The first steps towards resolving the war of words over chicken imports take place tomorrow when the Association of Meat Importers and Exporters (Amie) and the SA Poultry Association (Sapa) present their cases on the latter’s call to increase the tariff on frozen chicken imports before the International Trade Administration Commission of South Africa (Itac).
The hearings are expected to be a precursor to high court applications on the matter.
At the heart of the battle lies Sapa’s proposal to increase import duties on frozen chicken to 82 percent from 24 percent, which is opposed by Amie.
Over the past three months Amie and Sapa have been chirping at each other over the probable impact of the proposed tariff increase.
Should it be implemented, Amie said, chicken prices would rise by between 30 percent and 50 percent.
Itac said last week that it needed to move fast on the matter as the industry was in distress. However, Amie believes the industry’s distress is not caused by the level of chicken imports coming into the country, but by problems with the operating models of poultry producer companies.
Amie has also disputed that 400 000 tons of chicken a year is being imported into South Africa, claiming the total imports are about 220 000 tons, representing about 10 percent of total local production and about 12 percent of current consumption.
The claim that 400 000 tons of chicken is being imported annually has kept South Africa’s poultry producers awake at night. It has been described as “a nightmare” and as something that should be speedily dealt with. However, Amie has put brakes on the process by involving the courts.
The high court will hear an application on June 18 on whether Sapa must share what its chief executive Kevin Lovell described as private and confidential information, used to calculate price methods.
This application would also be filed against Itac chief commissioner Siyabulela Tsengiwe for access to information Sapa supplied to Itac.
Lovell said on Friday that Sapa had provided Amie with a method describing how the association had arrived at the proposed tariff increase. “We cannot simply give confidential financial information of poultry producing companies.”
While there is a complicated and technical argument around the tariffs, Amie believes the information given to Itac was flawed and it wants a chance to interrogate it.
Recent interim and full-year results by major chicken producers Rainbow Chicken, Astral Foods, Sovereign Foods and Afgri showed that margins remained flat or declined. Besides the chicken imports, chicken producers have put the blame on high input costs.
Lovell said a primary reason that imported chicken could be sold cheaper than the local product was because countries like Brazil had an advantage in production costs.
“In the case of Brazilian poultry producers, they pay less for soya and maize, those are the main advantages.”
Notwithstanding that the local poultry industry was ranked among the most efficient in the world, “it is impossible to compete with the economies of scale of the world’s richest economies, bi-annual grain and soya crops, government subsidies and other advantages enjoyed by foreign poultry producers who export to South Africa”, Lovell said.
In terms of technical efficiency, he said: “South Africa compares itself with the US, and we are better than the US and slightly worse than Brazil.” He said local producers could compete technically but not on prices, hence the importance of the increase in tariffs.
Lovell said importers were landing their products on South African shores at prices way below what local poultry manufacturers were able to produce at.
Another part of the debate is the difference in quality between the locally produced chicken and imported chicken.
Lovell argued that while local abattoirs were continuously checked by the departments of Agriculture and Health, the same was not happening with imported chicken. There were more than 200 registered abattoirs in South Africa, but well over 1 000 foreign abattoirs exported to this country. Some of these were accredited in the 1980s and were not regularly checked by South African authorities, he said.
He also argued that South Africa was consuming parts of the chicken, particularly the leg quarter, which was considered waste in Europe and the US. “The developed world prefers breast and wings and the rest is dumped here at discounted low prices.”
Amie chief executive David Wolpert said not only were local poultry business models unsound, but their chicken was full of brine.
“The Department of Agriculture wants the local poultry industry to stop or reduce pumping brine into chickens, often as much as 40 percent.” Wolpert said these products represented about 60 percent to 70 percent of the market.
The issue of job losses will make part of the case.
Amie said that should the import tariff be increased, about 18 000 jobs would be shed. Sapa argued that by implementing higher tariffs, 50 000 direct jobs could be protected.
But should the status quo remain, about 70 000 indirect jobs were at risk with large poultry firms having already shed about 3 000 jobs.