Mass retrenchments in food sector ahead, association warns

An association of meat importers and exporters has warned of mass retrenchments in the food sector after the government announced a significant  hike in poultry tariffs.

Last week, the government gazetted tariff increases to 62% on bone-in chicken portions while boneless portions were raised to 42%. The SA poultry industry had applied for an 82% tariff on both categories, up from 37% and 12% respectively.

SA’s poultry sector has shed thousands of jobs and blames its demise on cheap chicken imports from Brazil, the US and Europe. But SA meat importers blame this on the lack of competitiveness in the local poultry industry.

The Association of Meat Importers and Exporters (AMIE) said on Tuesday cash-strapped consumer are likely to pay about R4/kg  more for chicken.

It said SA will also have to wait for the reaction of its Brics partners —  Brazil, Russia, India and China — as well as the US to the increases, and there may be a drop in exports of many South African products.

AMIE said almost half of poultry imports, or 48%,  are subject to the increase in duty as they originate from countries without free-trade agreements with SA.

“Ordinary South Africans and especially poorer South Africans are the big losers as they will have to pay more for chicken or will be faced with shortages of chicken,” said AMIE CEO Paul Matthew.

SA recession

“But the economy will also suffer as there will be significant job losses in the food commodities and associated industries. At a time when SA is in recession and we are now fighting the coronavirus [outbreak] and still have to see the affect it has on world trade; this is an extremely short-sighted decision.”

Matthew warned that a lot of countries, including Brics partners, are looking at the tariff hike and “saying that they don’t want to trade with SA”.

“This decision has a huge affect on Brazil, which is a key trading partner and a member of Brics. We will have to see how this impacts trade relations with Brazil and within Brics.

“Added to that, we also need to watch for how the US reacts and how it impacts on our preferential access in terms of the African Growth and Opportunity Act (Agoa) for multiple industries. The US vehemently opposed the tariffs and we will see what President Donald Trump does in respect of AGOA which has implications for a lot of SA’s other industries which export to the US, like the wine industry.”

According to Matthew, an independent study in 2019 into SA’s broiler industry had found that domestic production is unlikely to increase fast enough to fill the gap opened by greater trade protection, and  consumers would pay more for chicken. Increased protection would also lead to job losses and slower  GDP growth.

The South African Poultry Association (SAPA), an organisation which represents local producers, said it is not true that the tariff hikes will lead to increased chicken prices and job losses.

Citing the master plan created by stakeholders, including importers and the government, SAPA’s Marthinus Stander said its objective is to create a competitive industry, and one of the ways to do this is to hike import tariffs.

“We have a competitive local industry, there is 110,000 jobs and the aim of tariffs is to level the playing field and create more local jobs. Hiking tariffs may well lead to job losses within the importers part of the industry, but, overall, more jobs will be created within the broader local industry.”

Stander said pricing was a matter of supply and demand, and local producers are ready to meet demand.  

SAPA also suggests that chicken producers mainly from Brazil are heavily subsidised and an increase in tariffs will not necessarily lead to high chicken prices.

phakathib@businesslive.co.za