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Poultry policy debate in SACU intensifies

01 July 2013

According to reports in South Africa’s business press, Astral Foods, South Africa’s leading poultry company, announced an increase of 3% in revenues from its poultry division for the 6 months to March 2013, as a result of higher sales prices for chickens (+6.1%), but with a 5.8% decline in sales volumes. An increase of 21.9% in feed costs led to a substantial decrease in Astral’s operating profits for the poultry division. This was attributed to “higher stock levels in the poultry industry as poultry imports from Brazil and the European Union hit record highs in October and November 2012”. However, profits were also hit by strike action and subsequent pay increases, and the costs of an agreement reached with South Africa’s Competition Commission. Rainbow Chicken has also faced a difficult period in the 6 months to December 2012, which it described as “[the] toughest in its history”.

According to Astral Foods, depressed consumer spending, “coupled with high levels of poultry imports, would continue to hamper the industry’s ability to recover the high input costs”. An application for an increase in the general tariff level on poultry meat imports has been tabled by the South Africa poultry Association (SAPA), in response to “the large and rapid increase in the volume of extremely low-priced imported frozen poultry meat”.

SAPA’s application, however, is being contested in the courts by the Association of Meat Importers and Exporters (AMIE), which has launched a legal action over the International Trade Administration Commission’s (ITAC’s) handling of the poultry tariff application. AMIE maintains that it is being deprived of “its right to present evidence in a meaningful way in its opposition to SAPA’s application”.

AMIE argues that the tariff increase would be passed on directly to consumers, and that this would lead to increases in prices for chicken of between 30 and 50%. It argues that the problem arises not from imports, which represent only 12% of total sales of poultry meat, but from the “poor operational performance” of South African poultry sector enterprises.

While the multiple retailer Pick n Pay endorses the view of AMIE, other retailers and fast food retailers surveyed stated that they only or mainly use locally produced chicken, so have a lower dependence on imported poultry products and are less concerned about the tariff increases.

SAPA contests the extent of price-increasing effects claimed by AMIE, maintaining that prices would only increase between 10 and 15%, since retailers would be unlikely to pass on the full tariff increases to consumers. In addition, SAPA maintains that the interests of the poorest consumers would be protected, as no duty has been requested on mechanically deboned meat imports that are used in processed meat products consumed by low-income households. The main products affected would be leg quarters (which account for two-thirds of imports), where tariffs would increase to 56%.

In Namibia, it has been reported that a system of import licences for poultry products was introduced on 6 May. Import permits are to be issued by the Meat Board of Namibia upon application. Permits for poultry products not produced locally will be issued up to a monthly quota of 600 tonnes (equal to 30% of local production). The allocation of import licences will be based on “each individual importer’s import history from the previous financial year”. Imports will be allowed for basic products not produced in Namibia, including frozen products such as wings, baby chicken and breast fillets. However, “individual quick frozen (IQF) products such as fresh whole birds will be restricted from entering Namibia.”

Editorial comment

There appears to be a recognition that a more diversified tariff structure, which recognises the role that imported poultry products can play in meeting consumer needs, is emerging in South Africa, while at the same time sustaining a thriving local poultry sector. This is consistent with policies pursued in the EU and elsewhere (see AgritradeExecutive Brief Update 2012: Poultry sector’, 1 August 2012). EU poultry producers have argued that “in the absence of import tariffs… the EU market would rapidly be influenced by imported products, with EU producers increasingly restricted to supplying niche markets” (see AgritradeExecutive Brief Update 2011: Poultry sector’, 15 November 2011).

It is increasingly recognised in South Africa that some poultry meat products are simply not available locally (see Agritrade article ‘ South African poultry sector problems compounded by rising EU exports’, 15 April 2013), with this providing scope for a permissive tariff regime in areas of growing consumer demand (processed meat products prepared from low-cost chicken). Moves towards a more sophisticated use of trade policy tools, alongside an effective competition policy, could offer opportunities for sustaining the current expansion of the SACU poultry sector while consumer demand grows for this low-cost source of protein.


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