The South African Poultry Association (SAPA) has made a pressing plea for the removal of the 15% value-added tax (VAT) on certain chicken products, arguing that such a move would significantly benefit families grappling with financial strain.
Izaak Breitenbach, the head of SAPA’s broiler organisation, yesterday said this initiative aimed to lower the cost of popular poultry meat, thereby improving accessibility and directly addressing the escalating issue of food insecurity faced by many in South Africa.
Breitenbach stated that applying zero-rated VAT to chicken products is an urgent priority, both for sustaining the nation’s food supply and for bolstering the economic welfare of households.
The application for this exemption is set to be formally submitted by mid-November, coinciding with President Cyril Ramaphosa’s commitment to expanding the list of essential food items exempt from VAT.
“The benefit of VAT-free chicken is enormous. We expect a meaningful increase in consumption, giving malnourished people access to nutritious chicken products they previously could not afford,” Breitenbach said.
Since its inception, the poultry industry has aimed to provide affordable chicken for all, and SAPA’s renewed commitment underscores its dedication to meet consumer needs.
SAPA is actively collaborating with retailers to pinpoint which chicken products are predominantly favoured by low-income households. This meticulous focus allows SAPA to ensure that its proposals effectively align with the needs of the community.
The current submission highlights tertiary products including all offal and frozen bone-in chicken, while excluding fresh and value-added products such as crumbed or marinated cuts.
Notably, past attempts to zero-rate VAT on chicken products encountered hurdles, particularly surrounding concerns of potential misuse in defining specific product categories. SAPA has remained proactive, working closely with government to ensure that its latest submission aligns with regulatory frameworks and expectations.
Financially, the cost of removing VAT on chicken products is estimated to be slightly over R4 billion. However, this figure represents less than 1.1% of the total VAT revenue, which amounted to R426bn collected in 2023.
Breitenbach articulated that the imposition of anti-dumping duties since 2018 has mitigated some of these revenue losses, asserting that a boost in local production and exports would yield additional tax revenue beneficial to the state’s coffers.
“VAT-free chicken can act as a material kick-starter for low-income households, feeding South Africa’s malnourished and impoverished citizens,” he stated, propelling the momentum behind the initiative.
Paul Makube, senior agricultural economist at FNB said South African producers were striving to recover in the wake of the avian influenza outbreak that led to significant culling within the poultry population.
With breeding and broiler stocks decimated, including an estimated 8.5 million birds, and a layer flock of around 6m, the subsequent price spikes in meat and eggs were felt nationwide.
However, interventions have been implemented, and the recovery, albeit gradual, is observable.
Current statistics reveal a modest year-on-year decline in individual quick-frozen (IQF) chicken prices at the producer level, down almost 8% in September 2024, while the consumer prices reflected an upward trend reflecting 1% month-on-month growth.
Makube acknowledged the long-standing consideration of VAT-free chicken will immensely benefit the poorest sectors given their dependence on chicken as a critical animal protein source.
He commended the industry's commitment to ramp up production and employment opportunities amidst challenges stemming from high feed costs and diminishing profit margins.
However, not all industry analysts share optimism. Anthony Clark, a food producers and agriculture analyst, cautioned that despite the noble intentions behind the call for VAT exemption on poultry, the realities of fiscal constraints faced by the Treasury could inhibit progress.
Clark pondered potential compromises, suggesting that similar exemptions could extend to processed foods in discussions surrounding future VAT policies.
As SAPA prepares its submission, the future of the poultry industry remains intertwined with broader economic realities. Efforts towards achieving VAT-free chicken appear poised to not only support consumers but also to stimulate the local economy amidst tightening margins and fluctuating prices.
BUSINESS REPORT