A new front has been opened as major producers are accused of resisting transformation of the industry
Black importers of poultry have come out against the latest application from local producers to hike import tariffs on, especially, “bone-in” portions like leg quarters.
This adds a new lobby fighting the South African Poultry Association’s (Sapa’s) continued attempt to hike chicken tariffs from the current 37% to the maximum allowed under World Trade Organisation rules: 82%.
Sapa’s major members include RCL Foods and Astral Foods and its latest application was published in the Government Gazette in November last year.
Frozen chicken portion imports have been the source of constant trade tiffs, especially with the US.
Up to now it has mostly been the long-established Association of Meat Importers and Exporters squaring off against the local producers.
At a media conference last week, however, a newly created organisation called the Emerging Black Importers and Exporters of SA (Ebiesa) joined the fight, claiming that increasing tariffs would massively hike local chicken prices.
Nontwenhle Mchunu, founder and director of chicken import company Mkabayi Group, said that Ebiesa had been formed earlier this year.
“Those who are controlling the industry are doing it deliberately to keep black participants out of the industry,” Mchunu said.
South Africa has different tariffs on different kinds of chicken and on imports from different countries.
In terms of current trade agreements, all European chicken imports have no tariffs, but South Africa has long imposed punitive anti-dumping tariffs on chicken from the US of R9.40/kg on top of the normal tariff.
South Africa imposes the same punitive tariff on British and German chicken, but this has simply led to these countries routing chicken through other European countries that export it free of tariffs.
BLACK IMPORTERS SURGE
A deal was, however, struck in 2015 to allow a quota of US chicken into South Africa without this duty, which has seen a massive proliferation of black-owned importers.
The department of trade and industry (the dti) had insisted that half of the 65 000 quota must be shared by black importers.
According to a subsequent report in December by the International Trade Administration Commission (Itac) the number of applicants for a piece of that quota has jumped from only 29 initially to 105 in the latest year, “primarily attributable to an increase in the number HDI [historically disadvantaged individual] applicants”.
These businesses typically had between three and five employees and were forced to share tiny parts of the overall quota.
Many of these importers are however “related in terms of marriage or consanguinity”, Itac added.
In other words, spouses and children are all applying for the quota, diluting the allocation to all applicants to unsustainably low levels, said Itac.
New rules have been proposed to force related parties to submit only one application.
Most of the Ebiesa members probably came about precisely due to the dti deal of 2015.
Ebiesa said in a statement that it represented 105 emerging black importers of chicken, incidentally the exact number of importers applying for allocations under the 2015 deal.
The 2015 deal was mostly meant to placate the US after it threatened to withdraw South Africa’s benefits under the African Growth and Opportunity Act (Agoa).
These benefits are crucial to vehicle and some agricultural exports to the US.
Apart from applying for higher overall tariffs on chicken imports, Sapa last year also went to court with an application to force the dti to scrap the 2015 deal on the basis that the US has imposed new tariffs on South African aluminium products under the Donald Trump presidency.
According to Sapa this undermines the benefit of maintaining Agoa benefits at the cost of chicken imports.
Apart from oversubscription for the black quota of imports, the Itac has identified what appear to be alarming instances of “transfer of benefits” by ostensibly black importers to the incumbent importers.
“Based on information obtained by the commission, benefits accruing to HDIs under permits issued to them were improperly being transferred to parties not named in such permits,” Itac said in its December notice.
Itac suggested that prohibited practices have included related party transfers that are not at “arms length”, meaning that the black importer is importing chicken and on-selling it to a non-qualifying importer at less than market price.
Ebiesa accused Sapa members of lying when they argue that tariffs were necessary to protect the local industry from complete decimation.
“Sapa is creating the wrong impression that imports, no matter whether from Brazil, the US or the European Union, are negatively impacting on the large local producers,” said Unati Speirs, chairperson of Ebiesa.
“This is not true. In 2018, some local producers posted bumper profits of more than R1.4 billion for the year. What is true is that this perception is being created in order to drive further protection for local producers, in an already concentrated and untransformed market.”
Speirs said that local poultry production of around 1.3 million tons was insufficient to meet demand of about 1.8 million tons.
The EU, Brazil and the US are the major sources of local chicken imports.
The specific tariffs Sapa wants hiked are those for bone-in pieces such as leg quarters, thighs, drumsticks and wings – as well as deboned breasts.
The bone-in pieces currently face a 37% tariff while deboned pieces face a 12% tariff.
A major part of South Africa’s chicken imports comes in the form of mechanically deboned meat, used for polony and sausages.
This carries no tariff and Sapa does not want to put tariffs on it either. This meat product makes up almost half of chicken imports.