Chris Schutte, CEO of Astral, South Africa’s largest chicken producer, has once again supported calls for the removal of value added tax (VAT) from the chicken portions favoured by the poor.
And he said the loss to the fiscus could be made up by stopping the theft and looting from the power utility Eskom, which is said to amount to R1 billion a month.
FairPlay has called for “VAT-free chicken” since 2018, with the need being even more urgent this year because of rapidly rising food costs. Astral supported a 2018 application to the treasury by the SA Poultry Association for the zero-rating of chicken, and has once again come out in favour of the proposal.
A precarious industry
In an article in the latest edition of the Poultry Bulletin, official journal of the local poultry industry, Schutte said the poultry industry was “in the most precarious position in my 35, 40 years of experience”.
“Between global feed costs, the exchange rate, extreme weather and avian flu, farmers are reeling. Over the past three years we have collectively invested around R1.8 billion in growing capacity to uphold our end of the bargain as we promised at the masterplan table.
“Unfortunately the government failed to keep its promise to create an enabling environment, deciding instead to postpone the recommended import tariffs.
“Now on top of that comes load shedding,” he said in a reference to the almost daily power cuts South Africa has experienced this year. Load shedding disrupted slaughter schedules, millions of chickens had to be fed for longer and the market did not want the larger and heavier chickens.
As a result Schutte said “the poultry industry, pouring money into diesel for generators, sees its paper-thin profit margins disappear into the red.”
He said Astral was currently subsidising consumers by about R2/kg, because it knew people were struggling, but that could not continue.
“The industry might have to scale down production to control costs. That would lead to job losses. Food security will suffer.”
Turning to the issue of VAT-free chicken, Schutte said chicken was an essential part of South Africa’s nutritional needs.
“We support the renewed call for the VAT exemption of chicken, as the animal protein that makes the most sense for the majority of our population. Any politician who really cares about people’s health would have to agree that tinned fish, currently the only animal protein in the VAT-free basket – is not what South Africans need.
“Chicken – a whole fresh chicken, straight off the production line, or a frozen whole chicken, or 2kg of IQF – belongs in that basket, for its nutritional value, its affordability, its sustainability.”
There would not be a direct benefit to the industry, but it would help the consumer. Indirectly farmers might benefit from increased demand for cheaper VAT-free chicken, which could stimulate the market.
“And then, maybe, the investments that were made can be kick-started into production,” Schutte said.
He stressed that Astral was not calling for processed chicken to be excluded from VAT, but only the primary product.
The last time Astral had called for VAT-free chicken, it was asked about the R2 billion to R3 billion the fiscus would lose because of the VAT exemption.
“As for where to find the extra money – there is the billion rand that is said to be stolen at Eskom every month. If theft and misappropriation was stopped, the funds would be there,” he said.