As one of the signatories of the Strategic Plan for Agriculture released by the President in 2001 Agri SA obviously subscribes to the core strategies contained in the document viz:

- Equitable access and participation which include land reform;

- Global competitiveness and profitability; and

- Sustainable resource management.

We do believe that these are fully compatible with the five policy priorities alluded to by the Minister of Finance in the MTBPS i.e. increasing rate of growth and investment, promoting economic and social mobility, social development, improving the state's capacity and improving relations for growth and development. We do not only concur but is also supportive of the related strategic framework of government for the period ahead.

We also agree with the international credit rating agencies (i.e. Moody's Investors Service and Fitch Ratings) that the economic policy has been well managed for many years, with restrained fiscal and monetary policies having had numerous positive spin-offs like the relatively low level of inflation as measured by CPIX.

Agriculture as a small but integral part of the economy obviously has a direct interest in the positive aspects flowing from this i.e. lower interest rates, employment creation, increases in disposable income, etc.

We do believe however that the various kinds of demands being made on the agricultural sector do not always take the following characteristics of the sector into consideration:

Primary agriculture mainly consists of small enterprises1. In the latest census of agricultural statistics of which a summary was released recently it was indicated that the average turnover of the 45818 farming units included in this survey amounted to R1,156

Th million in 2002. A total of 23 389 of these units had a turnover of less than R300 000 in

the particular year. The operating surplus has basically remained constant in real terms over the past 10 years at a level of R10,8 billion.

Although the agricultural sector directly only contnbutes +3 5% to the GDP it employs according to the MTBPS about 7,8 % of all employed people - implying that agriculture is still a very labour intensive sector.

The support to the South African agricultural sector as measured by PSE's (barometer of percentage of gross income derived from other sources) is currently estimated at about 3% to South African farmers compared to Canada (21%), European Union (37%), Japan (58%) and United States with 18%.

According to official statistics the debt burden of agriculture amounts to R30 billion in relation to the estimated value of land and fixed improvements as the main source of collateral amounting to R60 billion. Owners equity is therefor more limited than is often realised.

When fiscal and politically induced demands are made on the sector we believe that cognisance should be taken of the aforementioned issues. This implies that "real" ownership of assets given the high debt ratio ,the ability of farms as small enterprises to participate in BEE, the ability to pay the impact on employment due to profitability pressures and eventually food security should be discounted to the full when these kinds of demands are considered.

With respect to the MTBPS Agri SA wishes to specifically comment on the following issues:

Agri SA agrees that land redistribution and agricultural development should be given greater impetus. We took note of an additional amount of R200 million in terms of the adjustment appropriation for this year to bring the total allocated amount for restitution to R1.1 billion. We are concerned that, according to the Commission on the Restitution of Land Rights approximately R13 billion is needed to meet the December 2005 deadline for finalising restitution claims, set by President Mbeki. We trust that the 2005 budget will really make a significant provision to settle the approximately 9 200 outstanding claims in rural areas.

Agri SA_ learnt with dismay about the calls for the introduction of a land tax by a senior official of the Department of Land Affairs recently. This will apparently help finance land reform and to ensure that prices for buying land are 'affordable". We trust that if government is entertaining this idea scientific research will at some stage underpin this kind of ignorance, i.e. replacing subjective judgements by objective reasoning taking into account financial indicators in agriculture as well as to make a proper assessment of so-called high land prices.

Agri SA nevertheless wishes to once again register its support for land restitution, land reform and agricultural support programs aimed to expand the opportunities and resources of rural communities.

Agri SA supports the initiatives as contained in the MTBPS but wishes to stress the need for improvement of municipal management and concomitant interaction with the private sector. It is a fact that local government is the key interface between the private sector and the state whilst in the case of agriculture this interaction is more rurally based.

Of a major concern to organised agriculture is that issues like Agri BEE, property rates, and Integrated Development Plans (IDP's) with respect to agriculture will have to be taken up with local authorities where capacity and financial constraints are most likely to be extremely severe.

Agri SA supports the notion of reforming the RSC levy system also within the context of the Property Rates Act to be introduced as well as the pending restructuring of the electricity distribution industry, which will also impact on the finances of municipalities. We do agree that this should form part of a comprehensive review of the local government fiscal framework.

Agri SA is involved in various bodies dealing with international relations pertaining to agriculture e.g. Cairns group of farmers, International Federation of Agricultural Producers (IFAP) and the Southern African Confederation of Agricultural Unions (SACAU).

We are more than willing to respond to the call from government for greater co-ordination with respect to South Africa's own marketing and to utilise the above mentioned institutions for that purpose.

Agri SA also concurs with the primary focus of government's exchange rate policy aimed at reducing Rand volatility.

The agricultural sector, as previously indicated consists mainly of small enterprises. When a simplification of the tax system for small enterprises is considered, Agri SA wishes to become involved.

The minister also indicated that the lowering of the regulatory burden on small businesses would form part of economic policy priorities in the period ahead. Agri SA supports the concept of Regulatory Impact Analysis (RIA) on small businesses in general and agricultural _enterprises in particular. During Agri SA's recent congress the need for RIA in agriculture as well as co-ordination with respect to the financial impact of various policy initiatives (e.g. full cost recovery for electricity and water) on the sector was identified as issues requiring serious attention.

Establishing new enterprises in agriculture in the context of Black Economic Empowerment (BEE) or otherwise will require various forms of support including finance. The re-establishment of an Agricultural Credit Scheme as was announced is welcomed. Agri SA is currently paying attention to the implementation of the Broad Based Black Empowerment Act in Agriculture. As explained before related actions contemplated will be informed by the primary sector mainly consisting of small enterprises.

In accordance with what was announced for the small-scale mining sector possible tax measures (i.e. incentives) to deal with BEE in agriculture should also be considered.

Agri SA trusts that the framework and procedures whereby the allocated amount of Ri billion will be disbursed for credit purposes will be expedited. Farmers as previously indicated are reliant on credit in their farming operations, which make this a welcome development. Agri SA also welcomes initiatives by government towards completing legislation aimed to consumer protection in the financial industry.

Agri SA welcomes the fact that the contingency reserve that will increase to R8 billion in 2007/08 will also be available to deal with natural occurrences. more formal structures and procedures in this respect still needs to be devised in terms of the Disaster Management Act to deal with these and related issues in agriculture ad hoc disasters will 8Iways remain. We thus welcome this provision. The clarity on the VAT treatment of grants and subsidies by government to commercial businesses alluded to by the minister is also welcomed.

Agri SA welcomes the further allocation of R430 million in terms of the Adjustments Appropriation Bill for the current financial year aimed at drought relief.