This year’s State of the Nation Address placed strong emphasis on the challenges posed by the country’s power crisis. Agri Western Cape hopes that Minister Enoch Godongwana will include in his budget speech the necessary measures and funding to address this crisis. However, the take-over of part of Eskom’s debt and the additional incentives for investment in renewable energy sources, as well as government’s plan for a permanent basic income grant, will be funded from an already limited budget. The fiscal deficit in the budget is expected to rise to 5,5%.
Agri Western Cape hopes that such funding will not come from excessive tax rate increases that impact directly on the agricultural sector, or by cutting government expenditure on critical infrastructure.
Agri Western Cape hopes for the following in Minister Godongwana’s speech:
a.) Fuel levy
Fuel, as one of the biggest input costs in primary agricultural production and a major cost component in the broader agricultural value chain, has become prohibitively expensive over the past two years.In the previous budget speech no increase was announced in the general fuel levy.
“Primary agricultural producers cannot afford an increase in the general fuel levy and road accident fund levy. We therefore appeal to the Minister not to increase these levies by more than the inflation rate this year,” urged Jannie Strydom, CEO of Agri Western Cape.
Agri Western Cape also hopes for an increase in the rebate on diesel used in power generation for agricultural activities. “The agricultural industry, which plays a critical role in the South African economy, uses significantly more diesel than normal to ease the burden of load shedding. We therefore call on the Minister to increase the current rebate for diesel used in generators,” urged Strydom.
b.) Excise duty on alcohol
The wine industry is currently under immense pressure. Official statistics show that only 9% of wine grape producers achieve a sustainable net farming income (NFI), while 53% achieve an unsustainable low NFI, 3% break even and 38% make a loss. Furthermore, the lack of electricity supply places enormous pressure on the industry during the harvest season which is currently underway.
“Agri Western Cape therefore hopes that the Minister will not consider a further increase in excise duties this year,” said Mr Strydom. “An increase in excise duties will hamper the wine industry’s ability to recover.”
a. Disaster relief
Although some drought-stricken areas in the Western Cape have received good rains, there are still areas that are dry. Agri Western Cape hopes that the Minister will provide assistance to these areas.
During President Cyril Ramaphosa’s State of the Nation Address, there was much talk of interventions to address infrastructure issues in South Africa. Agri Western Cape hopes that the budget speech will provide for the necessary funding for the repair, maintenance and expansion of, among others, the electricity supply, railways, Cape Town harbour, the road network and water resources.
National Treasury is finalising the take-over of Eskom’s debt burden to the value of R400 billion. Agri Western Cape hopes that the Minister will explain how the take-over will be structured and provide sustainable solutions to investment in maintenance, repairs and expansion of generation and transmission capacity.
Agri Western Cape also hopes that Eskom will receive sufficient assistance from government to generate or purchase additional electricity in the short term. Generation by open-cycle gas turbines remains a challenge as no provision has been made for the purchase of additional diesel fuel and the budget has already been exhausted. Agri Western Cape therefore hopes that government can support Eskom with the purchase of diesel to mitigate the impact of load shedding in the short term. In his State of the Nation Address, President Ramaphosa mentioned Treasury’s support until the end of the current financial year. However, Agri Western Cape is concerned about the budget for diesel in the coming financial year and therefore calls on Treasury to budget for additional diesel purchases should the need arise.
Mention was made in the State of the Nation Address of a tax incentive for renewable power generation. Agri Western Cape is confident that Minister Godongwana will provide agribusinesses with elucidation regarding the benefits and opportunities it will offer to the sector.
In his State of the Nation Address, President Ramaphosa mentioned the Just energy transition investment plan, with a R1,5 trillion investment in renewable power over the next five years. Agri Western Cape hopes to receive more information in this regard.
President Ramaphosa also mentioned investment in new transmission lines and substations in the Western Cape, among others. Agri Western Cape hopes for further elucidation in this regard.
ii. Logistics network
During his State of the Nation Address, President Ramaphosa acknowledged that the national rail network had suffered over the past few years due to underinvestment, a lack of repairs and inefficient management. However, it is heartening to hear that public-private partnerships, and the associated third-party access to the rail network, are seen as a solution to revitalise the network. Agri Western Cape hopes that Minister Godongwana will provide more information and the necessary budget for this.
The Western Cape accounts for about 55% of national primary agricultural exports. It is therefore extremely important that the Cape Town harbour, and specifically the container terminal, functions optimally. Agri Western Cape hopes that Minister Godongwana’s budget speech will address plans and funds to improve the effectiveness of the port.
iii. Water resources
In his State of the Nation Address, President Ramaphosa said the elevation of Clanwilliam Dam wall would receive attention. The project is extremely important as it will allows for an additional 6 000 ha under irrigation and create additional employment opportunities in the local community. Agri Western Cape hopes that Minister Godongwana will elaborate further in this regard.
Agri Western Cape also hopes that financial support will be made available for the training and appointment of 10 000 additional police members, as promised in President Ramaphosa’s State of the Nation Address.
It was also promised that the budget for the Police, the National Prosecuting Authority and the Special Investigating Unit would increase significantly. Agri Western Cape looks forward to receiving clarification in this regard.