The South African Poultry Association (Sapa) said yesterday it strongly believed that targeted chicken products should be included in an expanded list of items that are zero-rated for value-added tax (VAT).

This comes after President Cyril Ramaphosa, during his Opening of Parliament Address, announced a plan to change the range of food items exempt from VAT, saying it indicated multi-party support for an initiative that would help to lower food prices for low-income households.

This includes a comprehensive review of administered prices to identify areas where prices can be reduced.

In a media statement yesterday, Sapa’s general manager Izaak Breitenbach said chicken was South Africa’s most popular and most affordable meat source, accounting for 66% of all meat consumed in the country.

“It is therefore the main source of meat protein for millions of poor people, including children in poor families. South Africa’s chicken producers are already doing everything in their power to keep chicken prices down,” Breitenbach said.

“Removing the 15% VAT from the chicken portions, most consumed by poor households, would bring immediate price relief and ensure that essential food items remain affordable. The basket of zero-rated food items was last reviewed in 2018, after the VAT rate was raised to 15%.

“Sapa proposed to parliament that targeted chicken products should be exempt from VAT because of their importance in the diet of millions of poor people. This included the popular packs of individually quick frozen (IQF) chicken portions.”

Sapa also said that due to the differences in the review panel, chicken was not included in the expanded list of VAT-exempt food products.

“In the last six years the need for VAT exemption has increased as food prices have risen sharply, locally and globally. Food inflation might be falling, but food prices remain high,” it said.

“The Competition Commission has noted that consumers are buying more tinned pilchards, which are mainly imported but VAT-exempt, while chicken is not. Every year since 2018, South Africa’s poorest consumers have paid an additional 15% on every chicken portion they have bought. It is time to change that.”

Anthony Clark, a food producers and agriculture analyst at Smalltalkdaily Research, said the last major review of VAT exemption on the food basket was in 2018.

Clark said that, shockingly, after a hard and intensive lobbying from the domestic poultry stocks, in-bone chicken was excluded from the 2018 VAT exempt revision as the National Treasury deemed the cost too high.

In 2018 prices, it was commented exempting all poultry (including heads and feet) would have cost R5.98 billion based on VAT paid, according to statistics (2018) based on decile and LCS undercounting.

Clark said as charitable and noble such a push was, six years later, the underlying VAT exemption on the domestic poultry industry was clearly a cost the fiscus and Treasury may again be unwilling to grant.

“Infant formula was also excluded in the last 2018 review and that cost (R455m in 2018) may be more palatable. There were also calls in the 2018 submissions to exempt peanut butter. There was also comment in 2018 to VAT exempt, aside from chicken, other meats,” Clark said.

“I ponder, given there was a duty and tariff free period for the importation of mechanically deboned meat (MDM) at the beginning of 2024 as imposed by former DTI Minister Patel, would that be extended into VAT exemption and as such processed foods such as polony could become VAT exempt as a sector compromise?

“As it stands now, I cannot see poultry being exempted simply due to the sizeable value of the sector and the scale of the VAT paid. Perhaps, Sapa should push for a compensation initiative for avian influenza which may be more attainable.”