Chicken on display for sale in a local supermarket. Picture: Simphiwe Mbokazi/ Independent Newspapers
By Francois Baird
If President Cyril Ramaphosa wants one standout policy success to help address many of South Africa’s ills, he should give full backing to the campaign to remove value added tax (VAT) from chicken.
Ramaphosa set out those maladies in a speech to the National Council of the Provinces (NCOP) last week. He noted that, despite the country’s many successes since the advent of democracy in 1994, it was still beset by poverty, unemployment and inequality.
He highlighted the need for economic growth, job creation, agricultural output and exports, improved education and better health. Noting the huge increase in social grants, which now benefit nearly half of South Africa’s households, Ramaphosa said “the aim must be to move as many social grant recipients as possible into sustainable livelihoods”.
VAT-free chicken can contribute to all of these objectives. It is a pity that Ramaphosa did not single out chicken when he reminded the NCOP of the government’s commitment to expand the basket of essential foods on which no VAT is charged.
VAT-free chicken is a pro-poor proposal, aimed at making nutritious and protein-rich chicken more affordable to lower-income households and to help address widespread malnourishment among the nation’s children.
The proposal is not aimed at removing VAT from all chicken – only the products most consumed by low-income households. The focus is on frozen chicken (whole chicken or pieces) and fresh or frozen offal (chicken heads, feet, livers etc) because these are the products poor people buy.
The move would also have national economic benefits. While these are not the primary objective, they are important considerations when looking at the wider impact of boosting demand for chicken among millions of poor people.
Take economic growth and job creation. The SA Poultry Association (Sapa), which has delivered its VAT-free proposal to government, has estimated that removing VAT from a specified list of chicken products could boost production by up to 10%.
Jobs
There is no estimate of the number of jobs this might create, but a similar expansion following the introduction of the poultry master plan resulted in nearly 4 000 new jobs. Another growth spurt would help reduce the number of jobless, which officially exceeds 12 million.
The poultry industry is the biggest job creator in rural areas, which are the worst affected by poverty, unemployment and malnutrition. Poultry growth would have direct economic benefits for these communities.
Take agricultural output. When the poultry industry grows, the supply chain grows too. Poultry production consumes nearly half of South Africa’s maize crop and nearly all of the local soya production. There would be growth and job creation not only in the grain industry, but in logistics, food processing and exports.
Take health. Chicken feeds the nation. It is South Africa’s most popular meat protein, accounting for 66% of all meat consumed. It is full of the essential vitamins and nutrients needed for our health.
Food prices
The need is huge. In his speech to the NCOP, Ramaphosa noted that nearly a quarter of South African households consider their access to food as inadequate or severely inadequate. More affordable chicken increases access to this essential food source for poor people and children.
An important aspect of health is malnutrition. South Africa has one of the world’s highest rates of child stunting, which results from chronic malnutrition. Stunting afflicts nearly 30% of South African children under the age of five – it limits them physically and often mentally for the rest of their lives.
That means that between a quarter and a third of South Africa’s children may not develop to their full potential. We are starving our future.
The results of stunting include poor educational attainment, low productivity and an increased life-long risk of nutrition-related chronic diseases. That will contribute to the poverty, unemployment and inequality that Ramaphosa wises to address. VAT-free chicken would help reduce the risk that they become a burden to society.
“Children who are stunted are more likely to drop out of school, face poorer health and economic outcomes and have stunted children themselves,” the VAT-free proposal states.
Take education. Healthy children learn better and progress further. A better diet is needed both at home and at schools. School feeding schemes in impoverished areas recognise the importance of what is often a child’s only healthy meal of the day. Chicken is a vital component of those meals.
Take social grants, sometimes punted as an alternative to VAT-free chicken. The VAT-free proposal notes the inefficiencies and corruption in social grant schemes. In addition, there are administration costs for the state and banking costs for recipients.
When the government is trying to wean people off social grants and turn them into productive citizens, VAT-free chicken is an all-round gain.
There are substantial side benefits from a proposal aimed at helping to feed poor people and improving the diets of malnourished children. They help to make a good case even better.
The cost of VAT-free chicken – R4.9 billion in foregone tax revenue – is relatively small. The proposal points out that this comprises only 1.08% of the total VAT collection projected for this year, and an even smaller 0.27% of total projected revenue.
In addition, the government is gaining substantial revenue from anti-dumping duties imposed on chicken imports from nine producer countries. Together with increased tax revenue from growth and job creation through the chicken value chain, this will help offset that loss.
As FairPlay has pointed out in a letter to the Treasury, the benefits are so substantial that South Africa cannot afford not to implement VAT-free chicken. When President Ramaphosa looks at South Africa’s needs, and the economic and social benefits of cheaper chicken, he should agree heartily.
Francois Baird is founder of the FairPlay movement
BUSINESS REPORT