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SA chicken producers in a flap over suspension of anti-...

Business Maverick

TARIFFS

SA chicken producers in a flap over suspension of anti-dumping duties on imported poultry

(Photo: Jamie McDonald / Getty Images)

While chicken importers applaud the suspension of anti-dumping duties, South African chicken farmers say it will hurt job creation, put the local industry at great risk, and could destroy it.

Described as a win for consumers, the government’s decision to suspend anti-dumping duties on chicken imports from Brazil, Denmark, Ireland, Poland and Spain has been welcomed by the SA Meat Importers and Exporters Association (AMIE), but the South African Poultry Association (SAPA) is less than thrilled. It has warned that a failure to replace provisional anti-dumping duties when they expired in June has put the local industry at risk.

AMIE, meanwhile, says the decision shows the government was “putting its citizens first”. 

It’s not the outcome the association had hoped for, as it had previously asked for a three-year moratorium. 

In March 2020, the government raised import tariffs on bone-in poultry products from 37% to 62%, to protect the domestic poultry market. Chicken imports account for 14.9% of all chicken consumed in SA, but local producers have complained for years that cheap chicken was being dumped on South African consumers. 

SA does not produce enough poultry meat to satisfy domestic demand, which is why imports are needed to cover the shortfall in domestic consumption. 

Broiler meat

Broiler meat, the most affordable source of animal protein per kilogram in SA, dominates the livestock sector in terms of production. The Land Bank’s May 2022 Poultry Industry Insight report said that from 2005/06 to 2019/20, broiler meat was consistently more consumed than pork and beef. 

In 2019/20, broiler meat had a per capita consumption of 39.3kg compared to 18.1kg for beef, 5.2kg for pork and 3.1kg for mutton. Poultry meat imports, as a percentage of domestic consumption, decreased from 27.8% in 2018 to 19.8% in 2021. 

The Land Bank’s exposure in the poultry industry as of March 2022 was low — only about 2.2% of its total loan book of just over R25.7-billion. The bank said since SA cannot currently produce mechanically deboned meat (MDM) — used in the production of processed cold meat products such as sausages and polony — there are opportunities in the processing sector of the value chain it could explore. MDM, mostly from Brazil, constitutes about 37% of SA’s poultry imports. 

The Fair Play Movement, a local chicken industry lobby group, says chicken imports had reached a record in 2018, when 566,000 tonnes were imported at a cost of R6.1-billion. In 2019, imports were 5.5% higher than the five-year average from 2013-2017. 

“This is poultry that could and should be produced in South Africa, in local facilities creating local jobs. Instead, local production is being squeezed and jobs are being lost. Chicken is South Africa’s cheapest and most popular form of animal protein, and demand is rising. However, increased demand is being taken up by imports, and local producers are suffering as importers grab market share,” Fair Play said.

The SA Poultry Association had applied for an 82% ad valorem import tariff on bone-in and boneless frozen chicken. Safeguard duties were approved against all EU countries in 2018 at an initial rate of 35.3%. For all other countries outside the EU, a 62% import tariff on frozen poultry portions applied, which was granted in 2020 (up from 37%) and 42% for frozen boneless portions (up from 12%). 

“This action taken by the South African government implies the recognition of predatory and unfair trade in the importation of chicken to South Africa,” Fair Play said.

‘Alive to the plight of the consumer’

The tariff suspension was announced in the Government Gazette on Monday. 

“In making its decision, [Trade and Industry Minister Ebrahim Patel] considered the current rapid rise in food prices in the [Southern African Customs Union] market and globally and the significant impact this has, especially on the poor, as well as the impact that the imposition of the anti-dumping duties may have on the price of chicken as one of the more affordable protein sources. 

“The minister, therefore, decided to suspend the imposition of the anti-dumping duties for a period of 12 months,” the announcement said.

AMIE has lauded the decision, calling it an “exceptional outcome” for consumers, who are under such significant financial pressure. 

“Chicken is the most affordable and therefore vital source of protein for South African consumers, especially those living below the poverty line. This shows that our government, and specifically Minister Patel, are alive to the plight of consumers, and ready to take bold actions to help mitigate the impact of rampant inflation, which is encouraging,” says Paul Matthew, CEO of AMIE.

