South African producers of frozen potato chips have again been left in the lurch by government following the duties protecting them against cheap imports from three European countries lapsing in the middle of January.
Imports from Germany, the Netherlands and Belgium can again enter South Africa without the hefty anti-dumping duties that were imposed for six months while the investigation into alleged dumping was being finalised.
The International Trade Administration Commission (Itac) had until January to finalise its investigation. Its preliminary investigation found prima facie evidence that the alleged dumping caused “material injury” to the Southern African Customs Union industry. The provisional duties ranged between 9% and 181%.
McCain, the dominant producer of frozen potato chips in the country, requested continued protection against dumping from Belgium and the Netherlands back in 2019.
However, the commission failed to complete the sunset review within the 18 months prescribed by the World Trade Organisation and the duties against the two countries lapsed, leaving the local industry (McCain, Nature’s Garden and Lamberts Bay Foods) exposed to cheaper imports.
Itac then decided to self-initiate an anti-dumping investigation and included Germany in the investigation. In July last year it imposed the provisional duties on imported frozen potato chips from the three countries.
Donald MacKay, trade law expert and CEO of XA Global Trade Advisors, says Itac has done its part of the work. However, the final report has not been published since this can only happen once it has been signed off by Minister of Trade, Industry and Competition Ebrahim Patel.
It is unclear where the delay is – whether it is indeed with the minister, or with the South African Revenue Service in publishing the final duties.
“We are all waiting, and it is somewhat distressing.”
MacKay says he is “guessing” that the anti-dumping duties will again be imposed for another five years. “I do not think they will simply terminate it. But even with that, we are sitting with food inflation that is pretty alarming.”
A similar decision may be made as with chicken, where the implementation of the anti-dumping duties was suspended for a period of time in the interests of the public.
Itac earlier recommended the implementation of anti-dumping duties on chicken imports from Brazil. However, Patel considered the “rapid rise” in food prices locally and globally, and the impact the duties might have on the price of chicken, and postponed the imposition of the tariffs on chicken by a year due to public-interest considerations.
Speaking on behalf of the local industry, Potatoes SA CEO Willie Jacobs says it is confident that the protection and growth of the local industry from producers to processors will be prioritised (by government).
“Our view on import tariffs is clear. While trade and thriving regional and global markets and economies remains a priority, so is South Africa’s agricultural and manufacturing industries.”
Jacobs adds that “cheap, low-quality potatoes” entering the market will ultimately be detrimental to South African producers and the sector as a whole.
“In order for industry players to provide the country with good quality, locally produced food, it is imperative that we prioritise our growers, our supply chain, and the expansion of the agricultural economy,” he adds.
High food prices
But there is another side to this story. According to the Reserve Bank, food price inflation reached 9.2% in 2022 and is forecast to average 7.3% this year.
Low-income South Africans have been hit the hardest by skyrocketing food prices, according to Fred Hume, MD of Hume International, an importer of frozen food.
“We need to do everything in our power to bring prices down, which includes doing away with unnecessarily heavy duties. Competition is integral to an economy’s ongoing welfare, and our food industry benefits greatly from global trade which serves to fill shortages in the market and keep prices stable,” he says in a statement released on Tuesday.
“The simple fact of the matter is that while the local industry produces sufficient amounts of potatoes to meet consumer demand, the same cannot be said for the specific variant used to make French fries, and hence our reliance on imports.”
Hume called on government to temporarily suspend trade duties on staple food products and previously inexpensive sources of protein such as chicken until local producers manage to catch up with demand.