Impact of Government Expenditure on Agricultural Productivity in South Africa

Government expenditure has been considered to be having an extent of impact on economic performance at both sectoral level and aggregate national level. Evidence from literature, however shows that this notion has not been generally accepted across countries and sectors. Considering the significance of agriculture in an economy most especially in Africa, and the consequent role of government, this study examines the impact of government expenditure on agricultural productivity in South Africa using annual time series data from 1983 to 2016. It is shown that there exists a long-run relationship between government expenditure on agriculture and agricultural productivity, and a positive significant effect only to be expected in the long-run. The finding underscores the non-negotiable role of the South African government funding of agricultural sector in an era of climate change and a highly commercialized agricultural system. Furthermore, considering the low and declining pattern of government expenditure in the sector in South Africa, the desired productivity growth impact will only be experienced in the long-run all things being equal. Improving government funding in the sector could accelerate the desired agricultural productivity in the short-term.