State takes action on chicken, but there is no single remedy
FairPlay’s Paul Dillon suggests the government is doing nothing to tackle the difficulties of the poultry industry (Task team must act to end dumping, October 10).
The government has already taken a number of important actions. But there is no one-off remedy for a complex and multilayered set of problems.
Dillon refers only to aggressive tariff protection measures — primarily against the dumping of mechanically deboned meat and chicken quarters in the domestic market. He also makes great play of the potential human cost of layoffs and retrenchments to poultry workers and the consequent suffering of their families, while insinuating that we either don’t know about this or don’t care.
It is not good enough for large corporates to come cap in hand to the government, demanding blanket tariff protection and support — and typically offering a black economic empowerment transaction — when at the top of the cycle while generating significant profits these same companies showed little appetite for investment in new plant and technology upgrades, lowering the barriers to entry and supplier development in upstream and downstream value chains, or supporting empowerment.
There have been weaknesses of co-ordination across the government; not all the policy tools available have been deployed as expeditiously as they might have been. However, we can point to some achievements. Here are a few stand-outs:
• A safeguard of 13.9% to protect the poultry sector has been implemented by the International Trade Administration Commission.
It must be borne in mind that any trade measures implemented by SA have to fall in line with our commitments to the World Trade Organisation and our bilateral and multilateral trade agreements. The government has to be mindful of the possibility of countermeasures from our trading partners as well as the danger of featherbedding uncompetitive domestic companies to the detriment of domestic, especially poor, consumers. It is striking that few, if any, companies in SA have the mechanically deboned meat capability in place — precisely in the subsector where there is import penetration and where poultry producers have failed to recognise an important market and make the necessary investments.
• The Department of Trade and Industry has launched a R1bn dedicated agroprocessing support scheme to boost domestic investment including in the poultry sector.
• To raise aggregate domestic demand for poultry sector products, the department has instructed government institutions to procure poultry from domestic producers, under the relevant clauses of the procurement legislation.
But the government has an overriding responsibility to act even-handedly, striking a calibrated, evidence-based balance between shielding poultry producers from unfair trade practices, saving jobs and meeting the food needs of the poor
These actions, among others, are designed to tackle issues affecting the poultry industry and its consumers. Some are short term (such as the avian flu epidemic); others are longer term and/or structural. The former are tackled by the Department of Agriculture, Forestry and Fisheries; the latter are a matter for continuing joint actions between the Department of Trade and Industry and all key stakeholders.
But the government has an overriding responsibility to act even-handedly, striking a calibrated, evidence-based balance between shielding poultry producers from unfair trade practices, saving jobs and meeting the food needs of the poor.
Since 1994, chicken prices have closely tracked the general inflation rate, while red meat prices have risen 125%. Partly as a result, per-person chicken consumption in SA has more than doubled over the period. The government cannot ignore the evidence, which suggests that imports have played a part in keeping local producers price-competitive, thus helping to put relatively affordable protein on to the tables of millions.
South Africans should reject the cynical narrative that suggests that because there are well-known problems and capacity constraints, this invalidates any and all government efforts. There are many women and men in the government with the highest ethical and professional standards. They will continue to work with the private sector and labour to fashion trade-offs and solutions that balance competing business interests with complex socioeconomic factors.
The government cannot be held to ransom by special plea groups that display so little understanding of trade and other critical measures, substituting crude populism for proper economic analysis and policies.
• Strachan is deputy director-general for industrial development.