Will chicken be cheaper with import tariffs lifted?

‘There are certain other factors that would inform whether or not the lower prices that would be found at the ports would translate into lower prices for consumers when they get to the shelves, says Ayabonga Cawe, chief commissioner at the International Trade Administration Commission.

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JEREMY MAGGS: In the meantime, though, let’s talk about poultry. You’ll be aware, the International Trade Administration Commission (Itac) has confirmed that its lifting punitive tariffs on imported chicken. The decision was made in response to the impact of the highly pathogenic avian influenza, HPAI, also known as bird flu, which I don’t need to tell you, has ravaged both global and local poultry supplies.

With us now is Ayabonga Cawe, who is the Itac chief commissioner, a very warm welcome to you. Just a little bit of context first, can you elaborate for me on the decision-making process that you went through?

AYABONGA CAWE: I think the starting point is for members of the public to understand the nature of the work we do. The bulk of our work, yes, some of it’s done by our own initiative, but the bulk of it really comes from policy statements and policy directives that come from the executive arm of government. In this instance, in line with Section 16 of the International Trade Administration Act, the Minister of Trade, Industry and Competition (Ebrahim Patel) directed Itac to consider a temporary rebate on different categories of poultry products. Now, this followed the culling of millions of chickens and, of course, the announcement of HPI avian flu outbreak by the Department of Agriculture, Land Reform and Rural Development (DALRRD). We’ve already seen, certainly since that outbreak was announced in the second half of last year, millions of chickens culled across the entire value chain from breeders to layers.

So, I guess, this really was a directive that tried to preempt what many would’ve anticipated, plausibly so, would be a shortage in poultry products, which would affect poor working class households for whom poultry is the main protein staple. So really that was the motivation behind this. We were given a directive to investigate it, and in that process would have given an opportunity to many players including the importers, the wholesalers, domestic poultry producers, and of course organs of state such as the National Agricultural Marketing Council (NAMC) and the Department of Agriculture, Land Reform and Rural Development.

Now, we then towards the latter part of last year and the early part of this year, then made a recommendation to the Minister of Trade, Industry and Competition and subsequently to the Minister of Finance (Enoch Godongwana) for a consideration of such a temporary rebate, which would be informed by the assessment of the outbreak by the line ministry, which is the Department of Agriculture, Land Reform and Rural Development. So it’s quite bizarre that there are certain comments in the public, which I guess aim to suggest that this is a decision that was a foolhardy one that was taken without any engagement with the submissions that different stakeholders would’ve made. We remain guided in this process by the outbreak, which certainly from many of the suggestions by DALRRD, is very much so with us.

JEREMY MAGGS: Are you able to then give me a sense materially as to how this is going to affect the price of chicken both in the short and the long term? Have you done those numbers?

AYABONGA CAWE: Well, so I think maybe two things, Jeremy, which will be of assistance in this case. Ordinarily the expectation is that this would ease not just the volume shortage, so the availability of poultry, but also that it would have a softening effect on the price increases in the food basket of many poor households that we could continue to observe. Now, in line with that, there are certain other factors that would inform whether or not the lower prices that would be found at the ports for containers bringing in poultry products would translate into lower prices for consumers when they get to the shelves. A big part of that has to do with whether or not the importer, wholesaler, retailer relay ensures that there isn’t really a passing on to consumers of unreasonable markups.

That’s why in the recommendation that we made to the minister, we requested that he also consider certain other instruments that he has at his disposal in order to monitor whether or not these prices will be passed through. In instances where that doesn’t happen, I guess correspondingly respond. So I think preemptively it wouldn’t make sense to run those numbers because you would have to make all manner of assumptions about whether or not the people at the port who pass it on to the wholesalers, then the wholesalers pass on that price reprieve down to the retailers, who then of course would pass it on to the consumers. So many other things could potentially happen in that chain.

JEREMY MAGGS: Fair enough. So are there other measures then, as a result of what you’ve just told me, that Itac could consider to mitigate the impact of bird flu and other external factors on increasing food prices?

AYABONGA CAWE: So Jeremy, what we have in our toolbox is the investigative capability. In this instance, we’ve undertaken an investigation that has allowed us to compute the shortages we would anticipate in the South African market for 2024, which would inform the volume of the quota of poultry allowed to come in. I would encourage members of the public to really read that report. It’s publicly available on the Itac website.

So that’s what we have in our toolbox. But as you would imagine, other organs of state also have other tools that they can then summon. In this instance, I think we flagged the price monitoring tools that might be accessible to the department. But in addition to that, I think part of responding to this outbreak is really to ensure within our veterinary services, which would rest with DALRRD, and even the prospect of vaccination here in order to deal with this outbreak.

It’s not the first we’ve experienced and certainly won’t be the last, Jeremy, and I think it does require a coordinated intergovernmental response.

We just have the toolkit in so far as the trade instruments are concerned but I think there are many other organs of state that in responding to this would be able to do so. I think it’s encouraging that the domestic industry has also come to the party in suggesting all manner of contingency measures that they have taken and continue to take, and really signalling an all of society approach insofar as this is concerned.

JEREMY MAGGS: I just need a quick answer to this one. The concern of course would be that the benefits of the rebate are passed on to the consumers, but that would be outside your scale or outside your remit, am I right?

AYABONGA CAWE: Indeed, it would be. That’s why I’m saying that there are two pieces of legislation, one being the Consumer Protection Act and the other being the Competition Act, which allow the executive authority in this instance the ability to intervene, one, to monitor prices and where they are unconscionable and unreasonable prices on the back of this reprieve to intervene accordingly. Those pieces of legislation would deal with that, and I think we flagged that in our recommendation.

JEREMY MAGGS: I’m going to leave it there. Thank you very much for joining me.

Roy Walsh

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