Discount on chicken imports may be welcome; supply problems persist

Henry

In some ranks there may be celebration after the International Trade Administration Commission (ITAC) confirmed last Thursday that it will introduce rebates on the import tariff of chicken pieces, but the news is not all good.

RNews previously reported that the decision was announced on Friday by Ebrahim Patel, Minister of Trade, Industry and Competition. This provides for a 30% discount on imported boneless chicken and a 25% discount on imported chicken pieces on the bone.

The decision was taken in response to the impact of the bird flu outbreak which has decimated international and domestic poultry supplies.

According to Roy Thomas, operations and logistics director at Hume International, ITAC’s tariff reduction is a welcome relief for consumers – especially low-income households.

“Despite claims that bird flu last year had little impact on stock or prices on store shelves, Statistics South Africa’s (StatsSA) latest inflation figures show that the price of chicken products experienced above-average inflation for the year.

“Eggs increased by 38% in 2023, chicken waste also increased by 18.3% and fresh chicken portions increased by 14.6%. Whole chicken increased by 8.4%, and individual quick frozen (IQF) portions increased by 6.4%,” says Thomas.

He believes the price increases reflect the ongoing impact of bird flu – locally and abroad – in addition to the effects of new import tariffs implemented in August last year.

“The reality is that although local chicken producers remain hopeful of receiving government approval for a vaccine by the end of February, South Africa does not produce enough chicken to meet local demand.

“Import therefore serves as an important supplement and price regulator in the local market.”

Thomas says South Africa’s food supply chain is also reeling under the weight of several serious collapses that have consequences for consumers’ pockets.

“If this problem is not tackled, these issues can paint a bleak picture for low-income consumers and the economy as a whole.”

Numerous challenges

Thomas says the constant headaches caused by load shedding are the first challenge to be tackled. Load power has serious effects on business operations and especially cold rooms on which the industry relies.

“According to the (data analyst) Outlier, there were 335 days with load shedding in 2023 and some experts predict that 2024 could be even worse.”

Severe water shortages in the Eastern Cape – due to a combination of drought and poor infrastructure – have also forced companies such as Hume International to rely on boreholes for survival.

“Although on the surface these seem like simple solutions, this means an additional cost factor that many companies in our position have never had to consider before – and one that leads to higher prices on store shelves.”

Thomas says load shedding is also just the beginning of the problems.

“Many food importers are grappling with ongoing delays and backlogs at ports, and expect this to continue well into the first quarter of the year. This has a serious and direct effect on the industry’s ability to deliver products in a timely and cost-effective manner.

“Some products that were supposed to be on the shelves before Christmas, for example, only arrived in January and of course the ongoing conflict in the Red Sea plays a role in the global shipping schedule and, expectedly, prices.”

All this, plus bureaucratic red tape

Thomas says that with all the pressure on food prices, “the import tariff discount on chicken offers real reason for optimism”.

“Many of Hume’s products are largely aimed at lower income households, which are extremely price sensitive and rely on the availability of cheaper proteins such as chicken.

“This consumer base represents a large percentage of the South African market and is the driving force behind our commitment to eliminate – or at least mitigate – these destructive pricing forces.”

According to Thomas, businesses involved in food supply chains must act proactively.

“We also hope that the government will hear the call and assist food producers and importers by providing mechanisms and legal provisions that will speed up the passage of food from our overcrowded ports to retailers.

“If urgent attention and a concerted effort to tackle these problems is not done urgently, many more fridges and kitchen cupboards could soon be empty.”