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Imported ‘frites’ are now cheaper than South African potato chips

Long-standing duties have expired, despite applications to keep them in place being submitted in good time.
Itac found sufficient evidence that the expiry of the anti-dumping duties would ‘likely lead’ to dumping and material injury to local producers. Image: AdobeStock

Imported potato chips from Belgium and the Netherlands are now at least 30% cheaper than locally produced chips, mainly because of the termination of long standing anti-dumping duties.

The removal of the duties – ranging between 6% and 30% – means the local industry will be battered. Employment levels are under threat and job losses seem unavoidable. The industry will also lose at least 10% of its market share to international producers.

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The International Trade Administration Commission (Itac) admits that the duties expired because it failed to complete its investigation into a sunset review application by local producers in the prescribed time.

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

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.

The Itac investigation started on July 26, 2019, and the commission failed to complete the sunset review investigation within 18 months.

Finger-pointing

The exporters have blamed the Itac investigators, saying they were responsible for delays during the verification process because of the “approach the team chose”. This approach made the completion of the verification process impossible, they said.

Itac, however, says this is incorrect.

The commission blames the exporters for providing incorrect or incomplete information, and of having “side meetings” with their consultant which left the investigators waiting for “unreasonabl[y] long” periods during the process.

Francois Dubbelman, founder of FC Dubbelman & Associates, says this is the first time in the history of the commission that it failed to finalise a sunset review application on time.

He has expressed concerns about the potential impact on investigations into other critical sectors of the economy such as poultry and structural steel, where anti-dumping duties are in place or trade-remedy investigations are underway.

Read:

In the McCain application, which was submitted well in advance of the expiry date, the company stated that without the duties the South African Customs Union (SACU) industry is likely to see “the continuation of dumping and the recurrence of material injury”.

Itac found there was sufficient and prima facie evidence that the expiry of the anti-dumping duties would “likely lead” to dumping and material injury to local producers.

‘Somebody must take control’

Dubbelman says in this instance no one can blame the Covid-19 pandemic, since the investigation was initiated long before the onset of the pandemic in South Africa.

In principle, it is on Itac to push an investigation.

It knows it has 18 months to complete the task. Generally, a sunset review is completed within a year. In terms of the General Agreement on Tariffs and Trade the deadline for investigations is 18 months, mainly because it is so disruptive to the trading environment.

“Somewhere in the dusty Covid-corridors of Itac, the Department of Trade, Industry and Competition [dtic], and the minister’s offices, somebody must take control and ensure that the industries that apply for relief are assisted quicker and more efficiently [than] is currently the case,” says Dubbelman.

‘Neglect’

“This neglect in support of South African industries who have invested millions and employ millions when they need it the most is not sending the right message to foreign investors that the president is trying to lure to South Africa.”

Dubbelman cites several instances where industries have approached the dtic.

“Investigations are not finalised as they remain on the minister’s table waiting [for] approval to ensure that applicants can receive the required protection or assistance from government to remain a viable and competitive industry while retaining jobs.”

Dubbelman says the Itac undertaking to finalise its investigation in six months is nothing but a pipe dream.

An investigation into tariff protection for the coated steel industry is currently gathering dust on the minister’s table, he adds.

Dubbelman also refers to a company that applied for protection against cheap imports of phosphoric and polyphosphoric acids in February 2018. It was stated in the application that without protection “local production will be lost to imports costing the SACU economy jobs and investments”. More than three years later there was still no outcome.

Read: New rebate on certain imported yarns and textiles is complex

In the white goods industry, particularly in refrigeration production, where protection was requested, an East London plant was closed at the end of March this year. More than 150 jobs were impacted.

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one can put it simple and straight when it comes to the governments slow reaction on anything that is important: at the end of the day too little too late is done. the incomprehensible part is that it seems that the government does not understand or want to understand that one first look after the country’s own economy & citizens before allow dumping in the country – the dumped product may be cheaper, but the long term negative effect on the economy is almost irreparable – just take sa’s clothing industry as an example due to cheap clothing from the east

Another blow to unemployment in SA due to government dragging its feet.

On the other hand, when did government ever care about the average person on the street and their employment status?

….the potato “board” wasn’t such a bad idea after all??

EU/FTC (www.ftc.gov) demanded unfettered market access and got it

Unfettered market entry works both ways. If you cant compete against the EU with its sky high wages and taxes then you as a country deserve to be preyed on!

@Billy BoJ
Some instances especially in the agri sector EU farmers deliberately produce surplus in order to qualify for Gov subsidies…Think French Farmers…Butter mountains.
Not all is as it seems.

@Billy BoJangels: let me correct that for you

If you cant compete against the EU with its sky high wages and taxes, _offset by government massive subsidies_, then you as a country deserve to start _subsidising your own strategic sectors_.

Potato board (and the other boards) were about subsidies and controlling prices. Once they were scrapped we decided to play the game with free-market rules. The tariffs are to protect us against other places that don’t play by those rules, such as the EU.

