South Africa’s agriculture sector has reacted positively to the National Budget Speech delivered by finance minister Enoch Godongwana yesterday.
Agri SA, the country’s largest agricultural representative body, welcomed the budget and praised the government’s understanding of the challenges facing the agricultural sector.
Agri SA chief economist Kulani Siweya stated that the budget was a “sober analysis” of the agricultural environment and demonstrated an understanding of the sector’s difficulties, which have significant implications for food security.
Along with chief executive Christo van der Rheede, Siweya expressed Agri SA’s support for the debt relief provided to Eskom, recognising the importance of this entity and calling on the power utility to demonstrate how it will use this opportunity to position itself for future sustainability and profitability.
Agri SA also welcomed measures to assist the sector, particularly the extension of the rebate of the Road Accident Fund levy for diesel used in the manufacturing of foodstuff.
This intervention will help contain food production costs and benefit consumers.
The implementation of the fiscal support package to address the energy crisis, was seen as a positive step to assist both households and businesses. However, Agri SA called for further study of the likely impact of this intervention on farmers.
The planned spending of more than R480 billion on critical infrastructure, including transport and logistics, water, and sanitation, was also seen as a reflection of the government’s understanding of the essential contribution of these vital projects to the national economy and food security.
While disappointed with the lack of any reprieve on the tobacco and alcohol excise taxes, Agri SA was pleased that the health promotion levy (the so-called “sugar tax”) would not increase. However, the public sector wage bill remained a concern.
Nonetheless, Agri SA expressed satisfaction that Godongwana understood the context in which the budget was delivered, calling it a critical moment for an agricultural sector battered by load shedding.
Business tax relief
Agbiz, the agricultural business chamber, welcomed the 2023 budget speech and praised the minister’s focus on Eskom’s debt and debt-relief arrangement, which will assist Eskom in prioritising capital expenditure and investing in the maintenance of the existing generation fleet to improve the availability of electricity.
Theo Boshoff, Agbiz’s chief executive, was also encouraged by the intervention to reduce the taxable income of businesses by 125% of the cost of investment in renewables and the refund on the road accident fund levy for diesel used in the manufacturing process.
Palesa Mabasa, business development head for SME funding at FNB, stated that the finance minister had given hope to small and medium enterprises (SMEs). The supportive measures provided in the budget will help SMEs navigate challenging economic conditions.
The planned Eskom debt takeover was seen as a positive step to reduce load shedding, which will improve SMEs’ bottom line by increasing revenue and decreasing costs on alternative energy solutions. The changes to the bounce-back loan guarantee scheme were also welcomed as SMEs could finance their solar power needs with government guarantees, and all solar-related loans were guaranteed on a 20% of first-loss basis.
The zero increases in corporate tax, personal income tax, VAT, fuel levy, and road accident fund levy will ease cash flow pressure on businesses as the economy continues to struggle. The ability to reduce taxable income by 125% of the cost of investment in renewables over the next two years was also an incentive most SMEs will consider seriously.
The projected R903 billion to be spent on infrastructure will create vast opportunities for SMEs, but it is important that they get their houses in order, particularly with regards to admin and governance requirements to avoid missing out on opportunities.
Sugar tax and flood relief measures
Meanwhile, the South African Farmers’ Development Association (Safda) also welcomed news that the health promotion levy would remain unchanged for the next two years.
“This is a relief to the sugar industry and most importantly to our farmers who have been anxiously waiting on the minister to announce this good news,” said executive chairperson Dr Siyabonga Madlala. “This would enable the industry to pursue various diversification opportunities which would allow the industry to export less sugar and ensure the sustainability of the industry.”
Safda also expressed its satisfaction with the R695 million that was immediately available for flood relief measures. A further R1 billion has been allocated by Godongwana for next year.
“We believe that this will assist our farmers as well that were affected by the floods and have not yet received any assistance to fix their infield roads, farmhouses etc. We hope that this financial relief will assist our farmers to get back to business as some have not been operational due to lack of assistance,” said Madlala.
With regards to the so-called sin tax hikes, the South African Liquor Brandowners Association (Salba) said the excise announcement would enable the alcohol industry to live up to its potential to contribute to economic growth.
“We are pleased that the minister’s announcement on excise rates is in line with inflation. This will allow businesses to contribute at their full potential in terms of their ability to create jobs, encourage the growth of SMEs, attract foreign investment, and contribute to the fiscus,” said Salba chairperson Pamela Nkuna.
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