‘The submission will exclude fresh chicken products and value-added products such as crumbed, spiced or marinated cuts.’
Many households in South Africa are unable to gain consistent access to enough food for an active, healthy life, making them food insecure.
The South African Poultry Association (Sapa) ) is of the view that adding certain chicken products to the list of essential items that are not charged 15% value-added tax (VAT) will help curb the high number of food-insecure households in the country.
Sapa will be submitting its application for VAT-free chicken products to parliament in mid-November.
Chicken in SA
“This initiative aims to benefit struggling families directly by lowering the cost of South Africa’s preferred protein and improving accessibility to poultry meat for its most vulnerable citizens, directly combatting food insecurity,” says Sapa CEO Izaak Breitenbach.
He adds that poultry production plays a role in ensuring that South Africa is a food-secure country by providing affordable, nutrient-rich foods, but more can still be done – like the government’s intention to expand the list of essential food items exempt from VAT.
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Increased chicken demand
He adds that should chicken be added to the list of essential food items exempt from VAT, the poultry industry can expand production to meet the increased demand.
The benefits of having VAT-free chicken products would include an increase in consumption, and increased access to nutritious chicken products, which some people could not previously afford.
“We have been producing affordable chicken for the masses for many years, and we continue working hard to create the conditions necessary to keep delivering on that promise.”
Which chicken products would be on the list?
Breitenbach says they are working with retailers to determine which chicken products are mostly bought by low-income households, to ensure that the proposal to government will meet real consumer needs.
“The submission currently notes tertiary products, which included all offal, fresh or frozen, as well as frozen bone-in chicken. The submission will exclude fresh chicken products and value-added products such as crumbed, spiced or marinated cuts.”
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Challenges by previous proposals
He acknowledges that similar proposals in 2018 to have certain chicken products added to the vat-free list faced challenges, particularly around the zero-rating of individually quick frozen (IQF) chicken pieces.
“Government concerns about potential abuse of these definitions were noted, and Sapa is working to ensure this submission aligns with regulatory expectations.”
“The cost of zero-rating chicken is estimated to be slightly over R4 billion, which amounts to less than 1.1% of total VAT revenue.” R426 billion in VAT revenue was collected in 2023.
He notes that anti-dumping duties imposed since 2018 have offset some revenue losses and that increased local production and exports would generate additional tax revenue to support the fiscus.
The association expects the final tax decisions to be made around February 2025.
“VAT-free chicken can act as a material kick-starter for low-income households, feed South Africa’s malnourished and impoverished citizens.”
The food basket currently
The average price of the household food basket increased again in September, making it difficult for low-income consumers to feed their families a nutritious diet.
Data from the Household Affordability Index showed that the household food basket has increased to R5 255.68, which is an increase of R28.54 from August and R99.91 increase compared to September 2023.
The Index also noted that core foods, or foods that should be prioritised and bought first, remain expensive.
These items form the primary basis for meals, these are products such as maize meal, rice, flour, samp, oil, salt, onions, and sugar.
The list of essential items that are vat-free includes maize meal, brown bread, samp, mealie rice, rice, dried beans, pilchards, milk powder, and eggs, amongst others.
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Food inflation unchanged
Statistics South Africa said annual food and non-alcoholic beverages inflation was 4.7% in September, which is unchanged from August.
“Vegetables, fruit, cold beverages and fish recorded cost more in September, while inflation for milk, eggs and cheese were stable.”
On a month-on-month basis, the food and non-alcoholic beverages price index increased by 0.6% in September compared to August, the highest monthly increase since January this year, when the rate was also 0.6%.
Low-income bracket affected the most
Professor Bonke Dumisa, an independent economic analyst said the low-income households are more affected by the food inflation. He said low-income people spend relatively more on transport and on food.
Dumisa made an example of when a bag of potatoes rises R80 to R200, for a person with a monthly salary of R2000, this means this bag of potatoes has now moved from 4% of this person’s income to 10% of their salary.
“On the other hand, for a person earning R50,000 per month, this person may not even notice the change in the price of potatoes. Food inflation is thus not always aligned to the end overall inflation.”
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