A decision by trade, industry and competition minister Ebrahim Patel – labelled by some as an invitation to Brazil and four EU countries to dump as much chicken in South Africa as they like – is not sitting well with local poultry farmers and organised agriculture.
Patel recently announced an immediate suspension of anti-dumping duties on chicken that comes to South Africa from Brazil, Spain, Poland, Ireland and Denmark. This means that, for the next 12 months, chicken importers don’t have to pay additional duty costs.
Thabile Nkunjana, an agricultural economist at the National Agricultural Marketing Council (NAMC), believes a number of developing poultry farmers are likely to run out of business as the duty suspension puts them on the back foot against overseas producers in a time when the cost of feed and electricity already has them in a tight grip.
“Producing chicken in South Africa is expensive compared to other countries. Unlike other countries, South African farmers are not supported by government with subsidies to buy feed.”
“This means that farmers are going to have to bear that burden themselves. On top of that, they have to compete with farmers from Argentina, Canada, Brazil and the US,” he explains.
When making the announcement, Patel said his decision was based on government’s concern that anti-dumping duties on these five countries would raise the price of chicken and particularly affect the poor.
However, Francois Baird, founder of the FairPlay Movement, reckons Patel’s concern is misplaced. “Experience shows that higher import tariffs have little or no effect on chicken prices for consumers but helps to create jobs,” Baird says in a statement.
He feels that, if the minister really wants to help the poor, he should urge his colleagues in cabinet to remove the 15% value-added tax from the chicken portions most consumed by low-income households.
Thereafter, he should encourage importers, wholesalers and retailers to pass the benefits of low-priced and dumped imports on to consumers.
“Chicken dumping has made the middle men rich, but it has not aided the poor. And now, thanks to Patel’s decision, for the next 12 months, profits for importers will keep rolling in at the cost of South African jobs,” Baird says.
A small relief is that the four EU countries cannot export to South Africa at the moment because of bird flu bans, but those bans are temporary and may well be lifted long before the 12-month “duty-free” period is up.
Tighter profit margins
Even though it is among the cheapest, chicken is an unaffordable source of protein to many South Africans at the moment.
According to the Household Affordability Index, compiled by the Pietermaritzburg Economic Justice & Dignity Group, the price of 10 kg of frozen chicken pieces increased in June by almost 14%, to R383.53, from a year earlier.
Nkunjana explains that, due to other meats becoming more expensive globally, more people are consuming chicken as a cheaper alternative. Because the demand has increased, the price of chicken has also spiked.
Despite this rise in demand and higher retail prices, poultry farmers still get the short end of the stick.
“Feed prices are putting a lot of strain on poultry producers, locally and globally. [The conflict] in Russian and Ukraine is exacerbating matters.”
Electricity is an even bigger problem for poultry farmers at the moment, Nkunjana adds. “Because of all of these factors, farmers spend more to produce chicken and chances are that profit margins will not be that good.”
Poultry producers are now likely to see less of a profit because they will be competing against the prices of farmers from Brazil, Spain, Poland, Ireland and Denmark who have excess stock to get rid of.
What does this mean for consumers?
Consumers seem to welcome the prospect of paying less for their chicken products. Na-eema Samuels, a qualified social auxiliary worker and founder of the NPO House of Grace, says this is great news to her because she has not been able to afford chicken.
Beside raising her two sons, Samuels has created a warm and loving home for children whose parents are unable to care for them.
“I dish 13 plates of food every night. This is definitely good news for me. I also reckon that, for the children, it probably means they will at least get an extra piece of meat on their plates.”
Meanwhile, Nkunjana says there has to be understanding for the prices of local poultry products. “There is what we call producer price and, included in this price formula, is the cost of feed, electricity and medicine or vaccines that are bought for the chickens.
“When you move this into retail, you have to consider the cost of transportation from farm to processor, and then from processor to retail store. Then there’s the cost of packaging and labour that is also added to this,” Nkunjana says.
According to him, the farm gate price for chicken is around R36/kg. The retail shelf price is about R60/kg or almost double the amount that farmers charge.
He, too, believes that, while the suspension on import duties benefit consumers down the line, jobs are at risk in the poultry sector. “We’ll see a reduction in poultry production in the coming months. As soon as the minister made the announcement, importing companies immediately placed their orders.”
He fears that the very same consumers who is hoped to benefit from lower chicken prices, will also risk losing their jobs. “We have to strike a balance here.”
Fairplay believes the decision will negate any progress in implementing the country’s poultry master plan, which Patel has driven since he signed it in 2019.
“Patel has left exposed the poultry producers who signed the master plan in good faith and with high hopes. The result will be job losses, and job creation postponed, in the local chicken industry, and in particular small-scale black poultry farmers.”
ALSO READ: Anti-dumping duties: the end of predatory trade?
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