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Crippling effect of lapsed anti-dumping duties on local industry and farmers

Fears that local producers could be forced out of business.
The cumulative rand value lost due to imports of frozen French fries between January and May could be close to R80m. Image: AdobeStock

South African potato producers have expressed concern about the increased risk of cheaper frozen potato fries from the Netherlands and Belgium, saying it could cripple local farmers and producers.

With less demand for local produce there will be a ripple effect on livelihoods and job losses, not to mention the effect on the economy, says Willie Jacobs, CEO of Potatoes South Africa.

Long-standing anti-dumping duties against importers have recently expired, despite a sunset review application by McCain Foods to keep the duties in place to protect the local industry.

Imported frozen fries from these two countries could be up to 30% cheaper because of the termination of anti-dumping duties.

The International Trade Administration Commission (Itac) failed to complete its investigation into the sunset review application by local producers in the prescribed time.

Application timeline

The duties were set to expire on August 7, 2019.

On February 7, 2019, McCain Foods submitted a sunset review application to prevent the termination of the duties. The application was supported by Lamberts Bay Foods and Nature’s Garden.

The Itac investigation started on July 26 that year. The commission failed to complete the sunset review investigation within 18 months of its initiation.

In terms of the Anti-Dumping Regulations anti-dumping duties must be terminated five years after implementation, unless a sunset review is initiated prior to the expiry date.

Imports already on the rise

Jacobs notes that the implementation of trade remedies saw imports of frozen French fries decline from 46 904 tonnes in 2010 to 18 417 tonnes in 2020 – a decline of 61% over a decade.

However, between January and May this year – just five months – almost 12 000 tonnes of frozen fries were imported into South Africa (a five-month average of the total figure for 2020: 7 674 tonnes).

Jacobs says the cumulative rand value lost due to imports during this period could be close to R80 million.

Rising costs and riots

Jacobs adds that South African producers have been experiencing many challenges brought on by Covid-19, the cost-price squeeze, rising input costs and, most recently, the riots in parts of the country.

“Furthermore, our producers don’t benefit from the financial support afforded to European Union farmers by their governments, and simply cannot compete with below-cost products being dumped in our country.”

The South African potato industry provides employment to an estimated 45 000 permanent and seasonal labourers and is worth approximately R7.5 billion at primary level, and R26 billion at secondary level.

Potatoes SA says in a statement the industry plants around 50 000 hectares of potatoes, with the crop accounting for 45% of the total vegetable crops produced in the country. This equates to a contribution of around R8.5 billion to the South African economy.

McCain Foods supports in excess of 6 800 full-time jobs and procures potatoes from more than 100 local farmers who plant in excess of 4 500 hectares of potatoes annually.

Listen to economist Mike Schüssler discuss the record unemployment rate: 

Local industry appeals for support

McCain Foods MD Unathi Mhlatyana says the negative financial impact of the Covid-19 pandemic and other prevailing socio economic and market conditions on local farmers and producers has been catastrophic.

“Further threats in terms of both demand and cost may force local growers and processors out of business,” he adds.

Mhlatyana says consumers and businesses are price-sensitive and would naturally be drawn to cheaper prices.

“We are therefore appealing to the retail and restaurant trade, as well as to consumers, to choose to support local farmers and producers so that their businesses can remain open, jobs can be saved, and so that the revenue remains within South Africa.”

Mhlatyana says McCain Foods was “deeply disturbed” and “disappointed” by Itac’s failure to complete its investigation in time.

“We are doing all that is in our power to remedy the situation.”

Loss of production

Hilton Lambert Trade Attorneys, representing the potato industry, says the industry reserves the right to hold the responsible parties accountable for any losses that may be incurred as a result of the loss of protection.

Francois Dubbelman, trade expert and founder of FC Dubbelman & Associates, earlier said this was the first time in the history of the commission that it had failed to finalise a sunset view application on time.

Generally, a sunset review is completed within a year. In terms of the General Agreement on Tariffs and Trade (the Gatt agreement) the deadline for investigations is 18 months, mainly because it is so disruptive to the trading environment.

Listen to Nompu Siziba’s interview with Alexander Forbes chief economist Isaah Mhlanga:

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COMMENTS   14

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Are we surprised that the sunset review is not done on time? Have the government ever got anything done on time. Are the officials lazy? Are they incompetent? Are they under qualified for the job? Do they know what the job is?
Another sign of a failed state.

