Compiled by Elmarie Helberg, AgriOrbit

On 21 February most of South Africa waited with bated breath for finance minister Malusi Gigaba to announce the country’s financial state and how this has affected certain amendments and allocations. While financial experts mostly agree that the outcome was positive for the agricultural sector, some concerns were expressed. In general, however, experts seem pleased that the minister took time to acknowledge agriculture’s contribution to the country’s economic growth.

We reflect on highlights of the budget speech that relates to agriculture and share what experts have to say. 

  1. R581,7 million is earmarked for the black producer commercialisation programme.
  • This will go a long way towards boosting efforts to transform the agricultural sector of our economy. – Wessel Lemmer, Absa AgriBusiness
  1. R40 million to upgrade infrastructure and equipment for analytical services.
  • This is a positive step. Additional capacity to negotiate improved market access for our agricultural producers is essential. – Wessel Lemmer, Absa AgriBusiness
  • This will ensure that our food standards are in place, which will in turn reassure our trading partners. – Dawie Maree, FNB Agriculture
  • Agri SA welcomes the strengthening of global market access for South African agricultural products. However, the effective and efficient use of these funds will be crucial to maximise its value to the sector. – Dan Kriek, Agri SA 
  1. R6 billion for drought relief and public infrastructure investment, as well as measurements to address the needs of drought affected communities.
  • The allocations to water infrastructure and drought relief will be welcomed by the agricultural sector, which has been grappling with the worst drought in more than a century as well as higher rand-based input costs for imported fuel and equipment. While South African agriculture as a whole has performed admirably amid these challenges, certain districts in the Western, Eastern and Northern Cape as well as other parts of the country have taken considerable strain. Nico Groenewald, Standard Bank
  • The option of temporarily increasing the intake in the Working for Water programme is being considered as a means of mitigating drought related job losses in agriculture. However, there isn’t any broader consideration aimed at supporting this sector. We had hoped that the budget would provide broader support, specifically for agriculture. – Dan Kriek, Agri SA
  • The impact of the drought in the Western Cape has been severe. The province has already spent R72 million of its own funds, and a further R40 million in national funding, on drought relief support to emerging farmers and on animal fodder. In total, R369 million has been diverted from our core functions to supplement disaster funding since 2015/16.

By delaying the national declaration of the drought as a disaster, the national government is also delaying relief efforts. We experienced huge delays in the administration of flood relief and call on the minister to deal with this funding support efficiently to avert further losses.

We welcome efforts to mitigate agri-worker job losses by temporarily increasing job opportunities in the Working for Water programme. – Alan Winde, Western Cape government

  1. R4,2 billion for the purchase of approximately 291 000 hectares for land reform.
  • This needs to be executed efficiently to make optimal use of the allocated R4,8 billion within the willing buyer/willing seller market framework. – Wessel Lemmer, Absa AgriBusiness
  • Transformation is important to ensure that these farmers also have market access and get general support. – Dawie Maree, FNB Agriculture
  • This is important, given that there is an increased demand to access land. – Paul Makube, Standard Bank 
  1. R10,8 billion for the completion of 2 851 land claims.
  • This is positive, but definitely an onerous process. – Dawie Maree, FNB Agriculture 
  1. VAT will be increased from 14% to 15%.
  • Additional taxes will put consumers under pressure and limit spending in the economy. We can expect the domestic spending on agricultural products to be negatively affected as a result. – Wessel Lemmer, Absa AgriBusiness
  • Although most agricultural producers (according to their respective business forms) are surely registered for VAT and can therefore recover VAT on purchases, the increased VAT rate will impact on the cash flow of the business (taking into account the struggle many producers have to receive their VAT payments). – Frikkie Maré, University of the Free State 
  1. The general fuel levy will increase by 22c per litre while the Road Accident Fund levy will rise by 30c per litre. This amounts to a total of a R0,52c/litre increase in fuel charges.
  • The increase in fuel levies will have a negative impact on farmers’ cash flow. However, the option of the diesel rebate should help farmers to mitigate the impact on their business. – Dan Kriek, Agri SA
  • In addition to the direct impact on users of any form of road transport (motorists, commuters, etc.), it also impacts on most prices of agricultural inputs, commodities and food products, as the transport costs of these items will increase. – Frikkie Maré, University of the Free State
  1. Excise duties on tobacco products will increase by 8,5%, and those on alcohol between 6% and 10%.
  • Given the fact that the sector is presently facing serious cost pressures because of the prevailing drought in especially the Western Cape, our view is that the increased excise duties on alcohol might have an adverse impact on the wine industry and could possibly lead to job losses. Some relief in this regard would have been very welcome. – Dan Kriek, Agri SA.
  • Above inflation excise tax is extremely disappointing, especially given the fact that the industry reached, and even exceeded, the tax incidence targets agreed upon in 2014. South African grape producers have been under financial pressure for some time due to the prevailing drought and other economic challenges. Production costs have doubled in the past decade and costs are expected to rise by 9% in 2018, along with a 17% increase in the minimum wage, which takes effect on 1 May. – Rico Basson, VinPro
  • The excise duty on tobacco products can open the door to illegal trade in cigarettes, which will have a negative impact on the tobacco industry in South Africa. – Wessel Lemmer, Absa AgriBusiness

 See an interesting infographic on #Budget2018 from ABSA here: