Pilchards more popular because chicken isn’t VAT-free

As chicken becomes more expensive in South Africa, low-income consumers are switching to pilchards for affordable food.

This is the conclusion drawn in a Daily Maverick article on the latest results reported by Oceana, the country’s largest fishing company. Oceana says its Lucky Star canned pilchards are selling in record numbers.

“It’s a sign of tough times for consumers back home as they turn to tinned pilchards as a more affordable form of protein,” the Daily Maverick reported.

“Fresh chicken, once deemed ‘affordable’, has now become a ‘luxury’ item out of reach of many.”

Oceana’s profits more than doubled and the fishing company’s shareholders were rewarded with a huge increase in the interim dividend.

Poultry producers, on the other hand, are battling, as shown by the latest results from South Africa’s largest poultry producer, Astral Foods, where profits were slashed and no dividend was declared. There are big boulders on the road to prosperity for chicken farmers, including high input costs, poor infrastructure, avian influenza and the increasing severity of power cuts.

Astral CEO Chris Schutte warned that government failings added to chicken producers’ costs and pushed up the cost of food for vulnerable communities. Oceana’s results show how those communities are reacting.

There is one notable difference in the pricing of chicken and pilchards. Pilchards are exempt from South Africa’s 15% value added tax (VAT), while consumers must pay that extra 15% for every piece of chicken that they buy.

FairPlay has repeatedly stated that chicken prices could be reduced immediately if the government removed VAT from the chicken products which have been a staple for low-income households.

Oceana states that less than 10% of their pilchards come from South Africa. Chicken production is a massive local industry, employing more than 50 000 people directly and supporting probably as many indirectly. Chicken feeds the nation, accounting for 66% of South Africa’s meat consumption.

Rapidly rising food prices have made the need for “VAT-free chicken” all the more urgent.