SA’s poultry industry has warned that prices will surge exponentially if the government does not move to zero-rate chicken, as the sector is hamstrung by intensified load-shedding.
Preferred by many South Africans as the main source of protein, chicken has been in short supply in recent weeks as fewer chickens are being slaughtered as a result of power outages that have only intensified in recent weeks.
Chair of the SA Poultry Association Izaak Breytenbach told Business Day that the effects of load-shedding are devastating for the sector’s operations as both large and small scale farmers grapple with high input costs that have pushed prices of chicken up about 17% in 2022. Local producers have also been competing with an influx of imports flooding the market.
Explaining that poultry producers run 24-hour operations and slaughter 3-million chickens a day, he said during every hour there is no power, losses are being incurred.
“Birds are standing on the farms but we can’t slaughter them when there is no power, which is what has been contributing to the shortage of chicken,” Breytenbach said.
The shortages are being felt by fast food restaurants such as KFC, and Breytenbach warned that they are now spilling over to the retailers and the wholesale trade.
“We are concerned about further price increases owing to load-shedding, which the producers will have to pass on to already cash-strapped consumers,” he said.
Estimating that the power outages are costing the sector at least 75c per kilogram to mitigate, Breytenbach said previous increases were directly attributable to rising input costs. But the upcoming price surge will be motivated purely by load-shedding disruptions.
François Baird, chair and founder of Fairplay, a not-for-profit trade movement, said the government needs to act quickly to ensure food security for millions of citizens and one sure way of doing so would be to remove VAT from chicken products.
“Zero-rating chicken would bring immediate relief to consumers, who are struggling to afford the protein source,” he said.
Fairplay, alongside other stakeholders, made submissions in 2018 to parliament to exempt certain cuts of chicken meat from VAT, but little has come of it. However, fresh calls for the tax to be struck off are being made.
ENS Africa tax practitioner Charles de Wet said despite numerous investigations into the need for zero-vat chicken, there has been resistance from the Treasury to add chicken to the list of items that are not charged VAT.
“It is even more relevant now than in 2018 to slash VAT given the state of the economy and load-shedding,” he said. Part of the problem is getting all parties to agree to which chicken parts — on the bone or hearts and livers — should be added to the list in a way that will be beneficial for all.
When contacted for comment the Treasury asked for two days to respond to queries. It had not yet responded by the time of publication.
Last week agriculture, land reform & rural development minister Thoko Didiza met with leaders of the agriculture sector to assess the effects of load-shedding on business activity and plans for the sector. Stakeholders called for the establishment of a sector task team comprising the government, industry participants and energy specialists to monitor the effects of load-shedding.
Meanwhile, producers have decried the move in 2022 by the department of trade, industry & competition to suspend tariffs on chicken imports for 12 months to ease pressure on consumers.
“We have not seen a material effect on decreasing prices after the suspension,” said Breytenbach, adding that the poultry association is fully behind the VAT-free campaign as it will bring “much-needed reprieve to consumers”.
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