The International Trade Administration Commission of South Africa will have a tough call to make in about two months' time when it is expected to make a decision on whether to impose a tariff of poultry imports.
Those with intimate knowledge of the tariff application say that ITAC's position is akin to a zero-sum game, where they may have to choose between exposing local poultry producers to cheap imports they cannot compete with, or raising consumer prices for poultry to impossibly high levels.
ITAC is a body which falls under the newly reconfigured Department of Economic Development, Trade and Industry. Its mandate is to set the trade agenda for South Africa for the benefit of economic development and use tariffs to this end.
The South African Poultry Association, a representative of local poultry producers, applied to ITAC for an 82% increase to the tariff, saying that the local producers cannot compete with dumping from the international market.
South African households, especially those in low income bands, are under increasing pressure, with the general cost of living on the rise. Products such as chicken portions are the cheapest meat protein on the market, and the impact of a price increase would be tremendous.
The South African National Consumer Union fears that, if approved, the tariff would raise prices of poultry products beyond what low income households can afford. They also fear that the local industry will not be able to meet the local market’s demands, which will further spike prices.
South African National Consumers Union vice chair Clif Johnston told Fin24 that the tariff application would harm consumers as it would make poultry products more expensive for some and unaffordable for others.
"It's going to lead to a price increase. We know that chicken is the staple meat product for the poor. We represent the consumer. The consumer is always sensitive to price increases. There are millions of people on social grants and they can’t even afford to eat chicken as often as they may like," said Johnston.
Johnston said while SANCU had not crunched its own numbers on the matter, statistics they have seen show that the price of chicken may increase 20% and 30% "conservatively speaking".
"We don’t have inside info into the industry. What we do know without a doubt is that if there is a local rescue in this matter, it will be at the expense of the consumer. They can’t afford the increase. We are not disputing that the local industry has problems," Johnston said.
SAPA general manager Izaak Breitenbach told Fin24 that the application for the tariff increase was being misconstrued as an attack on imports, when it was, in fact a response to product dumping.
"The background up to date is the 12% tariff and 37% on portions. The history is that ITAC found dumping and gave us the tariff. The dumping was at way below cost. Since then, the tariff has had no impact on import value. We applied to have it increased," said Breitenbach.
"We expect that by the end of July or early August, ITAC will rule. We will still send supplementary. Our last deadline for submissions is mid-July."
Breitenbach said the new dumping margin that SAPA was applying for is 82%, which is the World Trade Organisation maximum.
'Little value for consumer'
"I have a meeting with SANCU next week. Tariffs simply move production from one place to the other from imported to local production. The dumped product has little value for the consumer. There is no increase in price expected," Breitenbach said.
Paul Matthew of the Association of Meat Importers and Exporters said Breitenbach was using imports as a scapegoat for other issues affecting the local poultry industry. He denied that dumping was pervasive in the local market.
"I think Izaak has been talking about dumping a lot. I want to get my head around why he says Brazil is dumping in this country. I haven’t seen proof of the methodologies so I don’t know where his point is coming from in terms of dumping," said Matthew.
Matthew said imports go through strict control of standards. He added that Breitenbach’s objective seemed to be to get government to slow imports down even further.
"There is a first application they brought to take on bone in cut and the boneless at different levels. What he forgets is in the packs, the poor population many buy bone in chicken and it is going to have," Matthew said.
ITAC is expected to come to a decision on the tariff between late July and early August.