Budget 2022: Excise taxes dilute an otherwise positive budget for the agricultural sector
23 February 2022
Agri SA welcomes the prudent approach taken by the Minister of Finance to this year’s budget. The continuing commitment to fiscal consolidation is positive, as is the reduction of the budget deficit. We are however concerned about a number of announcements that will adversely affect the agricultural sector and restrict its ability to create desperately needed jobs and help drive economic growth and development.
We are encouraged that Minister Godongwana heeded our call for infrastructure investment, in keeping with President Ramaphosa’s State of the Nation Address. The funding for SANRAL in particular is a welcome announcement, as is the investment in South Africa’s water infrastructure, including the R2,1 billion allocated for raising the Clanwilliam Dam.
We also welcome 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. And while the increase in the carbon tax will have an adverse effect on the agricultural sector, the extension of the first phase of the carbon tax to at least 2025 is a welcome temporary reprieve for the sector.
We will also be encouraging our members to take the opportunity of the employment tax incentive, which the Minister announced will be expanded through a 50 per cent increase in the maximum monthly value to R1 500, to expand employment opportunities in the sector.
We are however disappointed in the above inflation increases in excise taxes announced today. The wine, tobacco and sugar industry have been amongst the most affected by challenges including 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, diluting the positive effect of the employment tax incentive.
We still believe that the public sector wage bill remains a risk to fiscus, especially while the bargaining process is still ongoing. Given that it’s a major burden on the fiscus, this needed to be addressed more resolutely. The allocation of more than R3 trillion to the social wage will also need careful monitoring in terms of its fiscal sustainability.
Nevertheless, Agri SA is of the view that the budget was generally positive. We are cautiously optimistic, being mindful that the success of this budget will depend on proper implementation. We will continue to engage with government to ensure that the agricultural sector can recovery and thrive in the years ahead, creating more opportunities and building a more sustainable and inclusive sector.
Issued by Kulani Siweya on behalf of 23 February 2022
