Shakeup looms in chicken industry

THE country’s poultry industry is all aflutter over imports and brining regulations, two issues currently weighing on the fortunes of local producers.

The dominant industry narrative has it that cheap foreign chicken is killing the viability of the sector.

Unchecked, they say, it will lead to a jobs bloodbath.

Indeed, imminent layoffs look to be a certainty at Remgro’s RCL Foods and Country Bird.

The employment of several thousand workers is potentially in jeopardy.

To safeguard these jobs, industry is lobbying the government to impose higher tariffs on bone-in chicken than the provisional duty of 13.9% levied on EU imports last year.

They want the tariff set at 37%.

At the opposite end of the argument, critics of market protectionism are less convinced by the measure, arguing that poultry companies are afflicted by fundamental inefficiencies that should rather be addressed if South Africa is serious about keeping the sector alive.

Those opposed to the idea of further trade barriers – or, in fact, any at all – say the cheaper imports benefit struggling households.

South Africans rich and poor do love their chicken and consume tons of it.

As the government special national committee considers the options, it cannot lose sight of the fact that inefficient markets are doomed to fail in the long run.

Just more than three years ago, a full round of tariff hikes were imposed for similar reasons.

If officials seek to ramp up protection of the industry further, they must keep in mind two objectives: one, the measure should remain provisional with the imperative being to save jobs immediately at risk, and two, producers should be compelled to commit to a binding review of the entire value chain, the aim being to unlock efficiency.

As we know, feedstock is a highly volatile input cost for producers and accounts for a significant portion of the retail price of a bird.

Some relief in that respect should push through this year, in the event maize farmers get their anticipated rainfall.

But seasonal vicissitudes aside, a greater metamorphosis of this sector is undoubtedly needed, for the sake of both workers and consumers.