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FIFI PETERS: There could be some changes on the horizon pertaining to the price that Brazil, Ireland, Poland, Spain and Denmark have to pay to bring their bone-in chicken in the country. I think that’s wings and thighs and the like. But already these countries pay a duty to bring their chicken into South Africa. The local industry has argued that this should have been a lot higher, because the dumping of cheap chicken – which the local industry believed was hurting competition – was still continuing.
Now, the application of additional tariffs to be placed on these countries was suspended in 2022, but word on the street is they could be resumed and there are worries that if they are this could have an impact on the price of chicken.
[We have] Ayabonga Cawe, commissioner at Itac [International Trade Administration Commission] for more on this. Ayabonga, thanks so much for your time. We really appreciate it.
Business Day is reporting that Minister of Trade [and Industry and Competition] Ebrahim Patel has gazetted a notice saying that the tariffs that have been suspended for about a year must resume.
All that is left right now is for the Minister of Finance, Enoch Godongwana, to sign. What can you tell us about the current situation regarding the resumption of these tariffs?
AYABONGA CAWE: Thank you very much, Fifi, and good evening to you, evening to your listeners, and thank you so much for the invitation.
Yes, indeed. There was a draft notice issued on August 2, yesterday, signalling that the suspension – which the minister had indicated [would be in place] for about 12 months or so sometime in August last year – [will be lifted] and the recommendation of Itac in relation to frozen bone-in portions from a select list of European countries would now come into effect.
You would know, Fifi, that Minister Patel made the decision on the back of his own observation of the path of consumer prices, consumer food price inflation, and the impact of course of instituting these anti-dumping duties last year, in 2022, at a time when many poor households would have been confronted by, I guess, difficulty in being able to access what for many is an affordable protein source.
FIFI PETERS: Right now we’re waiting for the minister of finance to sign – is that what you’re saying? If that is the case, when do you expect that to happen?
AYABONGA CAWE: Well, we at Itac issued a draft notice yesterday. I think maybe that question will be best posed to the Ministry of Finance. Unfortunately, I don’t speak on behalf of the Ministry of Finance and can’t really say when we would expect that. I would certainly think that the minister would apply his mind to the recommendation from his counterpart here and act accordingly.
FIFI PETERS: So ultimately it’s being reported that if the additional tariffs are placed on these countries that bring this frozen bone-in chicken into the country, they could impact prices. I’d like you to answer that.
AYABONGA CAWE: Let me just clarify, if I may. I also heard in your introduction that you said there are already customs duties on poultry products coming from some of these countries. That might be the case, certainly in the case of Brazil, but many of the other European countries – Denmark, Ireland, Poland, and Spain – would be as a result of the EPA [economic partnership agreement] that SADC has with the European Union, bringing some of these products ordinarily into South Africa duty-free. So many of these products would not have come, nor attracted a duty, save maybe for some of those that would have come from Brazil.
FIFI PETERS: Okay. So the change then would be that, if what has been gazetted is signed, these countries that have been allowed to bring in chicken without paying a duty will now have to do so as a result of concerns about what it has done to competition in the local markets.
AYABONGA CAWE: Indeed. And I think it’s worth explaining, Fifi, just briefly what is meant here by ‘dumping’.
By dumping really what is being referred to is the landing of exports from some of these originating countries at a price that is much lower than the cost of production of some of the products in question in the countries of origin.
So our work is to really, I guess, consider what would be a normal value, and compare that to the export price where these goods land in South Africa. The observation here certainly is that there is evidence that a large volume of imports is coming in and [being] dumped as a result of the investigation concluded last year.
Moreover – and I think this is the other burden that certainly investigations of this kind need to prove – the injury caused to [the] domestic industry arises from some of these imports that are coming in at dumped prices.
So you need to first prove that the goods are landing at a price much lower than what they would be produced at, and then of course draw a causal link between that evidence of those volumes of imports and the injury that is experienced by firms. That injury might be rising inventories, it might be lower capacity utilisation, lower profits, lower share of the market, and so on.
FIFI PETERS: Ultimately, Ayabonga, what does this mean for the price that South Africans will pay for chicken, and how could it be impacted?
AYABONGA CAWE: I think many would accept that [would be] by introducing an additional tax on goods that would not have had this tax.
And if we also assume that within the wholesale-to-retail chain many of the producers there will pass this on to consumers, it might give rise to, in some parts of the value chain, frozen bone-in portions and so on at relatively higher prices.
But certainly in the draft notice that was issued the minister made a comment in regard to the task that he has now given to the competition authorities to closely monitor prices of frozen bone-in portions.
Because we don’t want a situation where the levying of these anti-dumping duties – to correct the harm being caused by this dumping – gives rise to price increases at a time when many consumers can least afford them.
So there will be monitoring of prices. And of course the authorities will then act accordingly where I guess prices are rising over and above the path-of-production costs. That intervention, I guess, will occur in instances where it is observed.
So yes, prices are intended to rise, but I think the view is to make sure that, whatever price increases do occur [in] the domestic industry, those are linked to rising production costs rather than any price-gouging, or what many have started to call across the world ‘greedflation’.
FIFI PETERS: Yes. Ayabonga, thanks so much for that, really explaining and clarifying things for us quite simply and palatably.
Ayabonga Cawe is the commissioner of Itac, the International Trade Administration Commission.
Just to the point of clarity that Ayabonga pointed out, Brazil currently has a 62% tariff in place. And essentially if what has been gazetted is signed by the minister of finance the new duties will include additional tariffs on the likes of Ireland, Poland, Spain and Denmark.
Interesting to see that Brazil in fact exports more than half of the frozen chicken South Africa imports.
