John Deere has welcomed the R3.7billion allocation announced in the 2019 Budget Speech to assist emerging black farmers in acquiring land and title deeds, which it believes will complement the proposed blended finance model and assist in building a more inclusive agricultural sector for the benefit of all South Africans.
Land reform was a key focus for Finance Minister Tito Mboweni’s maiden budget speech which saw him allocate R1.8 billion for the implementation of 262 priority land-reform projects over the next three years in addition to the R3.7 billion set aside to assist emerging farmers seeking to acquire land to farm. Mboweni also announced that the Land Bank will support smallholders, and leverage partnerships with other financial institutions by disbursing R3 billion in the next fiscal year.
“We acknowledge that the unfavorable macroeconomic conditions largely due to weak economic growth and rising demand for government expenditure left very little room for the Finance Minister to increase budget allocations but we believe he has done very well in the circumstances,” said Jacques Taylor, Managing Director for Sub-Saharan Africa at John Deere. “Transparency in how the funds will be allocated as well as collaboration with the private sector could go a long way towards ensuring the sustainability of the projects.”
John Deere operates across Africa and is heavily involved in providing mechanization solutions to both large and small-scale famers across the continent. In South Africa specifically, John Deere through John Deere Financial, has for the past four years been involved with Grain SA’s New Age Farmer project where it sponsors a John Deere tractor to the winner of the New Age Farmer of the year. John Deere has also pioneered a contractor model in Kenya and neighbouring Uganda, which assists small farmers with acquiring tractors to not only plough their own lands but those of smaller farmers in their vicinity who may not have the financial resources to acquire expensive mechanization equipment.
As a member of AgBiz, the body who represents agribusinesses, John Deere is also actively involved in discussions with Government and other key stakeholders in promoting both support of small-scale emerging farmers as well as the continued growth of commercial farming operations which play an enormous role in job creation and food security in the country.
“Economic growth is at the center of discussions today,” said Taylor. “As John Deere, we believe transformation of the agricultural sector has to be off the back of growth in the industry.”
Another notable feature of the 2019 budget speech was the increase in the fuel levy, which amounted to total of 29 cents per litre for petrol and 30 cents per litre for diesel (including the carbon tax of 9c a litre on petrol and 10c on diesel). The good news for the agriculture sector was that the diesel refund increased from R3.22 per litre to R3.33 per litre on 80% of eligible use.
“Agriculture is, to a large degree, a price taker both on the input side as well as the output side so any increase in cost has a direct impact on the producers’ profitability and cost structure,” said Taylor. “The increase of 11c in the diesel rebate for agriculture is welcomed and will offer some relief.”
The proposed Carbon Tax Bill is expected to come into effect in June 2019, subject to sign-off by the President. Based on The Carbon Tax Bill tabled by Treasury in November 2018, indications are that Agriculture, Forestry and Land Use will be exempt from the first phase of implementation.
“We are supportive of any initiatives to limit any possible negative impact of agriculture on the environment,” said Taylor. “John Deere supports sustainable agriculture and we are continuously working to ensure our machines’ emissions meets the requirements of the markets in which we operate.”
One bugbear for a segment of the agriculture sector to emerge from the 2019 budget speech was the increase in the sugar tax from 2.1c to 2.21c per gram of sugar per 100ml, with the first four grams of sugar still exempted from taxation. The tax, which came into effect on 1 April 2018, has R2.3bn in revenue for the fiscus, according to Treasury. The SA Canegrowers Association has said the tax has cost the sugar industry nearly R1 billion since its implementation. It has also argued that the sugar tax has decreased local demand by 200,000 tons which puts 6,000 jobs at risk.
“With the lower local demand and weaker export prices, we expect the sugar producers to be more price conscious with capital expenditure,” said Taylor. “We are actively looking at ways in which we can provide cost effective solutions for this part of the industry as well as elsewhere where cost pressures may be impacting purchasing and investment decisions.”
