Home South African Increased frozen poultry imports likely to keep a lid on chicken prices

Increased frozen poultry imports likely to keep a lid on chicken prices

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The government has announced rebates on frozen chicken imports, a move likely to keep a check on rising chicken prices for consumers amid a cost of living crisis.

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THE GOVERNMENT on Friday announced rebates on frozen chicken imports, a move likely to keep a check on rising chicken prices for consumers amid a cost of living crisis.

The Association of Meat Importers and Exporters of Southern Africa (AMIE) welcomed the International Trade Administration Commission (Itac) decision on rebates for chicken imports and said the rebates would help poor households.

The Government Gazette said Friday the decision to introduce the rebates was to avoid any shortage of chicken, this after some 8.5 million chickens, a large portion of the South African flock, had to be culled last year following an outbreak of Highly Pathogenic Avian Influenza (HPAI).

The decision provides for a 30% rebate on boneless and 25% on bone-in cuts of imported chicken. Trade, Industry and Competition Minister Ebrahim Patel had applied for the rebates to Itac in October last year.

Imported chicken currently carries an import duty of 62% for frozen bone-in and 42% for boneless chicken pieces. Traditionally, higher import tariffs lead to higher consumer prices.

AMIE said the rebate decision showed the government was alive to the plight of consumers, who were struggling to afford this vital protein source.

The association said the move would keep the price of chicken in check, especially for poor households.

The Pietermaritzburg Economic Justice and Dignity’s Household Affordability Index showed a 10kg of frozen chicken was priced at an average R417.51 in January, almost 6% higher than R395.72 in the same month a year before and 2% higher than in December 2023.

These increases, however, are relatively low and close to equal to the inflation rate – core inflation averaged 4.9% last year.

AMIE said import duties were an “extremely regressive” form of tax, meaning that it impacts consumers most directly.

Chicken is the most affordable and essential source of protein for consumers, especially the poor, who are struggling to meet their families’ basic food security needs.

The need for the rebate was supported by Professor Lawrence Edwards, from the Policy Research in International Services and Manufacturing Unit at UCT’s School of Economics, who argued that it was pro-poor.

In his article, Edwards wrote “even with the rebate, demand for domestic chicken will exceed domestic supply, and will therefore have no impact on the sales of domestic products. The rebate, however, will provide some relief to consumers who have faced very high food inflation.”

Edwards estimated that for every 10% increase in the average import price from duties, there was a 4.8% increase in the consumer price of frozen chicken.

There is little doubt consumers are struggling financially due to a host of reasons including the weak economy, high unemployment, rising administered prices such as for electricity and water, high interest rates, and rising food prices.

For example, three of South Africa’s biggest unsecured lenders, Standard Bank, Nedbank and Absa have reported a big surge in credit impairments, and for many South Africans, according to reports, the increasing use of credit is about putting enough food on the table to feed the family, making their monthly income last until the end of the month, finding a way to afford the petrol or transport costs to get to work and school and to keep the lights on.

There are a multitude of high and rising barriers to imports of chicken.

The general tariff on chicken imports was raised in October 2013 and again in March 2020. Import tariffs on frozen bone-in cuts, which account for more than 40% of total import volumes, rose from 220c/kg or 18% ad valorem equivalent to 37% in 2013, and then to 62% in 2020.

Tariffs also increased on frozen whole chicken (27% to 82% in 2013), boneless cuts (5% to 12% in 2013 and then 42% in 2020), carcasses (27% to 31% in 2013) and offal (27% to 30% in 2013). Tariffs on fresh chicken (whole or cuts) and frozen mechanically deboned meat remained at 0%.

Meanwhile, the rebate was a blow for poultry producers in South Africa, many of which reported losses last year due to a host of challenges including avian influenza, load shedding, high interest rates and high feed costs.

– BUSINESS REPORT

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