WITH the desperately needed relief for the agricultural sector, sound policy-making for the sector, and investment into critical infrastructure, the agricultural sector would continue to outperform other sectors and add to the number of critical jobs it provides in South Africa’s rural communities and throughout the value chain, according to Agri SA chief economist Kulani Siweya.
However, he said this would require a Mid-Term Budget Policy Statement (MTBPS) that created an enabling environment for the sector to thrive, and this is what they hoped to hear on Wednesday.
The agricultural organisation said it was hopeful that the MTBPS would outline critical measures to support the agricultural sector amid a number of crises that threatened the sector’s continued growth.
“Coming so soon after the crippling Transnet strike, with ongoing load shedding and high input costs, Minister (Enoch) Godongwana must use the opportunity of the MTBPS to signal interventions that help to bolster the sector, which holds around 874 000 jobs and contributed more than 2% to GDP despite the challenges of the past three years,” Siweya said.
The MTBPS comes shortly after Agri SA’s 2022 congress, where the challenges facing the agricultural sector were ventilated with leaders of government, state-owned enterprises and the private sector.
With the magnitude of the problems now clear, Agri SA said Minister Godongwana must give particular attention to measures that safeguarded the top-performing and labour-intensive agricultural sector.
Among the interventions within the minister’s control, Siweya said, was the provision of tax relief for hard-hit agricultural industries.
He said tobacco, grape and cane farmers were among those hardest hit by high fertiliser and fuel prices.
“These industries therefore need relief from ‘sin taxes’ that only further reduce their ability to withstand current price pressures,” Siweya said.
He said the Treasury must also review the diesel rebate announced by the South African Revenue Service (Sars) on March 18 as they believed these unilateral changes announced by Sars fell short of meeting farmers’ needs on critical points.
Rather, he said, they lowered the refund percentage of the General Fuel and Road Accident Fund levies and failed to provide certainty of key issues such as logbook formats.
"Minister Godongwana must also review proposed changes to the Financial Intelligence Centre Act, 2001 (Fica), which would see suppliers of high-value goods become subject to Fica requirements in respect of transactions exceeding R100 000, Siweya said.
If this proposal were to be adopted, it would impose significant administrative costs on already embattled farmers. “It is therefore essential that this proposal is withdrawn,” Siweya said.
Finally, the chief economist said the Treasury must reconsider the proposed limitation on the assessed losses that businesses could write off against their taxable income.
For cyclical sectors like agriculture, he said, this allowance was often a lifeline and a key contributor to making continued agricultural production financially viable.
A disadvantageous amendment, especially in the midst of an ongoing cost crisis, would be a calamitous and costly mistake, he said.
Siweya said these sector-specific interventions must be supported by responsible macro-economic policies and Agri SA would be watching for a number of key indicators that the government was committed to fiscal discipline and to putting South Africa on a sound fiscal footing.
“These measures include decisive action to address the public sector wage bill, limitations on bailing out under-performing state-owned enterprises and increasing investment into infrastructure projects with positive multiplier effects.”
Meanwhile, SA Canegrowers chairperson Andrew Russell said the sugar tax continued to handicap small-scale growers who contended with bitter cost pressures.
The organisation called on Godongwana “to provide a signal on the future of the Health Promotion Levy” in the MTBPS.
"With high input costs already weighing down the agricultural sector, the added burden of the Health Promotion Levy on the sugar industry (despite there being no evidence that the tax has reduced obesity levels in the country) poses an existential threat to South Africa’s 21 000 small-scale growers and must be eliminated,“ Russell said.
In his main Budget Speech in February this year, Godongwana announced an increase in the tax, which was subsequently postponed to April next year in order allow for further consultation on lowering the 4g threshold and extending the levy to fruit juices.
Russell said while this postponement provided some relief for growers the prolonged enforcement of the Health Promotion Levy had continued to hamstring the industry, which has also been faced with other cost pressures including a spike in fertiliser and energy prices along with ongoing bouts of load shedding.
"While SA Canegrowers has written to Minister Godongwana to request a meeting to discuss the HPL, we have received no response to date. We have therefore also written to President Ramaphosa requesting his intervention in this long-running problem to provide desperately needed relief for the industry by eliminating the sugar tax," Russell said.
The tax was introduced in 2018 with the objective of reducing obesity levels in South Africa so as to reduce the burden of disease on the country’s healthcare system.
Despite being in force for more than four years, the sector said there remained no credible evidence that the intervention had reduced obesity levels in the country while the economic impact of the tax had been consistently demonstrated by credible research.
In June last year, a study commissioned by the National Economic Development and Labour Council showed that the tax had cost the country 16 621 jobs losses, a R653 million decline in investment in the economy, and a R1.19 billion decline in the first year of its implementation.
Further research conducted by the Bureau for Food and Agricultural Policy showed that maintaining the sugar tax at the current level would cost the industry a further 15 984 jobs and contribute towards a decline of 46 600 hectares under cane over the next 10 years.
The effect of an increase would therefore be devastating, threatening the survival of the industry’s 21 000 small-scale growers as well as the jobs created by commercial growers.
Russell said South Africa was not in a position to imperil desperately needed jobs.
"This is especially true for the rural communities in KwaZulu-Natal and Mpumalanga. For the sake of the one million livelihoods that depend on the industry, Minister Godongwana must use the opportunity of the Mid-Term Budget Policy Statement to finally signal the elimination of the calamitous and ineffective sugar tax.
“SA Canegrowers remains committed to working with the government to come up with a holistic plan to tackle obesity levels in the country, which does not unfairly target one industry and the livelihoods that depend on it.”
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