Finance minister Enoch Godongwana has received mostly praise from the farming sector for his first budget speech since being appointed. Despite some worry about excise and sugar tax hikes, most agri leaders say he was level-headed and on the money for turning his attention to critical infrastructure and the performance of state-owned enterprises.
The Agricultural Business Chamber of South Africa (Agbiz) has welcomed what they call a pragmatic budget at a crucial time of economic reconstruction.
“We are pleased to see a continued commitment to fiscal consolidation, prioritising health needs and resourcing the justice system in these uncertain times of the Covid-19 pandemic,” said CEO Theo Boshoff.
“We are also delighted that the minister paid attention to corruption, which he rightfully characterises as a blight to growth, and on the need to bolster state capacity.”
Agbiz was also pleased that state-owned enterprises are under the microscope, and said that Treasury will need to continue maintaining a tough line on the underperforming entities. “Still, we welcome the government’s support for the Land Bank, an important institution in South Africa’s agricultural economy. This institution has a vital role to play in the economy.”
Spending on particularly water and ports infrastructure, as well as “the moderation in the increase… in excise duties for alcohol and tobacco” were further noted as good news to Agbiz.
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Excise tax ‘dilutes otherwise good speech’
Despite Agri SA welcoming the “prudent approach” taken by Godongwana, the organisation says it is concerned about announcements that will adversely affect agriculture and restrict its ability to create jobs and economic growth.
It expressed particular disappointment in the hikes in excise tax on alcohol, tobacco and sugar.
“The imposition of these taxes will hinder the ability of these industries to recover from the past two years and place many marginal jobs in jeopardy, diluting the positive effect of the employment tax incentive.”
The organisation cautioned that the public sector wage bill remains a risk to fiscus that needed to be addressed more resolutely, and called for careful monitoring of the R3-trillion social wage to ensure sustainability.
On the positive side, Agri SA said, “The funding for Sanral in particular is a welcome announcement, as is the investment in South Africa’s water infrastructure, including the R2,1 billion allocated for raising the Clanwilliam Dam.
“We also welcome the R5 billion contingency reserves for the Land Bank, the decision not to raise the general fuel levy or the Road Accident Fund levy, as well as the corporate tax reduction which will come into effect in 2023.
“And while the increase in the carbon tax will have an adverse effect on the agricultural sector, the extension of the first phase of the carbon tax to at least 2025 is a welcome temporary reprieve for the sector.”
Agri SA described the budget as generally positive. “We are cautiously optimistic, being mindful that the success of this budget will depend on proper implementation.”
Tobacco and alcohol industry less happy
The spokesperson for the South African Tobacco Transformation Alliance, Zacharia Motsumi, expressed great disappointed that government did not say anything about the illicit cigarette market that continues to grow and hamper the industry.
“Those of us who are contributing to the fiscus of the government receive high taxes. We are not happy with the [6.5% excise hike]. We feel that it is a target on us.”
The Beer Association of South Africa (Basa) said that, while they were pleased that the local beer industry was not faced with another above-inflation increase, the 5.5% hike will still threaten the recovery of many small businesses, including craft breweries.
“With these breweries having received zero compensation from government to date despite the previous four alcohol bans, we had hoped minister Godongwana would have announced some financial relief for these businesses in order to ensure their survival [along with] many other businesses they support across the craft beer supply chain,” Basa wrote in a statement.
The organisation now plans to write to Godongwana to request an urgent meeting to discuss their concerns.
Meanwhile, according to the managing director of Vinpro, Rico Basson, they were grateful that their voice was heard following pleas to government not to impose high rates increases for the wine industry.
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Tax hike upsets sugar farmers
The South African Farmers Development Association (Safda) said in a statement that the sugar tax increase was a “slap in the face of small-scale farmers”.
“This increase seeks to undermine the master plan commitment by the government to put a moratorium on product tax policy changes,” it said.
“As Safda we see this act by National Treasury as a breach of the social compact by all participants and stakeholders in the sugar value chain who supports and signed the sugar masterplan. Our farmers who have started to see tangible benefits of the plan are likely to be serious losers.”
The organisation outlined the devastation of the July 2021 unrest on its member farmers, the burden of high fuel prices, flood damage in December last year and the fallout the sugar tax had already caused since 2018, saying that the latest tax hike will only add salt to the wounds of its farmers.
Some applause, some gaps
“I think we need to applaud government on the investment they are making on infrastructure,” Saamtrek Saamwerk coordinator Sehularo Sehularo told Food For Mzansi. “This is what will actually make the economy grow.
“Now that the minister has spoken, we need to see real action in terms of infrastructure development. Roads really need to be maintained, we need the construction of new dams but, importantly, we need a solid plan to maintain. We cannot always repair – maintenance is of importance.”
Free State Agriculture’s commercial manager, Dr Jack Armour, told Food For Mzansi that they, too, were pleased with Godongwana’s infrastructure announcements but called for more accountability and implementation of projects.
“[We] will, through our ‘eyes on the ground’, monitor these projects; that they are value for money and done to prescribed levels of quality.”
He further agreed that raising sin taxes always hurts agriculture as the basis for alcohol and cigarette products is produced by farmers. He believes more could have been said about stemming the illicit trade, which tax hikes will only boost.
Good news for vehicle owners
On the fuel front, the Automobile Association of South Africa (AA) said the halting of increases in the fuel and Road Accident Fund levies was a landmark win for consumers.
“This is a landmark win for all consumers, not only motorists. And while the fuel prices may still increase, the additional burden of higher taxes is now out of the way. We are extremely happy that our calls have been heeded,” the AA said in a statement.
Godongwana said that he and the minister of mineral resources and energy Gwede Mantashe have agreed that a review of all aspects of the fuel price is needed. The respective ministries have already begun to engage on this.
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