SA suspends Brazillian meat imports Downgrade bad news for agribusiness Mozambique bans chicken imports
SA suspends Brazilian meat imports
In line with the position taken by many countries around the world, South Africa has suspended imports of meat from Brazil. Two of the largest meat companies in Brazil that have been implicated in the corruption scandal involving unsafe meat certified fit for export - Seara Alimentos and BRF - both export chicken meat to South Africa in the form of MDM or mechanically deboned meat, which is used in sausages or polony.
An investigation by Brazilian authorities found salmonellatainted meat was exported to Europe, as well as various unsafe practices ranging from the use of acid to hide the smell of rotten meat through to mixing pigs heads and cardboard in sausages.¡
Downgrade bad news for agribusiness
The decision by S&P to downgrade South Africa’s sovereign debt to junk status is bad news for agribusiness and especially for consumers.
This is the view of Dr John Purchase, CEO of Agbiz, who said that the dramatic political developments of the past week, and the consequential and expected downgrading of South Africa’s investment grade to so-called junk status by the rating agency Standard and Poor’s (S&P), is seriously bad news for the agricultural and agribusiness sectors of our country’s economy, and for food security.
“The immediate nature of the downgrade following an emergency meeting of the rating agency indicates the serious concern that S&P has with the changes, especially at National Treasury, and the resulting impact on the economic and fiscal situation of the country,” he said, adding that the resulting higher cost of capital and a depreciating exchange rate will impact negatively on investor confidence and growth prospects of the country in the medium to longer term.
Hamlet Hlomendlini, senior economist at Agri SA, says the downgrade will hurt farmers in that the immediate rise in inflation could have a negative impact on the sector’s competitiveness as production costs, especially for the export- oriented producers, will now be relatively higher locally.
“The future immediate outlook of South Africa is negative, suggesting that any investor that decides to invest in South Africa will be taking a short-term risk by doing so because they might not get the desired return on their investment,” says Hlomendlini. “In addition, the downgrade will lead to a higher cost of credit for all borrowers in South Africa. This will have a tremendous impact on many households, especially the poor and small businesses, when it comes to accessing loans from banks and/or servicing their current debt. The local currency is likely to depreciate further, and inflation might rise leading to higher food and fuel prices.”¡
Mozambique bans chicken imports
The Brazilian meat scandal has led to the Mozambican government banning imported chickens, including those from South Africa.
Mozambique’s National Director of Trade, Zulmira Macamo, says following the bribery scandal concerning meat safety standards in Brazil, any chicken from that country is suspect – including Brazilian imports into South Africa or Europe that have been repackaged and relabeled for export.
This move represents a golden opportunity for producers in Mozambique, who have long complained about the effect that cheap imports have on the local market.