Higher prices for chicken and red meat are also on the schedule for consumers who are already drunk from increases in fuel, electricity and food prices. Experts predict a tsunami on chicken prices, while foot and mouth disease is causing prices to rise due to decreasing supply.
According to the SA Association of Meat Importers and Exporters (AMIE), the chicken price tsunami is the result of a perfect storm of inflation, rising costs and unemployment, as well as a global economic risk to food security.
All of these factors will affect consumers’ ability to afford chicken, a vital protein source for low-income consumers after the price of chicken has already risen 10% annually for the past decade.
The AMIE calls for the removal of trade tariffs and a 3-year moratorium on the new tariffs, as well as the removal of VAT on fresh chicken, saying that removing the tariffs alone could result in a 33% decrease in the price of bone – in chicken pieces and between 18-20% on chicken offal.
“We know that chicken is the main, most affordable and therefore the most important source of protein for local consumers,” says Paul Matthew, CEO of AMIE. He says the tsunami in the price of chicken is due to:
- rampant inflation
- Global shortage of food and raw materials
- The state of the post-Covid-19 economy
- The impact of the war in Ukraine on global food security
- The escalation of the costs of fuel, transport and electricity
- Increased commercial tariffs
- Supply chain disruption e
- The fact that wages are falling and unemployment is rising.
According to the Pietermaritzburg Economic Justice and Dignity Group’s Household Food Basket for March, the price of chicken rose 11% between March 2021 and March 2022 after a steady 10% annual increase over the past decade. The price of the basket increased 10.2% year-over-year.
Matthew says that bone-in chicken pieces and chicken offal are the most popular categories of chicken products for low-income families. If tariffs were reduced, for example, consumers could save 33% on the delivery price of bone-in cuts in the Gauteng market, while the price of chicken offal could be reduced by between 18 and 20%.
Import tariffs on poultry increased from 37% to 62% for boned frozen chicken portions in March 2020 and from 12% to 42% for boned frozen portions. In December last year, the government imposed new provisional duties on poultry imports from Brazil, Poland, Spain, Denmark and Ireland.
These provisional duties range from 6% to 265.1% for various poultry producers from Brazil, from 39% to 67.4% for Denmark, from 158.42% for Ireland, from 5% to 96, 9% from Poland and 3% to 85.8% from Spain and will remain in place until June 14 this year.
Chicken imports account for only 14.9% of all chicken consumed in the country, but they are key to maintaining a healthy balance between availability and affordability. South Africa currently produces only about 80% of the country’s overall poultry demand.
According to SARS data, chicken imports decreased by 41% between 2018 and 2021, with bone-in imports decreased by up to 53% over the same period.
At the same time, South Africans are becoming poorer and poorer. With the price of fuel at R21.96 per liter, transportation costs for low-income consumers rose 14.3% year-on-year and electricity costs rose 9.61% this month, wages are on the other hand, down to 55.5% of South Africans and 64.2% of black South Africans now live below the poverty line of the upper range. People are already struggling to survive and are likely to spend less than 37.2%.
According to StatsSA, during the fourth quarter of 2021, unemployment increased to 35.3% from 34.9% in the previous quarter, the highest level since 2008, with a staggering 65.5% youth unemployment.
The government should lower the tariffs
Matthew says it’s clear that South Africans are under extreme financial pressure and the most effective way to help them is for the government to impose a 3-year moratorium on imported poultry tariffs and remove VAT on poultry products.
“Last week, in an effort to ease economic pressure on consumers, the government cut the fuel tax by R1.50 per liter and postponed the proposed increase in the health promotion tax (sugar tax) by one year. The government recognizes the extreme pressure consumers are under and knows it can significantly intervene by changing administered prices and regulation. It can do the same for chicken, “says Matthew.
Grant Hendricks, a black South African entrepreneur and chief executive officer of Umoya Meat Importers and member of the executive committee of the AMIE, runs a South African meat import business and sells chicken products primarily at the lower end of the market.
“I have seen how township consumers are increasingly struggling to afford chicken. Their wages remain the same or even decrease and they find it increasingly difficult to put nutritious foods on the table ”.
Donald MacKay, business economist and director of XA International Trade Advisors, says this paints a very bleak picture for all South African consumers and especially the poor and unemployed.
“With the conflict in Ukraine not yet evident in the figures, we are at the beginning of an acute inflationary curve. The government must act quickly to ensure that growing food insecurity does not translate into further social unrest as we saw last year. ”
The prices of red meat are also on the rise
While it’s clear that consumers will soon be striving even harder to afford chicken, the picture for beef and lamb isn’t much better.
Gerhard Schutte, CEO of the Red Meat Producers Organization, says it is first and foremost important to remember that the red meat industry operates in a free market system and that red meat prices are dictated by supply and demand.
“The current drop in prices by producers, particularly for weaned calves, is a direct consequence of the foot-and-mouth disease epidemic. The larger feedlots have already stopped buying weaners as they are concerned about the movement of infected animals. “
He points out that feedlots purchasing infected animals are closed and quarantined when the disease is detected. It is therefore understandable that weaners are not being accepted now. Also, feedlots cannot operate at a lower capacity for a set period of time as they have to supply the consumer market with beef.
Schutte says this affects ordinary producers where foot and mouth disease has been detected because these areas are also being quarantined. According to the economic principle of supply and demand, prices will automatically rise even if consumers eventually resist the higher prices.
It also points out that meat from infected animals is safe for human consumption, as foot-and-mouth disease is not a zoonosis and cannot be transmitted to humans.