Bleak future for 1,350 axed Rainbow workers
Local poultry producers are efficient and world-class but cannot compete in an unfair environment
At 3pm on Friday, Loraine Ngubane, 42, will knock off work for the last time at Rainbow Chicken (RCL) Foods’ plant in Hammarsdale, about 50km west of Durban.
Ngubane is among 1,350 workers in the company who will be laid off this week as the sector reels from what it says is an influx of chicken imports.
SA imported an average of 27,500 tonnes of poultry a month from the US, Brazil and the EU for the 12 months to June 2016, representing a 43% hike. But many analysts say other factors are to blame.
Ngubane, a resident of Mpumalanga township near Hammarsdale, has worked at RCL Foods for 10 years, but her future, and that of her family, looks bleak.
“I don’t know what I will do now. I don’t know how I will take care of my family as my whole life was dependent on this job,” she said.
“My 21-year-old son, who is doing a third-year marketing diploma course at Durban’s Oval International College, will probably have to drop out.
“I don’t even know where to start looking for a job. There are just no jobs, no matter where you look,” said Ngubane.
Mthembiseni Thabethe, 56, is facing the same fate. He spent more than three decades at the company before he was forced to accept a severance package.
“The company said it will call us to work from time to time, but that will not be the same as when we were employed here full-time,” he said.
He did not know what he would do with the time on his hands now that he no longer had to wake up early to head to work, Thabethe said.
The job cuts will go ahead despite last-minute, relentless discussions among unions, the government and producers.
Scott Pitman, MD of RCL Foods’ consumer division, said the company was doing all it could to assist workers who stood to lose their jobs. The staff reductions “take effect at the end of January 2017, and the new business model at Hammarsdale comes into effect on February 1 2017”.
“An extensive social plan is being developed for the retrenchments through consultation,” Pitman said.
“The plan will involve other employers, occupational health providers and education sessions regarding financial issues, job-finding and CV-writing.
“[A total of] 1,350 posts will be cut, as we reduce operations at Hammarsdale from two shifts to one, in what has been a very sad process for us.”
RCL Foods, along with the rest of the chicken industry and Food and Allied Workers Union (Fawu), was in talks with the government to find a solution and try to avert further mass retrenchments. “If the situation does not improve, more jobs may be cut,” Pitman said.
KwaZulu-Natal spokesman of Fawu, August Mbhele, said the union had not given up on efforts to convince employers and the government to consider options other than retrenchment to deal with what he said was the issue of cheap chicken imports.
It was sad that mass retrenchments were befalling poultry workers, Mbhele said.
“We are saying companies should consider options, such as reduced shifts and others, that would keep workers in the system until a final solution is found on cheap [imports]….”
Fawu was encouraging retailers including Shoprite and Woolworths and hotels to buy at least 60%-70% of their poultry locally to save jobs.
Trade and Industry Minister Rob Davies could not be reached for comment.
The South African chicken industry, a significant portion of the country’s maize industry and tens of thousands of jobs are under threat because large quantities of surplus chicken are being dumped in this market by other countries at prices way below their cost of production. Thousands of jobs have already been lost and chicken dumping is spreading misery in a country with one of the highest unemployment rates in the world and where each wage earner supports up to 10 people.
Almost four years ago, the South African Poultry Association (Sapa) cautioned that 20,000 jobs could be lost if imports of cheap chicken continued. It said then that 5,000 jobs had already been shed at large and small producers. Since 2012, eight small to medium-sized poultry farms have closed.
That trend has continued as the volume of imports has climbed. Producers are being forced into production cuts, jobs are being lost and more are at risk. The latest Sapa estimate is that 1,000 jobs will be lost for every 10,000 tonnes of dumped chicken imports. Now the entire industry is under threat.
One of the country’s largest chicken producers, RCL Foods, has warned that the dumping could cause the entire South African chicken industry to collapse before the end of 2017. Huge numbers of direct and indirect jobs are at risk, mainly poor people with many dependants — 110,000 in the chicken industry and a further 20,000 in the maize and soya industries. Chicken producers buy nearly half of the country’s maize crop and if the chicken industry fails, the knock-on effect on the grain industry will compound the negative effect.
