Requests by the Association of Meat Importers and Exporters (AMIE) to suspend existing tariffs on the import of chicken in South Africa, and not impose any new tariffs for the next three years, is “superficially appealing, but economically dangerous”, says broiler organisation South African Poultry Association (SAPA) head Izaak Breitenbach.
“Consumers will be the ultimate losers if tariffs on chicken imports are removed,” he states, saying such a move will have “no impact at all” on the main drivers of food price inflation, which are the surge in the cost of feed, fuel and fertiliser prices, as well as the war in Ukraine.
These added inflationary pressures come at a time when prices were already rising because of the impact of the Covid-19 pandemic on global trade and the price of grains which make up nearly 70% of the input costs for poultry producers.
SAPA believes removing the tariffs will only serve to benefit the importers AMIE represents, whose revenues and profits have been hit by decreases in import volumes over the past three years.
Further, and crucially, Breitenbach says removal of tariffs will threaten the South African poultry industry, which is recovering from the damage caused by decades of unfairly priced, dumped and “predatory” chicken imports.
The biggest impact will be felt by small-scale independent producers, quite often family-owned enterprises which are the backbone of rural communities, he says.
South Africa had been flooded with dumped and predatory chicken imports in the years to 2018, SAPA states.
“The removal of tariffs will only strengthen the hand of importers to gain market dominance and pricing power so that they can drive out the competition from local producers,” he says.
Breitenbach points out that the poultry sector master plan was put in place in 2019 to bring about a recovery in the industry, aiming to curb imports and expand local demand and local production for the South African and export markets, creating nearly 5 000 local jobs.
Already, South African poultry producers have invested nearly R1-billion to create 1 268 jobs as part of their Master Plan commitment.
“The South African poultry industry is a R50-billion strategic national industry and asset, responsible for more than 100 000 jobs directly and indirectly, [and is] vital for food security.
“Putting this globally competitive industry at risk is not in the best interests of consumers or the country,” he says.
Breitenbach explains that the domestic poultry industry has, for many decades, supplied South African consumers with safe, high-quality and affordable chicken. “If the industry were to be forced into decline, or to collapse, not only would thousands of jobs be lost in the poultry supply chain, but importers would be free to raise prices to any level they choose.”
He notes that chicken is South Africa’s most popular and most affordable source of meat protein, especially for low-income households. “It is local producers who will ensure that this continues, not importers.”
However, Breitenbach says that, while AMIE contends that the local chicken industry is unable to meet local demand, the actual reason behind domestic production constraints is predatory imports, which have absorbed much of the recent growth in demand.
“In accordance with the master plan, the industry has already expanded capacity. Because of the impact of the pandemic, and now the Ukraine war, some of this capacity lies idle,” he says.
Such idle capacity can rapidly be put to use when demand increases, including by replacing some imports, Breitenbach states.
AMIE also contends that tariffs, such as the increase to 62% for bone-in portions which came into effect in March 2021, are unsustainable. “The fact is that provisional anti-dumping duties were imposed in December because foreign producers have been selling chicken portions to South Africa below their cost of production, and below the price the product is sold for in their home market,” Breitenbach explains.
Even after the 62% tariff, landed prices from some of these countries are still below South African producer prices, says Breitenbach. “That is not fair trade.”
Meanwhile, in terms of South African producers exporting poultry products, he says AMIE is aware of the obstacles and barriers to exports and that poultry exports cannot “suddenly be switched on”.
In this regard, Breitenbach says SAPA is working with local producers and government to address the problems and to increase poultry exports. “Progress has been slow, but we expect some good news later this year.”
At present, the domestic industry has made the decision to export breast meat to the European Union, and the process of accrediting South Africa for the export of cooked and partially cooked product has started. “This will increase the composite income from a whole chicken and put the industry in a position to put even more competitively priced chicken meat on the plate for South Africans,” he says.