Patel calls for urgent probe into temporary tax rebates

04 Oct 2023

04 October 2023
Business Day
By Katherine Child

Trade, industry & competition minister Ebrahim Patel has asked for an urgent investigation into a possible temporary tax rebate on imported chicken.

A rebate may increase imports and mitigate the expected price increases of chicken. About 25% of SA's chicken is already imported. It will incentivise imports amid the avian influenza outbreak. There is concern that there will be too little poultry available in December as more than 1.3-million broiler breeders have been culled, reducing the supply
of newly hatched chickens.

Another 1.3-million chickens that lay eggs for consumption have also been culled, leading to egg shortages in Gauteng and the northern provinces. Patel has asked the International Trade Administration Commission (Itac) to look at whether there must be rebates on ordinary import duties on chicken and/or the anti-dumping duties introduced in August on bone-in portions from some producers in Brazil, Ireland, Poland, Spain and Denmark. Itac is a public entity that conducts customs tariff investigations and manages import and export controls. It has been given two weeks to receive comments on the issue.

The bird flu outbreak, which began in June in Mpumalanga and has spread to four more provinces, is SA's worst avian outbreak and appears to show no sign of easing. The local poultry industry, which has been unprofitable all year, had hoped to use the expected supply shortage to lift prices and recover from the losses caused by avian influenza culls and load-shedding costs. The poultry sector is "spitting blood" at the idea of a rebate on imports, said Anthony Clark, an analyst who tracks maize and feed prices and works closely with the chicken sector. Clark said he understood Patel’s reasoning and desire to ensure there was adequate chicken for low-income consumers, but he accused the minister of "throwing petrol on the local poultry industry”. A’s largest chicken producers, Astral, RCL Foods and Public Investment Corporation owned Daybreak Farms, have been selling chicken below cost price and negotiating hard with retailers to allow them to sell at a profit.

Last week, Daybreak CEO Richard Manzini said price increases would allow the industry to offset the losses it has been experiencing. If the rebates are implemented, it may not stem shortages in time for the festive season when meat consumption increases. It takes two to three months for imports to reach SA, go through customs and be repackaged in smaller volumes to be sold on to consumers.

Itac chief commissioner Ayabonga Cawe said he was aware of the urgency of the matter. “The minister has directed us to undertake the investigation expeditiously, which would include the two-week consultative process, and then I think we then have to run the gauntlet. “He said the agency's investigation would try to balance protecting the local industry from dumping with concerns about supply constraints. Cawe said: "For now we’re trying to deal with a short-term shortage arising from the avian flu outbreak. And really, the idea is to see whether we can open the valve of control measures to deal with the supply chain[shortages]". He called on consumer groups to comment on a proposed rebate in addition to the industry players. “We are hoping that some of the consumer advocacy groups will submit comments, because we know this is a major staple protein for many low-income households.

So, there are a lot of welfare implications associated with how the investigation unfolds," Cawe said.SA Poultry Association CEO Izaak Breitenbach said on behalf of the local poultry industry that it has been unprofitable since December, in part due to Loadshedding, and it rejected Patel’s latest move.

"It will be the final nail in the coffin of the poultry industry. “The industry was protected by anti-dumping duties because it was in distress, Breitenbach said. "It is time to look after the poultry industry," adding that tax rebates were not needed to stimulate imports. - But Association of Meat Importers and Exporters CEO Paul Matthew said: "As an industry we welcome the minister’s progressive thinking. “We are pleased to see the government being proactive and placing discussions that serve the best interests of the SA consumer at the forefront. “Consumers had been severely impacted by the sustained rise in food prices, Matthew said. “Access to affordable protein sources remains a critical issue facing the poor in SA.