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Sapa calls for VAT-free chicken to boost food security

25 Oct 2024

To address rising food insecurity, the South African Poultry Association (Sapa) is advocating for the removal of the 15% value-added tax (VAT) on certain chicken products, aiming to make this staple protein more accessible to low-income households. With the cost of living on the rise, Sapa’s initiative targets the most vulnerable by reducing the cost of an essential protein source, providing a necessary boost to food security across the country.

Source: Freepik

Izaak Breitenbach, head of Sapa’s broiler organisation, emphasised that “VAT-free chicken is a top priority both in terms of feeding South Africa.” This priority aligns with government goals, particularly following President Cyril Ramaphosa's indication that the government will expand the list of essential food items exempt from VAT.

The application to zero-rate VAT on select chicken products will be submitted by mid-November, aiming for implementation in early 2025 if approved.

Economic benefits could be substantial

“The benefit of VAT-free chicken is enormous,” Breitenbach noted, “we expect a meaningful increase in consumption, giving malnourished people access to nutritious chicken products they previously could not afford. We've 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.”

SAPA, in collaboration with retailers, has identified “tertiary products, which included all offal, fresh or frozen, as well as frozen Bone-In chicken,” as core to the proposal. Value-added chicken products, including marinated and crumbed cuts, would not be included.

This proposal builds on efforts to support local poultry production, boosted by anti-dumping duties introduced in 2018, which helped reduce unfair competition and allowed for stronger local production.

Sapa issues statement on proposed VAT exemption for chicken

29 Jul 2024

Despite potential revenue impacts—estimated at just over R4bn, or “less than 1.1% of total VAT revenue (R426bn in VAT revenue collected in 2023)”—Sapa projects that increased demand could drive production growth and, by extension, tax revenue from exports and local sales.

Treasury is expected to carefully review the proposal, with decisions likely announced by February 2025. This timeline provides Sapa, along with the Department of Agriculture and industry partners, with a critical window to build momentum and advocate for a policy that could improve daily nutrition for millions of South Africans.

While past attempts to zero-rate chicken faced challenges around product definition and regulatory oversight, Breitenbach acknowledged that "government concerns about potential abuse of these definitions were noted.”

"Sapa is actively working to ensure this submission addresses such concerns, aligning with regulatory standards to meet low-income household needs without compromising quality or market integrity.

"VAT-free chicken can act as a material kick-starter for low-income households, feeding South Africa’s malnourished and impoverished citizens," Breitenbach concluded.