Industry body Agri SA has called on the government to hike the rebate or refund on fuel to cushion farmers, who are now heavily reliant on generators to remain in business amid the crippling load-shedding crisis.
The agriculture industry, which contributes about 3% to GDP and is responsible for almost 900,000 jobs, has been one of the hardest hit by the biggest ever power crisis, which is choking Africa’s most industrialised economy.
While farmers are eligible for a diesel rebate of at least R2.83 a litre, they say this is not enough to keep operations afloat under current circumstances.
“Farming businesses will definitely improve their cash flow [if the rebate is increased], thereby increasing their chance of survival,” Christo van der Rheede, executive director of Agri SA, told Business Day on Friday.
He said the industry body will settle on the size of the increase after deliberations with the National Treasury.
“That is why we are asking for a meeting to discuss the implications. In the past few months, all businesses have experienced an unprecedented increase in load-shedding ... Many industries are now forced to utilise diesel to keep their farming operations going during the constant blackouts,” he said.
Increasing the fuel rebate is a mechanism that the government can expand to all other business sectors to save much-needed jobs, he said.
“Less revenue to the fiscus due to expanding and increasing the diesel rebate regime would be minimal in comparison to the impact of the closure of many businesses that are struggling due to the destructive impact of load-shedding,” Van der Rheede said.
In a letter this week addressed to finance minister Enoch Godongwana and director-general Ismail Momoniat, Van der Rheede said the buying of diesel and petrol to generate electricity has become a tremendous financial burden for thousands of farmers who play an instrumental role in ensuring food security in the country.
“These additional energy costs and other costs are now becoming untenable for the farming sector and are seriously affecting its continued viability, let alone its international competitiveness,” Van der Rheede said.
“Given that we are a primary economic sector, that food security is a national imperative and that agriculture is an important economic driver, Agri SA appeals to Treasury and our government to consider providing relief from the ever-increasing energy costs impacting on the sector.”
Van der Rheede said the relief that Agri SA wants Treasury to consider should include additional rebates on petrol and diesel and/or a reduction in Eskom line costs. Consideration should also be given to tax relief for farmers who invest in their own security systems, he said.
Since 2015, the cost of diesel has risen by up to 170%. Add to it the huge increase in shipping, packaging and fertiliser costs, the sustainability of the agricultural sector is now seriously challenged, Van der Rheede said. Shipping costs per container have increased from R17,000 in 2017 to between R150,000 and R170,000. The cost of fertiliser has increased in some instances by up 150%.
Van der Rheede said the recent extreme weather patterns causing all kinds of natural disasters (hail, floods, fires, drought, locust outbreaks, and animal and plant diseases) as well as theft of farm produce and rising criminality also have a major impact on the financial sustainability of the sector.
“Agri SA would like to also meet the minister of finance and the leadership of Treasury early in the new year to engage on this [rebate on fuel] and other requests,” Van der Rheede said.
In an opinion piece published by Business Day earlier this year, Bernard Mofokeng, the director and head of tax at CMS SA, pointed out that many businesses have been forced to spend money they don’t necessarily have on buying and running diesel generators. He said it is only fair that they should enjoy the same privilege as Eskom as they suffer through blackouts.
Eskom has the privilege of being able to claim a tax rebate on every litre of fossil fuel it buys to manage the baseload energy crisis by burning diesel in its open-cycle gas turbines.
Mofokeng pointed out that in terms of the Customs and Excise Act, Eskom now claims back from the SA Revenue Service (Sars) the fuel and Road Accident Fund levies imposed on every litre of diesel it purchases. This means that Eskom can claim at least R3.65 on every litre of diesel it uses for its gas turbines. The power utility claimed diesel rebates of R799m in 2020 and R1.6bn in 2021.
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