Zero‑rating selected chicken portions for value-added tax would have a negligible impact on total tax revenue, is financially viable, and would not require an increase in the VAT rate.
Net VAT collections in 2024/25 amounted to R459 billion. The combined cost of zero-rated frozen bone-in and fresh and frozen offal of about R5.8bn represents roughly 1.3% of net VAT collections and approximately 0.3% of total tax revenue (R1.8 trillion).
These calculations were done by legal and tax firm ENSafrica in a report on the fiscal impact of zero-rating certain chicken portions. Charles de Wet, ENSafrica tax executive and indirect tax specialist, says the figures are not far off from what National Treasury presented to the Standing Committee on Finance last year.
De Wet was speaking during a media round table hosted by advocacy movement FairPlay on the submission by the South African Poultry Association (SAPA) to include VAT-free chicken in the Budget on 25 February.
The government wanted to increase the VAT rate from 15% to 17% in last year’s chaotic Budget. As a compromise, Finance Minister Enoch Godongwana proposed the expansion of food items in the zero-rated food basket. Only offal made it onto the list.
However, the proposed rate increase was vehemently opposed from all sides, and when it was scrapped, so was the expansion of the zero-rated list. Godongwana and National Treasury maintain the basket can expand only if the VAT rate is increased.
The VAT cost
The January Household Affordability Index of the Pietermaritzburg Economic Justice and Dignity group shows that food subject to VAT in the household food basket increased by R122 year-on-year from R2 538 in January 2025 to R2 660 in January 2026.
Foods subject to VAT make up 49% of the total cost of the household food basket and came to roughly R350 of the total basket in January 2026. De Wet’s calculations shows that R90 of the R350 is spent on chicken products consumed by poorer households (feet, gizzards, and liver).
Izaak Breitenbach, the chief executive of SAPA, says chicken comprises about 66% of all meat consumed nationally. Stunted growth affects nearly 28.8% of children under five, underscoring the link between poverty and malnutrition.
“We must keep in mind what the main objective (with the request for VAT-free chicken) is. The objective is not to hand money back to the consumer. It is to address nutrient deficiencies within our young population specifically, and to prevent cognitive stunting.”
The chicken consumption patterns of lower- and higher-income households differ significantly. Better-off consumers tend to buy fresh chicken and further processed chicken, whereas poorer consumers buy frozen bone-in chicken and offal products.
By limiting the definition to bone-in and fresh and frozen offal chicken, the target market will benefit. In its submission, SAPA specifically excluded chicken breasts, fresh chicken, and further processed chicken.
Cheap chicken is local chicken
Breitenbach notes that the poultry industry has expanded significantly since 2019. When the full value chain is included, it now employs about 110 000 people. The sector has also reached a major milestone, slaughtering 23 million chickens a week compared with 19.7 million a week in 2019.
Breitenbach referred to the results from a study done by the Bureau for Food and Agricultural Policy in collaboration with Netherlands Wageningen University at the end of last year.
It showed that South African poultry is the second most competitive industry in the world in terms of competitive and technically efficiency. It overtook the United States and is now just behind Brazil.
The poultry master plan intended to curtail the dumping of cheap chicken into the local market. “We have achieved this … Consumers must remember that the cheapest chicken is locally produced chicken. The more chicken we are afforded to produce, the cheaper we can produce in future.”
De Wet says it is “astounding” that South Africa – as a meat-producing country – still has no meat products included on the zero-rated food list. The only protein is canned pilchards.
Besides an expansion in 2018 when the VAT rate increased from 14% to 15%, the list has remained static for nearly 25 years. “It really is time to revamp it, and it is important to have a meat product included in the zero-rated basket of food items.”
Wide support
Breitenbach says SAPA has received wide support from political parties and trade unions. President Cyril Ramaphosa last year acknowledged that poorer households need relief against rising food costs.
The Democratic Alliance supports VAT-free chicken specifically. The push-back has mainly been from Treasury. De Wet says Treasury’s view is that any relief should be done through existing welfare grants rather than the tax system. “There has been a move away from incentives and exceptions (in the tax system) over time.”
There is also the concern that once the door is open it could have a huge economic impact in the sense that the numbers may be understated, and the cost to the fiscus could be far more than indicated.
“I think the issue is around the decision (whether it is affordable) as opposed to technical implementation,” says De Wet.
According to FairPlay founder Francois Baird, the intervention is administratively simple, economically feasible, and politically achievable. The only remaining challenge is the decision to implement it.
Amanda Visser is a freelance journalist who specialises in tax and has written about trade law, competition law, and regulatory issues.
Disclaimer: The views expressed in this article are those of the writer and are not necessarily shared by Moonstone Information Refinery or its sister companies.
