Ebrahim Patel, South Africa’s Minister of Trade, Industry and Competition, should beware of the law of unintended consequences.
Because he reportedly believed it would raise chicken prices at a time of high food price inflation, the minister has approved – but delayed for 12 months – the imposition of anti-dumping duties against chicken portions from Brazil and four European Union countries.
As FairPlay founder Francois Baird pointed out, applying those duties would have had little or no effect on South African chicken prices. The losers will be South African poultry producers and Minister Patel’s poultry master plan.
The move invites a deluge of dumped imports that would do untold damage to the credibility of both Patel and the master plan he has driven since its inception.
The delay is a “licence to dump” for those five countries for the next year. They know that stiff anti-dumping duties are coming, so the incentive will be for them to ship as much of their surplus chicken portions to South Africa as they can before the gates close.
They can bring it in at whatever impossibly low price they like, and nobody will stop them. The “please dump here” invitation applies only to Brazil at the moment, as all EU countries are prevented from exporting to South Africa because of bird flu out breaks. As soon as those bans are lifted, they will be racing to catch up.
Local producers have invested millions in expanded production on the understanding that imports – and particularly dumped imports – would be curtailed in terms of the master plan. The first to suffer from a new flood of dumped imports would be the small-scale black farmers encouraged by the master plan to set up or grow their businesses.
South African consumers are also unlikely to benefit. Importers have not previously passed on to consumers the benefits of low and dumped import prices. Now Minister Patel has told importers to act quickly because they have a year in which to get even richer.
Minister Patel has been poorly advised. He should “rethink, reconsider and reverse his decision,” Baird said.
If Minister Patel really wants to benefit the poor, he should encourage his cabinet colleagues to remove the 15% VAT from the chicken portions most purchased by low-income consumers.
As FairPlay has been urging since 2018, VAT-free chicken would result in an immediate drop in chicken prices.