MTBPS: Agricultural sector needs tax relief and infrastructure investment

Agri SA is hopeful that the Midterm Budget Policy Statement (MTBPS) will outline critical measures to support the agricultural sector amid a number of crises that threaten the sector’s continued growth. Coming so soon after the crippling Transnet strike, with ongoing loadshedding and high input costs, Minister Godongwana must use the opportunity of the MTBPS to signal interventions that help to bolster the sector, which holds around 874 000 jobs and contributed more than 2% to GDP despite the challenges of the past three years.

The MTBPS comes shortly after Agri SA’s 2022 Congress, where the challenges facing the agricultural sector were ventilated together with leaders of government, state-owned enterprises, and the private sector. With the magnitude of the problems now clear, Minister Godonwana must give particular attention to measures that safeguard the top-performing and labour-intensive agricultural sector.

Amongst the interventions within Minister Godongwana’s control is the provision of tax relief for hard-hit agricultural industries. Tobacco, grape and cane farmers are among those hit hard by high fertiliser and fuel prices. These industries therefore need relief from ‘sin taxes’ that only further reduce their ability to withstand current price pressures.

Treasury must also review the diesel rebate announced by the South African Revenue Service on 18 March 2022. The unilateral changes announced by SARS fell short of meeting farmers’ needs on critical points. Rather, they lowered the refund percentage of the General Fuel and Road Accident Fund levies and failed to provide certainty of key issues such as logbook formats. 

Minister Godongwana must also review proposed changes to the Financial Intelligence Centre Act, 2001(FICA), which would see suppliers of high-value goods become subject to FICA requirements in respect of transactions exceeding R100,000. Were this proposal adopted, it would impose significant administrative costs on already embattled farmers. It is therefore essential that this proposal is withdrawn. 

Finally, Treasury must reconsider the proposed limitation on the assessed losses that businesses can write off against their taxable income. For cyclical sectors like agriculture, this allowance is often a lifeline and a key contributor to making continued agricultural production financially viable. A disadvantageous amendment, especially in the midst of an ongoing cost crisis, would be a calamitous and costly mistake.

These sector-specific interventions must be supported by responsible macro-economic policies and Agri SA will be watching for a number of key indicators that government is committed to fiscal discipline and to putting South Africa on a sound fiscal footing. These measures include:  

·        Decisive action to address the public sector wage bill;

·        Limitations on bailing out underperforming State-Owned Enterprises; and

·        Increasing investment into infrastructure projects with positive multiplier effects.

With desperately needed relief for the agricultural sector, sound policy-making for the sector, and investment into critical infrastructure, Agri SA believes that the agricultural sector can continue to outperform other sectors and add to the number of critical jobs it provides in South Africa’s rural communities and throughout the value chain. But this requires a Midterm Budget Policy Statement that creates an enabling environment for the sector to thrive, and this is what we hope to hear on Wednesday.

Media enquiries: 

Kulani Siweya

Agri SA: Chief Economist

084 018 6019 

Christo van der Rheede

Agri SA: Executive Director

083 380 3492