LETTER: VAT is one issue the chicken industry can agree on
Consumers stand to benefit, directly and immediately, from the removal of the 15% VAT on the chicken portions most bought by low-income households
Consumers will be the ultimate losers if tariffs on chicken imports are removed. This has been the thrust of the SA poultry industry’s response to the call by chicken importers for a suspension of import tariffs — a move from which importers would derive immediate benefits.
Since importers first made the call earlier this year the SA Poultry Association has pointed out the flaws in the argument, the damage tariff removal would do to the local industry and the effect this would have on consumers.
Even though trade, industry & competition minister Ebrahim Patel has said it won’t happen, importers have persisted with their call for a three-year suspension of import tariffs.
In his recent article Association of Meat Importers & Exporters (AMIE) CEO Paul Matthew added to previous arguments an unjustified attack on local chicken producers (“Competition is the key to lower food prices”, June 21).
First, the issue of consumers and food prices, on which Matthew bases his plea. The SA poultry industry has existed for more than 100 years and over that time we have ensured the production of safe, nutritious and low-cost chicken for the many South Africans for whom it has become increasingly popular and their main source of meat protein.
We have done so despite a sustained assault for nearly two decades in the form of increasing volumes of dumped and predatory chicken imports. This has caused industry contractions and job losses, and held back expansion as local demand increased.
The industry has worked hard to level the playing field, which is the objective of the tariffs about which importers complain. Import tariffs are also part of the 2019 poultry master plan, which aims to curb illegal and predatory chicken imports, increase local production, increase local job creation, and to increase the local supply for the domestic and export markets.
Removing all tariffs and guaranteeing none for three years would lead to a flood of dumped and predatory chicken imports, worse than we experienced in the years to 2018. Contractions and job losses would happen again, perhaps on a scale sufficient to give importers pricing power. They could then charge whatever they liked, and it is consumers who would suffer.
Matthew contends that tariffs protect “a handful of chicken producers”, clearly aiming at the large commercial operations. In fact, most of the job losses have been because imports put small-scale poultry producers out of business. They are the first to suffer and this would happen again.
In an extraordinary attack on the local industry, Matthew also says the government “cannot count on the commitments from local poultry producers”. He backs this up with a blatant untruth — a statement that during negotiations on the master plan, poultry producers promised the government they wouldn’t raise prices.
That is a commitment we could not and would not make, and no promise has been broken. Certainly there were discussions about keeping price increases to a minimum, which has happened despite huge increases in the cost of inputs such as feed and fuel. I challenge Matthew to produce evidence of his false contention.
SA poultry producers have invested more than R1.1bn to create over 1,300 jobs, and there is more to come. Moreover, for each job created in the poultry industry, another job is created throughout the value chain.
Some of this additional production capacity has lain idle because of the impact of the Covid-19 pandemic and now the war in Ukraine, but we have already expanded production by more than 1-million birds a week as part of our master plan commitment.
Also, in terms of our commitment the industry has so far increased capacity for black farmers by almost 10%. It has provided R343m in finance for black farmers and this will increase to R466m in 2022. Since 2019, R570m has been spent on building poultry houses, and that will increase to R750m by the end of 2022.
The industry is committed to equitable and sustainable transformation, and despite the challenges experienced since the inception of the master plan, the poultry industry is delivering on its commitments.
Importers signed the master plan, and have been complaining about it ever since. Since they are reviewing their participation in the master plan process, it is their commitment that is questionable.
The AMIE contends that local producers can’t meet local demand for chicken. Again, this is untrue — we are ready to increase output as demand recovers, including exploring new export markets.
With government support we are seeking approval to export breast meat to the EU, and the process of accrediting SA for the export of cooked and partially cooked product has begun. We also aim to increase our exports of cooked chicken to the Middle East.
This will increase the composite income from a whole chicken and put the industry in a position to provide SA consumers with even more competitively priced meat.
Import tariffs should remain in place. The SA poultry industry is a R50bn strategic national industry and asset, responsible for more than 100,000 direct and indirect jobs, and vital for food security. Putting it at risk is not in the best interests of consumers or the country.
Where consumers — and the poor in particular — would benefit, directly and immediately, is through the removal of the 15% VAT on the chicken portions most bought by low-income households. We have supported this proposal since 2018, and have presented our arguments to parliament and the public.
The AMIE has belatedly joined the call for the removal of VAT on chicken, though our proposals differ in some respects. This should be an area where we can co-operate and agree, and present to government a proposal that is in the interests of the country, the industry and SA consumers.
Izaak Breitenbach, SA Poultry Association
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