They said it demonstrated an understanding of the particular difficulties faced by the sector with significant implications for food security. Picture: Reuters/Siphiwe Sibeko
While the government could have gone further in addressing the challenges facing the agricultural sector, this year’s Budget reflected a sober analysis of the environment in which the sector operates, says local agricultural organisation Agri SA.
Reacting to this year’s Budget delivered by Finance Minister Enoch Godongwana on Wednesday, Agri SA CEO Christo van der Rheede and the organisation’s chief economist Kulani Siweya said in a statement that Agri SA welcomes the solid Budget delivered by Minister Enoch Godongwana for the sector’s difficult climate.
They said it demonstrated an understanding of the particular difficulties faced by the sector with significant implications for food security.
“We welcome the debt relief for Eskom, recognising the dire condition of this critical entity. It is important, however, for Eskom now to demonstrate how it will use this opportunity to position itself for future sustainability and profitability,” they said.
Agri SA said it also acknowledged the measures put in place to assist the agricultural sector while the government works to put Eskom on a firmer footing. The agricultural organisation said that of particular note is the extension of the rebate of the Road Accident Fund levy for diesel used by manufacturers of foodstuff. It said this intervention will help to contain the cost of food production to the benefit of consumers.
“The implementation of the Fiscal Support Package to address the energy crisis will also go some way to assisting both households and businesses in this difficult environment. Agri SA must still study the likely impact of this intervention for farmers in particular.”
Van der Rheede said that the planned spending of more than R480 billion on critical infrastructure, including transport and logistics, as well as water and sanitation, also reflects Treasury’s understanding of the essential contribution of these vital projects to the national economy and the country’s food security.
“While the failure to grant any reprieve on the tobacco and alcohol excise taxes is disappointing, Agri SA is pleased by the decision not to increase the health promotion levy.”
Agri SA said there remained areas of concern in the national Budget, notably the public sector wage bill. Yet Agri SA said it was satisfied overall that Minister Godongwana has understood the context in which the Budget was delivered. This is a critical moment for an agricultural sector that is being battered by load shedding. Only time will tell if the government will meet the moment with the urgency it requires in the implementation of the interventions announced.”
Theo Boshoff, CEO at the Agricultural Business Chamber (Agbiz) also said that their organisation welcomed the 2023 Budget speech, delivered in a tough environment.
“Finance Minister Enoch Godongwana delivered the 2023 Budget speech in a uniquely challenging environment. Global economic growth is slowing, from an estimated 3.4% in 2022 to 2.9% in 2023. The domestic challenges, particularly the energy crisis, remain a significant constraint to growth, with the South African economy expected to grow by less than 2% through 2025. Agbiz welcomes this Budget speech,” Boshoff said.
He said that they were particularly encouraged by the minister’s focus on Eskom’s debt and the debt-relief arrangement, which will assist Eskom to have the flexibility to prioritise capital expenditure in transmission and invest in the maintenance of the existing generation fleet to improve the availability of electricity.
Agbiz said this proposal formed a central part of the work to which it contributed as part of the ministerial task team on energy security.
“This will also help ease consumer food price inflation, which we feared would remain elevated partly because of rising energy costs and the unreliability of the power supply,” it said.
“Moreover, the intervention for businesses to reduce their taxable income by 125% of the cost of an investment in renewables and the capped rebate for households will help ease cost pressure and hopefully incentivise increased renewable installations.
“It is somewhat unclear under which category farming businesses that operate as sole proprietors without separate entities will fall. Once Sars publishes the details of the rebate scheme, farmers will need to consult with their tax practitioners to determine the most appropriate avenue to benefit.”
Agbiz said that the increased focus on infrastructure, specifically on bulk water infrastructure such as the raising of the Clanwilliam Dam wall and the additional allocations for the maintenance of roads was encouraging.
It said these network industries were critical for the agriculture and agribusiness sectors, where irrigation is increasingly essential, and over two-thirds of the produce in the sector is transported by road.
Boshoff said that the minister also referred to engaging on strategic infrastructure projects as part of the R351.1 billion allocation.
“Agbiz has been working closely with entities such as Transnet to identify critical infrastructure constraints that are impeding the sector’s growth. We see synergy in these efforts and look forward to motivating projects of strategic importance.”
He said that the sugar and wine industries were under pressure from the health promotion levy and customs and excise duties respectively.
“While we had hoped that some relief would be forthcoming in the form of tax breaks, we are relieved that the rates on these taxes have not been increased substantially and are in line with industry requests. These industries face rising input costs and are taxed at relatively higher levels than our international competitors.”
Click here to view Business Report’s full coverage of the budget speech.
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