I for one am happy for the EU to subsidise the local potato consumer. Why should we pay extra for a bag of frozen chips so that the inefficient producer can enjoy an unearned advantage?

Here is the answer you wanted.

How do you justify the “unearned advantage” of your inflated salary while the Department of Home affairs protects your inefficient and overpaid position, relative to the Indian or Pakistani immigrant who is willing and able to do your job at a third of your salary? Certainly, what is good for the potato farmer, is good for you?

If the DTI allows subsidized farming produce for the benefit of consumers, then in all fairness, the Dept. of Home Affairs should also allow “subsidized” immigrant workers for the same reason?

Do you have any idea about this topic? I doubt it. Myopic at best.

yet you were whining the other day about PPE coming from china.

yet you were whining the other day about PPE coming from china.

@Sensei are you joking? I expect more from you. The way we continue to restrict the basic freedom of humans to move around the planet is despicable, and indeed leads to ridiculous inequities like Swiss burger-flippers earning more than South African plumbers, or whatever. I am all for open borders.

Even if I weren’t, no point about fundamental international imbalances justifies further layers of (local) inequity. You need to explain why the local potato consumer should be disadvantaged in favour of the local potato producer. As you well know, trade barriers are paid for by consumers in the country raising them. So a decent argument has to be based on things like staple foods, self-sufficiency given war, realpolitik, or whatever. So, why potatoes?

Personally, funnily enough, I am entirely exposed to competition from Indians because I work in export-oriented tech services. It’s hard to imagine being more exposed. The benefit I get from living in SA is not an inflated salary, but a cost of living low enough to make my particular niche internationally competitive – for now. This is thanks to efficiency, which is least partly because SA post-94 has not tended to transfer wealth to farmers!

One more way to get the farmers off their land?????

It is another way of forcing the hated colonialist/landowner/producing farmer off the land. They tried murdering them, they tried minimum wage, they closed the farm schools all part of the ANC way. Deliberate or incompetence?? Either way hunger will hit the masses and there will be another uprising like 2 weeks ago.

Anyone notice the silence regarding the chasing of the hat’s Dirty Dozen? Prosecution? All gone quiet, classed in the same vein as farm murders, not important. Or are they too close to a cadre?

This reminds me of the weird situation where the head of the financial services regulator, the organization that enforces fit and proper requirements, was charged with corruption, extortion, fraud, bullying, intimidation, and mismanagement. Socialist dogma allows the deployment of incompetent and unscrupulous cadres to monetize their positions of power for personal gain.

The extremely competitive nature of international negotiations about trade and tariffs requires highly competent and intelligent officials for the job. These individuals should understand the intricacies of trade negotiations. They should realize that exporting nations try to hide the fact that they subsidize their producers. Those countries are in effect, through the subsidies, exporting(getting rid of) unemployment, and the economic decay in their countryside.

The importing nation on the other hand, by allowing these subsidized products to destroy the profit margins of local producers, is in effect, importing unemployment and economic degradation of farming communities.

It is clear that the people at ITAC, who operate in the name of the ANC, are very successful as importers of unemployment and economic decay, while they export jobs and the tax base to European nations.

Local producers cannot be internationally competitive when the officials at ITAC are unable to compete with their foreign counterparts. ANC dogma creates a competitive advantage for European and American farmers and their trade negotiators. The incompetence of ANC cadres ensures a profitable business model for our international competition. This is tantamount to sabotage and treason of course.

Lucid commentary. I wonder just how many armchair critics have even the foggiest notion what the challenges of farming are.
My wife’s nephew runs a chicken farm a 24/7 operation. His input costs are horrendous, the unnecessary bureaucracy of mindless administrators with their clipboards the fragility of chickens vis a vis temperature and the list goes on. And then major chain stores import frozen chicken from questionable sources at a fraction of his costs.
When one of the chain stores drops an order he visits them and checks the source of the product. Once he discovered chicken exported from Argentina to Russia who had rejected it as sub standard. Yes!
Check the labels people. One of the largest retailers imports a huge amount of its produce from Belgium (and many others) which subsidizes its exporters.
And our balance of payments goes for a ball of chalk.

“my wife’s nephew”. You on that arm chair boet?

“my wife’s nephew”. You on that arm chair boet?

I would have expected to read that the journalist in question would include in her report comments from the ITAC. Also, no mention of checking with McCain’s that they had followed up on progress once they had submitted their application.

Somehow I think there is far more to this than what appears at first reading.

End of comments.

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