Trade, industry & competition minister Ebrahim Patel has shot down calls for the removal of tariffs on all poultry imports saying such an “extreme” step would destroy local jobs.
Chicken is one of the most popular animal proteins consumed by South Africans, probably because it is relatively affordable. But prices, which have increased by at least 10% annually over the past decade, are set to hit record highs in coming months. This is as input prices, including the cost of feed, spike partly due to the Russia-Ukraine war.
Ukraine is one of the largest producers of oilseed and grain, the main ingredients of chicken feed. In SA feed accounts for about 70% of production costs, which has put local producers, already facing low-profit margins, under pressure amid concerns of chicken price hikes.
During a debate on his department’s budget vote on Friday in parliament, Patel pointed out that while the DA is calling on the government to scrap tariffs, the EFF is arguing that the tariffs should be raised further to protect the local industry. He said the stance of both opposition parties is extreme.
The government’s approach is a “more balanced approach, more mature position that avoids these two extremes”, Patel said, signalling that tariffs will be maintained at their current rate for the foreseeable future.
In a bid to protect the industry from unfair competition, the government in 2020 gazetted tariff increases to 62% on bone-in chicken portions while tariffs on boneless portions were raised to 42%. Critics argued that despite SA’s trade partners accounting for about 15% of all chicken consumed in the country, hiking tariffs would make chicken less affordable as local producers generally always priced their products higher.
Revenue drop
Subsequently, the Association of Meat Importers and Exporters has been calling on the government to remove all tariffs and suspend the consumption tax on all poultry to cushion consumers from the rising price of chicken particularly. The DA has also backed the calls highlighting that millions of locals rely on poultry as the cheapest form of protein.
But suspending tariffs and VAT on chicken could also lead to a drop in revenue for the state while the government is desperate to close the gap between revenue and expenditure.
“[We] look at it [tariffs] case by case and based on that [evidence] we have been able to ensure that there is sufficient protection for SA producers, for people who create jobs here,” said Patel.
But pressure has to be maintained on the domestic poultry industry “to ensure that South Africans have access to affordable pricing. Globally, poultry prices have been rising and food inflation is going up across the world. It has nothing to do with SA’s policymaking. It’s caused by supply chain disruptions caused by geopolitical tensions and the war in Europe and a number of factors,” the minister said in his concluding remarks after the debate.
The DA is contradicting itself by calling for the suspension of tariffs “which will destroy local jobs”, and simultaneously demanding that more jobs be created.
“You cannot argue that we should take a set of policies that will destroy local jobs and on the other hand bemoan the fact that there is high unemployment. South Africans need affordable poultry, South African need jobs and government is trying to find ways to balance these important objectives.”
Harms country
In his speech, Patel also said the Competition Commission is conducting a market inquiry into online services such as e-commerce, tourism, accommodation, food and other online delivery platforms, to be completed this year. It will launch a new inquiry into fresh produce markets that Patel hopes will help provide insights and relief to consumers faced with high and rising food bills.
DA MP Dean Macpherson said that Patel will “almost always pick the side which most harms our country and the people who live in it, because being a trade unionist, his natural instinct is always to gravitate towards and align himself with the ‘insiders’ and to do everything possible to shut out those on the ‘outside’.
“Take for example the debate around poultry prices and the effects that tariffs have on it. Millions of South Africans rely on poultry as the cheapest form of protein. However, over the last few years, prices have steadily increased because multibillion-rand, JSE-listed businesses have been given state-sponsored protection from imports.”
He said if Patel and his department really cared, “they would immediately heed our call and drop all duties on imported chicken for at least six months to allow consumers to source the cheapest source of protein in these most trying of times”.
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