Potato chip scarcity looms as import duties soar
September, 2022: At a time when South Africans are struggling to fulfil their basic needs, the International Trade Administration Commission (ITAC) recently decided to substantially raise import duties on three major European frozen French fry exporters.
The new import duties on frozen French fries imposed in July 2022 reach as high as 23.06% for Belgium, 104.52% for the Netherlands, and 181.05% for Germany.
Although South African potato producers are reportedly producing enough raw potatoes to meet local demand, the production of processed frozen French fries currently does not meet local demand.
Local French fry producers tend to prioritise contracts with retailers, fast food chains, and quick service restaurants, only selling their surplus to other customers such as independent restaurants, wholesalers, hotels, and caterers. However, consistency is key in the restaurant industry. To safeguard against supply chain disruptions, access to a constant supply of affordable imports is therefore paramount.
South Africa imported some 13,000 tons of frozen French fries in 2020 despite lower demand during the national lockdown. This figure nearly doubled in 2021 as imports offset the shortfall caused by critical potato shortages at the time.
Pricing international frozen French fry producers out of the South African market with exceptionally high tariffs therefore isn’t helping businesses or consumers.
Inflation reached 7.6% in August, while petrol and diesel prices also increased by R7.12 and R8.95 year-on-year respectively in August, placing budgets under severe pressure. Consumers simply cannot afford for government-driven tariff increases to negatively impact the cost of food any further.
These new import duties could see affected European French fry producers seek out alternative markets with lower tariff rates, leaving South Africa high and dry, and further aggravating local price hikes and shortages. The 181% tariff increase on German producers means, for example, that a 2.5 kilogram pack of frozen French fries that used to cost R45 could now cost close to R130, effectively pricing the product out of the market for most consumers.
The South African government is showing a shocking lack of interest in consulting with stakeholders before making unilateral decisions which often prove to be harmful to businesses and households.
Had ITAC consulted customers of imported French fries to understand why local businesses are reliant on imports, they may have come to understand that it’s less about price and more about supply chain security.
Localisation efforts are commendable but should be implemented in line with the growth of local supply chains to prevent food shortages and high prices.