TRALAC - Trade Law Centre

South Africa: The war of the chickens (Opinion piece)

Sunday, 16 October 2016 Published: | Kevin Lovell

Source: City Press / Fin 24 (South Africa)

Our country is facing great turbulence at present, from economic stagnation and political uncertainty through to ahistorical calls for radical change.

[See follow-up response to this article HERE.]

And while all this is going on, a quieter disaster is slowly starting to bubble over the lip of the pot.

Following the birth of our democracy in 1994, South Africa’s chicken industry has been suffering the effects of rising levels of imported poultry products. This is for two main reasons.

Firstly, our borders were opened up to trade more than many other nations. This was born of a certain naivety that our trading partners had an interest in our national wellbeing, in the spirit of ubuntu.

Secondly, the distortions of agricultural trade – created by the developed world in particular – have grown worse as these countries are unable or unwilling to correct them.

For chicken meat, this means that the developed world prefers breast meat to the leg quarters, and so a surplus of leg quarters – the dark meat – exists in these countries.

Like most agricultural products, a limited part of global chicken meat production is traded. For us, this amounts to about 13% of global production.

Of that trade, at least half lies in the goods that the countries producing them do not want to eat; in other words, these are their waste products.

As is so often the case, the developing world is expected to take what is unwanted elsewhere.

It is expected of us to be satisfied with the leftovers, for we are left behind in the power dynamics of a distorted world.

As leftovers are often sold at discounted prices that reflect their scrap value – not their production costs – these imports arrive in South Africa at way below the normal cost of production.

Clearly, we find it difficult to compete in such an environment.

So, are South Africans “good farmers”? The answer is clear.

Using independent research conducted by the University of Wageningen in the Netherlands, it has been shown that we can produce a whole slaughtered chicken for less than any European Union country, for less than Thailand, for almost the same cost as the US, and for more than Brazil, Argentina and the Ukraine.

So, clearly we are excellent farmers – and if we could source feed ingredients for prices similar to those paid by the US, Brazil, the Ukraine and Argentina, we would be even more competitive.

Why, then, is the industry downscaling when we are able to produce all the chicken meat that South Africans want to eat?

Simply because the trading environment is so distorted by unrealistically priced imports that we cannot recover the costs of production, as every business needs to do to survive.

The recent announcement by RCL Foods that it is planning to reduce its farming and processing workforce is shocking in and of itself.

But even more shocking is that this is not the first loss the industry has suffered in recent times.

At least 12 businesses have gone out of production in the past few years; at least three more are not expected to make it through this year; and most major producers have more cutbacks to come.

The result is that there could easily be as many as 12 000 direct and indirect jobs lost before year-end to add to the thousands lost so far.

Yet there are still another 120 000 jobs to fight for, so not all is yet lost.

A simple metric is that for every 10 000 tons of chicken meat we import, more than 1 000 direct and indirect jobs are lost.

This year, total poultry imports are likely to be well in excess of 500 000 tons.

Our chance to help South Africa grow is being whittled away; our chance to help improve the lives of more South Africans by employing more people is being taken away.

There is no such thing as cheap food if you do not have a job – and we can create jobs as well as keep existing ones.

So, what can be done to reverse this decline?

The difficulty is that it is only government that can fix this mess, as government created it through the unforeseen consequences of our trade policy.

Trade policy is not for the faint-hearted. It is a brutal form of Trumpism often glossed over with genteel manners and deceitful economics.

If we are to reset our economy and maintain current employment in the chicken industry – and others – we need to toughen up on trade and accept that we will need to be at least as tough as those with whom we negotiate trade agreements.

This crisis can still be fixed and the stove turned off, but the time is now if much of the industry is not to be lost.

The chicken industry is the biggest user of soya beans in the country by far and the second biggest user of maize, after people. So, if we fail, it is not only our industry that will suffer, but broader agriculture as well.

Hope springs eternal.

  • Lovell is CEO of the SA Poultry Association.

 

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