VAT exemption on livestock to stimulate formal trade

Judith Phiri, Business Reporter 

FARMERS have applauded the move by the Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube, to exempt value-added tax (VAT) on the sale of livestock in a bid to restore demand for meat and at the same time promote formal trade in the sector.

The move aims to revitalise the demand for meat and encourage formal trade within the sector. During the 2024 National Budget presentation last year, Prof Ncube announced an increase in the standard VAT rate from 14,5 percent to 15 percent, effective 1 January, 2024. 

Consequently, the prices of meat products surged as producers grappled with the VAT adjustments. 

In his Mid-term Budget and Economic Review Statement on Thursday, the minister highlighted the industry’s decreased demand following recent VAT legislation changes, which now subject live animals and meat to standard rating. 

This decline is attributed to low disposable incomes, stemming from the El Nino-induced drought and heightened informal trading activities. 

“To encourage formal trade, thus restoring demand for meat products, I propose to exempt live cattle, pigs, goats, sheep and bovine semen from VAT. Furthermore, I propose to exempt poultry meat and kapenta from VAT,” he said.

Stakeholders have since praised the scrapping of VAT on livestock, stating that it was a significant milestone poised to inject new vitality into the agricultural sector.

Ministry of Lands, Agriculture, Fisheries, Water and Rural Development Permanent Secretary Professor Obert Jiri said the removal of VAT on livestock was a welcome development which meant more money into the hands of farmers. 

He said it was also coming at a time when the Government had put in place mitigatory measures to save farmers’ livestock that were not spared from the effects of the El Nino phenomenon.

Livestock specialist, farmer and columnist, Mr Mhlupheki Dube said they were happy about the development which showed that the Government heeded to farmers’ plea, as due to VAT buyers were transferring the cost to the livestock farmers. 

He said there was going to be an increase in producer prices, which will benefit livestock farmers. 

“The net effect of the 15 percent VAT on meat products was that there was a drop in producer prices which was affecting farmers. The producer price is the price paid to farmers by buyers for their livestock. The other unintended outcome of the tax was the proliferation of black-market meat outlets,” he said.

“However, with the latest development of scrapping of VAT on livestock, buyers will have latitude in terms of what they can offer farmers in terms of producer prices which might result in its increase, thereby benefiting the farmers.”

Mr Phineas Tshabalala, a livestock farmer from Redleaf Village in Nyamandlovu, Umguza District said the VAT that had been introduced had seen a sharp increase in all meat products.

“When Statutory Instrument (SI) 248 of 2023 was gazetted which saw the introduction of 15 percent VAT on all meat products among other provisions, major movers of livestock products flighted notices to inform customers of price increases of their products and as farmers there were shortcomings for us as well. 

“The removal of VAT on livestock will have several positive implications for farmers and the broader agricultural sector,” he said.

Another cattle breeder in Lupane, Mrs Gugulethu Nyathi said the removal of VAT on livestock will reduce the financial burden on them as farmers. 

“This will lower the overall cost of production and is beneficial for most farmers who are struggling with high operational costs considering the devastating effects the El Nino-induced drought had on our livestock,” she said. 

Poultry farmer Ms Florence Tshuma of Killarney suburb said with poultry meat exempted from VAT, the development will go a long way in reducing costs for them.