 fiscal year. This funding is projected to increase to R31.9 billion by 2027/28, reflecting an average annual growth of 2.5% over the medium-term period.
The agricultural allocations form part of the government’s broader economic strategy and will be implemented through various provincial and national programmes aimed at supporting the sector.
Fuel levy adjustment
The budget introduced an inflationary increase in the general fuel levy, which will directly impact operational costs for farmers and agricultural transport. The specific rates announced in the 2025/26 budget are:
- Petrol: R4.01 per litre.
- Diesel: R3.85 per litre.
These fuel levy adjustments will take effect according to the standard implementation schedule.
Infrastructure investment
The Minister announced a substantial public infrastructure investment of R1.03 trillion over the medium-term expenditure framework period, with several components relevant to the agricultural sector:
- Transport and logistics: R402 billion
- Water and sanitation: R156.3 billion
- Energy: R219.2 billion
These infrastructure investments are intended to support overall economic development, including the improvement of rural connectivity and service delivery in agricultural regions.
Water infrastructure
Water infrastructure was highlighted in the budget as a key area of investment, with R156.3 billion allocated over the medium term. This funding will support water supply expansion and improvements to sanitation systems, which are critical for agricultural activities, particularly in irrigation-dependent farming regions.
Economic projections
The Minister presented the following economic projections that will shape the operating environment for the agricultural sector:
- Real GDP growth: 1.4% in 2025, improving to 1.8% by 2027.
- CPI inflation: Expected to average 4.2% over the medium term.
- Food inflation: Projected at 4.5% in 2025.
- Export growth: 1.4% in 2025.
These projections indicate the economic context within which agriculture will operate in the coming fiscal year.
Trade and exports
The budget acknowledged challenges affecting agricultural exports, including:
- Global trade volatility due to geopolitical tensions.
- Reconfigured supply chains impacting export markets.
- Weakened export commodity prices affecting industrial and agricultural goods.
The allocation to economic development of R289.8 billion in 2025/26 includes funding aimed at enhancing rail and port logistics, which directly impacts agricultural exporters.
Disaster management
The budget indicated that previously planned additional spending for disaster management has been revised. The March 2025 budget had proposed additional disaster funding to address natural occurrences like droughts, but these allocations have been adjusted due to budget constraints.
Social relief measures
Several social relief measures announced in the budget will impact rural communities where agriculture is a primary economic activity:
- Extension of the Covid-19 Social Relief of Distress Grant: R35.2 billion allocated until March 31, 2026.
- Early Childhood Development: Subsidy rates increased to R24 per child per day (up from R17).
- Basic Education: R353 billion allocated in 2025/26.
- Health Services: R318.3 billion allocated to support healthcare delivery.
These social measures are designed to support vulnerable households, including those in rural farming communities.
Community development
The budget allocates R280.4 billion for community development, which includes housing, basic services, and municipal infrastructure. These investments aim to address service delivery needs in rural and other underserved areas where agricultural activities are prevalent.
