Presented to

Standing Committee on Finance, Parliament of the Republic of South Africa 27 August 2014

by

Langelihle Simela & Manish NichaExecutive Director Accountant

African Farmers’ Association of South Africa

National association of smallholder farmers from all 9 provinces of South Africa.

The association’s major objectives are to articulate, represent, protect and develop the economic interests of its members

CATEGORY A:

Established Commercial Farmers (ECF)

CATEGORY B:

First Generation Commercial Farmers (FGCT)

CATEGORY C:

Subsistence Communal Farmers (SCF)

Mainly white farmers farming for national and global markets.

Mainly black farmers who are developing first generation commercial farmers for local and national markets.

Only black famers farming on a communal farming system for household food security.

About 30 000 farmers About 2 000 farmers About 2 800 000 house holds

Most of the title deeds transferred from generation to generation

Most farm on state land with short term leased agreements (5 years)

All farm on tribal land with no security of tenure

Well organised collective action policy and legislative matters

Weak farmers structures with inadequate capacity on policy and legislative matters

Ineffective farmer structure on policy and legislative matters

Mostly highly mechanised and use latest technology

Mostly rely on manual labour to greater extent and use outdated technology

Most rely on government mechanisation programmes and technology

Some VAT

registered

Not VAT register

ed

Category A (established commercial farmer) enjoyed many concessions during apartheid era and pre deregulation era.

Category B and C are attempting to enter commercially – oriented production in a free market system: Expected to raise both capital and production loans at market-related

interest rates, and be able to pay them back (loan also funds VAT and interest on it).

Most not VAT registered because of cumbersome process, lack of knowledge & so land up with high costs of production + low economies of scale.

Other factors (extension, traini.ng, etc. set them up for failure

A sizeable proportion depend heavily on agriculture for household food and income (food security ) and hence could do with relief on costs

30,000 odd

2.8 million households

Adapted from Ben Cousins, PLAAS

Adapted from Ben Cousins, PLAAS

The removal of the zero –rating will increase the cost-price squeeze on farmers who are registered for VAT, and negatively impact on the sustainability of the sector and national food security.

Exempt all six input items, so that no farmer pays VAT on these items. All farmers who are registered for VAT would benefit from this rule.

Consider a 14% subsidy for smallholder farmers in order to level the playing filed for them.