What came first, the chicken or the reg(ula­tion)?

Finweek English Edition - - OPINION - SA’s po ul­try busin ess

On 6 April 1998, I was one of many elated Salomon em­ploy­ees watch­ing the ticker tape an­nounce that our par­ent com­pany, Trav­el­ers Group, had just merged with the bank­ing gi­ant Citi­corp. Citi had com­mer­cial branches and clients in over 100 coun­tries and a reach that went far be­yond any­thing we could have built in 30 years. And, best yet, it didn’t have an eq­uity de­riv­a­tives depart­ment. The maths on this was sim­ple. Our depart­ment would reap the benef it of im­me­di­ate

has en­joyed pro­tec­tion from im­port tar­iffs and anti-dump­ing du­ties, which ef­fec­tively prices US chicken out of the lo­cal mar­ket. The US claims the anti-dump­ing du­ties are un­fair and two pow­er­ful US sen­a­tors want th­ese re­moved, or they prom­ise to drop SA com­pletely from the AGOA re­newal sched­uled for next year.

It is un­avoid­able that SA will need to sac­ri­fice the poul­try in­dus­try and thou­sands of re­lated jobs for ‘the greater good’ of re­new­ing AGOA to ben­e­fit the other in­dus­tries and jobs that this re­newal will se­cure. As with ev­ery trade agree­ment, there are al­ways sec­tors that will suf­fer while oth­ers pros­per and grow.

While econ­o­mists trum­pet the benefits of com­pe­ti­tion for any in­dus­try, the re­al­ity is that there are too many fac­tors here that don’t come down to ‘just num­bers’. With a labour-in­ten­sive econ­omy where a large ma­jor­ity of work­ers lack the ed­u­ca­tional skills to re­train, re­tool and/or re­lo­cate to fill dis­tant va­can­cies or more tech­ni­cal jobs, an en­tire gen­er­a­tion of work­ers in par­tic­u­lar sec­tors will find th­ese trade agree­ments and the re­lax­ing of tar­iffs to be a

#ac­cess to new clients, mar­kets and rev­enue streams – and we would all keep our j obs. Our f oreig n ex­change desk didn’t share the ela­tion. Merg­ing with the world’s l argest cur­rency-t rad­ing desk meant many of th­ese traders would prob­a­bly be search­ing for new places to work.

Trade agree­ments have many similarities with merg­ers. They bring un­en­cum­bered ac­cess to new prospects and rev­enue streams, nor­mally with the added ben­e­fit of pref­er­en­tial tax treat­ment through the rela xa­tion of pro­tec­tion­ist poli­cies. From a big- pict ure per­spec­tive, they are a win-win for pro­duc­ers and con­sumers alike, but, as with merg­ers, not ev­ery­one shares the bounty – or the ela­tion.

Such is the cur­rent sit­u­a­tion with t he Africa Growth and Op­por­tu­nity Act (AGOA), a law that al­lows duty-free ac­cess i nto t he US for Sub-Sa­ha­ran African na­tions for more than 7 000 tar­iff lines, with­out re­quir­ing rec­i­proc­ity. South Africa, with the most di­ver­si­fied econ­omy in the re­gion, is by any es­ti­mate the largest win­ner. dev­as­tat­ing blow.

The only short-term so­lu­tion is to hope­fully ne­go­ti­ate quo­tas that keep the mar­ket from be­ing flooded with for­eign chick­ens at prices be­low lo­cal pro­duc­tion costs. If that can’t be ne­go­ti­ated, then we’ll need to get used to eat­ing chick­ens that have ac­cu­mu­lated fre­quent flyer miles.

The l ong- term so­lu­tion i s bet­ter ed­u­ca­tion stan­dards and op­por­tu­ni­ties – at ev­ery level. In or­der to re­main com­pet­i­tive on this global stage, it is im­per­a­tive that we pro­duce more en­gi­neers, MBAs and sci­en­tists who will be able to cre­ate, in­no­vate and an­swer the call of new in­dus­tries and tech­nolo­gies.

But ar­guably more cru­cial is the im­per­a­tive that we build a labour force that can an­swer to new de­mands at ev­ery level of pro­duc­tion so that when one door closes the next one isn’t bolted shut. If this is not our mission, the day will come when we’ll all need to sur­vive on chick­en­feed.

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