Rob Davies ‘must squash’ R10/kg US chicken imports

The department of trade and industry is still studying the court application handed in last week by the SA Poultry Association (Sapa) that is aimed at forcing an end to the special quota system allowing 65 000 tons of dirt cheap US chicken into South Africa every year.

According to Sapa, Trade and Industry Minister Rob Davies must cancel the quota in retaliation for new tariffs imposed on steel and aluminium products by the US this year.

The chicken imports from the US land in South Africa at an average cost of R10.64 per kilogram, according to official trade data – that’s less than half the cost of producing individually quick-frozen chicken pieces domestically.

The US chicken also severely undercuts imports from Ireland and Denmark, which land in South Africa at roughly R16/kg and R18/kg, respectively.

The new US tariffs will affect products that earned South Africa R6.7 billion in exports to the US market
last year.

Importantly, the tariffs hit products that South Africa could previously export to the US duty free under the African Growth and Opportunity Act (AGOA).

This amounts to revoking South Africa’s AGOA benefits, said Sapa executive Ziyanda Majokweni in
her affidavit.

However, South Africa granted US chicken exporters a special concession in 2016 precisely to maintain those AGOA benefits, she pointed out.

The US had threatened to kick South Africa out of AGOA due to the long-standing anti-dumping duties on bone-in frozen chicken pieces from the US.

The deal was that South Africa would let in 65 000 tons of this US chicken a year free of the duty if it retained its AGOA benefits. It follows that this quid pro quo should now be revoked after the new US tariffs at least partially took away South Africa’s AGOA benefits, argued Majokweni.

The department of trade and industry will, however, be loath to threaten the rest of South Africa’s AGOA benefits by retaliating against US chicken imports.

The lost exports due to the US tariffs on steel and aluminium are significant, but far less than the total exports to the US under AGOA, especially in the automotive and agricultural sectors. The scale of AGOA benefits for South Africa has however dropped dramatically this year because BMW South Africa upgraded its local manufacturing plant in Rosslyn to produce X series cars for the European market instead of the 3 series cars it used to manufacture for the US market. 

Department spokesperson Sidwell Medupe said that the department was still trying to negotiate an end to or reduction of the US steel and aluminium tariffs.
The largest single beneficiary of AGOA in South Africa and also on the continent has long been BMW, which for years exported about 40 000 cars from South Africa to the US every year. Due to the reorientation of the Rosslyn plant, South African car exports to the US dropped precipitously this year. The exports of sedans with engines smaller than 3 liters was about 3000 per month last year. Since March there were only 4 cars this size exported to the US. These exports were worth about R1 billion per month last year, which is now nearly zero.

Citrus and macadamia nut farmers also enjoy significant sales in the US thanks to AGOA.

Last year, South Africa exported about $1.2 billion (R17.3 billion) in cars and car parts to the US, and more than $200 million in farm produce duty free. Total AGOA exports were almost R24 billion. Most of this will dissipate this year due to the end of US-destined BMWs and the steel and aluminium tariffs introduced by the US.

In turn, South Africa imported R832 million worth of US chicken pieces last year.

The quota of cheap US chicken is allocated through permits and the objective had been to give at least half of it to black-owned importers.

However, the beneficiaries of this cheap chicken have not been revealed.

David Wolpert, the CEO of the Association of Meat Importers and Exporters, said they were seeking legal advice about whether or not to join the court case.

* SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

ZAR/USD
17.58
(-0.95)
ZAR/GBP
22.94
(-0.19)
ZAR/EUR
20.72
(-0.12)
ZAR/AUD
12.60
(-0.01)
ZAR/JPY
0.17
(-0.59)
Gold
2032.73
(-1.75)
Silver
27.97
(-5.99)
Platinum
958.00
(-4.00)
Brent Crude
45.10
(-0.18)
Palladium
2133.50
(-4.17)
All Share
56757.73
(-1.56)
Top 40
52435.65
(-1.72)
Financial 15
9897.96
(+0.10)
Industrial 25
74671.49
(-1.98)
Resource 10
58948.78
(-1.89)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 925 votes
It depends on how the funds are used.
74% - 6209 votes
No. We should have gotten the loan elsewhere.
15% - 1276 votes
Vote