AGRI SA SPEAKS ON EXPECTATIONS FOR THE UPCOMING BUDGET SPEECH
"The Minister of Finance, Mr Pravin Gordhan, has the challenge to promote economic growth and meet increased demands for social spending whilst sluggish economic growth constrains government's income. In the Medium Term Budget Policy Statement (MTBPS) of 2011, he made mention of the new course in development of rural livelihoods and we assume that a pivotal role is assigned to the agricultural sector in this regard.
Whilst we recognise the fiscal difficulties within which this objective must be pursued, we are looking forward to a budget which will make adequate resources available to boost agriculture's competitiveness as well as investment in the sector, and subsequently in food production and job opportunities", said Johannes Möller, President of Agri SA.
"Despite the sometimes malicious attempts by various institutions to discredit efforts by the agricultural sector to ensure decent employment opportunities for those involved in the sector, we fully support efforts by government and the business fraternity in this regard. But it should be recognised that there is a direct correlation between net farm income and the ability of farmers to enhance quality employment opportunities. It is, therefore, imperative to address the sector's developmental constraints in order to improve competiveness and profitability as preconditions for the further improvement in the quality of rural livelihoods", Möller added.
"Although the number of employees in the agricultural sector has shrunk in recent times, there remains untapped potential in especially irrigation farming, which could contribute to employment in the sector as envisaged in the National Development Plan - Vision for 2030", Möller said.
The MTBPS focused on a competitiveness support package of R25 billion aimed at industrial development. "We believe that agriculture should also assume its rightful role in this regard, given its potential contribution to employment creation, food security and providing inputs with a view to agro-processing. But such support will only make sense if the cost of doing business in agriculture can be lowered. This can be achieved with targeted investment in the road, rail and harbour infrastructure, on which agriculture is dependent for cost effective access to production inputs as well as to markets", Möller added.
Related to this, Möller also called on government for a thorough analysis and related action to curb the seemingly unabated increases in administered prices. "Due to the potentially detrimental impact of administered price increases (especially electricity and water) on agricultural production and food security we deem such action by government as of utmost importance. In the past year we worked with government on approaches which could alleviate the relevant cost pressures on agriculture, and we hope that appropriate budgetary provisions will be forthcoming ", he said.
Möller also alluded to disaster related matters faced by the agricultural sector. "Due to serious time lags with the disbursement of disaster relief funds, we regard a more streamlined system and improved co-ordination between government departments as of paramount importance. We also trust that the minister will in addition to the R150 million aimed at flood damage relief as announced in the MTBPS, also make further funds available to comprehensively deal with this matter. During the past year the sector's vulnerability to endemic Southern African animal diseases also became evident.
The necessity to beef-up the sector's research and veterinary services as well as to restore and improve neglected infrastructure such as international fences - which are essential for safeguarding our livestock industries - are widely acknowledged. This demands an increased allocation for agriculture, not only to benefit farmers, but also to secure job opportunities in rural South Africa and to provide consumers with adequate and safe food from local production", Möller said.
Sub-sectors of agriculture will look keenly for budgetary allocations intended towards incentivising aspects of the "green economy", such as for bio-fuels production and small scale electricity generation from renewable resources. "This can open-up new investment areas for farmers and create opportunities to diversify away from the present highly competitive food market", said Möller.
He is of the view that the budget should also respond to increased sensitivities and concerns with environmental issues, especially with regard to aspects that impact negatively on climate and sustainable production. "Whilst adequate funds should be made available for the reclamation of degraded land and the restoring of water quality, more funds and capacity should also be made available for pro-active steps by which the degradation of scarce resources can be mitigated by ensuring sustainable land and water management practises. Over the long run this may prove to be the preferred option", he said.
Möller indicated that capital expenses (except for weed eradication and soil conservation) may, in terms of the Income Tax Act, not create an assessed loss for income tax purposes. This tax dispensation should, however, be revisited due to a number of reasons, inter alia, the current situation pertaining to food security, the sluggish nature of investment in agriculture and the recent poor, relatively subdued performance of the sector in terms of foreign exchange earnings. Agri SA believes that the ring-fencing dispensation of income tax legislation should be abolished with a view to stimulating investment.
An open debate around government's policy approach with respect to land reform is currently underway. "Whilst there is consensus about the need to redress land ownership issues, affected farmers and beneficiaries are increasingly frustrated about bureaucratic processes, inefficiencies, wasteful spending and corruption that plague the process. We involve ourselves actively with the Green Paper process and welcomes Minister Nkwinti's approach to widely consult on this challenging issues. It will nevertheless be interesting to note Minister Gordhan's assessment of this situation as reflected by his budgetary allocation for this portfolio" Möller said.
Möller says that it goes without saying that the public sector's wage bill now constitutes such a large proportion of government's spending that investment spending will continuously be crowded out. "Coupled to a small tax base the magnitude of the wage bill and increased welfare spending does not bode well for future borrowing requirements by government and the related deficit before borrowings. One way of improving this situation, is to make increasing use of public-private partnerships together with a concerted effort to reduce the number of civil servants. Proven business principles such as transparency and accountability should also consistently be applied to ensure effective service delivery and by doing so, ensure value for the taxpayers money", he added.
Statement issued by Mr Johannes Möller, President Agri SA, February 15 2012
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