Poultry producer Astral has expressed doubts about the likelihood of chicken products being exempted from VAT as the National Treasury reviews its list of zero-rated items.
The SA Poultry Association has long advocated for certain chicken products, such as frozen and offal options, to be zero-rated to help alleviate financial strain on low-income households, according to Astral.
Astral said the association believed such a move would boost both the poultry industry and consumer welfare, projecting a potential 10% increase in sales if VAT exemptions were introduced. However, Astral said the revenue loss for the SA Revenue Service (Sars) was likely to hinder any progress on this proposal.
“This exemption could significantly aid the growth of the local poultry industry. Unfortunately, the loss in revenue for Sars will be severe and the likelihood of certain chicken products being exempt remains slim,” the group said.
The poultry industry, which employs 146,000 people, plays a critical role in ensuring food security and economic stability. However, challenges such as rising imports, global trade dynamics and domestic financial pressures persist.
According to Sas Kasselman, MD at Grainfield Chickens, SA consumes 23-million chickens weekly, 19-million of which are locally produced. Chicken accounts for 49% of animal protein consumed, far surpassing beef at 26%. On average, South Africans consume 36kg of chicken a year.
In August, SA imported poultry products worth R457m, primarily from Brazil, Spain and Argentina, while exporting R115m, mostly to neighbouring countries such as Lesotho, Mozambique and Botswana, according to the Observatory of Economic Complexity. This resulted in a trade deficit of R342m.
Exports increased by 4.25% compared to August 2023, driven by increases in shipments to Mozambique and Botswana. Meanwhile, imports grew by 56%, led by higher volumes from Argentina and Australia.
Despite the strong consumer demand for poultry as an affordable protein source, Astral said price increases in individually quick frozen chicken remained challenging for the financially strained majority, Astral said.
According to Astral, SA is affected by two issues. The group said first the government imposed anti-dumping duties on frozen chicken imports from countries like Brazil and the US in August last year to protect the local poultry industry from unfair competition.
While some raised concerns about potential shortages due to avian influenza outbreaks in major poultry-exporting countries, Astral said the SA Poultry Association successfully argued there was no threat to domestic supply. The duties have helped stabilise the local market, though poultry imports remain volatile.
“Industry players, together with the SA Poultry Association, made a strong case stating that there were not going to be any shortages, which stemmed from some of the imports. Throughout the reporting period, poultry imports experienced notable fluctuations.”
The second issue affecting SA is its greylist status. The group said although progress had been made to improve laws and regulations, significant issues remained. Being on the greylist means stricter financial checks, which could discourage foreign investment and slow down economic growth.
“SA has made progress in addressing some of the Financial Action Task Force’s concerns, particularly in enhancing its legal and regulatory frameworks. However, significant work remains to be done. The greylisting has implications for SA’s financial sector, including increased scrutiny and due diligence requirements for transactions, which can affect foreign investment and economic growth for SA,” Astral said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.