South Africans may face a severe shortage of French fries in coming months, as dramatic new import duties on European producers block supply to the local market, experts warn.
They said that the International Trade Administration Commission (ITAC) imposed heavy import tariffs on frozen French fries which came into effect in July in an alleged attempt to protect the local industry from ‘dumping’ or being undercut by artificially lowered prices. This includes duties on frozen chips from Belgium of up to 23.06 percent and up to 104.52 percent from the Netherlands, while German suppliers have been hardest hit with new duties of 181.05 percent.
According to Fred Hume, Managing Director of leading import-export business Hume International, however, the South African potato industry does not supply enough raw material to meet the local market’s need for frozen French fries.
Notably, South African French fry producers tend to prioritise contracts to retailers, fast food chains and quick service restaurants, and only then sell surplus–if any– to customers such as independent restaurants, wholesalers, hotels, and caterers.
Hume said these customers rely on frozen French fry imports to meet their needs for the simple reason that they were not able to get consistent supply locally. “But the timing of these new duties is especially irrational given the poor local potato harvests seen in recent months, which have limited supply even further. Ultimately, it’s not a question of dumping or cheaper prices–in many cases, these customers will actually pay more for the imported products just to guarantee their supply of quality fries.”
Pedros Flame Grilled Chicken Operations Director Moosa Bux said that they were heavily impacted by the import duties on french fries, as it was their core product. “And this import duty cannot come at a worst time. It's the perfect french fry storm. Local producers were already on the back foot with production due to the loadshedding last month. European countries are having heat waves affecting the crop yield, the SA market yield is not the best currently, other food prices are rising including the cost of fuel and shipping rates to bring these products into the country, and the government now imposes a tariff. It makes no sense, Bux said.
He said that they were unable to get sufficient supply in the local market anyways, so they were now paying a higher price for imported french fries, and driving inflationary pressures further. “The European market is not dumping chips here, we do not have enough local supply and we have contacted all 3 major local producers and none have stock for us. Even their large local existing customers cannot get a supply agreement in place with the french fry producers due to the shortages. We hope this decision is reversed as soon as possible.” Bux added.
To demonstrate the importance of imported French fries locally, South Africa is said to have imported over 13 000 tons of frozen chips in 2020 despite muted demand resulting from the COVID-19 imposed lockdowns. Last year, this figure rose again to nearly 24 000 tons as imports plugged the shortfall caused by critical potato shortages.
However, European producers were currently battling the impacts of devastating heat waves which were likely to result in below average potato harvests. Like South African producers, supply will then be directed to major fast food chains and quick service restaurants, leaving little stock for exports. “Global supplies are already being rationed, while basic food costs have increased drastically in line with fuel prices, making the threat of oversupply or dumping highly unlikely. On top of this, new tariffs are being implemented at a time when households around the world are facing a cost-of-living crisis which is threatening food security,” Hume said.
Meanwhile, uncompetitive new tariffs could force European producers to turn away from South Africa and seek other markets with any surplus, further aggravating local price hikes and shortages.
For example, where a 2.5 kilogram pack of frozen French fries from Germany used to cost in the region of R45, it would now cost some R130 as a result of tariffs before transportation costs and business margins were added. In total, this meant that restaurants would have to pay a retail price of R 160 to R 170 for a bag of frozen slap chips – before accounting for future price increases.
“These tariffs were imposed without consulting any customers of the imported Fries to investigate the reasons as to why South African businesses may be reliant on foreign producers. Had ITAC done so, they might have realised that support for the foreign product isn’t so much about price but rather to secure ongoing supply. “Government urgently needs to start consulting stakeholders before making unilateral decisions which are harmful to businesses and households.”
Hume said that localisation efforts were noble, but they must be done at time and pace in keeping with the growth of local supply chains to prevent food shortages and skyrocketing prices. “Other countries are actually doing away with import duties to secure food supply, while South Africa
seems intent on doing the opposite. We would also urge government to consider temporarily lifting all import duties on basic goods like frozen fries and poultry to manage rising prices for consumers.”