Tax on imported poultry an exercise in futility - Research

A new report on the poultry industry in Ghana has shown that government’s action to promote the industry by slapping a 35percent tax on imported chicken through the ECOWAS Common External Tariff (CET) arrangement has done nothing to help the local industry.

The study, which was carried out in 4,000 poultry farms across all 10 regions of the country between December 2015 and February 2016, and dubbed: “System Dynamic in Policy Making, a Case Study of the Poultry Industry in Ghana” shows that more than 85percent of broilers produced in 2015 were sold through the live market, a situation which has increased the demand for imported processed chicken, even at higher prices.

“More than 85 percent of broilers produced in 2015 were sold through the live market. The low proportion of birds going through the processor channel may explain the high rate of imported poultry meat into the country.

It is also evidence that the domestic live bird and imported processed meat markets are two distinct poultry product markets in Ghana, with the increasing demand growth showing in the latter because of its convenience and relative price advantage attributes,” the report states.

This, the Lead Researcher of the study, Professor Vincent Amanor-Boadu, who is also a lecturer at the Kansas State University, Manhattan, USA, argues that, government must channel the revenues accrued from the 35percent ECOWAS CET to programmes and policies that will boost the capacity of those in the industry to move into processing, rather than sell the birds live.

“Tariffs or anything that prevents imports are not a very useful thing unless the money that is coming from the tariff is going into a special fund to support the industry. From what we have heard in talking to policy makers, the tariffs are going into general revenue, and there is no new investment going into poultry.

So, given what is going on, I don’t expect to see any major change in the industry. Consumers will continue to demand imported products because they are available and price does not seem to matter to them.

The government has a choice of saying that: this tariff is for the poultry industry and we are going to invest it to enhance the competitiveness of the poultry industry instead of putting it in the general revenue,” Prof. Amanor-Boadu said.

The study further shows that about 87 percent of the about 1,500 commercial broiler chicken farms were small, with an output of less than 2,000 birds per year.

This, the study says, should give government more reasons to introduce interventions such as subsidised feed, that will help build their capacities to expand and match competition from outside the country.

“The size and scale of production and processing in Ghana suggests that the industry cannot succeed in a head-to-head competition with imports. This means policymakers have to find alternative public and private strategies that support the industry without harming consumers and is cost-effective to the national treasury.

Given that feed cost accounts for a high proportion in total variable cost, a feed subsidy policy program with stringent participant eligibility criteria to reduce moral hazard and/or adverse selection may contribute to increasing output.

This policy, however, cannot be implemented without developing and nurturing a processor channel to absorb the expected enhanced output resulting from the subsidy,” the study recommended.

In May this year, the Ghana National Association of Poultry Farmers (GNAPF) called on government to urgently formulate a broiler revitalisation policy document to propel growth of the country’s poultry industry.

The legal policy, the association argues, will guide existing and potential investors on the modalities of investing in the country’s broiler and general poultry industry.

“The 40 percent import substitution which mandates importers to take 40 percent of their poultry products from farmers in the country is just a word of mouth policy. We do not have a legal document on that,” Vice Chairman of the GNAPF, Napoleon Agyemang Oduro said.