Without interventions, financially-constrained South African poultry consumers will increasingly not be able to afford chicken products, according to the South African Association of Meat Importers and Exporters (AMIE).

To address multiple factors that will soon drive up the cost of chicken, AMIE requests government urgently remove trade tariffs on all poultry products, impose a three-year moratorium on any new tariffs and remove value-added tax (VAT) on chicken products.

AMIE CEO Paul Matthew says South Africa is facing a chicken price “tsunami” as a result of escalating inflation, global food and commodity shortages and the state of the economy post Covid-19.

In addition, factors such as the impact of the war in Ukraine on global food security; escalating fuel, transport and electricity costs; increasing trade tariffs; supply chain disruptions; lower wages for poultry workers; and unemployment, are also having a negative impact on chicken pricing.

“We know that chicken is the primary, most affordable and therefore the most important source of protein for South African consumers,” he says.

The “quickest and most effective way” to ensure such consumers can still afford chicken is for government to place a three-year moratorium on tariffs for imported poultry products and remove VAT on poultry products, Matthew argues.

However, South African Poultry Association (SAPA) GM Izaak Breitenbach tells Engineering News that SAPA does not support AMIE’s proposal to remove tariffs for three years.

Removing tariffs for three years will not address the issue that was precipitated by high raw material (maize and soya) prices that are at an historic high, he says.

Breitenbach adds that the removal of the anti-dumping tariffs will cause material hardship for South Africa, with reduced economic activity, job losses and losses to the fiscus. “Removal of tariffs will put the poultry industry on a trajectory of decline that will be devastating.”

Nonprofit trade movement FairPlay echoes SAPA’s sentiment, saying tariffs on imported chicken come third in terms of cost pressures to rising input costs, such as electricity, feed, fertiliser and fuel costs.

Most of these are being exacerbated by the war in Ukraine, which is driving up the cost of several goods globally, as well as Covid-19 pandemic disruptions, it notes.

“Food prices are going up around the world for the same reasons, and the warnings are that, because of the Ukraine war, worse is yet to come,” FairPlay says in a statement.

Nonetheless, SAPS supports the removal of VAT as a measure to reduce the cost of poultry products to the low-income earners.

AMIE, meanwhile, points out that, in early April, government, in an effort to ease economic pressure for consumers, implemented two critical interventions, including lowering the fuel levy by R1.50 a litre and postponing the proposed increase of the Health Promotion Levy (sugar tax) by a year.

“It is clear that government recognises the extreme pressure that consumers are under, and knows that it can meaningfully intervene through changes to administered prices and regulation. It can do the same for chicken,” he says.

Umoya Meat Importers MD and AMIE executive committee member Grant Hendricks, who operates a South African meat import business selling chicken products primarily to the lower end of the market, says consumers in townships are increasingly struggling to afford chicken.

“While their wages stay the same or decrease, they are finding it increasingly difficult to put nutritious food on the family table. The removal of tariffs and VAT on poultry will provide much-needed relief both for consumers and local businesses,” he suggests.

COST PRESSURES

AMIE cites the Pietermaritzburg Economic Justice and Dignity Group’s (PMBEJD’s) March 30 publication of its Household Food Basket index, which reveals the costs of average household food items had increased by 10.2% year-on-year between March 2021 and March this year.

The price of chicken increased by 11% in the same period, on the back of a steady 10% yearly increase over the past ten years.

While the price of food is increasing at an alarming rate, AMIE states that South Africans are getting poorer, exacerbating their vulnerable position.

Increasing poultry product costs are in addition to other rising costs, such as fuel which rose from R14.86 in January 2021 to R21.96 in April, thereby increasing transport costs for poor South Africans 14.3% year-on-year.

Eskom’s electricity tariffs went up by 9.61% on April 1 and further municipal tariff increases are likely to be implemented from July 1, while wages decreased, to the point where, according to PMBEJD, 55.5% of South Africans and 64.2% of black South Africans are living below the upper band poverty line.

As such, the PMBEJD’s report shows that those struggling to survive are likely to underspend on food by 37.2%.

AMIE’s suggestion of removing tariffs alone will translate into 33% relief for consumers on critical chicken cuts, the organisation says.

“Two of the most popular chicken product categories for lower-income households are bone-in chicken pieces and chicken offal,” says Matthew.

In March 2020, import tariffs on poultry increased from 37% to 62% on frozen bone-in chicken portions, a product most consumed by lower-income South Africans, and increased on frozen boneless portions from 12% to 42%.

In addition, in December 2021, the South African government levied new provisional duties on poultry imports from Brazil, Poland, Spain, Denmark and Ireland. The duties range from 6% to 265.1% for various poultry producers from Brazil, from 39% to 67.4% from Denmark, 158.42% from Ireland, 5% to 96.9% from Poland, and 3% to 85.8% from Spain. These provisional duties will remain in place until June 14 this year.

Removing the tariffs could result in a 33% saving on the delivered price of bone-in-cuts of chicken into the Gauteng market, based on current international pricing levels.

“As a further example, for chicken offal, based on international current prices, the delivered pricing levels into the Gauteng market could be reduced by between 18% and 20%. This would have a profound impact on consumers’ ability to afford this critical protein source,” he says.

Matthew explains that chicken imports from South Africa’s trade partners account for just 14.9% of all chicken consumed in the country, but are critical in maintaining a healthy balance between availability and affordability. This excludes the import of mechanically deboned meat, which South Africa does not produce but which is critical for the production of further processed products.

“The local industry is globally competitive and the industry has been supplying low-cost poultry products to the market for many years. The industry will continue to do so,” says Breitenbach.

Poultry prices are not alone in the prices are increasing, he adds. “Similar trends are observed in other food products like maize meal, soy protein products, edible oils and other meats, all driven by the fundamentals.”

AMIE’s request to drop anti-dumping duties is a direct contradiction of the reasons given for provisional anti-dumping duties imposed on Brazil, Denmark, Ireland, Poland and Spain in December 2021, states FairPlay.

It adds that South Africa’s trade regulator – the International Trade Administration Commission (Itac), after an extensive investigation, made a preliminary determination that bone-in chicken portions were being imported from the five countries at dumped prices, causing “material injury and the threat of material injury” to the local industry.

“Itac will make a final determination on the anti-dumping duties later this year. If AMIE believes they are not justified, they should make that case to Itac,” says FairPlay.