Recipe for disaster? Higher chicken prices will hurt South Africa's poorest.
On 30 September South Africa imposed higher tariffs on chicken imports. One important reason for the imposition of tariffs, according to Minister Rob Davies, was that South Africa needs to ensure its own food security. We cannot allow international food producers, the argument goes, to dictate the prices we pay for our food.
I've written about the higher chicken tariffs before, and the negative consequences it's imposition would have for South Africa's poorest consumers. Other economists agreed. (Economic consultancy Econex contributed this excellent summary. Full disclosure: it was written by my wife.) Nevertheless Mr Davies imposed the tariffs. The government has been so kind as to post a YouTube clip of the full press conference. Three questions: 1) Are we really employing 48 000 workers in the chicken industry? Really? 2) If chicken producers suffered injury because of foreign competition, we would expect to see it in a drop in earnings, right? So what happened to chicken producers' share prices over the last two years? Any signs of serious injury? Here's a clue, and 3) Can the journalists at the press conference look like they care any less?
So the predictable has happened. The sugar industry has asked for higher protection, claiming they can't compete against cheap imports and that South Africa will suffer because of lower food security. And what prevents the dairy or wheat industries from filing their own applications in the near future?
The reason the government gets away with this is because, as I've said before, food security is misunderstood by the general public (as reflected in a recent debate on the topic on Afrikaans radio station RSG). Food security is not about producing your own food, but about consuming it at the lowest price. We do not need to produce all of South Africa's food in South Africa. The richest countries in the world don't do it, so why should we? Instead, what we should aim for is to provide South Africans with the cheapest food we can find. Perhaps some of it is grown locally, but most of it will come from countries that are really good at growing food, like Brazil (where they can harvest twice a year and where rainfall reduces the need to irrigate). Or it will come from countries that subsidise their farmers which, in other words, mean that their tax payers are willing to pay parts of their salary so that we in South Africa can buy cheap food. This is a pretty sweet deal, except that our government is hell-bent on restricting these benefits.
Here is some more evidence to support my claim that that food security is not about producing your own food. The International Food Policy Research Institute has published a new Global Hunger Index, which measures the degree to which people go hungry across the world. I've correlated this measure with the share of agriculture in GDP for each of these countries. In short: countries with a high Agriculture/GDP ratio should, if food security is about producers, result in low rates of hunger. Surely a country that produces a larger share of its GDP as food should be able feed its citizens to a greater degree in comparison to countries where agriculture is only a tiny share of GDP? Well, no. In fact, I find a correlation coefficient of 0.6 for 1990, meaning that countries with a higher Agric/GDP ratio also has a much higher likelihood of going hungry. This correlation increases to 0.65 for 2010. (Both sets of data are available online, here and here.) Incidentally, The Economist also shows that South Africa is one of the countries where hunger has increased the most since 1990, meaning that all our 'food security' has had little effect for the poorest.
Keeping people well-fed is not only a humanitarian goal; there are also good economic reasons to do so. As Agnes Binagwaho, Minister of Health of Rwanda (and Senior Lecturer at Harvard Medical School) argues, one in three preventable deaths among young children worldwide – up to 2.5 million each year – are the result of inadequate nutrition. Malnutrition limits children's ability to learn in school, reducing the returns on education and GDP growth. Last year, Minister Binagwaho notes, "the Copenhagen Consensus – an esteemed panel of economists including several Nobel Laureates – ranked child nutrition as the top priority on its list of cost-effective investments that would improve global welfare".
Min Davies' higher chicken tariffs impose, I believe, what will be one of South Africa's most harmful economic policies since the turn of the century, not only for its direct impact on consumers but for the door it opens for other industries to ask for similar protectionist benefits. More shockingly, it's a policy largely ignored by the media. Of course we can produce our own food. Of course there is a need to make farmers more efficient global competitors. With a rising Africa on our doorstep, with better infrastructure that connects our farmers to this growing market, and farmers' willingness to invest in new technologies, this will happen.
But if we want to reduce the poorest South Africans' vulnerability to hunger and malnutrition – if we want food for all – we should eliminate efforts to build walls against imports. Given the government's recent policy decisions, however, it is highly probable that the hunger pains will further intensify for South Africa's poorest over the next few years, with incalculably dire consequences for our society and economy.
*Image source: Homegrown.org.