The state body responsible for enhancing the viability of the agricultural sector including increasing market access, says that while potatoes and some potato products are likely to cost more after the introduction of higher import duties, prices will not remain on an upward trajectory for long in part due to “reliable” local supply.
Thabile Nkunjana, an agricultural economist at the National Agricultural Marketing Council which also monitors food prices and inputs costs, said that newly introduced antidumping duties are likely to cause short-term price hikes.
“However, as the market price trace the long-term equilibrium supported by reliable local supply, the price will stabilise, which is also positive for farmers as they will receive good prices in the near term,” Nkunjana said.
But even with prices stabilising, the cost will likely be too high for many struggling households.
SA recently introduced higher duties for imported frozen potatoes from Europe in a bid to protect the local industry, a move that could push up the price of French fries while many households struggle to afford basics as the cost-of-living crisis deepens.
The government is under pressure to slash import duties on many products as consumers come under pressure. This week, trade, industry & competition minister Ebrahim Patel suspended antidumping duties on chicken imported from five countries for the next 12 months, citing the fight against food inflation and its effects on the poor.
The International Trade Administration Commission (Itac) — the organisation responsible for customs tariff investigations, trade remedies and import and export control — recently imposed provisional antidumping duties for frozen potato chips imported or originating from Belgium, Germany and the Netherlands.
The provisional duties — which are up to 181% for German producers, 104% for some producers in the Netherlands and 23% for those in Belgium — will be in place until January 2023 when the final five-year tariff determination will be finalised. This as the state moves to curb dumping.
Nkunjana noted that SA’s imports of frozen potato chips from the three countries increased by 88.6% between 2020 and 2021 to reach 29,635 tonnes. Moreover, in the first five months of 2022, the imports from the three countries grew by 114% compared to the corresponding period in 2021.
Potato harvest
“This sharp rise in imports can be attributed to the expiration of anti-dumping tariffs in the first quarter of 2021, which coincided with a high potato harvest in the European countries. Of the roughly 30,000 tonnes imported in 2021, Belgium accounted for 67%, Netherlands for 17%, and Germany for 10%.”
Nkunjana highlighted that between 2010 and 2020, the amount of potatoes consumed per person in SA doubled on the back of increasing production that has reached 2.6-million tonnes in 2021. Despite the steady growth in production over the long term, there are frequent short-term seasonal fluctuations in production which often cause erratic price changes in the local markets.
“This was the case in 2021, when the price of a kilogram increased to R14.21 underpinned by low volumes caused by rains in the Free State and Limpopo growing regions. Since the potato prices started moderating and in the first six months of 2022, the price was 3.1% lower than the corresponding period in 2021, despite the global food prices reaching record high in 2022 due to Russia-Ukraine conflict,” Nkunjana said.
He said the fall in potato prices in 2022 implies that prices are under pressure from the supply side.
Last month trade expert Donald MacKay said there were shortages of raw material (potatoes) in the local market, so it was not clear how the domestic industry will be able to supply the market if the imported chips are removed from the market.
“Chips will, in other words, become quite a bit more expensive,” MacKay said, adding that any increase in food prices is “dangerous” under the prevailing economic climate in which many households are stretched.
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