What exactly is at stake in the duty debate?

By Francois Baird

FairPlay believes that postponing anti-dumping duties on five countries found to have dumped bone-in chicken portions in South Africa is wrong, and it will invite a deluge of dumped imports for the next year.

South Africa has to fight for its markets and its jobs – as all other countries do. By surrendering our agricultural markets to Brazil or the EU we lose job opportunities, we lose investment, we become less competitive, we jeopardise the livelihoods of thousands of small farmers and we risk our country’s long term food security. None of these are in our national interest.

The strange case of disappearing duties

Anti-dumping duties were recommended against Brazil and four EU countries – Denmark, Ireland, Poland and Spain. South Africa’s trade regulator, the International Trade Administration Commission (ITAC), found that the five countries had dumped bone-in chicken portions in South Africa, causing harm to the local poultry industry.

The final decision rests with the Minister of Trade, Industry and Competition, Ebrahim Patel. Mr Patel agreed with ITAC that dumping was proven and that anti-dumping duties were warranted. He agreed with the duties recommended by ITAC – but postponed them for 12 months.

There is no information yet about the level of duties that would have been imposed on the five dumping countries. These five-year duties would have replaced provisional anti-dumping duties that were in place for six months to June 2022. The provisional duties on Brazilian producers ranged from 6% to 265%.

In postponing the tariffs, Minister Patel has undermined due process and is condoning the wrongful conduct of the dumpers. This creates uncertainty in government’s commitment to upholding the rules, an expectation that small and big businesses rely on when deciding to invest and hire more people.

Anti-dumping duties are not protectionist

FairPlay points out that anti-dumping duties are not tariffs for protection of a local industry; they are punishment for breaking World Trade Organisation rules on trade, to which South Africa, the USA and Brazil are all party. Anti-dumping duties help to create a level playing field and fair competition.

Brazilian bone-in chicken portions, mainly leg quarters, are also subject to a 62% general duty. This applies to all countries except the European Union and South Africa’s neighbours. This general duty is not affected by Mr Patel’s decision, and remains in force.

South Africa’s poultry industry has had to contend with a massive amount of chicken dumping over the past decade and more.

Dumping has caused industry contraction, hindered expansion and cost thousands of jobs.

A 2019 survey by the SA Poultry Association (SAPA) showed that 47% of 860 small poultry farmers they spoke to went out of business.

Nine countries are dumping chicken

Had the anti-dumping duties been implemented against the five countries involved, it would have brought to nine the number of countries against which South Africa has secured anti-dumping duties. Anti-dumping duties remain in place against the United States (since 2000), and Germany, the Netherlands and the United Kingdom (since 2015).

The suspended duties resulted from the poultry master plan, signed in 2019. The plan aimed to expand the local poultry industry, curtail imports and create nearly 5 000 jobs. It also promised to “act decisively” against illegal trade and dumping.

Consumers don’t benefit from dumped imports

Minister Patel believes that suspending anti-dumping duties will give consumers cheaper chicken for the next year. He’s wrong.

FairPlay’s Special Report last year highlighted research by agricultural economist Prof Johan Willemse in 2021, who found that “cheap prices of frozen portions are not passed on to consumers”.

“The argument by meat importers that they are providing cheap meat to poor consumers has so far not been substantiated. The price of frozen chicken thighs was for example reported in June as R14/kg, but the domestic price was approximately R75/kg,” he wrote.

“The available information indicates that products are priced slightly lower than the price of the locally produced product.

“This assures fairly good profit margins for importers, and at the same time it imposes downward pressure on the prices of local producers.”

Prof Willemse also pointed out that chicken imports displaced some R4.6 billion of South African grain which would have gone to feed an equivalent amount of local chickens.

“It is clear that imports of broiler meat into South Africa, below the cost of production and with little evidence that lower prices are passed on to consumers, adds up to a large net cost to our national and rural economies,” Prof Willemse said.

FairPlay has repeatedly urged government to remove the 15% value added tax from the chicken portions most consumed by low-income households, and on poultry feed.

This will immediately decrease chicken prices for consumers and input costs for small poultry farmers.