Consumers could bear the brunt of the cost with the localisation policy insight
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Cape Town - While the localisation policy to encourage South African businesses to promote locally produced goods is in the works, the poultry sector and consumers are concerned about how it will impact the business, especially when it comes to the cheapest source of protein, chicken.
The policy was implemented in May as part of the government’s commitment to build and upgrade domestic production in the economic reconstruction and recovery plan.
According to ChickenFact, implications for the poultry industry are significant due to the fact that of the 42 products targeted, poultry falls part of the agribusiness category, which makes up 7% of all agricultural imports and South Africa’s most affordable protein.
Insight from a South African capital markets and financial services research house report estimated that if localisation was imposed in any way, the price of goods could rise by approximately 20%.
CEO of the Association of Meat Importers and Exporters (AMIE) Paul Matthew said that limiting imports would lead to shortages, wastage, and price increases.
“The honest truth is that local producers cannot produce enough chicken to supply the current demand in South Africa, and in terms of food security, we know as a country we love our chicken meat.”
“South African producers only produce around 1.2 kilos of chicken, and if you really want to get the best out of the carcass, one would understand that it's not enough. Poultry production is not limited by competing imports. It is limited by the failure of the government to create an efficient infrastructure.
“Our producers are badly affected by water and electricity shortages, crime, and transport impediments. Also, our market in South Africa prefers certain portions of the chicken over others, which means that there will be shortages of bone-in, brown meat that South Africans prefer - while there is a surplus of the white meat, that we could be exporting if our health standards were high enough.
“No matter what we do, we will never be able to produce enough chicken to meet demand. Reducing imports, therefore, would simply restrict supply, and prices would go up,” said Matthew.
While chicken remains the mainstay of the average food basket because it is the most affordable protein.
According to ChickenFacts, local producers are unable to produce more than 80% of the chicken consumed in South Africa. The remaining 20% is imported, and this is critical in maintaining food security and keeping prices in check.
Deputy director of the Free Market Foundation, Chris Hattingh, said that localisation would cause a negative impact because prices would go up, and that would affect poorer consumers.
“South African consumers are under a huge amount of strain and do not have as much disposable income as before. Hence I think that any increase in the price of goods will definitely impact their spending patterns,” said Hattingh.