Trade & industry minister Ebrahim Patel says calls by the poultry and sugar industries to hike import tariffs will not necessarily solve the challenges afflicting those sectors.
“If industry sees government as shielding it, it is not going to win the war that is out there,” Patel said in an interview this week.
SA’s poultry sector has shed hundreds of jobs in recent times and blames this on cheap chicken imports from Brazil, the US and Europe.
The SA Poultry Association has lodged an application to the International Trade Administration Commission (Itac) — the organisation tasked with customs tariff investigations, trade remedies, and import and export control — calling for an increase to the ad valorem tariff on bone-in and boneless frozen chicken portions to 82% from existing levels of 37% and 12%, respectively.
An association representing Brazilian poultry exporters recently warned of the dire consequences for SA consumers and the broader economy should a new application for a hike in import tariffs on frozen chicken portions be granted. Brazil is the world’s largest poultry exporter.
SA sugar producers have warned that the sector is on the verge of collapse. The crisis is due to several headwinds, including a drop in sales volumes, the sugar tax, falling prices and stiff competition from cheap imports, mainly from Brazil. In 2018, Itac agreed to raise the dollar-based reference price (DBRP) — which is an import tariff levied on products that come into SA — from $566 to $680. Local sugar producers had requested that the tariff be increased to $856 per ton.
Patel said small-scale sugar farming, like poultry, is a very sensitive sector. However, the government’s underlying philosophy is that protectionism on its own is not a sufficient means to ensure a long-term future for any industry, he said.
“You do need to look at both sides of the equation. Strengthening your supply side and, where warranted, getting support on the demand side.”
“My job is to focus on the industrial opportunities and to support industry to manage all of these areas. We are working with sugar producers to improve the efficiency of their operations and to work with the downstream users.”
He said he intends to work with agriculture, land reform & rural development minister Thoko Didiza and “we have spoken about how we can support the long-term development of the sugar industry”.
Patel said it is a global phenomenon that sugar intake in foods is beginning to slow down as a result of health considerations. However, there are certainly opportunities to look at other nonfood applications of sugar, and finding ways of reducing the cost of production, the minister said.
On the poultry sector, Patel said the government faces a dilemma: “On the one hand, domestic poultry industry is a very significant employer, providing relatively easy access for small-scale farmers to get into agriculture … and that industrial base, you want to retain. On the other hand, they produce chicken, which is a very important source of protein for all South Africans, but particularly poor South Africans.
“The domestic players have put an application to Itac. Once Itac has made a decision they will send that as a recommendation to me. I will then look at the recommendation and make a decision. At this stage I am not able to anticipate what my decision will be.”
He said, however, the approach “we take is that in dealing with the future of the poultry sector, we want a competitive industry and relatively competitive prices. So not all of that can be obtained simply by a tariff increase, or the lack of a tariff increase.”
SA will have to think of a broader competitiveness programme for the sector. “It may potentially involve tariff relief, but it has to be more than tariff relief.”
He said: “As a general approach, I am looking for a new deal with industry where, as the state gets an application whether to increase tariffs or give a tariff rebate, there has to be commitment by the applicants to invest more heavily in improving the competitiveness of their supply chain. In the long run, tariff protection offers you only temporary relief. You have to look for deeper competitiveness.”
He said insulating oneself from international competition was not going to make the sectors competitive. “You may need that protection, but you will also need to invest in improving your performance,” he added.
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