No fuel levy and sugar tax increases in Budget 2025, a positive outcome for agriculture

Following a tumultuous start to the 2025 Budget season, South Africa’s Finance Minister Enoch Godongwana finally delivered the much-anticipated expenditure plan and hopefully implementation is expedited to unlock and accelerate economic activity.

The 2025 Budget presented today is a far departure from the original budget prior to the postponement as the most contentious issue of a 2% hike in value added tax (VAT) was watered down to a modest half a percentage point for 2025/26 to 15.5% beginning 1 May 2025 and a further half a percentage point for 2026/27.

From an agriculture perspective, farmers can breathe a sigh of relief that the general fuel levy for 2025/26 was not increased. Fuel accounts for almost 13% of production costs in the grain sector and is critical for distribution of all types of produce and inputs to and from markets across the country. Further, there was no mention on changes to the Health Promotion Levy (HPL) after the industry was given a two-year breather on levy increases to afford it time to diversify and restructure.

Government’s commitment to infrastructure investment through payments for capital assets that are projected to account for 5.1% of total spending with an annual growth of 8.1% over the next three years bodes well for boosting confidence in the sector.

Agriculture growth remains constrained by the deteriorating logistics infrastructure such as the dilapidated roads that increases operational costs, and further investments in both rail and road facilities and services will help unlock expansion as envisaged in the country’s Agriculture and AgroProcessing Master Plan (AAMP), a product of collaborative effort by government, agribusiness, labour, and civil society to revitalise and grow the sector.

Finally, the increase of R130 in pension grants and addition of more food products to the VAT zero-rated list goes a long way in alleviating pressure on consumers thus improving prospects of affordability and accessibility of food commodities.

This shows commitment to ensure fiscal sustainability given that no provisions were made for bailouts of state-owned enterprises (SOE) which augurs well for business confidence and investment in the economy. However, this remains the Finance Minister’s proposal until the country’s parliament approves it in due course following the completion of its processes.