While the local potato harvest in South Africa is quite good this season, the country is again facing a shortage of French fries. Anti-dumping levies mean that European French fries exporters have to deal with hefty levies. This doubles or triples the already high fries price. There are now rumors that the levies should be abolished quickly.
South Africa produces approximately 2,5 million tonnes of potatoes per year on 55.000 hectares. Potatoes can be grown throughout the country all year round. The majority of this is intended for the table potato market. It is currently at a low point in terms of price. Due to extremely warm weather, growers have harvested earlier and that puts pressure on the price. Growers receive an average of 18 cents per kilo for sorted and bagged product, while consumers in supermarkets have to pay 39 to 50 cents for the same kilo. The price for loose field crops is much lower. That is the sore leg of organization Potatoes SA. According to them, a price of 28 cents is too low and a profitable price for field product is between 33 and 39 cents per kilo. The availability and costs of water in particular are a major bottleneck for cultivation.
Another tax
South Africa has had an anti-dumping duty on European fries since 2013. That levy expired at the beginning of 2021, after which exports increased by 40% in six months. Again local players raised the alarm at the International Trade Administration Commission of South Africa (Itac). There will be a new anti-dumping duty from mid-July. Belgian fries are taxed at 23%, Dutch at 104,5% and German even at 181%. Last year, several African countries already had one French fries shortage. Not only due to poor local harvests – as was the case in South Africa – but also due to logistical problems and shortages.
What the government had hoped for, and what did not happen, is that the local chip industry has developed. That has hardly happened in almost ten years. McCain is the largest player in the country with three factories and therefore remains very dependent on imports, mainly from Europe. The price for a portion of fries in South Africa has now increased by 88%, making the call to abolish the levy louder.
Report full of errors
At the initiative of Itac itself, research agency XA Global Trade Advisors has been established research carried out into the impact of the anti-dumping duty. According to CEO Donald MacKay, the levy is not in the interests of consumers. They pay the price of the levy in a market with already rising costs of living. "Itac's report is full of errors, skewed calculations and incorrect product comparisons," said MacKay. "What Itac ignores is the state of the South African chip industry. The total harvest consists of 88% consumption potatoes. Only a fifth of that volume goes to the chip and chip industry. The largest processor (McCain) has three quarters of the chip market - and potatoes – owned, while the rest is served by two other players. They are forced to import because there are simply no potatoes available for local processing."
In response to the report, Itac said that the anti-dumping duty has been imposed for six months and will therefore expire on January 16. It will then be decided whether the levy will be continued or stopped. "The minister of trade ultimately decides on this," said an Itac spokesperson. If Itac's investigation is not completed in time, the importers will receive a refund for the levies they have paid."
Export figures are leveling off
The most current European export figures of fries to the African continent show a stable picture in the twelve months between September 2021 and August 2022. In August of this year, African imports fell and that is special. All markets actually grew, with the exception of Russia and the ones mentioned above. In this period, 111.000 tons of fries were exported, which is almost the same as in the previous twelve months. The average price rose sharply by more than 60%, but in line with what other continents pay.
This week it was announced that the world population has grown to eight billion people. The greatest growth is expected in Africa this decade. The population is estimated to increase by a fifth. Until 2050, scientists think that there will be 75% more people in Africa. According to FAO figures, African potato consumption per capita has fallen over the past decade. Simply because production cannot keep up with population growth, despite a doubling of African potato production in the last decade. The area and hectare yield grew by more than 40%. Yields in particular must increase in the coming decades to continue feeding the population.