Red-meat body cries foul over VAT cuts

Producers of red meat have denounced Agriculture and Land Affairs Minister Lulu Xingwana's proposal to scrap value added tax (VAT) on poultry meat products as anticompetitive, saying it could lead to the demise of the red meat industry in SA.

Red Meat Industry Forum chairman Dave Ford said yesterday the industry would take whatever action was necessary to protect itself, including litigation, if the government pressed on with what he called a discriminatory approach to zero-rating basic foods.

“That 14% (reduction in price) is not achieved from any competitive advantage, but from the discriminatory exclusion of VAT,” said Ford.

Xingwana announced the proposal in response to the presidential working group on agriculture's recommendation last month for VAT to be scrapped on sorghum, baby foods and chicken. The intention was to provide poor people with relief from high food prices.

Consumption of red meat rose sharply (14,8%, or 90000 tons) in the past four years to 635,000 tons a year, while chicken and eggs accounted for 57% of the consumption of animal protein. Animal protein producers are all under pressure with the cost of feed and other inputs rising sharply on global demand for grains and energy.

South Africans eat an average of 60kg of animal protein a year compared with 120kg in the US. Red meat sells for about double the price of chicken in SA. Ford said it was a misconception that red meat was consumed exclusively by wealthier people. “In fact, a lot of the protein needs of the poor come from red meat, such as offal, stewing beef, forequarter cuts and polony.

“This simplistic approach of reducing VAT on chicken will be to no one's benefit. The whole basket of foodstuffs consumed by the poor needs to be considered to make a significant impact on their plight, and that includes other protein sources such as red meat and red meat products,” said Ford.

The benefits of VAT zero rating would apply to all consumers, and not only the poor, which would affect the whole spectrum of the market, Ford said.

The implications were that chicken could replace red meat and the red meat industry could simply disappear.

Although about 80% of beef was produced on feed lots, he said the industry was linked inextricably to grass-fed animals produced in rural areas.

“About 75% of the country's surface area is unsuited to any form of agriculture except for the production of red meat,” Ford said. “The people who would be the hardest hit by what would amount to a 14% reduction in the value of their herds would be small herders in the poorest rural areas.”

South African Poultry Association CEO Kevin Lovell said the proposed zero rating of chicken was not necessarily anti competitive.

“People were buying less protein anyway. And at half the price of red meat, they are getting the same nutritional value from chicken.”

Lovell nevertheless called for a zero rating on all basic foods, and not just on those proposed by the minister, as it did not reflect the consumption pattern of the poor.

Source: Business Day

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