VAT-free chicken urgent as food inflation bites

FairPlay is renewing its call for Value Added Tax (VAT) in South Africa to be removed from most chicken portions to help counter the rise in food inflation following the conflict in Ukraine.

The Ukraine war has led to rapid increases in grain and fuel prices, which are already pushing up food prices and will continue to do so.

FairPlay founder Francois Baird said in an article in Business Report that the looming food crisis would lead to hunger and starvation among South Africa’s poor.

“Action is urgent, starting with the removal of VAT from the chicken products that will have the most impact on low-income households”, he said.

“Chicken is South Africa’s most popular meat protein source, and is the food product most consumed by lower income households. That means that zero-rating chicken would directly target the poor, who are most affected by food price rises.”

FairPlay launched its “VAT-free chicken” campaign in 2018, when VAT was increased to 15%. Baird said the arguments for the move remained valid, but now with added urgency because of the rapid impact of the Ukraine war on global food prices.

FairPlay is writing to President Cyril Ramaphosa and to Finance Minister Enoch Godongwana arguing for VAT to be removed from specified chicken products. We are sending them copies of the parliamentary presentation made at the time by the SA Poultry Association (SAPA) setting out how this could be done.

An analysis by consultancy PwC proposed the removal of VAT from what it called “primary chicken” – uncooked fresh or frozen whole chicken and fresh or frozen mixed portions known as Individually Quick Frozen (IQF) chicken. These were the products most consumed by lower-income households.

The definition specifically excludes cooked chicken or fresh or frozen single portions, which are favoured by more affluent consumers.

The 2018 analysis estimates that the cost to the fiscus of removing VAT from these chicken portions would be between R1.2 billion and R1.9 billion. Minister Godongwana’s February budget showed R182 billion in additional tax income, mainly from increased commodity sales.

While the Ukraine war fuelled food price increases, it would also provide South Africa with further additional income from the sales of higher-priced agricultural and mining exports. “That means he has room to move on zero-rating chicken ahead of a looming hunger crisis,” Baird said. 

President Ramaphosa has said the state will use all available levers to mitigate the impact on consumers of rising fuel and grain prices. FairPlay believes removing VAT from chicken is one of those levers.

The VAT-free chicken proposal was turned down in 2018. That should not happen again.