SOUTH Africa’s potato industry, already under strain because of COVID-19, is now under threat from cheap European imports.
That’s according to industry body, Potato South Africa (PSA), which has urged buyers to give priority to local growers and suppliers.
PSA CEO André Jooste said potatoes account for approximately 45% of total vegetable crops produced in South Africa and contribute around R8.5 billion to the economy.
“These numbers, however, are under threat due to a surplus of frozen and processed potato products in Europe, as a result of a decreased demand brought on by the COVID-19 pandemic worldwide, and hence significantly depressed prices. As South Africa is a key destination for processed potato product exports from the EU where there is a history of dumping, this is set to have a negative impact on the country’s agricultural sector and surrounding communities.”
He said that in addition tp the normal farm support that EU farmers receive, special COVID-19 support measures were extended to potato producers. “This support, combined with low priced surpluses, will drive export prices down further with a significant risk of increasing dumping margins threatening the South African potato industry.”
In South Africa, COVID-19 related regulations, such as the closure of restaurants and fast food outlets, restricted trade and movement of informal traders have already had a significant impact on the industry.
“The result was a significant drop in prices far below break-even prices for producers and a build-up of stock levels in the processing sector. A further blow due to low priced imports from other countries could be catastrophic.”
The Potato and Vegetable Processors Forum (PVPF), which includes PSA, McCain Foods South Africa, Natures Garden and Lamberts Bay Foods, have been lobbying the government to institute a temporary prohibition on imports of frozen potato chips from the European Union as a consequence of market conditions impacted by COVID-19.
Jooste said this was done to protect the sustainability and jobs among local potato growers and processors which represent significant economic multipliers for rural towns and cities.
According to the PSA, volumes of potatoes exported by the EU increased from 4.5 million tons in 2015 to 5.7 million tons in 2019. “In comparison South Africa produces approximately 230,000 tons of French Fries annually. The potential volumes available to be imported could have a detrimental effect on our market for years to come.” He added that New Zealand, Australia and the United Stated share similar concerns.
“To this end, one of the points outlined in the forum’s argument to Government states that the long-term effect on local processors could result in a significant shortage of product once European markets recover. This is because when considering the time it takes to grow potatoes from seedlings to final product, a disruption in local supply could have a severe long term impact on the supply to downstream industries.”
Jooste said there was also no guarantee that the benefit of lower prices as a result of imports from Europe would be passed on to consumers. “In fact, a longer-term consequence is that consumers could face higher prices if South African growers and processors are forced out of business as a result of cheap imports on the back of COVID-19 inflicted reasons.
“By raising concerns against the importation of these products, we have an opportunity to buy and support the local industry and help rebuild the South African economy in a time when it is more critical than ever before, especially if one considers the strong labor multiplier of the industry.”
He cited as an example the fact that the leading processor of potatoes and vegetable products in the country 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.
“It is therefore imperative that we prioritise our growers, our supply chain and the expansion of the local agricultural economy; especially if we are to combat the financial effects of the COVID-19 pandemic,” Jooste said.
“As such, while we wait for an answer from government, we appeal to buyers and other decision-makers to think twice about where they’re sourcing their potato product from, to ensure they continue to support the local industry which so desperately needs to recover from the pandemic and keep operations afloat.”