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Debate Hots up over Tax on South Africa's Chicken Imports

12 September 2013

SOUTH AFRICA - Poultry meat producers and importers clashed at a meeting in Parliament this week in a debate over a proposed increase in the tax on imported products.

Simmering tensions over whether South Africa should increase tariffs on imported poultry products came to a head during hearings on 10 September before Parliament’s agriculture committee as importers and local producers faced off, reports BD Live.

Trade and Industry Minister, Rob Davies, is due to make a determination over whether the current tax of 27 per cent on imported poultry products should be increased to 82 per cent.

Opposing the increase is the Association for Meat Importers and Exporters (Amie), which claims that a tariff hike would have a limiting effect on imports, with the result that local producers would be less competitive on a global scale. Rooting for a tariff hike is the South African Poultry Association, which argues that the local industry is efficient and that tariffs would not result in exploding local prices.

Chicken and poultry products make up the largest market for animal protein eaten by consumers in South Africa, making up more than 65 per cent of the average grocery basket.

Chicken farming is also the largest part of the total agricultural sector, making up about 25 per cent of agricultural gross domestic product.

The chicken sector employs 50,000 people directly and another 60,000 indirectly.

A further 18,000 people are employed in the grain industry to supply feed.

According to the poultry association, poultry generates about 30 billion Rand (ZAR) in farm-gate revenue and about ZAR1 billion in corporate taxes.

"If it collapsed, ZAR30 billion in foreign exchange would be lost to South Africa to imports," the association’s senior executive, Sol Motsepe, said.

The association also said the local poultry industry was being devastated by imports, leading to companies such as Austral South Africa, Country Bird Holdings, Rainbow Chicken, and Afgri South Africa showing losses.

However, Amie member Georg Southey dismissed most of the poultry association’s arguments, saying should the tariff increase be approved, it would have a limiting effect on total imports and those from non-European Union countries, such as Brazil, would in effect cease. Mr Southey said imports amounted to about 10 per cent of total chicken production in South Africa.

He told BD Live that Amie believed that the International Trade Administration Commission of SA (Itac) had already approved the tariff increase and forwarded it to Mr Davies.

Mr Southey also said the delay in the announcement has led to speculation "and is now causing real market disturbance".

According to the Amie presentation, the depreciation of the rand has already provided a 25 per cent protection for local producers. "If they can’t do more with that kind of protection, then will they be able to do more with an added tariff?" Mr Southey said.

Competition commissioner Shan Ramburuth said investigations by the commission had found elements of collusion among the major chicken producers. He said this occurred through information sharing during meetings of industry associations where areas of the country were informally divided up among them.

Mr Ramburuth said the poultry sector was vertically integrated with high entry barriers. This included cases investigated by the commission where producers of day-old chicks would refuse to sell them to a company unless the grain was also bought from them.

BD Live reports that Mr Ramburuth added import tariffs tended to stifle competition from imports that otherwise could force domestic producers to compete.

ThePoultrySite News Desk



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