Christo says: Essential to get back to the basic principles
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By Christo van der Rheede
Food security is crucial for South Africa – and so is support by the government!
In his State of the Nation address, President Cyril Ramaphosa recognised that the country is in a severe crisis. In many ways he had no alternative as there is no ignoring the perilous state of the country and the impact of load-shedding, rising crime and declining infrastructure on the economy and society more broadly; the agricultural sector has been particularly hard-hit. Unless the government deals with these conditions, grave short-, medium-, and long-term implications will follow.
In the context of crippling electricity blackouts, it was encouraging to hear the president announcing various steps to address the situation. However, the true value of the planned interventions will only become evident in the budget. Urgent and direct relief to the agricultural sector needs to be addressed in the budget if our government is to protect the country’s food security.
Not only is load-shedding crippling irrigation, but also slaughter operations, processing, packing and cold storage of food products. While attempting to mitigate the impact of load-shedding, farmers are expending significant resources on additional fuel and rising labour costs due to wasted production time and irregular working hours planned around load-shedding. This is an unbearable burden on a sector with high levels of debt, exacerbated by rising interest rates and inflationary pressure on input costs such as fertiliser and agrochemicals. The effects are becoming visible on the shelves of our local stores, but the real impact is yet to come. There is a real and imminent risk to the certainty of food supply – shelves will be bare of products unless struggling farmers are afforded relief.
Before his address, Agri SA called on the president to declare the agricultural sector an essential service and partially exempt it from load-shedding, particularly above stage 4. This would allow for sufficient continuous hours of electricity to power irrigation systems. While the president noted that the State of Disaster would enable the government to exempt critical infrastructure from load-shedding, he said nothing of extending this exemption to the sector, even after acknowledging its vulnerability to the energy crisis. This was a wasted opportunity to give concrete relief to a vital sector.
Nor was there any clarity on the role of the yet-to-be-appointed Minister of Electricity. With the departments of Mineral Resources and Energy and Public Enterprises remaining involved in the crisis, this new ministry risks miring the urgency envisioned by the State of Disaster in a web of bureaucracy.
Important though are the policy levers that Minister Godongwana pulls along with the fiscal ones. Given the cost burden placed on farmers by the energy crisis, it would be unconscionable to see increases, for example, in excise taxes and the Health Promotion Levy. Any such moves risk decimating the sugar, tobacco, beer and wine industries long before the energy interventions can provide meaningful relief to our grape wine farmers, cane growers, tobacco farmers and other affected producers. However, the minister saw it fit to propose an increase in the excise duties on alcohol and tobacco of 4,9%, in line with expected inflation. Not to mention the reprieve that was extended to the sugar industry in terms of leaving the health promotion levy unchanged for the following two fiscal years. It could’ve been worse.
The minister also announced measures to ease the financial burden of load-shedding on the agricultural sector. Agri SA in its submissions to the government called for special incentives for embedded generation in the sector, and further rebates for fuel costs and other energy alternatives to mitigate the crisis. As a result, the following incentives were announced:
- From 1 March 2023, businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewables.
- There will be no thresholds on the size of the projects that qualify, and the incentive will be available for two years to stimulate investment in the short term.
- A new tax incentive for individuals was introduced to install rooftop solar panels to reduce pressure on the grid and help ease load-shedding.
- Individuals who install rooftop solar panels from 1 March 2023 will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000.
- This can be used to reduce their tax liability in the 2023/24 tax year. This incentive will be available for one year.
- Changes to the Bounce Back Loan Guarantee Scheme were also proposed to incentivise renewable energy and rooftop solar, and address energy-related constraints experienced by small and medium enterprises.
- The government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis.
- To promote investments in renewable energy, the general fuel levy and the Road Accident Fund levy will not be increased this year.
Of great significance though, to ease the impact of the electricity crisis on food prices, the refund on the Road Accident Fund levy for diesel used in the manufacturing process, such as for generators, will be extended to manufacturers of foodstuffs.
We need to come to grips with where we are as a country. Record levels of load-shedding were experienced in 2022 – 207 days of load-shedding compared to 75 days in 2021. South Africa is on the edge of a precipice. If over and above load-shedding and declining service delivery, we start to see steeply increasing food prices, food shortages, and the labour-intensive agricultural sector shedding jobs, social unrest is likely to follow. The national economy and balance of trade would also be significantly undermined if South Africa shed its food self-sufficiency, relying more and more on food imports.
Of even bigger concern is the fact that municipalities owe Eskom R56,3 billion and the debt is rising. Add to it the culture of non-payment, not only by municipalities but by all organs of state and individual household customers, and we’re heading towards a perfect storm.
However, we have the diagnosis of the situation from the president. And Minister Godongwana administered the right medicine. We must get back to basics, and there is little more basic than the need for food. No doubt the budget has prioritised the load-shedding crisis – millions of South African jobs depend on its resolution. In this regard, the minister did not let us down.
He announced the following to assist Eskom:
- Bring additional capacity onto the grid.
- R337 billion of Eskom’s debt is already government guaranteed.
- Eskom will prioritise capital expenditure in transmission and distribution with this government bailout.
- In addition, Eskom must focus on the maintenance of the existing generation fleet to improve the availability of electricity.
But policy interventions for the agricultural sector will have to come a close second in the priority matrix for the sake of the agricultural sector’s workers, yes, but also every resident of this country who relies on our food value chain for sustenance daily. Without food, imagine what will happen!