With less than two weeks to go before Trade, Industry and Competition Minister Ebrahim Patel is expected to revise the suspension of the import duties on bone-in chicken, the South African Poultry Association (Sapa) has again warned that dumping poses a material threat to the local industry.

Sapa wants anti-dumping duties to be imposed permanently on Brazil, Denmark, Ireland, Poland and Spain, saying its research has shown that the duties have a minuscule effect on the price of poultry for the consumer.

The International Trade Administration Commission (Itac) has previously investigated producers in these markets and decided that poultry dumping was taking place, harming the industry in South Africa. It called for anti-dumping duties on those countries to offset harm. The duties were provisionally imposed between December 2021 and June 2022, but Patel postponed the implementation of permanent duties for 12 months, citing the impact on food price inflation and consumers.

The duties are due to go into effect next month. Fearing another suspension, Sapa is lobbying for the duty to be renewed.

It says a further suspension would be costlier to consumers than the potential passthrough costs of an anti-dumping duty, because it would destroy the South African poultry industry, a R59-billion strategic national asset.

A Sapa-commissioned study, prepared by Genesis Analytics, aimed to assess the potential price impact of anti-dumping duties on bone-in poultry products. André Frauenknecht, principal competition and regulation economist at Genesis Analytics, explained in a briefing today that, based on trade data pre-Covid levels, the five targeted countries – Brazil, Denmark, Ireland, Poland and Spain – accounted for 60% of individual quick freezing (IQF) chicken imports. 

“As of 2022 that [was halved]. Currently, some 50% of our imports are coming from the United States, which are subject to historical trade duties, but not subject to these dumping duties.”

Genesis Analytics sought to determine the impact a tariff would have on the price paid by the consumer, after accounting for various factors such as trade composition by country and product as well as free-on-board (FOB) levels and monthly fluctuations. Their results suggest that the provisional duty would have affected retail prices only by about 3%.

Frauenknecht said European avian influenza outbreaks meant the countries found to be dumping were prohibited from exporting, so Brazil was effectively the only country subject to the provisional duties. Because Brazil represented only about a third of bone-in imports between January and June 2022, the costs of about two-thirds of bone-in imports would have been unaffected by the provisional duty – significantly diluting its potential effects.

‘Negligible at best’

Commenting on the findings, Sapa general manager Izaak Breitenbach said they could “finally see that the potential passthrough of these corrective trade measures are ‘negligible at best’, especially when compared to the effect rolling blackouts have had on the poultry price over the past year”. 

“Load shedding adds several rands to the price of locally produced poultry, where anti-dumping duty adds a few cents on selected imports.

“And it’s these anti-dumping duties that allow us to grow the industry, to invest more, to create more jobs.”

He said they had created more than 4,600 jobs throughout the value chain since Covid, and invested in excess of R2.1-billion in the local industry, with another R600-million coming online by the end of 2024. 

“But we’re only able to do all these things as signatories to a masterplan that encourages the use of trade measures that would defend the local industry from predatory trade practices, like dumping.”

Breitenbach said the industry shares Patel’s concerns about the retail price of chicken. To assist the country’s most vulnerable consumers, Sapa recommends scrapping VAT on selected poultry products.

“The load shedding tax is already too much. It is evident that the removal of anti-dumping duties will have little to no impact on the poorest of the poor, but will jeopardise the businesses of integrated producers and emerging poultry farmers alike; SA is rated as one of the top three most competitive poultry producers in the world, but no one can compete with dumping.” 

Three countries – the US, Brazil and Argentina – supplied more than 98% of SA’s bone-in imports in the first five months of the year.

In May, SA imported 38,082 tonnes of poultry products, with a total value of R450-million. Brazil accounted for almost 86%, or 32,703 tonnes, and the US, 12.6%.

Impact of bird flu

Argentina is currently banned from exporting owing to the outbreak of the highly pathogenic avian influenza virus, the US is heavily affected by the outbreak while Brazil has reported cases in wild bird populations but not yet in its commercial farms.

Last week, Paul Matthew, CEO of the Association of Meat Importers and Exporters, accused the local poultry sector of using skewed statistics to try to convince Patel to reinstate the punitive tariffs.

“Imported poultry already carries an exceptionally high MFN [most favoured nation] duty rate of 62% on bone-in portions. Lobbyists want the anti-dumping duties to be added on to those, which will potentially double or even triple the price of the imports, and allow local producers to substantially raise the price of their domestically produced chicken as they will be cushioned from competition.”

Citing Sars statistics, he said there had been a drop of more than 30% in imports since the additional punitive tariffs were suspended last year.

“We have to ask ourselves, in light of the substantial decrease in imports, what a reinstatement of additional tariffs will achieve, apart from providing even more protection for the local chicken producers’ profits and driving up the price of poultry, which will add to the strain of the already-overburdened consumer.”

In a commentary on the poultry sector, Anthony Clarke, of Smalltalkdaily Research, said any spread of avian influenza virus to the main commercial flocks might see Brazilian products banned.

“This would be a sentiment and confidence boost to South African domestic poultry producers, but the main impact would be on the poor given the main exports are MDM [mechanically deboned meat] and offal.” 

Don’t forget Agoa

But he said a far bigger and more dramatic impact, which would have dire economic consequences for South Africa, is if the US decided to suspend or exit the Agoa free trade agreement, which is due to be renegotiated in 2025.

“The US is a large exporter of poultry product to South Africa (R92-million) in May, of which the vast majority was frozen bone-in product. The US export sales always surge before the roll-over of the Agoa quota in April yearly, then fall away.”

If the US were to exit Agoa and the duty-free allowance of 71,632 tonnes were to cease entry into South Africa, “the domestic poultry industry and Sapa would reluctantly dance … however, the loss of overall economic trade of circa R400-billion would be catastrophic”. DM