2012 BUDGET: WHAT DOES IT MEAN TO AGRICULTURE Overview The 2012 budget will see consolidated government expenditure

rise by 8,8% from the 2011 to reach R1,1 trillion. The total amount appropriated to the agriculture, rural development and land reform cluster will increase by 10,6% to around R22 billion and Land Bank will receive a generous R1 billion from Treasury to complete its recapitalisation. INFRASTRUCTURE The 2012 budget, as presented by Minister Gordon made expansion in infrastructure investment as one of the main priorities of the 2012 budget and special emphasis will be given to improving competitiveness in industry, investment in technology, encouragement of enterprise development and support for agriculture. Over the medium-term expenditure framework (three-year period), Treasury budgeted for infrastructure plans amounting to R845 billion. The investment in infrastructure can be seen as positive to the sector as it will make the transportation of goods much easier and hopefully cheaper than the current road system. Treasury introduced the competiveness package worth R9,5 billion which will be implemented over the next three years, mostly by the Department of Trade and Industry. As part of this package, R150 million will be spent on improving provincial and rural agricultural colleges. The National Agricultural Marketing Council (NAMC) will receive R400 million to boost support to smallholder farmers and to conduct research on animal vaccines. AGRICULTURE The Department of Agriculture, Forestry and Fisheries will be allocated R1,9 billion during the 2012/13 financial year to improve agricultural support services. As minister Gordon puts it, We need to take advantage of rising demand for agricultural and manufacturing goods, According to the 2012 Estimates of National Expenditure, spending by the agricultural department increased from R3,6 billion in 2008/09 to R5 billion in 2011/12, at an average annual rate of 11,7% and is projected to increase to R6,3 billion over the medium term (threeyear period), at an average annual rate of 8,4%. The total allocated budget for 2012/2013 will amount to around R5,8 billion. The spending focus over the medium term will include making transfer payments of R2,9 billion to the Agricultural Research Council, R99,2 million to the NAMC and conditional provincial grants for the government support programme LandCare, and the Ilima/Letsema Project to the value of R6,4 billion. The department will also receive additional annual allocations of R554 million, R507 million and R610 million over the next three years to improve conditions of service, implement the disasters and flood damaged infrastructure component of the Comprehensive Agricultural Support Programme, as well as an allocation for agricultural colleges and NAMC for the economic competitiveness and support package.

Rural development and land reform was allocated roughly R8,9 billion. According to the 2012 Estimates of National Expenditure, the implementation of the comprehensive rural development programme, land reform, and the settlement of restitution claims will remain the departments core spending focus over the medium term. Therefore spending increased from R6,7 billion in 2008/09 to R8,1 billion in 2011/12, at an average annual rate of 6,9%, due to the need to settle 4 000 outstanding restitution claims. Over the next three years, expenditure is expected to increase to R9,9 billion due to the addition of 5 000 recruits under the national rural youth services corps programme, and the need to recapitalise 525 farms. NO INCREASE IN WINE EXCISE TARGET The excise duties on tobacco and alcohol products will increase, but the excise target for wine will not be adjusted. This is good news for wine farmers who made an urgent appeal to Treasury in 2011 to not increase the wine excise target following an announcement in the 2011 budget that the appropriateness of these benchmark tax burdens (23%, 33%, and 43% respectively of the weighed average retail selling price of wine, clear beer and spirits) would be reviewed and possibly increased to complement broader efforts to reduce alcohol abuse. In its appeal to Treasury, the wine industry argued that price increases were not a silver bullet to solve alcohol abuse and that excise increases were putting pressure on the profitability of grape producers. It is now proposed to retain the current benchmark for wine but to increase the targeted benchmark tax burdens for beer and spirits to 35% and 48% respectively over the next two years. For the 2012/2013 budget period, the excise on wine will increase by 8% to about R2,50.