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Africa|Financial|Logistics|Operations
Africa|Financial|Logistics|Operations
africa|financial|logistics|operations

Potential Agoa expulsion would add to South Africa’s growing chicken price problems

Hume International logistics and operations director Roy Thomas

Under AGOA, South Africa is currently exempt from a R9.40 /kg of chicken anti-dumping duty for imports from the US

29th June 2023

By: Cameron Mackay

Creamer Media Senior Online Writer

     

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Food importer Hume International logistics and operations director Roy Thomas stresses that the looming threat of South Africa’s expulsion from the African Growth and Opportunity Act (Agoa) trade agreement with the US threatens to push the industry over the edge, risking meteoric rises in local chicken prices.

This comes in addition to the fact that South Africa’s chicken supply and its crucial import industry are already in a tenuous position as a result of the global bird flu outbreak.

Demonstrating the importance of the white meat to local tables, South Africans consume about 1.8-million tonnes of chicken each year, or an average of 33 kg per person, Thomas points out.

This represents close to 60% of all meat consumed, making chicken one of South Africa’s most important proteins and staple foods.

But US lawmakers’ recent request to move the upcoming Agoa Summit out of South Africa hints at the country potentially being excluded from the Agoa agreement before it reaches its next renewal date in 2025. This is an event which could prove catastrophic, warn experts. 

This comes as the US has expressed concern about South Africa’s neutral stance on Russia’s war in Ukraine.

“The effect of South Africa’s expulsion from Agoa on local poultry prices would be immense, and the situation is far more dire than many realise,” states Thomas.

He adds that South Africa receives close to 70% of its chicken imports from Brazil, making it by far the country’s largest supplier.

Brazil, however, is under extreme threat from a bird flu outbreak, having already detected several cases of the disease among wild birds. An outbreak among its commercial flocks would devastate import supplies, forcing greater reliance on the US and Europe, both of which have likewise experienced bird flu outbreaks, he notes.

“The Department of Agriculture, Land Reform and Rural Development clearance process can take several months, and the problems don’t end there.

“When the International Trade Administration Commission of South Africa imposes its planned 265%, 158.4%, 96.9%, 85.8% and 67.4% import tariffs on Brazil, Ireland, Poland, Spain and Denmark, respectively, on August 1, South Africa could run the risk of alienating many of our major trading partners,” warns Thomas.

He further notes that, if the US pulls South Africa from the Agoa agreement, imports from the country’s second-largest poultry importer may also become too expensive for local businesses and consumers to bear.

Thomas speculates that there would not necessarily be an observable chicken shortage in South Africa, but rather that prices would outpace most South Africans’ wages.

Under Agoa, South Africa is currently exempt from a R9.40/kg of chicken antidumping duty for imports from the US. A price increase of this magnitude is sure to severely affect local chicken prices.

He also notes that imports generally serve as a counterweight to local prices by introducing competition, which ensures that all market participants maintain fair prices, while still making a profit.

“The trouble with shortfalls in import supplies is that the local market may then lose its ability to regulate the price of locally produced chicken against that of international producers, potentially seeing local producers significantly boosting their prices”.

He stresses that delays in approvals for suppliers from countries where there was bird flu, unreasonable antidumping duties placed on key trading partners, and a possible exit from Agoa could result in some of the worst chicken price-inflation experienced in South Africa.

He also points out that, ultimately, the largest risk is to “local pockets”.

“Government should not underestimate the importance of Agoa. It also needs to become more proactive in managing growing risks to chicken supplies by modifying its bird flu protocols, and only banning imports from individual States or areas impacted by bird flu rather than blocking imports from entire countries.

“Likewise, it should seriously reconsider implementing new duties at a time when vulnerable households are already at the financial brink,” concludes Thomas.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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