Local chicken producers are threatening to cancel or postpone up to R570m in new investments in protest against the suspension of additional duties on imported chicken from five countries for 12 months.
Trade, industry & competition (DTIC) minister Ebrahim Patel this week deferred anti-dumping duties on chicken to alleviate supply shortages and rising food costs. This means there will not be an increase in tariffs for poultry products from Brazil, Ireland, Denmark, Spain and Poland. Now, importers are paying a 62% duty.
Izaak Breitenbach, general manager of the South African Poultry Association, described Patel's announcement as a disappointing surprise, saying companies would reconsider planned expansions of R570m, promised to Patel, which would have created more jobs, or delay them for 12 months. He said investment in factories would suffer.
“Industry wants to invest and has already invested a lot, and now we have a delayed return waiting for us,” he said.
According to Breitenbach, the industry has invested R1.5bn and created 1,600 jobs since 2019. He said the minister was going against the poultry master plan agreed by the industry and the government in 2019. It aimed to expand and improve production.
The industry has long complained about dumping of subsidised chicken from Brazil, the US and EU countries. Additional tariffs had been expected after the International Trade Administration Commission (Itac), a DTIC agency that deals with the issue, found dumping was causing “material injury” to the local industry.
However, Patel, who has the final say on tariff impositions, opted for a 12-month suspension as inflation pushes the cost of food through the roof. Chicken is a cheap and popular protein for South Africans.
“In making its decision, the minister considered the current rapid rise in food prices in the Sacu [Southern African Customs Union] market and globally, and the significant impact this has, especially on the poor, as well as the impact that the imposition of the anti-dumping duties may have on the price of chicken as one of the more affordable protein sources,” read a government gazette announcing the decision.
Donald MacKay, CEO of XA Global Trade Advisors, said over the past three years imports from Brazil, Denmark, Ireland, Spain and Poland have fallen by 34%. “In every respect, the local industry has been doing well.”
He does not expect retail prices to change since the duties paid by importers will remain the same for a year.
According to MacKay, without the imports, chicken prices would have skyrocketed. “Imports have slowed down inflation of prices.”
Those five countries know stiff anti-dumping duties are coming, so the incentive will be for them to ship as much of their surplus chicken portions to South Africa as they can before the gates close
— Francois Baird, FairPlay Movement founder
Importers and local chicken producers have long fought over the issue of import duties.
In April the South African Meat Importers and Exporters Association (AMIE) asked the government to consider a tariff moratorium on imported chicken to help curb inflation.
It also asked for existing tariffs to be reconsidered and for all chicken cuts to be exempted from VAT, as governments around the world have been slashing import tariffs as a way to help their citizens survive. Mexico, the Philippines and South Korea have removed tariffs on imported goods, including chicken, to mitigate inflation.
The US is considering scrapping tariffs on various goods for exactly the same reason, said Paul Matthew, CEO of AMIE.
Matthew said there had been no direct response from the government regarding their chicken tariffs request in April. He said the decision to defer new increases would have no impact on retail prices.
“We've got Brazil as the biggest supplier in the world. There is a huge demand in the world, resulting in prices being high. We also don't have a favourable exchange rate at the moment, so for us to compete is impossible,” he said.
Matthew said the tariff suspension would not greatly benefit AMIE members since they still have to pay 62% tariffs.
The real beneficiaries of Patel’s announcement were consumers because local producers would not be able to increase prices.
AIME represents 36 companies in SA and 33 overseas. Locally there are about 3,500 people employed in the chicken import value chain.
Local poultry producers have called on Itac to release the findings of its investigation into the dumping of chicken from the five countries as this would assist in understanding why the minister decided to suspend the tariffs.
In the absence of this, MacKay said, Patel probably found himself in a difficult position because inflation is “terrifying at the moment” and consumers have been hit with all types of additional costs, such as fuel.
“I am guessing politically it can't be good to put up prices, which would make it not politically sensible to push out prices on chicken right now. I would guess that would be the reason he has chosen to defer it by a year,” he said.
FairPlay Movement, a lobby group for the local poultry industry, said the real losers would be local producers and the poultry master plan. “The [suspension of new duties] invites a deluge of dumped imports that would do untold damage to the credibility of Patel and the master plan he has driven since its inception,” said the movement's founder, Francois Baird.
“The delay is a 'licence to dump' for those five countries for the next year. They know stiff anti-dumping duties are coming, so the incentive will be for them to ship as much of their surplus chicken portions to South Africa as they can before the gates close,” he said.
“They can bring it in at whatever impossibly low price they like and nobody will stop them.” He noted only Brazil would immediately benefit, because bird flu outbreaks have blocked imports from all EU countries.
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