While Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement (MTBPS) included some positive pronouncements, agricultural organisation Agri SA says it is disappointed that the statement failed to provide for critical interventions to support South Africa’s hard-hit farmers.
In a statement issued on Wednesday by Agri SA’s chief economist Kulani Siweya and Agri SA’s executive director Christo van der Rheede, the organisation said it was encouraged by the commitment to increase infrastructure expenditure.
“We are hopeful that this expenditure will have positive multiplier effects and, if carried out timeously and effectively, will set the economy on a growth trajectory.”
Agri SA said it was also cautiously optimistic about the planned expenditure on state-owned enterprises. It said that to date, expenditure on these entities had not yielded good outcomes, and there remains a risk that relieving Eskom of a portion of its debt may encourage further maladministration. Nevertheless, the organisation said that given the magnitude of the current power crisis, it hoped to see Eskom use this opportunity to address its challenges and fix the country’s power supply.
Despite these positive steps, Agri SA said it was concerned by the minister’s failure to provide any relief targeted at the agricultural sector.
This sector, which is a key contributor to the South African economy and the country’s guarantor of food security, has been hit hardest by rising input costs, with farmers in dire financial circumstances.
“Yet Minister Godongwana did not announce any measures to help ensure the sustainability of the sector,” Agri SA said.
It lamented the fact there was no tax relief for industries weighed down by excessive sin taxes, nor was there any pronouncement on critical policy concerns including the revision of assessed tax losses, proposed changes to the Financial Intelligence Centre Act, 2001(Fica), or the new rules around the diesel rebate scheme.
Agri SA said it would continue to engage the government and National Treasury to ensure that it saw a taxation and policy framework in the Budget next February within which the agricultural sector could thrive and that reflected the needs of this critical job-creating sector.
Meanwhile, SA Canegrowers CEO Thomas Funke said they welcomed the commitment by Godongwana to address the damage to infrastructure caused by the April floods in KwaZulu-Natal.
“We are, however, disappointed that he failed to give any indication on the future of the Health Promotion Levy, an existential issue for South Africa’s cane growing industry and broader sugar value chain,” Funke said.
Much of South Africa’s cane growing took place in KwaZulu-Natal, and cane growers were adversely affected by the floods.
He said that investment in the repair of critical infrastructure was a necessary intervention, but it was of limited value while the industry struggles under the burden of the unsubstantiated sugar tax.
“The job-killing sugar tax continues to stifle the sugar industry’s growth and contribution to South Africa’s economy. As it stands, the industry is a major employer in rural communities across KwaZulu-Natal and Mpumalanga. Figures from the National Economic Development and Labour Council indicate that the sugar tax cost the industry more than 16 000 jobs in its first year alone, and figures recently cited by (the) Beverage Association of South Africa suggest that job losses may now be as high as 25 000,” Funke said.
The organisation said that worse still, based on the Budget Speech in February, Godongwana looked set to increase the tax, possibly lowering the 4g threshold and extending the levy to fruit juices. It said the impact of such a move would be catastrophic and would further corrode any progress made to secure the future of the industry under the auspices of the Sugarcane Value Chain Masterplan.
SA Canegrowers said it had initiated engagements with the Presidency and National Treasury on the impact of the sugar tax.
Dr Marlene Louw, a senior economist at Absa AgriBusiness, said they were encouraged to see that the MTBPS touched on a number of the pain points that the South African agricultural sector was currently grappling with.
“Higher-than-expected tax collections have resulted in the government providing increased support to SOEs. In this regard, issues at Eskom and Transnet are arguably the biggest current constraint and potential future impediment to the growth of the agricultural sector. In addition, increased support to Eskom will undoubtedly free up cash to channel to operational issues and maintenance at the power utility but will not provide immediate relief to the current local electricity crisis,” Louw said.
She added that they were, however, positive that this would lead to improvements over the medium term, which would be further supported by the sourcing of funds for a just energy transition over the longer term.
“Furthermore, additional support to Transnet aimed at repairing some of the damage caused by the April floods and an increase of locomotive capacity is good news for mining and agricultural commodity exports. Closely related to this is the renewed commitment to investment spending on infrastructure which could support momentum for improvements in regional, provincial and national road infrastructure and our ports. Lastly, the extension of the social distress grant would likely support demand for agricultural products such as fresh produce up until March 2024,” Louw said.
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