Does the 2025 Budget Support Agriculture? Farmers Weigh In

South Africa’s 2025 budget has sparked mixed reactions, particularly from the agricultural sector. While Finance Minister Enoch Godongwana’s decision to avoid increasing the fuel levy and sugar tax has been welcomed, farmers argue that more could have been done to stimulate growth and address systemic challenges. Here’s a closer look at how the budget impacts agriculture and what farmers are saying.

Fuel Levy and Sugar Tax: A Welcome Relief

One of the key positives for farmers in the 2025 budget is the decision to keep the fuel levy and sugar tax unchanged. Paul Makube, Senior Agricultural Economist at FNB Commercial, highlighted the significance of this move:

• Fuel Costs: Fuel accounts for nearly 13% of production costs in the grain sector and is critical for transporting produce and inputs. The general fuel levy (R3.96 per litre) and Road Accident Fund (RAF) levy (R2.18 per litre) remain unchanged, providing some relief amid rising fuel prices.
• Sugar Tax: The Health Promotion Levy (HPL), also known as the sugar tax, was not increased. This comes as a relief to the sugar industry, which has been given time to diversify and restructure.

Infrastructure Investment: A Step in the Right Direction

The budget’s commitment to infrastructure investment has been praised as a positive step for agriculture. Capital asset payments are projected to grow by 8.1% annually over the next three years, accounting for 5.1% of total spending.

• Logistics Challenges: Deteriorating roads and rail infrastructure have long been a bottleneck for the agricultural sector, increasing operational costs and limiting growth.
• Master Plan Alignment: Investments in infrastructure align with the goals of the Agriculture and Agro-Processing Master Plan (AAMP), which aims to revitalize and grow the sector through collaboration between government, agribusiness, labor, and civil society.

Farmers’ Disappointments: Lack of Economic Stimulus

Despite these positives, many farmers feel the budget falls short of addressing broader economic challenges. Roelie van Reenen, Supply Chain Executive at Beefmaster Group, expressed disappointment:

• Taxation vs. Incentivization: “Taxing the nation is not a sustainable solution. We need incentives encouraging entrepreneurship, supporting business growth, and attracting international investment.”
• Tax System Imbalance: Van Reenen pointed out that 7.9 million personal income taxpayers support 28 million grant recipients, calling the model unsustainable in the long term.

VAT Zero-Rated Food Items: A Partial Solution

The expansion of VAT zero-rated food items, including specific cuts of meat like offal, has been met with mixed reactions:

• Limited Impact: While the move aims to support low-income households, Van Reenen argues that it is more of a “plaster for the poorest poor” rather than a broad economic incentive.
• Implementation Challenges: Specifying organ meats for zero-rating creates enforcement challenges, and further clarity is needed on how this will be implemented.

A Glimmer of Hope: Democratic Decision-Making

One optimistic takeaway from the budget is the involvement of the Government of National Unity (GNU) in the decision-making process. For the first time in years, no single party has unilateral control, ensuring that the interests of all South Africans are represented.

• Democracy in Action: Van Reenen sees this as a positive development, stating, “This is democracy in action, ensuring that the interests of all South Africans are represented.”

While the 2025 budget offers some relief to farmers through unchanged fuel levies and sugar taxes, as well as commitments to infrastructure investment, it falls short of providing the broader economic stimulus needed to drive growth in the agricultural sector. Farmers are calling for more incentives to encourage entrepreneurship, attract investment, and address systemic challenges. As the budget awaits approval by the GNU, the hope is that collaborative decision-making will lead to more balanced and effective policies for the sector.

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