By Paul Matthew, CEO of the Association of Meat Importers and Exporters (AMIE)
There is not a lot of consumer optimism in the air as we hurtle into the holiday season, a time when families traditionally splash out on food, clothing and a few luxuries.
It should be a time for hard-working South Africans to draw breath, put their feet up and to spend time with loved ones – which many were unable to do during the pandemic. Instead, South African consumers are going to be cutting back, with fewer roast chickens, lamb or beef on the festive table and less cheer all around.
The reason is that this year, most households find themselves increasingly cash-strapped, as they battle increases in general inflation, rising electricity and transport costs, and steep price increases in their basic food basket. And there is more financial pain to come.
The bottom line is that consumers need all the relief they can get right now.
The Minister of Finance is well-aware of this, as evidenced by his October Medium Term Budget Policy statement, when Minister Godongwana extended the Social Relief Grant until March 2024. Other arms of Government are doing what they can to intervene and offer relief to consumers, particularly in containing food inflation as consumers have seen the cost of food rising for months.
International Trade Administration Commission (ITAC)
But some arms of Government seem oblivious to the plight of the country’s citizens, notably the International Trade Administration Commission (ITAC), the Government agency responsible for customs tariff investigations and trade remedies.
ITAC falls under the purview of the Minister of Trade, Industry and Competition, and part of its job is to make recommendations to the Minister on the imposition, increase, extension or removal of tariffs on imported goods. This includes chicken, lamb and beef.
One way ITAC could provide relief to consumers is both to remove existing import tariffs on basic foods, especially protein-critical foods such as chicken, lamb and beef, as well as to refrain from imposing new or additional duties on imported proteins.
The problem with duties is that they are essentially an additional tax on consumers, and they lead to price increases in the cost of food. Chicken is still the most accessible, critical source of protein in the country, and we need to ensure that it remains that way, not only for nutrition, but for food security.
Similarly, where consumers were able to afford lamb and beef cuts before, they are increasingly trading down lamb and beef offal, which themselves carry a duty of 22% on fresh, chilled beef livers, 30% on frozen beef livers, and 40% on lamb cuts and offals.
The fact is that the removal of tariffs will have a significant impact on the price of all meat proteins, and consumers’ ability to afford them.
Import Tariffs Significant
This was confirmed by the SA Reserve Bank’s October Monetary Policy Review report, which pointed out that import tariffs are a significant contributing factor to the price of goods, and highlighting that existing import duties on frozen chicken alone have increased consumer prices by between 13% and 40%.
Duties on chicken have more than trebled between 2013 and 2022, increasing from 27% to 82% on imported frozen whole birds and from 18% to 62% on frozen bone-in chicken cuts. For this reason, the SARB welcomed the hopefully precedent-setting decision of the Minister of Trade, Industry and Competition to suspend the imposition of additional duties on imported poultry.
This decision by Minister Patel illustrates that he and his Department, like the SARB and the Minister of Finance, are also well-aware of spiralling price pressure on consumers.
Decision to Suspend New Tariffs
In fact he has been very clear about this, with the DTIC conceding in the Government Gazette which announced the decision to suspend new tariffs, saying: ‘in making its decision, the Minister (Ebrahim Patel) considered the current rapid rise in food prices in the SACU 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. The Minister, therefore, decided to suspend the imposition of the anti-dumping duties for a period of twelve (12) months.”
Unfortunately, the message is not filtering down to ITAC, which is now also seeking an extension of duties against poultry imported from the USA. These duties have also been in place for five years.
It appears that ITAC is hellbent on extending duties to benefit a handful of domestic producers. Of course what happens when duties are extended is that we all pay more for our poultry at the till.
Basket of Foods
According to the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD), the basket of foods prioritised and bought first increased by 13.5% year on year. The price of frozen chicken pieces alone has increased by 24.7% since September 2020 and September 2022, outstripping general food inflation substantially.
In addition, in the Bureau for Food and Agricultural Policy’s September report, it stated: “Food and non-alcoholic beverages increased by 11.9% y-o-y. Surpluses are keeping the prices in check but we could see prices rise by at least 30%, which would result in a major shock in domestic food security, resulting in a shock to the overall socioeconomic stability of the country.”
No Relief from Domestic Producers
There is no relief coming from domestic poultry producers either. Last month, Astral, in a build up to its results for the 2022 financial year, said that it has been “subsidising the record-high input costs in poultry selling prices to both its customer base and the consumer, and cautioned that the scenario could not be sustained and would, unfortunately, lead to further poultry selling price inflation.” This is an indication that prices will increase.
The evidence is clear. It is time that ITAC properly considers public interest, the consumer and the economic environment in its administration of trade policy, and joins its colleagues in Government in providing much-needed relief to the country’s consumers.
The question ITAC should be asking is not how to continue to pander to the demands of large domestic producers, and rather ask how much more can consumers bear before they cut meat, the most valuable source of protein, out of their diets?