Durban - Retail giant the Shoprite Group announced on Sunday that it would sell frozen chicken imported from the US at cost price.
Economists and producers have fluffed their feathers, warning the move would create a price war and kill smaller competitors.
On Monday, Shoprite Holdings managing director and chief executive Whitey Basson said the company had no ulterior motives.
“Shoprite supports the local industry, and does not import chicken, but this influx was going to be sold, one way or another. By pushing it out at a low price and fast, the country’s poor will benefit and the market will be freed up quickly again for local suppliers.”
Shoprite sells 60% of all frozen chicken in South Africa.
Last month SA and the US agreed to allow the US to export 65 000 tons of poultry after deadlocked negotiations around the African Growth and Opportunity Act (Agoa). One of South Africa’s concerns was the US outbreak of avian flu, killing 50 million birds.
According to Brand South Africa’s website, SAnews.gov, in June, representatives from the two countries met in Paris under the auspices of Agoa with their respective industry associations, which resulted in a breakthrough.
Agoa provides duty-free market access to the US for qualifying sub-Saharan African countries by extending preferences on more than 4 600 products.
The website said the South African poultry industry was represented by the South African Poultry Association, and the US by the National Chicken Council and United States of America Poultry and Egg Export Council.
Shoprite said half of the imported chicken was to be given to historically disadvantaged middlemen who did not have the distribution network to translate the cost-saving into a benefit for consumers.
“Shoprite understands the minister’s mandate (Trade and Industry Minister Rob Davies) to allocate a portion of the quota to historically disadvantaged individuals. But it cannot comprehend why a minimum 50% must go this route as the benefits of these imports must also reach previously disadvantaged consumers in the form of lower chicken prices in stores,” Shoprite said.
Shoprite also called on the Department of Trade and Industry to consider the impact of imports on local suppliers and poultry producers and asked for prioritisation of investment in its growth.
Kevin Lovell, chief executive of the South African Poultry Association, said the real reason Shoprite was selling chicken at cost was to try to protect its domestic market.
However, he said the impact would only be felt once the chicken arrived at the end of January in 2016. Chicken prices had not moved much during the festive season because the economy was going through a hard time, Lovell said.
South Africans were now paying R1 400 more for a ton of maize than they were last year, he said.
Economist Professor Bonke Dumisa said: “There is no such thing as a free lunch.”
He said Shoprite had already made its calculations on how it could benefit from selling at cost price. The group’s motive was to push out smaller competitors, who would be unable to compete.
Dumisa said the decision would ruffle the feathers of other big retailers who would be forced to respond to the low prices, starting a price war which smaller companies would not be able to join. He said once smaller competitors were out of business, Shoprite would raise the price again.