By Michelle van der Spuy
The latest proposed budget may still change in the coming weeks, but it currently contains some positive developments for the agricultural sector, says Dawie Maree, head of information and marketing at FNB Agriculture.
The fact that fuel levies have not been increased is excellent news and a significant relief for the sector, particularly as fuel accounts for about 13% of input costs in the grain industry.
“This is usually one of the areas targeted for tax increases,” Maree says, “but fortunately it was overlooked this time – which is a substantial benefit for the sector.”
The Health Promotion Levy, or the so-called sugar tax, which also remains unchanged, benefits the sugar industry. “It gives the industry a bit of a breather in that regard.”
As usual, agriculture as an industry received little attention in the budget, but Maree believes the sector stands to benefit from government’s plan to increase spending on public infrastructure over the next three years. This includes the rehabilitation of ageing infrastructure and improved maintenance – key components of National Treasury’s strategy to mitigate disaster risks.
As far as roads, railways and ports are concerned, this investment is crucial for the agricultural sector, which has been severely impacted by deteriorating infrastructure, Maree says. Improving these systems will also boost farmers’ confidence in the implementation of the Agriculture and Agro-Processing Master Plan.
He adds that the above-inflation increases to social grants, for which government has budgeted about R384 billion for the 2025/26 financial year, could also benefit the agricultural sector as a significant portion will likely be spent on food.
Boost for disaster management and recovery proposed
Arguably the most significant news for the agricultural sector in the latest proposed budget is that additional funds have been allocated for disaster management in the 2025/26 financial year, says political commentator Prof Theo Venter, who is affiliated with North-West University’s Business School.
For the 2024/25 financial year, R149 billion was allocated to provincial disaster management. This has been increased to R151 billion in the proposed budget. Additionally, R395 million has been budgeted for municipal disaster management, and R1,425 billion for municipal disaster recovery – up from R378 million and R709 million, respectively, in the previous financial year.
The latest proposed budget also includes plans by National Treasury to reform the disaster risk financing framework to ensure that disaster response is timely, efficient and equitable, while proactively reducing risks.
A survey by Treasury of the 40 municipalities at highest risk of natural disasters highlighted significant delays in municipalities accessing disaster response funds and recovery grants, averaging five months and more than a year, respectively.
Venter says it is important that the budget addresses natural disasters such as droughts, fires and floods – events that the agricultural sector is all too familiar with. “Disaster management is receiving notable attention this time. In the past, it was barely mentioned in the budget.”
VAT increase
A VAT increase is once again included in the latest proposed budget, but government has undertaken to mitigate the impact of the 0,5% increase – scheduled for 1 May this year and again for 1 April next year – by adding more food items to the basket of VAT-exempt goods.
Venter believes the agricultural sector could benefit from this expansion of the list of zero-rated goods.
The VAT increase could be a setback for the economy, Maree says, but as a broad-based tax it at least ensures that the burden is spread rather than being shouldered by a small group of income taxpayers.
Withdrawing is not an option
Maree says the fact that the Democratic Alliance does not support this proposed budget will lead to an interesting scenario in parliament when members of the government of national unity (GNU) have to vote on it – the ANC may struggle to secure a majority.
“Many people believe this could lead to a collapse of the government, followed by an early election. However, according to the provisions of the Constitution, specifically clauses 102 and 50, this is not possible. An election cannot take place unless three years have passed since the previous one.”
Since the last general election in South Africa was held in May 2024, another election cannot take place before May 2027.
Venter believes that both the ANC and DA have accepted that they will not reach an agreement on the budget’s structure, and that the disagreement will need to be managed. They are not in a position to withdraw from the GNU.
Read the full Budget Review 2025 here and click here for highlights.
