Chicken Industry

Feathers fly over proposed duty tariff hikes on chicken imports

Reproduced courtesy of The Citizen. First published on 18 April 2019. Article by Simnikiwe Hlatshaneni. Access the original article here

It is claimed that the increase would make chicken 32% more expensive, but the SA Poultry Association says imports are getting harder to compete with.

Poultry importers have upped the ante in their fierce lobby against proposed duty tariff increases, claiming this would make chicken 32% more expensive for consumers.

This claim by Emerging Black Importers and Exporters South Africa was backed by the South African Consumer Union (Sacu) during a joint press briefing yesterday.

The groups outlined the submissions they had made to the International Trade Administration Commission of South Africa (Itac) against an application by local producers to have duties on bone-in cuts increased from 45% to 82%. The application was made by the South African Poultry Association (Sapa), which represents the country’s largest broilers.

Sapa claims the current duties failed to make up for the unfair trade posed by the fact that international producers such as those in Brazil had considerably lower production costs, thanks to substantial government subsidies, making imports harder to compete with.

According to the Bureau for Food and Agricultural Policy’s report, Key Fundamentals Underlying the Crisis in the South African Poultry Sector, consumers will pay the ultimate price for duty tariff increases.

It suggested that, based on the effect of tariffs on individually quick-frozen (IQF) wholesale prices, it could be presumed that for every 10% increase in the IQF prices due to duty tariffs, the consumer could end up paying 4.7% more for the product.

Importers claimed this meant that the proposed tariff increases could hike up prices by as much as 32% for boneless chicken and by over 21% for bone-in chicken.

Chairperson of Sapa’s Broiler Organisation, Marthinus Stander, vehemently refuted the claim that their proposed tariff hikes could increase consumer chicken prices by 32%, calling it uninformed and unsubstantiated.

“A researched report done by an independent economics-based consulting firm on the potential price effect of said tariff application was recently submitted to Itac.

“The numbers came in significantly lower than the association’s claim. The report also found that sufficient competition exists between local producers and this, together with the competition created by the big retailers, will keep prices in check,” he said, adding that increases in local production would be more beneficial for the economy.

“These benefits to SA far outweigh the potential and marginal price increase associated with better protection against portion dumping. Imports are already bigger in volume than SA’s biggest producer and should uncontrolled dumping win the war, consumers will be at the mercy of importers, with prices spiralling out of control.”

Sacu chairperson Dr Cliff Johnson suggested that the real effect of the tariff hikes could be even more dire than the suggested price hikes. He said it could lead to lower demand in the market because the poor, who were the biggest consumers, would be left with no choice but to buy and eat less food.

“Chicken is the cheapest source of protein on the market and for many consumers, especially the poorer and rural consumers, this is the sole source of protein,” he said.

“The statistics over years show that what we call administrative prices – all the important things like fuel and electricity – have increased substantially above inflation and food prices have increased, which has caused a lack of demand. People usually have to sit close to the end of the month with no food or minimal food, and if you increase the price of chicken, people will simply eat less because there is no money.”

Nontwenhle Mchunu, founder of local chicken importer Mkabayi Group, added that local producers were the anti-competitive party, saying the only market allowing for smaller and emerging industry players was in imports.

“Those who control the industry are deliberately keeping out black participators,” she said. “Instead of trying to shut out our trade partners, we should be strategic in developing mutually beneficial relationships with them.

“Instead of government protecting local industry, it should be investing in the local industry to gear it up to expand and participate in the export market.”

But according to Stander, the local poultry industry has been instrumental in enabling growing numbers of emerging farmers with technical and other support, and having already assisted 70 black farmers to become landowners.

“The competitiveness and sustainability of poultry farming and production is largely driven by scale. In simple terms, big companies can produce cheaper chicken. There are enough big producers in SA to create the desired competition and at internationally competitive pricing.”