#MTBPS2026 | R10bn reserve, R1.5bn extension funding target agricultural risks

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The government’s 2026 Medium-Term Budget Policy Statement (MTBPS), tabled by Finance Minister Enoch Godongwana on 21 October, includes temporary fuel levy relief and additional funding for agricultural extension services, while industry bodies have stressed that longer-term investment in infrastructure, animal health and climate resilience remains essential to the sector’s growth.

Fuel relief eases pressure

Fuel costs are a key concern for farmers preparing for the summer grain planting and summer fruit production seasons. Under the MTBPS measures, the general fuel levy will be reduced by R3 per litre for diesel and R1.50 per litre for petrol from 4 November to 1 December 2026. The reductions will then continue at lower levels until 5 January 2027, with the diesel levy reduced by R1.50 per litre and the petrol levy by R1 per litre.

The temporary relief will provide R10bn in support for households and businesses, at a fiscal cost of R10bn in foregone revenue. AgriSA welcomed the intervention, saying it would help ease pressure on agricultural production costs and food prices.

“It is an important intervention to ease pressure on agricultural production costs and food prices,” said Johann Kotze, AgriSA CEO.

AgriSA said the timing was particularly important as farmers face expected El Niño-related climate risks alongside persistently high fuel and fertiliser costs.

“Against this backdrop, the fuel relief is particularly welcome. Diesel is a major input across agricultural operations and the entire food system. The intervention will provide much-needed relief at a time when farmers are making critical production and investment decisions,” said Kotze.

Agbiz also welcomed the fuel levy reductions, highlighting the sector’s reliance on road transport.

“About 80% of SA agricultural products are transported by road,” said Theo Boshoff, CEO of Agbiz.

Frank Blackmore, lead economist at KPMG South Africa, said the fuel relief could help ease inflationary pressure because diesel vehicles transport many goods across the economy.

Reserve and extension funding

Alongside the fuel relief, the MTBPS increases the contingency reserve to R10bn to respond to potential threats associated with El Niño and other risks. Agbiz chief economist Wandile Sihlobo welcomed the provision, saying the Department of Agriculture would need to assess the impact of El Niño in 2027 and use available resources to support the farmers most affected.

The MTBPS also allocates an additional R1.5bn over the next three years for agricultural extension officers to support farming communities. Agbiz welcomed the funding as government releases state land and refocuses on implementing the Agriculture and Agro-processing Master Plan. Extension services will be important in supporting farmers, particularly new entrants to the sector.

Infrastructure and animal health

AgriSA also pointed to allocations in the 2026/27 Adjusted Estimates of National Expenditure. In its 21 October statement, the organisation highlighted R183m carried forward for foot-and-mouth disease (FMD) vaccine procurement, R242m in additional funding to rehabilitate flood-damaged agricultural infrastructure, and R1.46bn for rehabilitating flood-damaged national and provincial roads.

AgriSA said effective implementation would be critical to protecting livestock production and export markets. It called for sustained funding for FMD vaccination and biosecurity rather than reliance on emergency interventions.

The organisation said infrastructure investment must extend beyond disaster recovery. Reliable roads, water systems and logistics networks are essential to lowering production costs, attracting investment and expanding agricultural exports.

Agbiz also welcomed the MTBPS’s focus on infrastructure and municipal operations, saying weak municipal performance can constrain businesses and add costs. It highlighted the need to improve fresh produce markets.

“The increased focus on infrastructure matters and the effectiveness of municipality operations is a welcome development,” Boshoff said.

AgriSA calls for sustained investment

While welcoming short-term relief, AgriSA said predictable and adequate agricultural development finance was needed, including strengthening the Land Bank and investing in climate resilience and El Niño preparedness.

“The MTBPS provides welcome short-term relief, but agriculture's long-term contribution to economic growth, employment and food security depends on sustained investment in the systems that support production,” said Kotze.

AgriSA said agriculture had grown by an average of 3% annually since 2012, compared with 1% for the broader economy. It argued that investment in biosecurity, infrastructure and agricultural finance would be important to sustaining growth and unlocking further investment, jobs and exports.

Growth outlook weakens

The MTBPS forecasts South Africa’s economy will grow by 1.2% in 2026, down from the 1.6% projected in February. Godongwana cited a prolonged conflict in the Middle East and the potential impact of El Niño on producer costs and output among the risks to domestic growth.

Blackmore said stronger revenue collections, partly supported by higher commodity prices, had improved the government’s fiscal position. However, he cautioned that some of the revenue gains might not be sustained as commodity-related gains dissipate. Maintaining a primary budget surplus would support South Africa’s risk profile, he said.

KPMG corporate tax partner Itumeleng Nkadimeng also highlighted stronger collections from corporate income tax, dividends tax and value-added tax (VAT), while noting that revenue gains linked to commodity prices might not last.

Nkadimeng pointed to tax administration, compliance and the modernisation of the South African Revenue Service (SARS) as important elements of the government’s fiscal approach. She also highlighted infrastructure investment as central to economic growth, with sustainable tax revenue dependent on stronger economic activity.

Agbiz described the MTBPS as balanced overall. Its response, alongside AgriSA’s, highlights the importance of turning short-term relief into lasting support for agricultural production, infrastructure, animal health and climate resilience.