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PR Worx Admin

‘No local poultry producer was harmed in the making of this rebate’

Proponents of the local chicken industry are advocating for the termination of the import tariff rebates of 25% on bone-in cuts and 30% on boneless chicken, introduced in the first quarter of 2024 by the International Trade Administration Commission (ITAC). However, importers such as Hume International argue that the rebates have provided much-needed relief to a critical sector which has been hard-hit by anti-dumping duties.

 

To date, ITAC has approved tariff rebates for around 43,000 tonnes [JH1] of imported poultry in the first quarter of the year. South Africa imports close to three [JH2] times that amount over a typical three-month period, which means that around 80,000 tonnes of imported chicken did not benefit from a rebate. Applications for rebates for the second quarter of the year are now open, and it remains to be seen whether this coverage will increase.

 

“These rebates are meant to help the importers that supplement supply in the local market to meet demand and serve to partially offset the incredibly high and unnecessary duties importers continue to face,” says Fred Hume, Managing Director of Hume International.

 

“In reality, there is no incentive for the international market to dump low-quality chicken, and every reason to import premium meat and cuts that fetch a higher price. Dumping simply isn’t a significant enough factor in South Africa to warrant high dumping duties, calling into question the real reason for why local producers want these rebates gone.”

 

He further notes that the interests of local producers are not jeopardized by these tariff rebates in any substantial way, as local producers and importers are rarely in direct competition.

 

“The fact of the matter is, we’re not competing on price. We’re predominantly importing cuts that the local market does not supply in abundance, such as wings and drumettes. Most of what local suppliers produce in these segments goes to, for example, quick-service restaurants, leaving the rest of the market dry. Imports simply serve to bridge the gap in these shortfalls, and without the rebates, this chicken risks becoming unaffordable for many businesses.”

 

Importers and local producers serve different markets

 

Hume further contends that importers and local producers often have different goals. Local producers typically focus on supplying individually quick frozen (IQF) chicken portions, which are mainly consumed by lower income groups in South Africa. IQF portions mostly consist of the less desirable bone-in breast, bone-in thigh, and keel cuts. Because drumsticks and wings command higher prices elsewhere in the market, such as in the restaurant sector, they are used sparingly in IQF chicken packs.

 

The import sector, which only supplies around a fifth [JH3] of the poultry consumed in South Africa, concentrates on mechanically deboned chicken meat (MDCM), which is largely used in the production of sausages, nuggets, and patties. MDCM accounts for just over half of all chicken imported into the country and is not produced in any substantial quantity by local producers.

 

Furthermore, bone-in portions consisting of chicken leg quarters, thighs, wings, and drumsticks account for an additional 15% of imports. These cuts are in high demand and typically sell at a premium. At this price point and these quantities, the import of these portions does not threaten local producers’ market share, explains Hume.

 

He advises that other special considerations should also be taken into account. For example, government’s National School Nutrition Programme is phasing in the Chicken [JH4] Liver Project to increase learners’ protein intake.

 

“The programme’s suppliers source as much locally produced chicken livers as they can, but this ultimately accounts for only a fraction of the total demand.

 

“The vast majority of livers for the programme comes from abroad. As a major supply partner in this scheme, we’re concerned that rising prices and prohibitively high import tariffs will make it difficult for government to scale this project across the country. We’re therefore calling for a permanent zero-duty exception for chicken livers sold into this scheme.”

 

Likewise, Hume questions the reasoning behind a 30% import duty on chicken feet. Importers typically import larger chicken feet, in excess of 35g per piece, which are highly valued by South African consumers. This is due to the common local industry practice of harvesting chickens at a younger age, yielding smaller feet, which provide less nutritional value and feed fewer people.

 

“It’s inconceivable that a country such as ours, faced with one of the highest unemployment and poverty rates in the world, can levy such a duty on this product at all. This is not a tax on a premium product typically consumed by the rich. It’s a more affordable foodstuff that serves as an important source of protein for countless households.

 

“Government has shown that it is open to change with the implementation of limited tariff relief, but it’s clear that more duty reforms and conversations are needed. In the end, these rebates pose no real risk to local producers, but they do help importers plug any market gaps, while providing businesses and consumers with access to a wider range of products,” concludes Hume.

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