ChickenFacts Investigates: LOCALISATION WILL AFFECT CONSUMERS POCKETS NEGATIVELY​

ChickenFacts Investigates: LOCALISATION WILL AFFECT CONSUMERS POCKETS NEGATIVELY

A localisation plan, announced by Department of Trade and Industry Minister Ebrahim Patel in May 2021, proposed that South African businesses should replace 20% of their imported goods with locally-produced substitutes within five years. The implications for the poultry industry are significant. Of the 42 products targeted, poultry was part of the agribusiness category: it makes up 7% of all agricultural imports and is South Africa's most affordable protein.

Ulandi Bekker September 23, 2021 3 min read

ChickenFacts Investigates: LOCALISATION WILL AFFECT CONSUMERS POCKETS NEGATIVELY

ChickenFacts, a fact-checking online information service for the poultry industry*, investigated this new policy, eliciting the opinions of poultry specialists, economists and trade advisors the findings concluded that the consumer would bear the brunt of the cost.

ChickenFacts investigated a report from Intellidex, a leading South African capital markets and financial services research house. The report estimates that if localisation was imposed in any significant way, the price of goods could rise by approximately 20%.

Most economists agreed that any attempt to manipulate free trade would raise prices in either the short term or the long term. ChickenFacts approached Paul Matthew, CEO of the Association of Meat Importers and Exporters (AMIE), whose sector would be most affected by import limitations. He pointed out that limiting imports would lead to shortages, wastage, and price increases.

“No matter what we do, we will never be able to produce enough chicken to meet demand. Reducing imports, therefore, would simply restrict supply and prices would go up.”

ChickenFacts also spoke to Dr. Martin Cameron, a researcher with the Trade Research Advisory at North West University. He emphasised that while localisation policies looked good on paper, they usually failed on implementation and the consumer pays in the end.

“History has shown us again and again that localisation causes a negative outcome because prices are sure to rise, and it is the consumer who pays,” he said. “An economy is not an island and by trying to make goods locally, the inevitable result is that prices will go up.”

ChickenFacts also approached Chris Hattingh, deputy director of the Free Market Foundation. He believes that localisation will affect poorer consumers.

“South African consumers are under a huge amount of strain, and do not have as much disposable income as before,” he said, “thus any increase in the price of goods will impact their spending patterns.”

At the moment, chicken is the mainstay of the average food basket as it is the most affordable protein for poorer households. The South African poultry industry enjoys the highest level of protection in the world through import tariffs. All the experts and reports agree that reducing imports will have only one outcome: making chicken meat unaffordable for the poor South African consumer.

* About ChickenFacts.

Poultry is a significant part of South African life: it is the most affordable protein and therefore a large part of the average food basket. Poultry makes up 7% of agricultural imports (the largest portion along with rice), and is the mainstay of the fast food and restaurant sector. It is also a complex industry with many facets, and the one sector with the most potential to grow the agricultural economy. Therefore a dedicated fact-checking portal is very useful.