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Agri SA welcomed the prudent approach taken by the minister of finance to this year’s budget. According to a press release by Agri SA, “the continuing commitment to fiscal consolidation is positive, as is the reduction of the budget deficit.” The organisation, however, raised concern about several announcements. Agbiz welcomed the National Treasury’s pragmatic budget at a crucial time of economic reconstruction.
Cons of 2022 budget
One such concern is the inflation increases in excise taxes which will affect the wine, tobacco and sugar industry. These industries have been among the most affected by the Covid-19 restrictions and the unrest in July 2021. The imposition of these taxes will hinder the ability of these industries to recover from the past two years and place many marginal jobs in jeopardy.
Agri SA also stated that it dilutes the positive effect of the employment tax incentive, which the minister announced will be expanded through a 50% increase in the maximum monthly value to R1 500, to expand employment opportunities in the sector.
Agbiz, on the other hand, welcomed the moderation in the increase of approximately 4,5 to 6,5% increase in excise duties for alcohol and tobacco. In a press release, they said significant increases in the levies would have added a strain during the recovery process of these industries.
The increase in the carbon tax will have an adverse effect on the agricultural sector. However, the extension of the first phase of the carbon tax to at least 2025 is a welcome temporary reprieve for the sector.
Pros of 2022 budget
Agri SA said they are encouraged that minister Enoch Godongwana heeded their call for infrastructure investment, in keeping with president Cyril Ramaphosa’s State of the Nation Address (SONA). The funding for SANRAL was also welcomed. The investment in South Africa’s (SA) water infrastructure such as the R2,1 billion allocated for raising the Clanwilliam Dam is also very positive for the agricultural industry.
“We are encouraged by the increase in financial allocation for infrastructure, particularly the water (Clanwilliam Dam, Lepelle Water Board and Umngeni Water Board) and ports infrastructure, which are critical for the sustainability of SA’s export-oriented agriculture,” Agbiz CEO, Theo Boshoff, stated in a press release.
Other announcements that were welcomed by Agri SA include the R5 billion contingency reserves for the Land Bank, the decision not to raise the general fuel levy or the Road Accident Fund levy, as well as the corporate tax reduction, which will come into effect in 2023.
Agbiz also welcomed the government’s support for the Land Bank, since it is an important institution in SA’s agricultural economy.
Nevertheless, Agri SA is of the view that the budget outlook is generally positive. They are cautiously optimistic, being mindful that the success of this budget will depend on proper implementation. Agbiz also felt that overall, the 2022 budget was pragmatic and was a good follow-up on the themes outlined in the SONA. The key focus for all social partners should be driving inclusive growth in the economy through a social compact approach. – Ursula Human, AgriOrbit