The SA Poultry Association (Sapa) has rejected calls made on Monday by industry peer grouping, the SA Association of Meat Importers and Exporters (Amie), to remove all trade tariffs on chicken imports and suspend any new tariff measures in the industry for the next three years.
Sapa says this will only place the currently globally competitive industry on a declining trajectory.
Its reaction comes after Amie proposed that government remove value-added tax (Vat) and trade tariffs on chicken products and suspend new tariffs to combat rising chicken prices.
According to Amie, implementing the three-year suspension of trade measures will result in a 33% drop in the price of bone-in chicken pieces and chicken offal could cost consumers up to 20% less.
“South Africans are under extreme financial pressure. As a country, we have to do everything possible to arrest poultry price increases, and the quickest and most effective way to do this is for the government to give the South African consumers relief by placing a three-year moratorium on imported poultry tariffs, and the removal of Vat on poultry products,” Amie CEO Paul Matthew said on Monday.
However, Sapa representative Izaak Breitenbach tells Moneyweb that because Sapa believes rising grain prices – instead of existing tariff measures – are the main drivers of price increases in chicken product prices, it cannot support calls by Amie to cut trade tariffs.
“We do not support a moratorium being put on all trade measures for the next three years,” says Breitenbach.
“Should these measures be implemented, it will cause huge economic problems, a reduction in GDP growth and it will cause job losses in the poultry industry.”
“More importantly, it will put an industry that’s globally competitive on a trajectory of decline, to the detriment of the consumer,” he adds.
Sapa notes that forging ahead with the proposal to scrap trade measures on the industry will have a ripple effect on complementary industries like the feed manufacturing industry, the grain industry, and packaging and retail industries.
But Sapa supports ‘partial Vat-scrap’
Although Sapa rejected Amie’s proposal to scrap all trade tariff measures for the next three years, the association does support the proposal to scrap Vat on chicken products to alleviate rising cost pressures on lower income consumers.
“We would refine the call for Vat-free chicken to focus on the products consumed by low-income consumers and that the Vat-free campaign specifically focus on those,” it says.
“One example of a product like that would be IQF [individual quick freezing] chicken that is consumed by the lower LSM consumers in the country and in that way the government can give relief to the relevant consumer,” says Breitenbach.
Poorest consumer most affected
Speaking at the Amie press briefing, business owner Grant Hendricks, who sells meat products to consumers in the lower LSM of the market, supported the calls for Vat and trade tariff cuts.
He says bone-in chicken has now become too expensive for lower income consumers and, as a result, these consumers are now supplementing their chicken consumption with processed meat products.
“I’ve seen how consumers in townships are increasingly struggling to afford chicken. While their wages stay the same, or decrease, they are finding it increasingly difficult to put nutritious food on the family table,” adds Hendricks.
“The removal of tariffs and Vat on poultry will provide much-needed relief both for consumers and local businesses.”
According to a Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) study cited by Amie, the price of chicken between March 2021 and March 2022 has increased by 11%, higher than the steady 10% increase registered in the last decade.
Consumers to feel the pinch soon
The group further estimated that should these cost pressures on the industry persist, consumers will start feeling the pinch of higher chicken prices in the second half of the year.
“With the disruptions in the supply chains, we should feel the effects [of higher prices] from June onwards, up until December,” Hendricks says.
He adds that the industry has already started observing an increase of between 10% and 15% for bone-in, leg quarters and drumstick chicken pieces.
Expressing similar sentiments, trade economist and director at XA International Trade Advisors Donald MacKay says that should conditions remain the same, the country could see even higher prices increases in the next year.
Matthew adds that local producers have already begun passing the cost pressures on to already cash-strapped consumers.
“As of today, local producers have just increased their prices by R1.70 per kilogram, so that’s happening already now,” he claims.
Meanwhile, Sapa’s Breitenbach says chicken prices have been on the rise since 2021 and the only way consumers will find relief is if the market sees a reduction in cost pressures in the raw materials market.
“If we follow the prices of maize and soybean, we will see what the impact would be on the consumer for the future … if prices of raw materials increase, we can expect upwards pressure on the price of poultry products, but if the price pressure comes off the maize and the soybean then we must see a reduction in the price of poultry products,” he says.
Trade movement Fairplay shared Sapa’s sentiments adding that cutting trade measures will not have the desired impact on chicken prices as Amie suggests, further warning that as a consequence of Russia’s ongoing attack on Ukraine, consumers might have to brace themselves for further price increases.
“Chicken importers and their advisors like to pretend that the main reason for the increase in local chicken prices is import tariffs and anti-dumping duties,” Fairplay says in a statement to Moneyweb.
“South Africa is not alone in this. Food prices are going up around the world for the same reasons, and the warnings are that, because of the Ukraine war, worse is yet to come,” Fairplay adds.
Listen to Fifi Peters’s interview with Paul Matthews of the SA Association for Meat Importers and Exporters (or read the transcript here):