The agricultural industry in South Africa has given mixed reactions to the reversal of the proposed 0.5 percentage points increas in the Value-Added Tax (VAT) by Finance Minister Enoch Godongwana that the proposed on Thursday.
Francois Rossouw, CEO of Southern African Agri Initiative (Saai), on Friday said that the reversal of the proposed VAT increase was positive news for the agricultural sector and the consumers.
“A VAT increase would have put additional financial pressure on farmers, particularly smaller-scale and emerging producers who are often not VAT-registered and therefore unable to reclaim increased input costs. It would also have negatively impacted consumer affordability of essential agricultural products,” he said.
Rossouw added that while the VAT remaining at 15% would alleviate immediate cost pressures, the sector was still faing significant challenges, including rising input costs, infrastructure limitations, and logistical inefficiencies.
“We therefore urge the government to focus on improving infrastructure and logistics, and ensuring stable, supportive trade policies to foster sustainable growth and stability within agriculture,” Rossouw said.
Dawie Maree, head of information and marketing at FNB Business and Agriculture, said that a change in VAT will not have ahd a significant impact on commercial agriculture since commercial farmers were VAT registered, so there was a pass-through.
“Small-scale farmers who are not registered would have been negatively affected since they would have had to absorb the VAT increase. Indirectly it is good news for agriculture if there were a VAT hike, consumers who are still struggling would have less disposable income to spend,” he said.
Jaco Minnaar, president of Agri SA, said that they welcome the increase being scrapped because it will just be an additional burden to consumers.
“All VAT-rated product prices would have increased if the bill was passed, like white bread, meat…All other services and products prices would have increased by an extra 0.5%,” he said.
Minnaar added that the pity was the timing of scrapping the increase seven days before implementation, where a lot of businesses already had huge expenses to prepare for the increase.
“Now all the time, effort, and costs have gone to waste,” Minaar said.
TLU SA general manager, Bennie van Zyl, said the cancellation of the planned VAT increase was a victory for healthy opposition and cooperation.
“However, it does not solve the deeper crisis. The problem is not VAT but decades of policy direction that have suffocated the private sector. We need structural reform and expertise and more support for the agriculture sector,” Van Zyl said.
Francois Baird, founder of the FairPlay movement, said that poor people will be the hardest hit by the government’s decision to scrap the proposed additions to the list of VAT zero-rated foods.
“The decision is a consequence of the welcome reversal of the proposed increase in VAT from 15% to 15.5%. But forcing poor people to pay more for food is a shocking way for the government to try to make up for the revenue it will lose by not increasing VAT,” he said.
Baird added that since the last VAT increase in 2018, FairPlay has campaigned vigorously for ‘VAT-free chicken’, the removal of VAT from the chicken portions most consumed by low-income households.
Baird said that this year, FairPlay supported the application by poultry producers and chicken importers for the removal of VAT from frozen chicken portions and fresh and frozen offal products such as chicken heads, feet, and livers.
“This was a pro-poor proposal aimed at helping poor people feed themselves and their families. The need is urgent.”
Aliya Chikte, project officer at the Alternative Information and Development Centre (AIDC), said that the reversal of the VAT hike was welcome, particularly in the context of horrific impoverishment and hunger.
“However, there is growing concern that this move may be offset by deeper spending cuts, potentially harming grant recipients and the majority who rely on essential public services,” Chikte said.
“The Minister stated that the decision to not increase VAT means that the measures to cushion lower-income households against the potential negative impact of the rate increase now need to be withdrawn and other expenditure decisions revisited.”
Chikte added that this means that offal and tinned vegetables will not be included in VAT zero-rated goods.
“Pro-poor expenditure such as above-inflation increases to social grants and expenditure on health and education should be protected.”
BUSINESS REPORT
