Fat flies around imported chips

Imports of frozen French fries knocked local processors, with South Africa’s largest processor reportedly suffering a drop in sales.

- Advertisement -

Mydibel chips from Belgium retail at Checkers for R12/kg to R15/kg while McCain Foods SA chips retail at R24/kg to R28/kg.
McCain Foods SA, with global headquarters in Canada, is SA’s biggest frozen French fry processor. “Cheap imports affect us negatively. We have experienced a significant dip in sales, especially in the food service market and in the catering industry. One of the major quick service restaurants imports more than 50% of its frozen chips,” said McCain Foods SA MD, Louis Wolthers.

Wolthers said the raw cost of potatoes in SA was higher than it was in the EU, making it difficult to compete. “If the food service industry would buy local it would help. Buying local is an assured supply not subject to currency fluctuations. Buyers also don’t have to hold stock so there are cost advantages,” he said. Wolthers said it didn’t believe that importing was good for the country or consumers in the long term.

McCain has made significant investment in processing and product development and opened a state-of-the-art potato processing factory in Delmas in 2009. McCain, Potatoes South Africa (PSA) and members of the processing industry were seeking tariff protection as a measure against a surge of cheap frozen chips. The International Trade Administration Commission (Itac) was currently investigating and negotiations were at a sensitive stage, with importers opposing the move. An outcome was expected in a month.

- Advertisement -

Wolthers said the safeguard would provide local industry with time to develop new potato varieties that could be more competitively produced, but this would take five years to develop. Merlog Foods, a Durban-based importer and distributor of foods, opposed the Itac application. Merlog imported about 10 000t of Belgian frozen chips a year, mainly for the food service industry where it was sold as hot cooked chips, as well as for retailers such as Shoprite/Checkers.

Merlog manager Georg Southey said total imports into SA amounted to around 30 000t/year, worth about R30 million based on a value of about R10/ kg from the EU. This was some way off the peak of 46  000t imported in 2009/2010. “That spike occurred because there was potato crop failure in SA, mainly due to black frost in Limpopo, and imports made up the shortfall,” Southey said.

“SA was hosting the Soccer World Cup and additional imports were made to cater for the tourist influx. Imports have settled back at the 30 000t/year level, which is about 10% of local production. We believe the data on which the McCain Itac application has been based is outdated, and in terms of the WTO Safeguard Regulations this investigation should never have been initiated,” said Southey. He said they considered the McCain application opportunistic.

“McCain is awaiting regulatory approval in the EU for its purchase of [Belgian frozen chip and vegetable producer PinguinLutosa, one of the primary exporters to South Africa over the past five years. This will further strengthen its dominance of the world frozen chip market.” Wolthers confirmed that McCain was in the final stages of purchasing PinguinLutosa, with the deal pending approval from the necessary authorities. Wolthers said the deal should not affect the local business landscape.