September 13, 2013

 

South African meat producers, importers argue on chicken import tax

 

 

At a meeting in Parliament this week, South African poultry meat producers and importers clashed in a debate over a proposed increase in the tax on imported products.

 

As importers and local producers faced off during hearings on September 10 before Parliament's agriculture committee, simmering tensions over whether South Africa should increase tariffs on imported poultry products arose.

 

Trade and Industry Minister, Rob Davies, is due to make a decision over whether the current tax of 27% on imported poultry products should be increased to 82%.

 

The Association for Meat Importers and Exporters (AMIE) is opposing the increase which claims that a tariff hike would have a limiting effect on imports, with the result that local producers would be less competitive on a global scale. On the other hand, the South African Poultry Association is rooting for a tariff hike which argues that the local industry is efficient and that tariffs would not result in exploding local prices.

 

Chicken and poultry products make up the largest market for animal protein eaten by consumers in South Africa, making up over 65% of the average grocery basket. Chicken farming is also the largest part of the total agricultural sector, making up about 25% of agricultural gross domestic product.

 

The chicken sector employs 50,000 people directly and another 60,000 indirectly.

A further 18,000 people are employed in the grain industry to supply feed.

 

According to the poultry association, poultry generates about ZAR30 billion (US$3 billion) in farm-gate revenue and about ZAR1 billion (US$100 million) in corporate taxes.

 

The association also said the local poultry industry was being devastated by imports, leading to companies such as Austral South Africa, Country Bird Holdings, Rainbow Chicken, and Afgri South Africa showing losses.

 

However, AMIE member Georg Southey dismissed most of the poultry association's arguments, saying should the tariff increase be approved, it would have a limiting effect on total imports and those from non-EU countries, such as Brazil, would in effect cease. He said imports amounted to about 10% of total chicken production in South Africa.

 

He said that the association believed that the International Trade Administration Commission of South Africa (ITAC) had already approved the tariff increase and forwarded it to Davies. Southey also said the delay in the announcement has led to speculation "and is now causing real market disturbance".

 

According to the AMIE presentation, the depreciation of the rand has already provided a 25% protection for local producers.

 

Competition commissioner Shan Ramburuth said investigations by the commission had found elements of collusion among the major chicken producers which occurred through information sharing during meetings of industry associations where areas of the country were informally divided up among them.

 

Ramburuth said the poultry sector was vertically integrated with high entry barriers that included cases investigated by the commission. This is where producers of day-old chicks would refuse to sell them to a company unless the grain was also bought from them.