Publications
Partners
SOUTH Africa is a wide open country with huge farms and is suited to the growing and harvesting of crops and meat. The country is self-sufficient in its agricultural needs.
True or false?
The above myth is generally believed by the average South African.
What is going on?
South Africa is a large, open country with large tracts of arable land and grazing. Much of this land is not productive due to poor soil condition and a lack of water, be it from irrigation or from natural rainfall.
Add to this the restrictive and threatening labour environment rampant in South Africa and we find that the horizon is not conducive to investment in and development of agrarian businesses.
This is shown by the number and quantum of requests from local agricultural producers for increased tariff and non-tariff barrier (SPS) protection.
South Africa has been a net importer of foodstuffs over the past 30-plus years. This includes perishable and dry groceries.
Our agro industries are uncompetitive, and because of this they are seeking tariff increases as protection against imports from productive agricultural countries.
It is not subsidised exports we are talking about, but globally competitive industries.
Most of the local industries that want protection are not globally competitive. Instead of managing change and improving effectiveness, they remain inward-focused and expect local consumers to pay more because of these practices.
'We need protection' - but why?
Industries which seek greater protection are: wheat, sugar, chicken, potato, pasta, salmon, and pork.
Where will this slew of applications end?
Why do our primary agricultural industries require additional protection? Many of these industries are already protected through both tariff and SPS measures. So why the further requests?
Pork 15%, potato chips 10%, chicken 27% already enjoy substantial tariff protection. If there is dumping or subsidies in exporting countries, there are measures to combat these anticompetitive activities.
But in the current applications there is no allegation of wrong-doing by the exporter, but a claim of not being able to compete with fair competition.
Should the already hard-pressed consumer be expected to pay more than necessary, especially when it comes to basic foodstuffs?
Our constitution guarantees the right to healthy affordable food for every citizen of our country.
Why then protect industries which have only the next dividend or management bonus as a priority against the needs of the average citizen?
An example of pure commercialism is McCain, the international potato chip and vegetable giant.
McCain invested heavily in potato chip processing capacity in 2009, creating capacity in excess of South African demand.
Frozen jobs versus frozen chips
To protect their investment, McCain has applied for a 61% import duty on frozen potato chips so it could realise shareholder returns on this investment. You may well say that we require this international investment.
A few months after making the import duty request to “protect jobs and create employment”, the very same McCain, a wholly-owned subsidiary of Canada, announced the closure of its vegetable processing facilities in the southern Cape.
Where is their loyalty to job creation and capital investment now?
This closure will result in a net decrease in employees in this company. Why not apply for a duty increase on frozen vegetables? Or does this not fit their worldwide model of market dominance?
The recent high-profile investigation by the International Trade Administration Commission into raising import duties on imported chicken has many unique aspects.
The Southern African Customs Union producers want increased protection. They claim to require this because they are in distress. Distress has not been defined.
The only stress should be shareholders demanding from management why they are not globally competitive in their growing and processing segments.
South Africa slaughters smaller birds than international competitors. This results in reduced farm yields and slaughter facility productivity. This is the first aspect.
The second is that the smaller bird size yields a smaller breast portion, which is generally included in individually quick frozen packs.
South Africa imports in excess of 20 000 tonnes of boneless chicken per annum to feed the processing and food service industry, which requires an unadulterated product.
With a small modification to the processing activities this supply could easily be met, with no increased duty protection.
There are many other examples of protectionist thinking in our agro industries. If we cannot do it better locally, should our cash-strapped consumers be expected to shell out more than necessary to continue the legacy of “shut out imports”?
Will it be business as usual, or are we actually going to force industries to invest and compete globally?
Someone has to stand up for the consumer. Will it be the minister of trade and industry?
- Fin24
*David Wolpert is CEO of the Association of Meat Importers and Exporters of SA. Views expressed are his own.
True or false?
The above myth is generally believed by the average South African.
What is going on?
South Africa is a large, open country with large tracts of arable land and grazing. Much of this land is not productive due to poor soil condition and a lack of water, be it from irrigation or from natural rainfall.
Add to this the restrictive and threatening labour environment rampant in South Africa and we find that the horizon is not conducive to investment in and development of agrarian businesses.
This is shown by the number and quantum of requests from local agricultural producers for increased tariff and non-tariff barrier (SPS) protection.
South Africa has been a net importer of foodstuffs over the past 30-plus years. This includes perishable and dry groceries.
Our agro industries are uncompetitive, and because of this they are seeking tariff increases as protection against imports from productive agricultural countries.
It is not subsidised exports we are talking about, but globally competitive industries.
Most of the local industries that want protection are not globally competitive. Instead of managing change and improving effectiveness, they remain inward-focused and expect local consumers to pay more because of these practices.
'We need protection' - but why?
Industries which seek greater protection are: wheat, sugar, chicken, potato, pasta, salmon, and pork.
Where will this slew of applications end?
Why do our primary agricultural industries require additional protection? Many of these industries are already protected through both tariff and SPS measures. So why the further requests?
Pork 15%, potato chips 10%, chicken 27% already enjoy substantial tariff protection. If there is dumping or subsidies in exporting countries, there are measures to combat these anticompetitive activities.
But in the current applications there is no allegation of wrong-doing by the exporter, but a claim of not being able to compete with fair competition.
Should the already hard-pressed consumer be expected to pay more than necessary, especially when it comes to basic foodstuffs?
Our constitution guarantees the right to healthy affordable food for every citizen of our country.
Why then protect industries which have only the next dividend or management bonus as a priority against the needs of the average citizen?
An example of pure commercialism is McCain, the international potato chip and vegetable giant.
McCain invested heavily in potato chip processing capacity in 2009, creating capacity in excess of South African demand.
Frozen jobs versus frozen chips
To protect their investment, McCain has applied for a 61% import duty on frozen potato chips so it could realise shareholder returns on this investment. You may well say that we require this international investment.
A few months after making the import duty request to “protect jobs and create employment”, the very same McCain, a wholly-owned subsidiary of Canada, announced the closure of its vegetable processing facilities in the southern Cape.
Where is their loyalty to job creation and capital investment now?
This closure will result in a net decrease in employees in this company. Why not apply for a duty increase on frozen vegetables? Or does this not fit their worldwide model of market dominance?
The recent high-profile investigation by the International Trade Administration Commission into raising import duties on imported chicken has many unique aspects.
The Southern African Customs Union producers want increased protection. They claim to require this because they are in distress. Distress has not been defined.
The only stress should be shareholders demanding from management why they are not globally competitive in their growing and processing segments.
South Africa slaughters smaller birds than international competitors. This results in reduced farm yields and slaughter facility productivity. This is the first aspect.
The second is that the smaller bird size yields a smaller breast portion, which is generally included in individually quick frozen packs.
South Africa imports in excess of 20 000 tonnes of boneless chicken per annum to feed the processing and food service industry, which requires an unadulterated product.
With a small modification to the processing activities this supply could easily be met, with no increased duty protection.
There are many other examples of protectionist thinking in our agro industries. If we cannot do it better locally, should our cash-strapped consumers be expected to shell out more than necessary to continue the legacy of “shut out imports”?
Will it be business as usual, or are we actually going to force industries to invest and compete globally?
Someone has to stand up for the consumer. Will it be the minister of trade and industry?
- Fin24
*David Wolpert is CEO of the Association of Meat Importers and Exporters of SA. Views expressed are his own.
