Consumer to pay more for chicken

20 Nov 2014

The New Age

Putting a whole roast chicken on the dinner table is likely to cost consumers a bit more in future, Trade and Industry Minister Rob Davies said on Monday. Davies raised the poultry import tariffs by an average 8.75 percent, saying the higher duties were necessary to raise local production and save jobs in the industry. "The roast chickens you will have at your dinner table, you can now pay a little bit more and you can all help ensure that there's job creation in South Africa," Davies said.

While the tariff duties for whole chickens rose from 27 percent to the maximum 82 percent allowed under World Trade Organisation rules, increases for other categories of chicken specifically those usually consumed by lower income households were much lower. "Bone-in portions, these are for lower income segments... it's about 70 percent of domestic production and the industry is at a significant price disadvantage," Davies said. "The import tariff is changed from a specific duty of 220 cents per kg to an ad valorem duty of 37 percent." This meant the import rate had changed from around 17 percent to 37 percent for bone-in chicken.

These white meat cuts represented around 54 percent of total poultry imports over the past year. "In respect of carcasses... the conclusion was that the domestic industry is at a significant price disadvantage, but this remains a significant source of protein to lower income people and here the tariff is increased slightly from 27 percent to 31 percent," Davies said. Carcass imports represented about two percent of the total poultry imports over the past year. Import duties for offal were also slightly increased from 27 percent to 31 percent.

"Offal -- the domestic industry is at a significant price disadvantage but this is an important source of protein to poor households," said Davies. The most expensive cut -- boneless chicken -- represented around 11 percent of imports over the past year. "What we call boneless cuts... mostly consumed by higher income households... this we've seen [local producers] is also at a price disadvantage and the tariffs increased from five to 12 percent."


Explaining his decision, Davies said the local industry was "bleeding" and increasing tariffs were necessary as "tools of industrial development". "This is not here to raise revenue for the state, this is here to increase production in South Africa," he explained. Davies said he believed the increases struck the right balance between restricting the price-raising effects on poor households and ensuring domestic producers became more competitive compared to their foreign counterparts. One of the conditions attached to the tariff increases was an early review -- possibly in one year -- to check whether it had the intended impact on local producers.

The department would also monitor prices and developments in the industry to guard against the increases being used for anti-competitive practices. Davies's decision followed an application by the SA Poultry Association (SAPA) to the International Trade Administration Commission (ITAC) to increase the tariffs in March this year. The ITAC made its recommendation to Davies last month, after consultation with stakeholders including the SAPA and chicken importers.

The tariff increases are effective immediately.