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Agbiz responds to 2016 Budget Speech

25 Feb 2016

According to Dr John Purchase, CEO of Agbiz, "Not in the last two decades has there been as much interest and anticipation in the annual budget speech of the Minister of Finance, as was the case with Minister Pravin Gordhan's 2016 Budget Speech. Against the background of South Africa's poor and declining economic performance, a tight global economic situation, and the threats of downgrades of South Africa to so-called 'junk status' by rating agencies, Minister Gordhan was under considerable pressure to deliver a budget speech that indicated a new economic direction of inclusive growth and a better future for all, but also reined in excessive and wasteful state expenditure."

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Gordhan emphasised several broad principles in the National Development Plan (NDP) and indicated that the Budget is guided by the NDP. He further indicated that we cannot, as a principle, spend money we don’t have and that the budget deficit will be reduced to 2.4% by 2018/19 and that net national debt will be stabilised at 46.2% of GDP by 2017/18.

Agbiz welcomes these targets as servicing our debt has been the fastest growing expenditure item on our budget and needs to be brought down and controlled better. Agbiz also welcomes the announcement that measures are in progress to strengthen agriculture and agro-processing, although these agriculture measures appear to be primarily directed at smallholder farmers only.

“The minister made reference to the drought and its impact on a number of occasions, indicating that resources had already been reallocated to provide relief in the current financial year and that additional drought response allocations will be made, as required, in the Adjustments Appropriation later this year. It is unclear if any envisaged drought relief and drought recovery funding will benefit the commercial sector in any way at all,” Dr Purchase said.

Tax and levy increase not good news for agriculture

Significant increases in capital gains tax, the introduction of a tax on sugar-sweetened beverages, above inflation increases in duties on alcoholic beverages and tobacco products, and an increase of 30c per litre in the general fuel levy, are generally not good news for the agriculture and agribusiness sectors.

Dr Purchase added that, “Key to the success of the indicated new direction in the 2016 Budget, will lie the effective implementation thereof by government departments and provincial and municipal authorities over the next year or more. That, together with creating policy certainty, will need to build trust and investor confidence that are the necessary precursors for significant investment into and growth of the economy.”