Crippling effect of lapsed anti-dumping duties on local industry and farmers

South African potato producers have expressed concern about the increased risk of cheaper frozen potato fries from the Netherlands and Belgium, saying it could cripple local farmers and producers.

With less demand for local produce there will be a ripple effect on livelihoods and job losses, not to mention the effect on the economy, says Willie Jacobs, CEO of Potatoes South Africa.

Long-standing anti-dumping duties against importers have recently expired, despite a sunset review application by McCain Foods to keep the duties in place to protect the local industry.

Imported frozen fries from these two countries could be up to 30% cheaper because of the termination of anti-dumping duties.

The International Trade Administration Commission (Itac) failed to complete its investigation into the sunset review application by local producers in the prescribed time.

Application timeline

The duties were set to expire on August 7, 2019.

On February 7, 2019, McCain Foods submitted a sunset review application to prevent the termination of the duties. The application was supported by Lamberts Bay Foods and Nature’s Garden.

The Itac investigation started on July 26 that year. The commission failed to complete the sunset review investigation within 18 months of its initiation.

In terms of the Anti-Dumping Regulations anti-dumping duties must be terminated five years after implementation, unless a sunset review is initiated prior to the expiry date.

Imports already on the rise

Jacobs notes that the implementation of trade remedies saw imports of frozen French fries decline from 46 904 tons in 2010 to 18 417 tons in 2020 – a decline of 61% over a decade.

However, between January and May this year – just five months – almost 12 000 tonnes of frozen fries were imported into South Africa (a five-month average of the total figure for 2020: 7 674 tonnes).

Jacobs says the cumulative rand value lost due to imports during this period could be close to R80 million.

Rising costs and riots

Jacobs adds that South African producers have been experiencing many challenges brought on by Covid-19, the cost-price squeeze, rising input costs and, most recently, the riots in parts of the country.

“Furthermore, our producers don’t benefit from the financial support afforded to European Union farmers by their governments, and simply cannot compete with below-cost products being dumped in our country.”

The South African potato industry provides employment to an estimated 45 000 permanent and seasonal labourers and is worth approximately R7.5 billion at primary level, and R26 billion at secondary level.

Potatoes SA says in a statement the industry plants around 50 000 hectares of potatoes, with the crop accounting for 45% of the total vegetable crops produced in the country. This equates to a contribution of around R8.5 billion to the South African economy.

McCain Foods supports in excess of 6 800 full-time jobs and procures potatoes from more than 100 local farmers who plant in excess of 4 500 hectares of potatoes annually.

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Local industry appeals for support

McCain Foods MD Unathi Mhlatyana says the negative financial impact of the Covid-19 pandemic and other prevailing socio economic and market conditions on local farmers and producers has been catastrophic.

“Further threats in terms of both demand and cost may force local growers and processors out of business,” he adds.

Mhlatyana says consumers and businesses are price-sensitive and would naturally be drawn to cheaper prices.

“We are therefore appealing to the retail and restaurant trade, as well as to consumers, to choose to support local farmers and producers so that their businesses can remain open, jobs can be saved, and so that the revenue remains within South Africa.”

Mhlatyana says McCain Foods was “deeply disturbed” and “disappointed” by Itac’s failure to complete its investigation in time.

“We are doing all that is in our power to remedy the situation.”

Loss of production

Hilton Lambert Trade Attorneys, representing the potato industry, says the industry reserves the right to hold the responsible parties accountable for any losses that may be incurred as a result of the loss of protection.

Francois Dubbelman, trade expert and founder of FC Dubbelman & Associates, earlier said this was the first time in the history of the commission that it had failed to finalise a sunset view application on time.

Generally, a sunset review is completed within a year. In terms of the General Agreement on Tariffs and Trade (the Gatt agreement) the deadline for investigations is 18 months, mainly because it is so disruptive to the trading environment.

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