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South Africa: Treasury loses out on more than R1 billion in VAT through drought

The South African government has lost out on more than R1bn (€63.6 mln) in VAT from drought-stricken farmers who were forced to cut production after their irrigation water from the Cape supply dams was radically reduced a year ago.

Agri Western Cape CEO Carl Opperman said on Monday this was one of the facts he presented to Water and Sanitation Minister Gugile Nkwinti when they met to discuss the impact of water cuts. "We put it in monetary terms. This is only the loss from VAT, and excludes the losses to the National Treasury from farmers' income taxes."

Agri Western Cape calculated that the VAT loss from the R5.9 bln (€375 mln) of lost fruit production was R890 mln (€56.6 mln). The VAT loss from wine was R45 mln (€2.9 mln)  and the loss from livestock was R237 mln (€15 mln), amounting to a total of R1.172 bln (€75.5 mln).

"It also excludes the job losses, and the loss of buying power as a result and the loss of VAT from that. The farmers suffered losses, but the overall losses were much more widespread. The whole system is under threat because there is not enough sustainable water." reports how the agricultural sector - and the City of Cape Town - are on tenterhooks waiting to hear what the new water allocations will be.

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