Chicken industry can’t find the sweet spot
SA’s fractious chicken industry is at war with itself again. The issue of chicken imports almost derailed our membership of Agoa, the US trade opportunity for Africa, in 2015.
This time it could last up to two years as poultry importers try to fight off staggering antidumping claims against chicken or chicken pieces from Brazil, Denmark, Spain, Poland and Ireland.
The SA Poultry Association (Sapa) appealed for antidumping help from the department of trade, industry & competition’s International Trade Administration Commission (Itac) a year ago, after a global scanning exercise by legal firm Webber Wentzel.
Now Itac has announced the start of an investigation into what it says is a prima facie case for anti-dumping duties, including 124% against Brazilian frozen wings, 201% against Danish frozen thighs, 161% against Irish frozen leg quarters, 39% against the same cut from Poland and 114% on frozen thighs from Spain.
For perspective, the timeline would show that Itac began investigating the Sapa complaint at roughly the same time that trade & industry minister Ebrahim Patel imposed regular import duties on chicken meat in 2020. The anti-dumping duties, should Sapa be successful, would be imposed on top of these year-old duties, where tariffs on bone-in chicken rose from 37% to 62% and boneless chicken from 12% to 42%.
“This chicken thing has been going on for a very long time,” says Georg Southey, an importer and former SA Association of Meat Importers & Exporters (AMIE) chair.
“The local poultry industry is addicted to protection, [and] if you ask me, if a businessman in any industry needs that kind of protection he shouldn’t be in it.”
But much of the industrial policy out of the department since Patel became minister in May 2019 has ensured the protectionist fences around SA industry have grown taller and harder to scale.
Patel works from master plans. His hope is to re-industrialise and grow or save jobs. The poultry sector master plan of November 2019 is a fundamentally protectionist charter, blaming imports for most of the domestic industry’s problems even though they account for significantly less than 20% of the market.
The pieces imported are predominantly brown meat and the market is at the lower end.
Nonetheless, the master plan insists that “the potential growth in local production has therefore been displaced by imports. This has mainly been due to the lower prices at which imports have come into our market.” An industry meeting with Patel in December 2020 was cheerful.
“In a difficult year,” a statement from the meeting quotes Patel, “we have seen promising gains … we have had more than R1bn invested by domestic companies, resulting in nearly 1,000 additional jobs and an encouraging increase in production. The next year will require more work to open up export markets and further drive transformation across the entire poultry value chain.”
Sapa was happy the minister was happy. “Transformation was high on the agenda and 13 new farmers established their own contract farms with assistance for inputs like feed and chicks from the producers. 2021 will be the year of delivery in terms of the master plan where increased local production and consumption is envisaged,” its representative said.
The AMIE representative was less thrilled. “It is pleasing to note the increase in local production,” he said, but “the benefits to the consumer can only be realised if all the Poultry Master Plan objectives are delivered.” Because, despite the master plan, exports have hardly budged.
That doesn’t bother Chris Schutte, the hard-driving CEO of Astral, the biggest poultry producer in the country and an ardent supporter of the antidumping complaint.
“Nobody [abroad] wants our chicken,” he says. He blames the avian viruses that drift around the country, particularly the ostrich areas around his hometown, Oudtshoorn. “You simply can’t contain it.”
Others claim we can’t export because local chicken is heavily brined. Or that it is pumped up with antibiotics. But Schutte has other problems. His poultry division is making a loss and he says he is selling chicken below cost as his costs rise.
He initially had problems with Patel because, as he puts it, “he was trying to be nice to everybody” and tried to find a “sweet spot” to avoid going the anti-dumping route. Hence the 62% duty on bone-in poultry in 2020. “But for anti-dumping there is no sweet spot. It should be what it is.”
Schutte promised Patel that whatever shortfall extra duties on imports cause, local producers would make it up.
The fight now will be about where the anti-dumping duties end up. Webber Wentzel will have to defend its numbers. Obviously dumping (selling abroad below what your costs are at home) is unfair. But to come in at 62% and then another 161% below your costs for an Irish frozen leg quarter in SA, produced in euros, this I gotta see. This “case” should be heard in public.
Meanwhile, huge 18wheeled lorries drive to Mthatha from KwaZulu-Natal loaded with live chickens for rural folk who can’t freeze their meat — an indictment of the people who approved the master plan. By the time a live chicken arrives down the delivery chain at a homestead 15km from Mqanduli it could easily cost more than R100.
And one day, when we have driven away all the foreigners and are struck with an avian virus we cannot control and the poor run out of a critical source of protein, we will wonder where our friends are.