The threat to the chicken industry that ‘does not exist’

The affordability of meat for households will be under threat if the South African Poultry Association (Sapa) achieves its aim of having more duties imposed on chicken imports. And, contrary to popular belief, there will also be more local job losses because the increase in duty will enable a small group of local “chicken magnates” to expand their market dominance without competition.

Against increasing demand for chicken, which local production is unable to meet, the concentration of production will drive prices up and deny consumers choice and access to an affordable source of protein.

Sapa, through the International Trade Administration Commission of SA, is seeking increases that will result in a surge from 37% to 82% ad valorem (in proportion to the estimated value of the goods) for bone-in cuts of chicken and a big jump from 12% to 82% ad valorem for boneless cuts.

South Africans are accustomed to hearing local business decrying the value of the rand and the “unfair” competition posed by cheaper imports.

These cries are often accompanied by a plea for protection against imports. It is on this basis that Sapa makes its request.

But the local industry is booming and, by the admission of some significant players, is even expanding. Sapa is seeking protection against a threat that does not exist.

The Association of Meat Importers and Exporters regards the protection being sought as a pre-emptive move by the local industry to entrench growing levels of profitability by tightening its grip on output.

Sapa’s own figures show that the request

for tariff protection is based on information gleaned in 2015/2016. This was, admittedly, a tough time for the local industry. However, since then, input costs have dropped and profitability has increased significantly.

To illustrate the point, profits at Astral Foods, which owns the Goldi and Country Fair brands, fell in 2016 to R372m, rose in 2017 and reached R1.4bn in 2018.

Astral said disappointing consumer spending and high stock levels had been to blame for lower average selling prices.

Is this a basis for applying for punitive import tariffs that will further punish consumers and importers of quality chicken, damage collection levels of customs duties — R1.2bn was collected in 2018 — by vastly reducing imports and potentially place a strain on the relationship with countries like Brazil and the US, with whom SA enjoys preferential trade status?

Other chicken producers also reported sharp increases in profit in 2018. Furthermore, imports of chicken have remained stable while these chicken producers’ profits have increased.

But the local industry claims to be in financial distress. Using 2016 data, the industry in September 2018 managed to have a “safeguard duty” of 35.3% imposed on EU chicken imports.

Outdated information by the government led to options for consumers being reduced.

Can this be allowed to happen again? Will local manufacturing jobs be placed at risk so that a small, monopolistic and highly profitable group of producers can benefit from artificially reduced competition?

Matthew is CEO of the Association of Meat Importers and Exporters. He writes in his own capacity