FRANÇOIS BAIRD: Government must not play fast and loose with trust

The SA government is pinning its hopes of an economic revival on the private sector. The state knows it cannot solve the country’s problems alone. It needs the private sector to step up, in a big way. While it is up to business to take risks, the job of the government is to create a predictable, stable policy environment. Success requires mutual trust.

SA has to dig itself out of a difficult position. Last year President Cyril Ramaphosa admitted that the country’s infrastructure backlog was so immense that business had to take the lead. Only 30% of capital requirements for new infrastructure projects would come from the state, he said. 

All of the investment in poultry, SA’s largest agriculture sector, is by private sector players, large and small. Feeding the nation relies solely on private sector investment along the entire value chain. This raises the question: when the government needs business to feed the nation, how could it best build trust with private sector partners?

One of trade, industry & competition minister Ebrahim Patel’s signature growth initiatives is SA’s poultry master plan. This brought private sector buy-in and investment. In exchange for business expanding production and processing capacity, the government agreed that it would create new export opportunities and defend the local market against illicit and illegal imports (excessive chicken dumping from Brazil, the EU and US has long destroyed SA poultry jobs and constrained growth).

Patel’s poultry master plan brought business, labour and the government together in an agreement to enable growth, investment and transformation and create a new exporting industry for our agricultural sector. In just two years the plan started showing results.

Local business, responding in good faith to a promised stable environment for growth, invested well over R1.5bn to empower a new generation of black farmers, expand local production lines and set-up new processing facilities for cooked meat exports — all in record time. Local producers increased SA’s chicken production capacity by a stellar 10% in under two years. Small chicken farmers allowed themselves to hope.

Now the plan — and small farmers — are floundering because the government has reneged on its end of the bargain: Patel suspended anti-dumping duties on dumped chicken imports. These are not all chicken imports — only those found by SA’s International Trade Administration Commission to be undercutting the market by dumping and causing material harm to the industry, which is a transgression of the rules of international trade.

Thus the minister undermined trust in due process and created uncertainty over the government’s commitment to upholding the rules — a reasonable expectation of small and big businesses alike, especially when they are the ones footing the bill and taking the risk.

Brazil’s economy ministry recently gloated that it had been in talks with the SA government for months to negotiate the suspension of these anti-dumping duties on dumped chicken imports. The Bolsanaro government also indicated that it has an expectation that the suspension of anti-dumping duties will become definitive.

Patel has explained that his main motivation for suspending the duties was the consumer cost of chicken, but we know the main cost drivers are rising agricultural commodity prices not anti-dumping duties on dumped imports. Since these duties expired on June 14 the retail price of chicken has not declined.

Trust is built over time and requires a level of transparency that has not been forthcoming from the government. Rebuilding lost trust is difficult, but it is vital as the government looks towards the private sector to pay the lion’s share of the country’s capital projects and keep all the other master plans on track.

The stakes are higher than they have ever been. SA is battling a jobs crisis, a growth crisis and a hunger crisis simultaneously. A devastating 63.9% of South Africans under the age of 24 are unemployed. Consumer inflation is at a 13-year high and one in  every four people now lives below the food poverty line. A quarter of our children under five are malnourished to the extent that their development has been permanently stunted. The government cannot afford to play fast and loose with the trust of its partners, big and small.

Despite the shock suspension of anti-dumping duties, RCL Foods recently announced that it will continue with a R220m investment to return a second shift to its Hammarsdale processing plant in KwaZulu-Natal. This was the same shift that was closed in 2017 due to the effect of chicken dumping, which resulted in the loss of more than 1,200 jobs.

The poultry industry should be commended for sticking to its word, despite having the rug pulled from under its feet. Trust comes from those who show up, even at their cost.

• Baird is FairPlay movement founder.