Chicken wars continue as local producers deny profiteering amid surges in prices Bekezela Phakathi affordable as local producers ated SA jobs instead of buying generally always price their imports which create jobs in With the price of chicken soaring products higher. Brazil and Europe? Or have they and set to hit record highs, local While local producers have justenjoyed fat profits?" poultry producers have dis- backed the removal of VAT on Baird called on importers to missed suggestions that they are selected cuts of poultry con- cut their profit margins to make profiteering at the expense of sumed by lower-income fami- chicken more affordable to con- consumers. lies, they vehemently oppose the sumers, particularly lower- Chicken is one of the most removal of tariffs, arguing that income shoppers. popular animal proteins con- they did not cause the price Paul Matthew, the CEO of the sumed by cash-strapped South increases in the first place Association of Meat Importers Africans, in part because it is still Trade, industry & competition and Exporters, said in response relatively affordable. minister Ebrahim Patel is also to questions from Business Day But prices, which have against the suspension of tariffs, that local producers should increased by at least 10% annu- arguing that such an "extreme" focus on alternative measures to ally over the past decade and by step would destroy local jobs boost growth instead of limiting as much as 17% in the past year, Francois Baird, founder of imports. He said imports, even at are set to hit record highs as Fair Play Movement, an organi- marginal levels, are crucial as input prices, including the cost of sation that aims to fight preda- they provide the necessary feed, spike. This is partly due to tory trade practices and poultry competition to keep prices in the Russian invasion of Ukraine dumping in SA, suggested that check for consumers. one of the largest producers of importers are pushing for the "It is troubling that local pro- oilseed and grain, the main suspension or removal of tariffs ducers keep talking about fur- ingredients of chicken feed. to maximise their own profits, ther reducing imports, which At a media briefing on Mon- not necessarily to protect con- are currently at a mere 94% day, braak Breitenbach, chair of Costly: Chicken feed makes up about 70% of a producer's input sumers according to SA Revenue Ser- the SA Poultry Association, costs, and these have rocketed in recent times. /Russell Roberts Baird was of the view that the vice data) if you exclude which represents local produc- low prices at which chicken is mechanically deboned meat .. If ers, said contrary to popular fighting price increases," he said trade protection, with general imported are not passed on to local producers truly want to belief, producers have not made The sector has in the past tariffs, antidumping duties and consumers. increase production, which enough profit in recent years to shed thousands of jobs and safeguard duties in place, to the He emphasised that for the would boost jobs and benefit the invest back into the industry. ascribed its struggles to cheap detriment of consumers. past six years chicken imports entire value chain, they should Recent price increases have chicken imports mainly from In an effort to protect the have averaged Robn a year. focus their sights on seizing the been forced on them by rising Brazil, the US and Europe. industry from unfair competi- "If chicken importers sold opportunity to build a poultry feed prices, Breitenbach said, The Association of Meat tion, the government in 2020 those consignments for only 10% export market," Matthew said, adding that chicken feed makes Importers and Exporters has gazetted tariff increases to 62% more than they paid - and we highlighting that SA already has up about 70% of a producer's been calling on the government on bone-in chicken portions think it's more because we duty-freestatus in the EU, which input costs. to remove all tariffs and suspend while tariffs on boneless por- believe their profits are substan- means it pays no tariffs to sell its "Feed prices went up by 20% the consumption tax on all poul- tions were raised to 42%. Critics tial - then they are making product there and Brazil one of the major try to cushion consumers from argued that despite SA's trade R600m a year. Every year, for The EU has already said that exporters of poultry] has raised the rising price of chicken. It partners accounting for not the pastsix years. it will buy SA poultry once the chicken prices by 23%%. Our often highlights that the local more than 15% of all chicken "What have they done with country meets the required increases are far lower than poultry industry enjoys unfair consumed in the country, hiking R3.6bn over the past six years? health and safety standards Brazil - our industry is actively and excessively high levels of tariffs would make chicken less Expanded their business? Cre- helath babushandwe co zEconomics for Business Individual Assignment MBA 2022 Prof. Christopher Malikane Due Date: 18 July 2022 Question 1 Themba has a weekly income of R10, all of which he spends on good X and good Y. The price of X is R1 and the price of Y is R2. His utility from consuming these is U(X)+V(Y). The utility from each of the goods is given by the table below: X U(X) Y WY) 0 0 0 0 1 12 1 20 2 20 2 32 3 26 3 40 4 30 4 44 5 32 5 46 a) At what combination of X and Y does he maximize his utility? (20) b) Suppose the price of X increases from R1 to R2, at what combination will he maximize his utility? (20) c) Draw the demand curve for Themba, and explain the factors that will shift this demand curve. (10) Question 2 Consider the article: Chicken wars continue as local producers deny proteering amid surging prices", and answer the following questions. a) Graphically illustrate and explain the equilibrium position of the market for locally produced chicken, and the equilibrium position of the market for imported chicken with the tariff on imported chicken in place. (10) b) Graphically illustrate and explain the impact of the removal of tariffs on imported chicken, on the market for locally produced chicken and the market for imported chicken and, by extension, employment locally and abroad. (10) c) The global shock of the Russia-Ukraine war affected all chicken producers. Using both market diagrams for locally produced and imported chicken, graphically illustrate and explain why local producers would still insist on govemment raising tariffs in response to this shock. (10) d) The Fairplay Movement says that importers will not pass on lower prices to consumers when tariffs are removed. Graphically illustrate and explain the impact of not fully passing on the lower prices to consumers by importers, on the market for local chicken and the market for imported chicken. (10) Graphically illustrate and explain the impact of the removal of VAT on locally produced chicken, on the market for locally produced chicken. Will this help local producers in ghting competition from imports, explain