LETTER: Localisation drive in poultry means higher food inflation and poorer quality
The problem with import reduction and local industry taking up the slack is that it just does not happen according to plan
30 March 2022 - 14:35
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Francois Baird lives in a fantasy world (“VAT-free chicken is vital,” March 29). He’s been telling us for years that import dependency must be reduced substantially and local poultry will take up the slack and create thousands of new jobs. But why would there even be import dependency if there were no demand?
The only problem with import reduction and local industry taking up the slack is that it just doesn’t happen according to plan. Imports dropped more than 20% over the last two years and local poultry sales increased about 16%. Yet amazingly, local poultry profits dropped due to lower margins and increased costs. In addition, with the exception of one case where the business model was completely restructured, there were no staff increases despite Baird’s claims to the contrary.
If Baird takes the trouble to study the recent financials of SA’s largest poultry producer he will see that the labour force increased by about 15 in its latest reporting period, which reflected a whopping turnover increase of 14%. In addition, one of the main reasons for the margin drop (but not the only one) is that local poultry seems unable to balance its carcasses (aligning production and sales cuts), resulting in a huge surplus of quality white meat, which ends up in cheap mixed frozen chicken packs.
The solution to this is to build a meaningful export market where white meat is the chicken cut of choice, but local poultry either cannot or will not do this. Our export sales are minute. It’s much easier to launch tariff investigations aimed at driving imports down and then increase prices with less competition around. The net result of this localisation drive is higher food inflation and poorer quality.
Who suffers from these poorly conceived strategies? The embattled consumer. I can refer Baird to numerous international research papers substantiating this. Just like democracy, the free market is not perfect but it’s the best we’ve got.
Anthony Peerie Sandringham
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: Localisation drive in poultry means higher food inflation and poorer quality
The problem with import reduction and local industry taking up the slack is that it just does not happen according to plan
Francois Baird lives in a fantasy world (“VAT-free chicken is vital,” March 29). He’s been telling us for years that import dependency must be reduced substantially and local poultry will take up the slack and create thousands of new jobs. But why would there even be import dependency if there were no demand?
The only problem with import reduction and local industry taking up the slack is that it just doesn’t happen according to plan. Imports dropped more than 20% over the last two years and local poultry sales increased about 16%. Yet amazingly, local poultry profits dropped due to lower margins and increased costs. In addition, with the exception of one case where the business model was completely restructured, there were no staff increases despite Baird’s claims to the contrary.
If Baird takes the trouble to study the recent financials of SA’s largest poultry producer he will see that the labour force increased by about 15 in its latest reporting period, which reflected a whopping turnover increase of 14%. In addition, one of the main reasons for the margin drop (but not the only one) is that local poultry seems unable to balance its carcasses (aligning production and sales cuts), resulting in a huge surplus of quality white meat, which ends up in cheap mixed frozen chicken packs.
The solution to this is to build a meaningful export market where white meat is the chicken cut of choice, but local poultry either cannot or will not do this. Our export sales are minute. It’s much easier to launch tariff investigations aimed at driving imports down and then increase prices with less competition around. The net result of this localisation drive is higher food inflation and poorer quality.
Who suffers from these poorly conceived strategies? The embattled consumer. I can refer Baird to numerous international research papers substantiating this. Just like democracy, the free market is not perfect but it’s the best we’ve got.
Anthony Peerie
Sandringham
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
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