The South African Poultry Association (SAPA) and the Democratic Alliance (DA) are advocating for individual quick frozen (IQF) chicken products to be zero-rated for VAT. This move aims to make these products more affordable for South African consumers.
The Red Meat Producer’s Organisation (RPO) supports the idea of lowering food prices for marginalised and low-income households, but believes several factors need consideration before implementing zero-VAT on specific products.
In South Africa, basic food items are zero-rated for VAT to make them more affordable and address hunger and malnutrition. The current list includes essential sources of protein, energy and fibre. However, the RPO argues that the list is not perfect and should be reviewed to ensure it effectively addresses hunger and malnutrition.
Research indicates that marginalised and low-income consumers eat too little meat, particularly red meat, which is a vital source of vitamins and minerals. Including chicken in the zero-VAT list could help increase meat consumption, the RPO questions whether it will be sufficient to address malnutrition.
It also highlights the need to consider what constitutes a basic foodstuff when it comes to animal protein. Currently, pilchards and eggs are on the list. If the list is expanded factors such as product price, meat protein content and availability should be considered.
A comparison of meat products at local retailers shows that while IQF chicken has a low shelf price, its actual meat content makes it one of the more expensive options. The RPO suggests that other meat products may fit the profile of basic food items better.
It also warns of the potential impact on the chicken industry and the broader meat industry if only IQF chicken is zero-rated for VAT. A market analysis commissioned by RMRD SA showed that zero-rating only chicken could distort the meat industry, potentially harming the local poultry industry due to increased imports.
The RPO questions the long-term benefits of zero-rating IQF chicken for consumers. While prices may initially drop, increased demand could eventually drive prices back up.
Additionally, the red-meat industry, already struggling with low producer prices, could suffer further if demand shifts significantly towards chicken.
The RPO suggests that a variety of meat products be considered for zero-VAT to keep prices relatively balanced.
It also raises concern about the current ad valorem import tariff on poultry and red meat imports, questioning whether protection from cheap imports is necessary if meat is considered a basic food item.
Finally, the organisation highlights the challenges of monitoring and ensuring zero-VAT benefits are passed on to consumers. It cites the example of brown bread, which is zero-rated, yet often priced the same as white bread, questioning the actual benefit to consumers.
The RPO proposes forming a working group of government representatives, nutritionists, economists and agriculturalists to review the costs and benefits of including different meat products on the zero-VAT list. This approach aims to maximise consumer benefits while minimising potential risks and costs in the livestock and meat industry.