OFF-CUTS EXPORTED TO SA
The cause of the problem is that some foreign producers are selling cuts of brown meat, which are unpopular in North America and Europe, below cost in SA. The preference in North America and Europe is for chicken breasts and wings, and these premium cuts can be sold there at a price high enough to cover the production cost of the entire chicken. This leaves the brown meat — drumsticks and thighs — which becomes surplus off-cuts that are classified as waste and then sold in any market that will take them for any price the exporters can get. They are sold below the cost of production, which is the trade definition of dumping and against the rules of the World Trade Organisation (WTO). As local producers cannot compete with dumped products at artificially low prices, they are left with no option other than to shut operations, cut jobs and eventually go out of business.
Imports of chicken have increased by nearly 10 times in the past seven years, from 3,500 tonnes a month in 2009 to 30,000 tonnes a month in the first half of 2016. It has accelerated rapidly in recent years as SA remained open to chicken imports when other markets around the world closed. Importers are selling more chicken into the South African market than many of the local producers.
SA is being targeted by exporters, particularly those in Europe and South America because it is one of the few countries that allows virtually unrestricted chicken imports. Russia, formerly a large market, closed its borders to EU imports in 2014, while China has raised tariffs and health barriers to keep imports out. As African countries were targeted, they also implemented a variety of measures to protect their industries. In Ghana, one country that did not do so, the local chicken industry has collapsed. That is the danger facing SA as ever larger volumes of chicken imports are dumped here.
Dumping raises important issues for SA and its policy makers, from unemployment to food security, and has implications for economic and social stability.
It is not about globalisation, free markets and free trade. Nor is it an issue of an inefficient South African industry being undercut by world-class producers in other countries.
SA’s modern chicken industry is the fifth most efficient in the world, with production costs well below those in Europe.
However, there is almost no country SA can export to because all impose a variety of technical barriers to block entry of our chicken products. For example, we are not allowed to export poultry to countries in South America because they say they don’t approve our abattoirs. For them to approve our abattoirs, we have to undergo a lengthy process that requires years of certification.
Other territories such as the US and Europe say our ostriches have bird flu, and although our chicken industry has never had avian flu, they use that to block South African exports. Other countries, such as African powerhouses Nigeria and Kenya, ban all poultry imports because they want to develop their own industries. All these countries understand the importance of food security and jobs. In SA, we don’t seem to appreciate that enough.
Calls are being made for the local industry to become more efficient to compete against imports. That misses the point — we are efficient, but we cannot compete against dumped chicken portions sold way below the cost of production.
UNFAIR COMPETITION
South African producers would compete strongly against imported products if competition was fair, but dumping is not fair competition. Exporters are price takers – they will sell their large surplus of brown-meat leg quarters for what they can get. If tariffs are raised, they will simply accept even lower prices to accommodate the increase.
And so, the local industry contracts and jobs are lost. This in a country where official unemployment jumped to 27% in November 2016, with the broader definition — including the hopeless who have stopped looking for work — standing at 36%.
Food security also becomes an issue when leading food-producing industries are under threat. Chicken is the major source of protein for the majority of South Africans and has been supplied by local producers. If the local industry collapses and the country relies on imports, that security is gone. Foreign producers are free to raise prices or switch markets at will when a better business opportunity arises.
Dumping is not a friend, even for the poor. Local consumers may briefly enjoy cheaper chicken, but eventually they will have to pay higher prices or go hungry. Tens of thousands of South Africans will be jobless, many of them permanently unemployed without hope of finding work.
Dumping is a destroyer, which is why the South African chicken industry and its thousands of workers need protection, not because the industry cannot compete, but because it is being destroyed by dumping, a practice outlawed by the WTO.
Key players in the industry and labour have initiated discussions with the government to investigate a way forward beyond the insufficient provisional 13.9% safeguard duty that was imposed on EU imports in December 2016. SA needs to act quickly and implement the technical barriers used by other countries — phytosanitary measures, health checks and demands for abattoir certification — that can help protect the South African chicken industry.
Chicken dumping is becoming a national crisis. If nothing is done, the country could have another 130,000 jobless people by Christmas 2017, leaving about 1.3-million family members and other dependants without food or income. That grim prospect is a call to action for the policy makers who can prevent it.