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Why chicken is important for South Africa:
Imports provide a gateway to affordability and accessibility to the masses. In a report in the UN, the Global Panel Member states that:
“Trade policy instruments should be part of any government’s toolkit for improving diet quality for their populations. Given the scale and devastating impact of malnutrition, it is imperative that no policy tool to address suboptimal diets is overlooked.”
There are a number of misconceptions about the poultry industry in South Africa. One of the most persistent misconceptions is that large quantities of poultry products are ‘dumped’ in this country. ‘Dumping’ is when a country exports products below the cost of production. In response to claims of ‘dumping’ in 2018, the poultry industry took firm action over the last two years, and there are currently no trading partners that are dumping chicken products in South Africa. In fact, poultry imports into South Africa have declined by 15.3% this year, and the local industry has grown by 5%. According to the Department of Trade and Industry: “This is despite the challenges in the operating environment brought on by COVID-19.”
All dumping should be reported to the International Trade Administration Commission (ITAC) in Pretoria. ITAC is responsible for trade remedies in South Africa. The Trade Remedies Unit of ITAC administers the trade remedies instruments through investigation of alleged dumping, subsidised imports and a surge of imports into the Southern African Customs Union (SACU), in accordance with domestic legislation and consistent with WTO Rules.
There is another misconception associated with dumping: that imported chicken is cheaper than local chicken. However, price comparisons should not be based on landed cost (ie. the cost of the chicken when it arrives in the port) but it should include repacking, insuring, loading, freight costs, clearing, paying taxes and duty, and transport to a processing facility. When these costs are factored in, the price differential between imported chicken and locally-produced chicken is very slight. When this procedure is considered, the following is revealed: local chicken is delivered for R24.37 — a full 21c cheaper than the imported product (R24.58).
It should also be considered that the reason local prices are beyond the consumer price point is that a large quantity of vaccines issued by the Directorate of Animal Health registered in terms of Act 36 or Act 101. This importation of the vaccines and the duties may significantly increases the prices.
Most recently the CEO of Astral wants to increase the local price of chicken and apply dumping duties on imported poultry which will have a disastrous effect on the price of poultry.
The SA Poultry Association recently applied for an 82% ad valorem import tariff of bone-in and boneless frozen chicken from many non-EU countries, including Brazil and the USA. In March 2020 the South African government did grant a tariff of 62% for frozen bone-in chicken portions (up from 37%) and 42% for frozen boneless portions (up from 12%). Import duties and VAT are collected by SARS.
South Africa’s trade tariffs on imported chicken are amongst the highest in the world. However, extremely high tariffs go beyond levelling the playing fields, and border on extreme protectionism. Protectionism allows large local producers to hike their profits while the smaller producers get shut out of the market. Consumers bear the brunt of protectionism by paying more for chicken. According to the National Agricultural Marketing Council (click to download), the price of chicken has increased by 7.8% over the last year.
This increase, according to Dr Sifiso Ntombela, chief agricultural economist at the National Agricultural Marketing Council, is due to the exchange rate weakening just before the start of lockdown and new poultry import tariffs that were gazetted in March.
Imported vs Local Chicken:
Imports provide a gateway for South Africa to trade with the rest of the world. Imported chicken is a useful measure that fills a gap in demand. The chicken that is imported into South Africa ensures that it meets the specific product quality and requirement that aligns with the Meat Safety Act.
Consumers should also be aware that local chicken does not meet the sanitary requirements of the EU standard. The local chicken is often subjected to ‘brining’ (injecting salt water into the chicken flesh to make up weight). None of South Africa’s trading partners exported brined product to South Africa.
● South Africa is not the victim of predatory trade.
● Imported chicken makes up less than 20% of the market and fills the growing demand of chicken consumption.
● South Africa cannot produce enough chicken for the masses, SA is not a self-sufficient country to produce poultry products that sufficiently feeds the growing population.
● Imports provide a cheaper and quality driven source of protein for the masses. If imports are removed there would be less poultry and less affordable poultry to consume that negates South Africa’s goal of food security.