There’s no truth to importers’ threats about ‘expensive’ chicken
The latest diatribe (“Meat importers association to fight tariff protection”, Business Report, June 3) is no different. So here are some facts the Association of Meat Importers and Exporters (AMIE) tries to hide.
Paul Matthews, the chief executive of AMIE, pretends that the application for increased tariffs is all about increasing input costs, and says that a bumper maize crop is going to nullify this. Implication - all will soon be well in the chicken industry because of cheaper chicken feed, so there’s no need for “punitive tariff protection”.
Fact: In the tariff application by the SA Poultry Association (Sapa) and its partners in the SA Customs Union countries there is exactly one mention of maize. It is a statement of fact in the introduction, noting that the poultry industry “is the second biggest user of maize in the region and by far the biggest user of soy beans”. Nowhere is the maize price, high or low, given as a reason for the application.
Fact: The 107-page application details the damage done to the industry by years of ever-increasing volumes of chicken imports. It sets out in detail why these imports are unfair in terms of World Trade Organisation rules, and asks the tariff arbiter, the International Trade Administration Commission (ITAC), to level the playing field through increased tariffs.
In another of his diatribes, Matthews said the chicken industry’s request for higher tariffs was “difficult to substantiate”.
Perhaps he hasn’t understood any of the 107 pages, which AMIE has access to in which Sapa details how imports have soared, with the industry losing sales volumes and market share, cutting production and reducing employment.
As he has done in other articles, Matthews says the chicken industry’s claims of hard times are outdated, and it is actually “booming”. He bases this on the financial results of the country’s largest chicken producer, Astral, in the first half of last year.
Fact: In both of the two six-month periods since then, Astral’s profits have declined sharply. When it reported the latest drop only a few weeks ago, Astral noted that trading conditions for the second half of the financial year are usually slower than the first half. So unless positive developments outweigh the negative ones, there might be worse to come.
Fact: In its interim results report in February, the second largest chicken producer, RCL Foods, also reported declining profits for its chicken business. The drop in earnings would have been nearly 50percent, it said, had it not been for the once-off profits from the sale of former chicken farms.
Fact: Those farms were sold when the RCL division, Rainbow Chickens, cut production and retrenched 1350 workers because of successive annual losses caused by imports. The chicken business, now smaller, is expected to remain profitable only because it has been restructured away from the market segments dominated by imports.
Fact: In its quarterly survey of 370 small farmers, 47 percent indicated to Sapa that they had given up farming. What is at stake is the livelihood of 800 000 small farmers in the informal industry.
Where’s that booming market, Mr Matthews? He is also careful not to tell readers that higher tariffs would not apply to all chicken nor even that they would not apply to all imported chicken. He says a tariff increase “could see a staple food vanishing off the menus of many South Africans”.
Fact: AMIE itself acknowledges that imports now comprise 30percent of the South African market. That means that 70percent of chicken supply comes from local producers and is unaffected by the tariff application. Tariffs would not add one cent to the price of local chicken.
Fact: The tariff application does not apply to all of the 30 percent of imported chicken. It excludes the EU, already subject to a lower tariff, the US, which has a separate duty-free allocation as part of the Agoa trade agreement, and neighbouring African countries who are members of the Southern African Customs Union.
Fact: While the tariff application does apply to Brazil, as part of the Mercosur trade bloc which would be affected, it would not apply to all Brazilian chicken imports.
The tariff application relates only to frozen bone-in portions, such as drumsticks and leg quarters, and frozen boneless portions. It excludes fresh chicken, whole chickens and mechanically deboned meat which comprises a huge proportion of Brazilian imports.
Fact: The tariff application doesn’t even apply to all imports of bone-in chicken, the popular cuts which have done much of the damage to the local industry. It says that the higher tariffs would affect 75 percent of imports of bone-in chicken, which totalled 175 million kilograms in 2017.
This doesn’t stop Mr Matthews from claiming that higher tariffs would turn South Africa’s most affordable meat into a luxury “depriving many of a previously accessible source of nutrition and protein”.
Fact: Any retail price increases resulting from higher tariffs on some imported chicken portions are likely to be small. They will not be the 32 percent or the implied 58 percent that AMIE is citing in its scare tactics.
Fact: In its application, the chicken industry estimates that there may be no retail increases at all, because of normal market competition. It says that, with increased production as a result of tariff protection, there may even be retail price decreases.
Matthews derides industry complaints of “unfair competition” because of the significant harm done to the industry by the huge surge in import volumes.
Fact: ITAC has already found that what has happened constitutes unfair trade. Only the percentage tariff required to level the playing fields is under consideration in a decision AMIE has tried desperately to delay.
Fact: Thousands of workers in chicken and grain production, transportation and other industries in the formal chicken value chain stand to benefit from a revived and growing South African chicken industry.
Francois Baird is founder of FairPlay.