While finance minister Tito Mboweni cheered the agricultural sector in his 2021 budget speech, it seems the sector was left rather disillusioned.
Agri SA executive director Christo van der Rheede said it was clear that government was now scraping the bottom of the proverbial fiscal barrel, while Vinpro MD Rico Basson described the latest sin tax increase as disappointing.
A hopeful Mboweni said the economic outlook has dramatically improved. Government will not introduce any tax increases this year mainly due to a higher tax collection estimate of nearly R100 billion from the previous financial year.
Despite this, there will be an 8% increase in the so-called sin tax on on wine, sparkling wine, brandy and tobacco products.
Basson said this excise hike will inflict a final blow to many wine businesses. It will also hamper the economic recovery of the local wine industry even further.
“This follows on the back of a 16% wage and 15% electricity increase that is absorbed at farm level. We are extremely disappointed that government has, once again, not heeded the call of our industry,” said Basson.
‘Final blow to many’
The country’s wine boss revealed that Vinpro and other industry organisations have, in the last few months, requested the National Treasury to not increase sin tax by more than 50% of the consumer price index (CPI).
“In light of the serious financial position in which our industry finds itself, we now need stability, policy certainty and financial dispensation.
“The higher-than-expected excise increase detract from this. It can inflict a final blow to many businesses that are already on their knees. This will in turn contribute to the already large number of job losses and exacerbate the socio-economic challenges in these communities,” said Basson.
Furthermore, Mboweni announced a R7-billion bailout to recapitalise the Land Bank over the next three years. He promised that this will not affect the expenditure ceiling, but rather be offset through an expenditure reprioritisation process.
Also, government plans to finalise 1 409 restitution claims at a cost of R9.3 billion over the next three years. This is for citizens to gain equitable access to land. The department of agriculture, land reform and rural development has set aside R896.7 million for post-settlement support, said Mboweni.
Near fiscal abyss
While social media buzzed about the nearly 10 000 “experienced extension officers” that will be recruited as part of this process, Van der Rheede had his doubts.
“With gross loan debt amounting to R5.2 trillion in 2023/24 and an estimated tax deficit of R213 billion, South Africa is fast on its way to a fiscal abyss,” the Agri SA boss said.
“Big question marks hang over the further R7 billion allocated to the Land Bank and the R816 million to establish new landowners through the restitution process. Not to mention how the 10 000 ‘experienced’ agricultural officials mentioned by the minister will be deployed and funded.”
Meanwhile Agri Western Cape chief executive Jannie Strydom said, “There is very little in minister Mboweni’s budget speech that is positive for commercial agriculture. His speech confirmed the country’s finances are in a dire state.”
Strydom said it is clear that commercial agriculture cannot rely on much government support.
To the contrary, he believes the burden on commercial producers has been increased. Among others, there is a 27 cents per litre increase in the fuel levy. Also, no drought assistance was offered to the sector.
According to Mboweni the fuel levy increase comprises of 15 cents per litre for the general fuel levy, 11 cents per litre for the Road Accident Fund levy and 1 cent per litre for the carbon fuel levy.
What about economic growth?
Furthermore, Van der Rheede emphasised that the national budget should have shifted from welfare assistance to wealth creation.
“R1,2 trillion is allocated towards social services. A mere R207 billion is towards economic infrastructure, industrialisation, innovation, science and agricultural development. R27,4 billion has been allocated to agriculture. It begs the question whether government is really serious about economic growth,” he said.
He indicated that Agri SA understood the need for social interventions during the Covid-19 pandemic. However, everything must be done to free up the economy, eradicate policy constraints and end conflicting ideological pronouncements.
“Greater alignment between government ministers and their respective departments to spend their budgets wisely and effectively is now needed more than ever. There is no shortcut to get the country out of its economic quagmire”, Van der Rheede concluded.