As for whether scrapping those boards was a good idea: that’s a discussion for another day.

Well they dump in SA because SA has been turned into a dump!!

I cant think of a single product we can “dump” elsewhere because we are not competitive!! Unions, cadre deployment, BEE and the anc made us uncompetitive.

Protection is like a social grant!! Just make you weaker and even more uncompetitive.

If you cant compete close down and let the workers go home and get a grant!!

Exactly

How do you explain economics to uneducated morons?

I’m referring to government of course.

Sorry Mmmmm

If all producers competed without subsidies or tariff or such we nail 90% of the world in 90% of agricultural exports.

We are playing on a level playing field but our competitors moved the goal posts.

Sure: we need nimbler officials shutting down unfair trade

You are competing against a trade bloc that reallocates resources to subsidise its agricultural sector.

There plenty of reasons to be negative above South Africa: needing these tariffs isn’t one of them.

Average monthly salary in Belgium is 6100 euros, in Netherlands it is 3100 euros..in sunny SA, it is 1000 Euros and probably far less if you a farm worker. And yet frozen chip manufacturers cannot compete with the Europeans even after adding the cost of the mark up of the importers, the weak rand and the sea freight cost which is very high at the moment. SA has become terribly uncompetitive relying on ‘cheap’ yet lazy labour instead of mechanising so maybe locals should rather look in the mirror for someone to blame!!

Fair point, but do realise that the European Agriculture Industry is highly subsidised.

Subsidised yes, with taxes collected from working population

Climate, soil type and rainfall may also be an issue.

The grain producer in the USA. Canada, and Europe who manage a farm of the same size as the average South African farmer receive R1.5 million in subsidies from the state before he has sold any of his produce. Those farmers can produce at a loss and will still be viable as farmers. The only buffer available to local farmers is the cost of freight and transport from international harbors.

The sad reality is that in this competitive international trading environment, the local industry is unable to compete internationally when the officials at the DTI are of inferior mental capacity relative to their foreign counterparts. The socialist political dogma, combined with cadre deployment, ensures that a clueless and incompetent cadre is entrusted with the long-term viability of local food producers. The rest of Africa is dependent on food aid because their leaders allowed the dumping of subsidized imports to bankrupt their own farmers.

The farming enterprise has been in my family for 100 years now, but my conviction in this statement is the main reason why I am moving out of agriculture locally to invest offshore where the important officials have an IQ above 110. The populist and shortsighted ANC policies turned me into an economic refugee.

If they had half a brain they would figure out a way to extract some value for all the social grants we pay.

EU/US subsidies are a form of social grant for farmers.

No BilliBo!

Those super efficient EU farmers you admire so much get paid enormous subsidies.

Ireland is not clever at making cheese cheaper than SA, the dairy farmers receive a subsidy per liter that exceeds our farm gate price per liter.

EU beef subsidy per head of cattle per year exceeds the annual feed cost.

If I spent ten minutes I can find you what the Belgian potato subsidy works out to but try it yourself.

The EU farmers would not recognize efficiency or capitalism if they stumbled over it.

Ahh, yes, but…
If you want to make or do anything in South Africa you have to also factor into your cost model the bribery and corruption payments, otherwise you won’t get a “licence.”

It is mystery why the best president in the history of the universe hand-picked Ebrahim Patel, a ridiculous and pedantic pen-pusher, to be his economics minister.

Stephen Grootes, Peter Bruce and Ferial Haffajee can no doubt justify that decision.

While they are at it they can also explain why the prophesied one chose a blithering idiot as minister of police and a clown as minister of transport.

Not to mention Patel’s communist and trade-unionist characteristics.

The consumers will benefit and dinosaurs protected for too long will die off

Pity about the jobs

Maybe the jobless should talk too their government about it.

there is no Govt : just the ANC !!

Finally we can use the phrase “as cheap as chips” in South Africa…the bureaucrats aren’t all bad. Watch those diabetes rates though…

It is very difficult to understand how a product produced in the EU with high wages is then shipped halfway across the planet and then sold in this country 30% cheaper than the local item, unless:

1. The local operation is not efficient, nor productive
2. The local operation’s overheads are too high
3. The local operation has enjoyed protection for too long.

It should actually be the other way around!
Stop moaning, pull up your socks and face the challenge head-on. Many South African Companies can cut their overheads and the way they operate by at least 40% without losing a single head. People call it Best Practice, I call it common sense.

Capex and Opex Purchases must be based on the total cost of ownership AND operation as an example.

Don’t bank on the government helping you and, once you have achieved this, cut your sales price and prevent anyone from entering the market as your pricing is too competitive to make it attractive to others.

It’s a pretty easy explanation actually – EU farming is subsidized so local farmers cannot compete, no matter how competitive they are run their farms

not only fries…even spare ribs,chicken are from germany,frozen foods from uk,buscuits from uae,cosmetics from greece,cigars from cuba,…

End of comments.

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