Business Poultry investors cry fault over unofficial embargo on exports
September 21, 2024
New tax rules, rising import costs, security concerns pushing investors out
The poultry industry is up in arms over a government policy prioritizing domestic supply over exports to neighboring markets at a time when new tax laws, forex rules, and security concerns are raising costs and pushing producers to consider shutting down their farms.
“The government has basically barred us from exporting chicken and eggs. It has laid down directions that domestic demand must be fulfilled first, and it’s been almost impossible to export,” said Zinaw Tsehayneh, general manager of the Ethiopian Poultry Producers and Processors Association.
The majority of commercial poultry farms are situated near Bishoftu, Adama, and the outskirts of Addis Ababa. Security concerns mean these farms struggle to send their products into regional markets, leaving them to vie for space in the increasingly saturated markets they still have access to.
Zinaw claims that poultry farms are struggling to make ends meet.
“We must find new markets. We must export to new niche markets in neighboring countries. But bureaucratic hurdles make it very difficult to export,” he said. “We’ve repeatedly requested all relevant government offices to permit us to export but there has been no response.”
The lobby group he leads represents over 150 large-scale poultry farms.
Recent changes to tax laws have created disruptions in the poultry and livestock industries as overhead costs skyrocket following the removal of value added tax (VAT) exemptions for animal feed and other inputs. Prices for imported inputs have also been surging as a result of the foreign exchange market liberalization.
The recently amended VAT proclamation scraps animal feed from the list of commodities that are exempt to the 15 percent tax, and livestock and poultry farms have since responded by shifting the added cost onto consumers but even that has not worked, according to Zinaw.
“There was a large surplus in poultry and egg production right around the time the new VAT rules were introduced [in June], particularly as the industry was preparing for the New Year holiday market,” said Zinaw. “Poultry farms were unable to shoulder the surging costs for animal feed and were unable to feed their chickens.”
He disclosed that many farms took to culling their animal stocks as a way to cope with the rising costs, while others have begun shutting down operations.
The government’s decision to float the currency in late July has also had an impact on the industry as costs for imported feed supplements, known as pre-mix, surged. Domestic prices for animal feed inputs such as soybean, maize, and others have also risen.
“Poultry farm investors have incurred over 292 million birr in losses this year alone,” said Zinaw. “Large commercial farms are literally killing chicks because they cannot feed them. Small poultry farmers, who used to source different breeds from the large farms, no longer are.”
This is leading to supply constraints, pushing up final prices for consumers.
Last month, the Ministry of Finance had summoned livestock investors to hear feedback on the new VAT rules.
“Unless animal feed is exempted from VAT, the livestock investment sector will cease to exist. Prices will soon double. If it continues this way, prices for eggs and chicken will double very soon,” a participant told Finance officials during the discussions.
Zinaw says his lobby group’s efforts to reach out to the ministries of Finance and Agriculture have not yielded responses.
“The VAT proclamation and directive have already been approved. It’ll take time to study the impacts and revise the legislation. It is likely that the problem will worsen,” he said.
Feeds costs constitute over 80 percent of expenditures on a poultry farm. Zinaw says, despite the recent surges, domestic retail prices for chicken and eggs are still too low to cover these costs. His lobby group wants to see the government allow exports as a way to ease the burden.