An association representing meat importers and exporters has called on the government to remove all tariffs on all poultry imports to cushion consumers from the rising price of chicken in particular.
The Association of Meat Importers and Exporters also urged the government to scrap the consumption tax on all poultry products to make them more affordable.
Chicken prices, which the association says 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 in part 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.
“This [suspending tariffs and VAT] would have a profound impact on consumers’ ability to afford this critical protein source,” Paul Matthew, the CEO of the Association of Meat Importers and Exporters, said on Monday.
“South Africans are under extreme financial pressure. As a country we have to do everything possible to arrest poultry price increases, and the quickest and most effective way to do this is for the government to give the SA consumers relief by placing a three-year moratorium on imported poultry tariffs, and the removal of VAT on poultry products,” he said.
But suspending tariffs and VAT on chicken could also lead to a drop in revenue for the state at a time when the government is desperate to close the gap between revenue and expenditure.
Matthew said the government has already shown it can take such “decisive” steps to shield consumers, after recently cutting the fuel levy and delaying the sugar tax increase by a year.
Chicken is one of the most popular animal proteins consumed by South Africans, most likely because it is relatively affordable.
But Matthew warned that prices will spike in the coming weeks due to rampant inflation, global food and commodity shortages; the state of the economy post Covid-19; the impact of the war in Ukraine on global food security; the escalation in fuel, transport and electricity costs; increasing trade tariffs; and supply chain disruptions.
Matthew said, however, consumers can be cushioned by a suspension of tariffs and for a three-year moratorium on new tariffs which will make imported chicken much cheaper.
Matthew explained that chicken imports from SA’s trade partners account for about 15% of all chicken consumed in the country, but are critical in maintaining a healthy balance between availability and affordability. In the past 12 months the US, Brazil and Spain were the largest suppliers of imported chicken in SA.
But the local poultry industry players argue that cheap imports have led to colossal job losses.
The state has moved to protect the industry from unfair competition in recent years. In 2020 the government gazetted tariff increases to 62% on bone-in chicken portions while tariffs on boneless portions were raised to 42%.
The year before that the government announced a new master plan for the industry that includes measures to boost domestic demand, the affordability of local broiler products and access to new markets.
Donald MacKay, a trade economist and director at XA International Trade Advisors, said the poultry industry is one of the “most protected sectors” in SA, to the detriment of the many consumers, especially the poor that rely on poultry products for their protein intake. He said there is no evidence that tariffs have actually led to job creation.
The SA Poultry Association, which represents local producers, said it opposes the proposed suspension of tariffs.
“The current price increases that we see and have seen since mid-2021 reflect the increase in the prices of maize and soya and do not reflect a change in tariff structures,” said Izaak Breitenbach, chairperson of association’s broiler board.
“The SA Poultry Association does not support the removal of tariffs since it did not cause the increase in price in the first place. Sapa supports the removal of VAT on selected cuts of poultry meat that is consumed by the lower-income families.”
Breitenbach highlighted that Ukraine is not planting any maize or soybeans.
“At present logistics in exports of maize and soybean is disrupted and there is a great concern about planting of crops. Ukraine is a net exporter of maize and soya and the lack of exports will put upward pressure on grains and in turn on poultry prices,” he said.
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