Brazil now turning Ghana into a poultry wasteland
The crux of the matter is that the frozen chicken portions being dumped in our market are unwanted surpluses in Brazil and the EU
Warning bells should be ringing in government offices as the assault on the SA chicken industry by EU producers ramps up. If the EU regains its previous huge share of the market, the local industry may reach a tipping point into decline from which it will be almost impossible to recover. Not one province in SA would be unaffected.
EU chicken imports are climbing rapidly after a two-year absence because of avian influenza bans. Before the avian influenza outbreaks in Europe, the EU dominated SA imports of frozen chicken portions. While they were away, Brazil quickly filled the gap. Now they’re back, and the EU plus Brazil could spell disaster for SA.
That disaster is called Ghana. EU producers did to Ghana what they’re trying to do here: they swamped the market with dumped chicken imports, sold below the cost of production and at prices Ghanaian producers could not match.
The result: imports took over and local chicken producers went out of business. A once-flourishing local industry that had provided 80% of Ghanaian chicken have been reduced to supplying only 5% of the country’s chicken.
The effect of that assault is recorded in a touching video called “Ghana’s Last Poultry Farmers” — a televised feature produced by Germany’s public international broadcaster Deutsche Welle. Any South Africans who think imports are not a problem should take a look at it.
The industry has applied for higher tariffs against Brazilian imports but, even if these are secured, the threat from the EU looms large because of a trade agreement that gives it unrestricted access to our markets
A damning indictment of the EU impact on Ghana’s chicken industry was provided recently by the independent organisation EPA Monitoring, which monitors agricultural trade and investment between the EU and African-Caribbean-Pacific (ACP) countries.
An EPA Monitoring report in June 2019 concludes: “The ongoing huge expansion of EU poultry meat exports to Ghana, which have increased four-fold since 2010, would appear to represent the final nail in the coffin of the poultry production in Ghana.”
Could that happen in SA? Yes, unless firm action is taken now to halt the flood of imports from Brazil and stem the rapidly rising tide of dumped EU chicken imports threatening the local industry and thousands of jobs in poor rural areas.
The SA industry is fighting on two fronts against this combined threat, because trade with Brazil and the EU is subject to different rules. The industry has applied for higher tariffs against Brazilian imports but, even if these are secured, the threat from the EU looms large because of a trade agreement that gives it unrestricted access to our markets.
PODCAST | Business Day Spotlight: EU is not playing fairly with SA’s poultry industry
It’s the same economic partnership agreement that sunk the Ghanaian chicken industry. The EU has signed these agreements with multiple ACP countries. In theory, they guarantee duty-free access both ways, but in practice, EU chicken imports flood in while ACP countries find it very difficult to access EU markets. This has happened in Ghana, SA, Cameroon, Ivory Coast, and also in Caribbean countries.
Again, in theory, the EU undertakes to help and support local industries. The practice so far has been that any EU aid is directly undercut by the damage done by the flood of dumped imports. EU policy is to support EU producers and protect EU markets, and it’s doing both with ruthless efficiency.
Warning bells from the EU
The actions of EU poultry exporters fly in the face of the EU’s own policy coherence for development (PCD), which supposedly seeks to minimise the negative impact of EU policies on developing countries. This is a concept embedded in the EU treaties: “The EU shall take account of the objectives of development co-operation in the policies that it implements, which are likely to affect developing countries.” In reality, the exact opposite is happening.
That is why the warning bells should be ringing so loudly. EU chicken imports are climbing again. In 2016, the EU supplied 63% of total chicken imports in SA, and more than 90% of the frozen bone-in portions, the key import segment comprising primarily leg quarters, which has done most damage to the local industry.
These fell away to negligible amounts from 2017 as bird flu bans came into effect, but the country was still hit by record import volumes in 2018 because of a rapid increase in Brazilian chicken imports.
Now EU imports are on the rise again, despite anti-dumping duties against three EU countries, and a 30% safeguard duty on those important bone-in portions to protect against import surges. In terms of the EU agreements, these trade measures can be applied despite the guarantee of duty-free access to our market.
By April 2019, the EU accounted for 45% of bone-in imports, and this dropped slightly to 41% in May. But the trend is upwards, and EU producers are clearly eyeing the 90% market share they used to have. And that is likely to come at the cost of thousands of SA jobs, let alone the lost opportunity to create thousands more jobs by replacing imports with local production.
That’s the dilemma facing the department of trade and industry and its new minister, Ebrahim Patel, as they consider whatever new tariffs are recommended against Brazilian imports, the renewal of anti-dumping duties against the Netherlands, Germany and the UK, and whatever new measures the local industry may seek to halt the import flood.
The crux of the matter is that the frozen chicken portions being dumped in our market are unwanted surpluses in Brazil and the EU. Producers there make their profits from premium-priced breast meat, leaving them with mountains of leg quarters and other brown meat to sell off in frozen bulk packs wherever they can. They are price takers, and have shown before that they can reduce their prices to counter additional duties.
The master plan for the chicken industry, being developed by government and the industry, will be looking at multiple ways to help the industry create jobs and expand into both the local and export markets. While they do that, EU chicken producers are trying to force us down the Ghana road. Patel and his experts are going to need a huge stop sign to prevent that happening.
• Baird is founder of FairPlay.