Should SA reimpose anti-dumping duties on chicken meat imports from next month the move could create tensions between SA and Brazil, a major supplier of bone-in chicken. The two nations are members of the Brics (Brazil, Russia, India, China, and SA) grouping whose summit SA is hosting next month.
A recent study by the Tutwa Consulting Group for the Association of Meat Importers and Exporters (AMIE) cautions that the reintroduction of the import tariff on chicken meat would not only threaten food security and raise the cost of living for low-income households, but also places at risk SA’s important trade with its key partners.
The reality is that domestic poultry producers cannot meet demand for chicken, a gap which will continue beyond 2030. This means that reintroducing the tariff on chicken meat imports will raise prices in SA, reducing the affordability of this favourite source of protein for low- and middle-income households.
Chicken meat constitutes the largest portion of food expenditure for low- and middle-income households, accounting for 13-14% of total expenditure on food. This compares with 9% for affluent households.
Chicken meat consumption averaged about 40kg per person in 2020/21, more than double the per capita consumption of beef and veal, the second most popular meat category. The affordability of chicken is therefore important for the welfare of South Africans, specifically the poor. And this welfare should not be compromised by raising the cost to the consumers of their favourite source of protein.
Government must decide soon whether to reintroduce the tariff on imported chicken meat products. Imposing tariffs raises the domestic price of chicken meat, imposing a burden on the poor whose finances are already stretched by the increased cost of living.
Reimposing the tariffs could have far-reaching consequences for SA. The most significant is the likely reaction of the countries that would be most affected by the reintroduction of the tariff on chicken meat imports. These include Brazil, the US, and EU member states. Estimates are that retaliation by the EU could affect SA exports to that region valued at about $32.4bn.
With SA hosting the Brics summit next month, it remains to be seen whether the government would reinstate a tariff on as important a partner as Brazil. No doubt such an act would not be taken lightly by Lula da Silva’s administration. Brazil has not only been a partner since the establishment of Brics, but the two countries have been allies (with India) since 2003 when the IBSA Dialogue Forum was launched.
Reimposing the tariff could also put at risk the renewal of SA’s status as a beneficiary of the African Growth and Opportunity Act. SA’s chances of inclusion in AGOA’s renewal in 2025 are already hanging on a thread after US lawmakers called on the Biden administration to move the hosting of the AGOA summit from SA to another country because of concerns about what SA describes as its neutral stance in the Russian invasion of Ukraine.
Other than their impact on SA’s trade relations, tariffs on imported chicken meat would be a double whammy for SA consumers whose cost of living has risen sharply in recent years.
As the AMIE-Tutwa report notes, the cost of the import tariff is simply passed on to consumers. Second, the imposition of import tariffs allows domestic producers to increase their prices, safe in the knowledge that cheaper imported alternatives cannot enter the market at a competitive price favourable to the consumer.
In addition, import tariffs are not addressing the real cause of the problems for the domestic poultry industry. Among the often-quoted drivers of costs for local producers is feed, primarily maize and soya. But even when the prices of maize and soya decline, domestic chicken prices have not adjusted downwards. This signals that the domestic poultry industry’s challenges are to be found elsewhere, or that there are other more significant causes of its problems.
Among the structural challenges facing the poultry industry are recurring power cuts, which have increased in intensity and duration in recent years. These have been accompanied by sharp increases in energy costs as measured by the electricity tariff. Other factors are poor economic infrastructure, including road, rail and ports, and the failure of municipalities to provide basic services such as water and well-maintained roads.
Increasing import tariffs will not remedy these socioeconomic problems. Raising import tariffs on chicken meat products may boost profits for domestic producers in the short term, but it will not address the real cause of the domestic industry’s problem.
SA needs a robust and competitive poultry industry to ensure food security and guarantee supplies of chicken meat, a reasonably priced staple choice for the poor majority. Building protective tariff walls for domestic producers will not deliver a robust and competitive industry. It will only lead to higher prices for chicken meat, further squeezing low-income households.
Government and industry stakeholders must seek a balance between assisting domestic poultry producers to become competitive and guaranteeing food security and a stable supply of chicken meat.
The Poultry Master Plan emphasises this balance. It recognises the role imports play in keeping chicken meat reasonably priced, especially for low- and middle-income households. Restricting imports by reintroducing the import tariff would jeopardise current and future chicken meat consumption, a development that would hit low-income households the hardest.
Reintroducing tariffs on chicken meat imports would therefore amount to imposing pain on the country without any gain in the medium- to long-term, without the competitive domestic poultry industry that can ensure food security and guarantee the poor their most relied-on source of protein.
Moreover, alienating ourselves from long-established trading partners will only do further damage as we see more foreign investment and trade projects, with the associated productive capital, failing to reach fruition.
• Paul Matthew is the CEO of the Association of Meat Importers and Exporters (AMIE)
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