Poultry sector calls for more protection
There is a chicken sector crisis, says Rob Davies, and we have plans to manage it
Trade and Industry Minister Rob Davies, who in December increased tariffs on imported chicken portions, says the government is aware of the crisis facing the poultry industry and is tackling it on various fronts.
The minister has just approved a provisional 13.9% safeguard duty on European bone-in chicken imported in December in terms of SA’s economic partnership agreement with the EU. The latest duty comes amid another comprehensive probe by the International Trade Administration Commission (Itac).
Davies said in an interview on Sunday that his department was aware of the influx of bone-in portion chicken portions, particularly from the EU and Brazil, and was considering designating chicken as one of the products that government departments and state entities would be required to procure locally. The department has a dedicated unit focused on the poultry industry. In addition, the Department of Agriculture, Forestry and Fisheries is involved in a number of projects to support local producers and to provide feed for the poultry industry.
The South African Poultry Association (Sapa) applied for a 37% safeguard duty on European bone-in chicken imports in 2015 and the association’s CEO, Kevin Lovell, insisted on Sunday that the 13.9% duty granted by Davies in December was "grossly inadequate", far too late and would not work. If it was not increased, the impact on the industry — which is already in the process of closing plants and retrenching workers —would be devastating, he said.
Lovell said the association would be making further representations to Itac to support its case that the domestic industry needed to be protected from European imports, which prior to the 13.9% safeguard duty came in at zero duty and at prices far below the cost of local production. A 37% duty would make the playing field more equal.
He noted that the EU supplied about 80% of all SA’s bone-in chicken imports in 2016. Of total poultry imports of about 530,000-tonnes, about 230,000-tonnes were bone-in chicken portions.
Major chicken producers such as RCL Foods (which owns Rainbow and Farmer Brown chicken producers) and Country Bird are struggling to maintain their profitability in the face of the import onslaught and have planned, or are planning, to reduce their operations. Together they plan to retrench nearly 3,000 workers, while other producers have had to shut up shop. Both producers and the Food and Allied Workers Union have called on the government to act.
The drought, which pushed up the price of chicken feed, contributed to the industry’s woes, which RCL Foods CEO Miles Dally has described as an "unprecedented crisis".
Lovell said seven of the 10 European countries that exported chicken to SA had been hit in November and December by highly pathogenic avian influenza. Only Belgium, Spain and Ireland were exporting at present.
He said European consumers ate the white breast meat portions of chicken. The brown meat, such as leg quarters, was exported as a by-product at below cost price.
Itac processes are by their nature time consuming as the commission has to investigate in depth and with quantitative backing whether an application for a tariff increase is justified in terms of the impact that imports are having on a local industry.
However, Lovell said, while the lengthy process was under way, the damage to the local industry continued unabated so that when and if relief came it was often too little too late.
Sapa applied for a safeguard duty on European chicken imports at the end of 2015 but Itac’s decision to grant a 13.9% hike was approved only in December. The EU sent legal experts to argue its case before the commission.
While the local industry feared the impact of the concessions made by SA to the US on chicken imports during the negotiations on the extension of the African Growth and Opportunity Act, US chicken exporters have taken up less than half of the annual quota of 65,000-tonnes that can come in free of the anti-dumping duty.