Big potato price increases in South Africa are on the cards

The South African government has introduced new import duties on imported frozen potato chips of up to 239%, which may result in significant price increases.

Last Wednesday, the South African Revenue Service (SARS) announced the imposition of the new tariffs following approval from the Minister of Trade and Industry, Ebrahim Patel.

The tariffs were recommended by the International Trade Administration Commission (ITAC) of South Africa following an investigation into the alleged dumping of imported potato chips.

McCain, which dominates the local production of frozen potato products, initially requested protection against the dumping of imports from Belgium and the Netherlands in 2019.

Dumping refers to the mass import of a product sold in the importing country at prices below what it is sold for in the exporting country.

ITAC did not complete a review of the request within 18 months, resulting in the existing duties lapsing. In effect, no import duties have been placed on frozen potato imports since then.

ITAC conducted an anti-dumping investigation following further complaints from local producers. This investigation found evidence that dumping caused “material injury” to the local industry.

Thus, it recommended import duties be placed on imports from Belgium, the Netherlands, and Germany, ranging from 8.8% up to a maximum of 239%.

The duties announced by SARS on 17 May placed duties amounting to 18.1% on imports from Germany, 23% on imports from Belgium, and 239% from the Netherlands.

Local industry versus importers

Ayabonga Cawe, the chief commissioner of ITAC, said these import duties were recommended to “levelling the playing field” between importers and local producers.

Cawe claims that imposing import duties would protect local producers and agri-processors from material injury – loss of production, jobs, profit, and tax revenue.

Such duties may even stimulate local industry, according to Cawe.

“It is all about levelling the playing field” and not collecting additional tax revenue, with ITAC considering potential price increases and inflationary effects, he said.

Hume International, one of the largest importers of frozen food products into South Africa, said the import duties are “astronomical” and will increase the cost of their products.

Local producers, such as McCain, can supply a significant portion of the local market for frozen potato chips but cannot supply it all.

Hume also said that it is “absolutely crazy” to implement such tariffs when local producers cannot supply the whole market.

Further, not all local potato produce is suitable to be processed into potato chips.

According to Hume, the knock-on price increases of imported potato chips and increased demand for local production will result in substantial price hikes.