In this year’s State of the Nation address, the President placed strong emphasis on the challenges currently facing the agricultural sector. Agri Western Cape hopes that Minister Enoch Godongwana will also give the necessary attention to agricultural matters in his budget speech. We expect Minister Godongwana to touch on the following:
1. Tax rates
a.) Fuel levy
Fuel, which is one of the major inputs for primary agricultural production as well as an enormous cost component in the broader agricultural value chin, has become exceptionally expensive over the past year. For this reason, Agri Western Cape hopes that the minister will not announce a further increase in the general fuel levy and road accident fund on Wednesday.
“Primary agricultural production cannot afford another hike in the general fuel levy and road accident fund. We therefore call on the minister not to announce any further increases,” urged Mr Jannie Strydom, chief executive of Agri Western Cape.
b.) Excise duty on alcohol
The industry is still in the process of recovering from the impact that the local alcohol ban and travel restrictions had on its income streams.
“To this end, Agri Western Cape hopes that the minister will refrain from announcing another hike in excise duties, which had increased by 8% last year for wine, sparkling wine and brandy,” said Mr Strydom.
c.) Company tax
During last year’s budget speech, the former minister of finance, Tito Mboweni, announced that company tax would be reduced in April this year from 28% to 27% in an attempt to attract more private investment. A condition for this reduction was that companies would be limited in terms of how estimated losses or expenditure on interest payments can be used to reduce their tax liability. Agri Western Cape has serious concerns in this regard, especially section 20 of the amendment which states that assessed losses of one year would be limited in the next tax year. According to Mr Strydom, agriculture – due to its cyclic nature – regularly experiences periods of uncontrollable circumstances which result in
losses.
“If these amendments were to be implemented, only 80% of the losses can be assessed against future profits. This will considerably reduce the sector’s ability to recover after cyclic events.”
“Agri Western Cape therefore hopes that this amendment will not be implemented in the coming financial year, and recommends that wider consultation take place in order to understand the scope of these amendments,” said Mr Strydom.
2. Risk and disaster relief
The National Risk Management Centre in July 2021 declared the drought afflicting many producers in the Western, Northern and Eastern Cape, a national disaster. However, it is still unclear what the extent and format of support for these drought-stricken areas will be. Agri Western Cape hopes that Minister Godongwana has some good news in this regard.
3. Infrastructure and security
In President Cyril Ramaphosa’s State of the Nation address, he referred to several interventions to address issues around infrastructure in South Africa. Agri Western Cape welcomed, among others, the proposed interventions at Eskom, Cape Town harbour, Transnet and the road network, but now hopes that the minister will announce further support in his budget speech.
Agri Western Cape is also looking forward to the announcement of financial support for the training and appointment of 12 000 additional police officers, as promised by President Ramaphosa in his State of the Nation address.