The approval of rebates on chicken imports has been denounced as unjustified and damaging by South Africa’s poultry producers struggling to recover from last year’s losses, but will be welcomed by chicken importers, who stand to profit handsomely from the rebates.
The regulator, the International Trade Administration Commission (ITAC) has confirmed to FairPlay that 65 permits for import tariff rebates have been issued for the first quarter of 2024. This is in terms of their calculation last year that there would be shortage of 170 000 tonnes this year, and they have divided this into quarterly quotas of 43 000 tonnes.
The move has mystified poultry producers, because the approval of rebates permits appears to conflict directly with the requirements set out by the government and by ITAC. These are that rebates are to be granted only if there is a shortage of chicken on the local market, and then only if that shortage is caused by avian influenza (bird flu).
Despite ITAC’s calculations, it is clear that neither condition applies at the moment. Bird flu outbreaks have abated and there is no shortage of chicken because the industry imported 150 million hatching eggs to ensure supply. There is currently a surplus on the local market, and prices dropped in January as usual.
ITAC says that it and the industry use different methodologies to calculate a chicken shortage. The evidence on the ground suggests that the SA Poultry Association (SAPA) is right that ITAC has got it very wrong.
The stage is set for a battle (and possibly a legal battle) about the calculations, whether or not there is a shortage, and the reasons for approving import tariff rebates that the market does not need.
There’s politics behind this, says FairPlay
FairPlay suspected political interference from trade and industry minister Ebrahim Patel’s department.
“There can be no credible reasons to justify approving these permits, which will result in a new flow of unwanted and unnecessary chicken imports, putting further pressure on the distressed local poultry industry,” FairPlay founder Francois Baird said in a statement.
“This is an election year, and the government will claim it is acting in consumers’ interests, despite the fact that no importers have publicly committed to passing on the savings from lower import tariffs. ITAC is supposedly independent, even though it is part of Patel’s empire, but its imperviousness to pressure from above will be questioned.”
Baird said the losers would be South Africa’s struggling poultry producers, struggling to recover from last year’s losses due to bird flu, rising feed costs, electricity shortages and other infrastructure failures.
“What they do not need is a government-sponsored new flood of chicken imports that will cost them revenue and market share, and put their recovery at risk. Patel has put businesses and jobs in danger.”
FairPlay hoped there would be a legal challenge to these rebates approvals.
“If ITAC cannot persuade a court of law that there is a shortage of chicken, the rebate permits stand to be nullified.
“That, in turn, would confirm interference in administrative decisions to benefit politicians at huge cost to the country’s chicken farmers and rural jobs,” Baird said.
Instead of supporting chicken jobs for foreign poultry producers, the government should do everything possible to support local poultry farmers to produce the best, cheapest chicken possible in South Africa for all South Africans. This will add local rural jobs, and help poor people to eat chicken for a healthier South Africa.
Another wrong prediction from AMIE
Chicken importers will be doubly pleased with their permits for import tariff rebates. Firstly, the rebates will give importers a fat increase in profits. Secondly, they will be happy that their chief was wrong to predict that the rebates wouldn’t happen.
Paul Matthew, outgoing CEO of the importers’ association AMIE, has been wrong about a lot of things. In his attacks on import tariffs, he’s made inaccurate predictions or claims about a jobs bloodbath, price increases, and chicken shortages.
Last month he complained in Business Day that the rebates for which AMIE had campaigned were “a sham” because the requirements for permit approvals has been set so high that “it is unlikely many rebates will be granted”.
To be fair to Matthew, that opinion was shared by many, including FairPlay. Like Matthew, we believed that, when the two main requirements – a shortage of chicken which had to be caused by bird flu – were both absent, no rebate permits would be issued.
We were all wrong and, contrary to the government’s own conditions, tariff rebates have been approved for some 45 000 tonnes of chicken imports. Harassed local chicken producers will suffer further from a spurt of subsidised imports and jobs may be at risk.
Importers, however, will be anticipating a boost to revenues and profits. With the money about to roll in, they won’t mind that their boss got this one wrong.