In April 2022, AMIE had asked the government to consider a three-year moratorium on tariffs on imported chicken to help curb inflation, that existing tariffs be reconsidered, and for all chicken cuts to be exempted from VAT. 

In June, the association wrote to the Finance Minister (as the final decision-maker on the imposition of duties and tariffs), urging him to conduct an inquiry on the imposition of anti-dumping duties. 

“The suspension of additional tariffs on chicken imported from these five countries is a first step in the right direction, and we hope to see more of this sort of action from government in future,” Matthew said in a statement issued on Monday.

“Governments around the world have been slashing import tariffs as a way to help their citizens survive. Mexico, the Philippines and South Korea have removed tariffs on imported goods, including chicken, to curb and mitigate the impact of rising inflation on their people. The US is currently considering scrapping its tariffs on various goods for exactly the same reason.”

Cheap as chips

In June, Izaak Breitenbach from the South African Poultry Association voiced concern about chicken dumping. He told Farmer’s Weekly magazine that Australian chicken thighs were arriving in SA ports at about R6.89/kg

“This is the lowest price for any [portion] of meat from any country in the world. It’s even less than [the price of] chicken feet, which are usually cheaper than [other] meat

.”

With exporters from outside the EU paying a 62% import tariff on poultry products, it meant importation tax on such poultry would be R4.27, bringing the total cost to R11.16/kg, he said. 

“We don’t mind poultry imports at competitive rates, but dumping destroys local jobs and damages the local poultry industry. Dumping is not acceptable within the World Trade Organization’s guidelines [either]. This is why there are certain remedies [such as tariffs] that countries can apply to prevent dumping.

“Beyond load shedding, access to clean water, the rising cost of fuel and feed, South Africa’s poultry industry is facing one of its biggest threats yet: the non-renewal of import tariffs. This leaves SA’s second-largest agricultural industry vulnerable to dumping; a practice that nearly destroyed it prior to the signing of the Poultry Sector Master Plan.”

The masterplan, which was signed in November 2019 by the government, the poultry industry, importers, labour representatives and others, was aimed at stimulating local demand, boosting exports and protecting the local chicken industry.

R1.5bn spent on expansion

On 25 July, SAPA issued a statement, saying its members had invested more than R1.5-billion in expanding poultry processing capacity in the local industry, with an additional R570-million earmarked for 2023, to support food security, local job creation, rural development and additional revenue for the fiscus.

“Beyond investing in the sector’s industrial development, emerging black farmers and contract growers have also been supported with an injection of R474-million in additional cash flow.

“Since 2019, the sector has added 1,465 new jobs, with an additional 800 in the pipeline as investments come online in 2024. Moreover, the growth of the poultry industry has had a significant impact on the broader value chain, with AFMA reporting the addition of over 2,000 new jobs in the agricultural sector throughout the poultry value chain.

“Like so many South Africans, the poultry industry has had to contend with load shedding, access to fresh, clean water, the rising cost of fuel, the rising cost of feed and a less than desirable exchange rate, yet, despite these challenges, the industry still produces the cheapest chicken our rands can buy.

“Despite this exceedingly challenging production environment, the biggest threat to South Africa’s poultry industry — and by extension, South African consumers — is unfair trade practices from countries like Brazil, Ireland, Spain and Denmark which dump their product on South African shores.”

It said while SA’s International Trade Administration Commission (ITAC) had considered imposing anti-dumping duties, provisional anti-dumping duties were in force from December 2021 to 14 June 2022, which have now expired. 

“As of 12 June 2022, Minister of Trade and Industry, Ebrahim Patel, had 60 days to react to the ITAC report, citing material harm sustained by the local poultry industry due to the unfair trade practices employed by these countries. With neither provisional nor permanent duties in place, the local poultry industry is at risk and the negative impacts can already be measured.

“South Africa is currently open to predatory trade from other countries, and the progress that’s been made to achieve the objectives of the Poultry Sector Master Plan are under threat. Allowing dumping to continue undermines the pillars of the Poultry Sector Master Plan, and severely compromises and endangers South Africa’s poultry industry — a R56-billion strategic economic asset.”

He said as seen in countries such as Ghana, Senegal and Cameroon, dumping can destroy an industry — “without these tariffs in place, we could witness the systematic dismantling of South Africa’s poultry industry, leading to massive job losses and severe economic contraction”. DM/BM

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