‘Sugar tax’, chicken ‘dumping’ and maritime industry key issues affecting the province
Many of the options open to Finance Minister Pravin Gordhan as he adds the finishing touches to this year’s budget will affect all South Africans, but a few will have a particularly marked impact on individuals and businesses in KwaZulu-Natal, says Ruwayda Redfearn, Deloitte’s KZN Office Managing Partner.
These include the proposed “sugar tax”, measures to curb “dumping” of foreign products like cheap chicken onto the local market, and the Operation Phakisa initiative to unlock opportunities in the maritime sector.
Redfearn said hikes across the spectrum of taxes are pretty much a certainty, given projections in the Medium Term Budget Statement (MTBS) that the fiscus would collect R23 billion less revenue than the February 2016 estimate and that the 2017/18 Budget would need to raise additional tax revenue by about R28 billion.
“In addition to tax hikes, it’s the perfect climate for tax reform,” she said, adding that while the widely-touted VAT increase may prove too hot a political potato for the Minister to grasp this year, a tax on sugar products could indeed be in the offing and would have a profound impact on a number of KZN-based businesses.
“Although preliminary research suggests that around R4 billion could be raised annually from a sugar tax, this figure is debatable as there are many variables yet to be finalised. What isn’t in doubt is the significant ripples it would send through the KZN economy if implemented.”
The province is home to major sugar cane growers, soft drinks producers and bottlers as well as multinationals for whom sugar is a key component of their product offerings.
“All of them will be affected to a greater or lesser degree. A large bottler, for example, is already actively pursuing rationalisation and automation. It’s not hard to see how a tax on sugar products would help accelerate this trend – and the implications this would have for employment,” Redfearn said.
Another interest group that will be watching Minister Gordhan’s budget announcement closely is the province’s chicken industry, which is struggling to compete against a flood of cheap imports which it says amounts to dumping.
Redfearn said a Department of Trade and Industry (DTI) task team is considering a range of measures to alleviate the situation. “These include boosting trade, competitiveness, value-addition and technology upgrades, as well as providing export support, industrial finance and incentives.”
While it was probably too early for any of the DTI team’s work to find its way into the Finance Minister’s budget speech, a brief reference to the crisis, acknowledging that the government is taking it seriously, would go a long way to bolstering confidence, she said.
Turning to the maritime sector, Redfearn flagged Operation Phakisa – an initiative aimed at unlocking the economic potential of South Africa’s oceans – as particularly relevant to KZN, which is home to two of Africa’s busiest ports, Durban and Richards Bay.
“It is anticipated that what government calls the ‘Ocean Economy’ could treble its contribution to GDP (from R54 million to R177 million) and the number of jobs (from 316 000 to 1 million). The MTBS highlighted that public and private investment totalling R17 billion has been targeted towards Oceans Economy-related initiatives over the past two years, creating about 5 000 jobs,” said Redfearn, adding that these investments support shipbuilding and training of marine engineers and artisans.
An announcement of continued support for Operation Phakisa as well as programmes and incentives aimed at streamlining trade through ports and logistics hubs like the Dube TradePort Special Economic Zone would be positive news for KZN, Redfearn said.