SUBMISSION TO
SARS ON
The Diesel Rebate System
In the Forestry Industry Context
Produced by FSA Transport Committee
Pietermaritzburg,
February 2016
1.
Introduction to Forestry South Africa
Forestry South Africa (FSA) is an Association which represents the interests of its members in
particular and the promotion and wellbeing of the South African commercial Forestry Industry
in general. Although voluntary in its nature, FSA’s membership includes all 11 corporate
timber companies, including their subsidiaries, operating in South Africa, 1 100 commercial
timber farmers and over 20 000 small-scale black timber growers. This membership
represents over 90% of the Industry as a whole and virtually all the private sector involved in
the Industry. Due to this representivity, FSA is viewed by both Government and the Private
Sector as the body which represents the South African Forestry Industry.
FSA is involved in a host of areas such as research, education and training, water and
environmental affairs, forest protection, bio-energy, business development and transport. We
thus regard ourselves as qualified to give comments on the current situation regarding the
diesel rebate regulations.
This submission, for which we are grateful of the opportunity to be able to make, is made on
behalf of the South African Forestry Industry by Forestry South Africa’s Transport Committee.
2.
Background to the South African Forestry Industry
The South African Forestry Industry is, by any measure, an important sector of the economy,
employing 62 000 people directly, producing over R7bn worth of products annually and
supporting a primary processing sector which employs a further 50 000 people directly, which
produces value added products worth over R20bn. In 2014 exports of forest products earned
the country net foreign exchange earnings of R5.9bn. In addition, the Industry is a major
catalyst for rural development and has the potential to create an estimated 30 000 extra jobs
in the country, particularly in Zululand and the Eastern Cape.
It needs, however, to be noted that the cost structure of the Forestry Industry has changed
over the years. Whereas in the past, the greatest production cost related to harvesting
activities, in recent years this has changed dramatically – transport costs have now become
the biggest single input cost. Diesel costs, being a major component of these costs, have
therefore a major bearing on the profitability of timber operations.
The diesel rebate system for forestry operations, currently allowed by SARS, is thus most
welcome and of great benefit to timber growers, both large and small. It is all our interests
that the rebate system not be abused.
Because of various issues raised by Industry (through organised agricultural and forestry
organisations, including Forestry South Africa), SARS, to their credit, decided to hold a series
of workshops throughout the country to inform diesel rebate beneficiaries in various
Industries (including our own) on how the diesel rebate system would work and how players
in these industries could claim diesel rebates. The focus of these workshops related to the
information that needed to be submitted to SARS in terms of “log book” requirements in
order for beneficiaries to claim the applicable diesel rebate.
We have, in this submission, made other comments and recommendations not specifically
related to the log books.
2
3.
Forestry Industry Concerns
Despite the fact that Forestry South Africa is well aware of the need for SARS to administer
the diesel rebate concession applicable to timber growers in a fair manner, we nevertheless
have some concerns which we would like to bring to your attention. These issues are detailed
below.
3.1
Onerous Reporting Requirements vis à vis the completion of Log Books
Although stated by SARS that the reporting requirements required of agricultural and forestry
operations in terms of the details needed in log books is far less onerous than those applied to
other sectors (e.g. mining), we still have major concerns.
These problems primarily relate to the operational environment in which we work. For
example, it is simply not feasible to fill up a bowser on the first day of the month. Likewise, if a
tractor for example, has to perform two functions in one day this is highly problematic. If a
tractor is carting timber in the morning and ploughing in the afternoon, the current
regulations stipulate that the tractor must travel (maybe many kilometers) to a bowser to fill
up so that the fuel used on (in this case) ploughing, can be accounted for. This is totally
impractical and extremely costly.
The stringent criteria regarding fuel usage per piece of equipment, per activity, per day, needs
to be relaxed dramatically. The current system places an immense administrative burden on
farmers, especially given that most tractor / equipment operators are illiterate. The current
system whereby diesel usage has to be measured per machine, per activity, per day is, quite
frankly, impossible to comply with on a practical point of view.
Recommendation: We propose that a monthly record be kept for such equipment – after all,
we are not concerned about what that tractor did during the day, we need to record how
much diesel it used on agricultural / forestry activities during the month. This could then be
reconciled with the amount of diesel used from the bowser which should also be recorded
each month.
3.2
The Diesel Rebate vis à vis the Transport of Wattle Bark
In terms of the current regulations, diesel used in the transport of Wattle Bark does not
attract a rebate. The question needs to be asked as to why is this so? In terms of the National
Forests Act, wattle bark is classified as a “forest product”. In terms of the Income Tax Act, a
diesel rebate can be claimed on the “cartage of timber” or any other activity related thereto.
Wattle Bark is a major forest product – in fact for every five tons of wattle timber produced,
one ton of bark is produced. It needs to be noted that in the past wattle bark was regarded as
the primary crop and the wattle timber was regarded as a by-product and often left in-field to
rot and thus enhance the nutrition in the soil.
Although wattle timber now is sold as a product, wattle bark fetches a far higher price than
the wattle timber itself. Current wattle timber prices average R1 100 per ton whereas wattle
bark prices are R1 400 per ton.
3
Given the above, we as an Industry find it absurd that SARS regards the diesel used for the
transport of wattle bark to mills as “un-rebatable usage”. This is more absurd when the diesel
used for the transport of sugar “cane tops” (a by-product used for cattle feed) is allowed in
terms of the rebate. Recommendation: Diesel used in the transport of wattle bark to mills
(and back) be eligible for a diesel rebate.
3.3
The Diesel Rebate vis à vis the Transport of Farm Workers
In terms of the current regulations, diesel used in the transport of farm workers to their place
of work and back does not attract a rebate. The question needs to be asked as to why is this
so?
Given that many farm workers live “off farm”, why would SARS not allow a diesel rebate to
those farmers who, out of their own goodwill (and out of their own pockets), and in the
course of their daily farming activities, transport their workers to and from their farms?
Recommendation: Diesel used in the transport of workers to and from their work places be
eligible for a diesel rebate.
3.4
The Diesel Rebate vis à vis Empty Return Trips from Processing Plants
In terms of the current regulations, diesel used in the transport of timber from a farm to a
processing plant is eligible for a rebate. However, diesel used on the return trip back to the
farm is not. This is highly problematic and quite frankly, nonsensical. The current SARS diesel
rebate regulations stipulate that a diesel rebate can apply to “any activity” involved with the
“cartage” of timber products.
The cartage of timber involves the loading of trucks with timber at the farm, the transport of
this timber to a processing plant (often many kilometers away) and then a return trip (empty)
to load up the next load of timber. Timber trucks are designed specifically to transport logs –
they cannot transport any other products. They cannot therefore travel back from a
processing plant with other cargo – they are empty!
Given the above, we find if totally irrational for SARS to allow a diesel rebate on the diesel
used to get timber to a processing plant but not that used on the (empty) return trip.
Recommendation: Diesel used in the transport of forest products (timber and wattle bark)
to processing mills be eligible for a diesel rebate.
We trust that SARS will accept our comments in the spirit with which they were made and
take cognisance of their content.
Roger Godsmark
Operations Director and Chair of the FSA Transport Committee
Forestry South Africa
Pietermaritzburg,
29th February 2016
4