Food For Mzansi spoke to farmers who were hoping finance minister Enoch Godongwana would address various issues ahead of today’s Budget 2023. Now that it’s done and dusted, as expected, Eskom received a massive bailout and sugarcane growers can let out a sigh of relief after it was announced that there’d be no increase in the sugar tax.
National Treasury appreciates that the agricultural sector is performing well despite the power crisis posing significant risks to Mzansi’s livestock, grains, and horticulture commodities, the budget revealed.
The government has allocated a large chunk of its agricultural budget to South Africa’s land restitution programme. Presenting his third budget speech in Cape Town City Hall, Godongwana allocated R12.5 billion over the medium-term expenditure framework (MTEF) period to land reform.
“Over the next three years, the government will focus on finalising outstanding restitution claims and supporting resettled farmers to sustain productivity, create jobs and reduce poverty,” the finance minister said.
Land Bank bailout
South Africa’s agricultural development, The Land Bank, will also receive a bailout. In April 2020 the bank failed to meet its debt obligation, however, Godongwana said he is satisfied with the entity’s improved financial position.
“The net profit for 2021/22 was R 1.4 billion, compared to the net loss of R747 million in 2020/21, this was a result of action taken to address poorly performing investments and a decrease in administrative fees,” he said.
In order to continue with its lending scheme to farmers in the country, Treasury has set aside an amount of R5 billion for the bank.
Godongwane said he is pleased with the growth of agriculture in the country, despite the sector facing several pressures, from input costs for fertiliser and fuel to market access constraints, and severe weather patterns.
Strong 2023 performance expected
Godongwana said, “Despite the contraction, the sector is still performing well, although there is a risk of flooding in some areas, the sector is expected to register a strong performance in 2023.”
He does, however, anticipate slower economic growth for the remainder of 2023. Higher and sustained growth depended on rapid progress in implementing key basic services, Godongwana added.
Furthermore, the department of agriculture, land reform and rural development has been allocated R7.8 billion over the medium term. This money is intended for managing biosecurity, increasing agricultural production and managing natural resources.
Good news for sugar industry
When it comes to taxes, the sugar industry is the only agricultural sub-sector to walk away smiling. Godongwana announced that there would be no sugar tax increase this year.
“Due to the difficult operating environment for the sugar industry from the impact of flooding and social unrest, the health promotion levy will remain unchanged for the following two fiscal years, to enable the industry to diversify or restructure,” he said.
The South African Canegrowers Association (CGA) welcomed the announcement in today’s budget speech. According to Andrew Russel, chairperson of CGA, with the many serious challenges currently facing South Africa’s growers, the increase would have decimated the industry, costing the country much-needed jobs.
“Minister Godongwana’s decision to maintain the health promotion levy at its current level for another two years was in recognition of the difficult operating environment for the industry. With the industry facing more than R700 million in lost revenue due to load shedding, a milling crisis, and the impact of the recent floods, this intervention was vital.”
Tobacco and wine not so lucky
However, the same cannot be said for the tobacco and wine industries.
Unfortified wine will increase by 18c per 750ml bottle, fortified wine by 31c per 750ml bottle, sparkling wine by 9c per 750ml bottle, and ciders and alcoholic fruit beverages by 10c per 340ml can.
A twenty-pack of cigarettes will increase by 98c, while cigarette tobacco will increase by R1.10 per 50g.
Godongwana said the South African Revenue Service [SARS] had taken several steps to enhance its effectiveness in combating illicit trade, particularly tobacco, over the past three years.
“To this end, SARS has completed 2 316 seizures of cigarettes and tobacco products to the value of R 598.8 million.”
Eskom gets bailout
The government will also fork out a massive R254 billion to Eskom over the next three years to address the energy crisis. The bailout comes with strict conditions.
“The goal is to strengthen the utility’s balance sheet, enabling it to restructure and undertake the investment and maintenance needed to support the security of electricity supply.
“Government will provide Eskom with advances of R78 billion in 2023/24, R 66 billion in 2024/25 and R 40 billion in 2025/26. These advances will cover capital and interest payments as they fall due and may only be used for that purpose,” he said.
The minister also announced that from 1 March 2023, businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewables.
“There will be no thresholds on the size of the projects that qualify, and the incentive will be available for two years to stimulate investment in the short term.
“Individuals who install rooftop panels from 1 March 2023 will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R 15 000. This can be used to reduce their tax liability in the 2023/24 tax year and this incentive will be available for one year,” he said.
Climate change focus
Climate change was also featured in Godongwana’s speech.
He pointed to the Just Energy Transition investment plan and said R 1.5 trillion would be invested in the economy over the next five years. This will be supported by a coherent industrial policy to enable innovation and economic diversification, he said.
“Our Just Energy Transition plan addresses these urgent climate challenges. It aims to significantly lower emissions of greenhouse gases and harnesses investment in new energy technologies, electric vehicles and energy-efficient appliances,” Godongwana said.
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