SEPTEMBER 2018

Chicken Industry Report

FAIRPLAY WELCOMES RAMAPHOSA’S PLANS AGAINST DUMPING

IOL reports that the move by President Cyril Ramaphosa to provide trade protection to the poultry sector and other industries as part of the government’s economic stimulus was welcomed by the FairPlay movement. The FairPlay Movement, which fights for jobs and against predatory trade practices, said these industries were worth investing in and were currently under financial pressure.

“Concerted government action against dumping and other predatory practices is what we have been fighting for all along and we are heartened at this recognition of the importance of the poultry industry as a strategic industry worth investing in,” said FairPlay founder Francois Baird.

“Dumped imports have plunged the chicken and sugar industries into crisis and have cost thousands of jobs,” said Baird. “The only way to promote growth is by putting an end to dumping,” Baird argued.

“That will only happen if there is trade protection and a range of other measures taken by the government.”

The SA Revenue Service (Sars) revealed that imports of chicken increased in the first half of 2018, outstripping the import volumes of the previous two years. “There is no better time for an urgent intervention”said Baird.

FairPlay had hoped that Ramaphosa’s statement would include more specific details about the plans for agriculture generally and the sugar industry specifically. Earlier this year President Ramaphosa publicly recognised that sugar is one of South Africa’s biggest industries and includes large numbers of independent black farmers; and is one of the biggest employers in rural areas. It is crucial that its potential is protected”.

The overproduction of sugar in heavily subsidised countries such as Brazil has caused a constant glut of cheap sugar in the world, which has led to most of the other 120 sugar-producing countries raising tariff and other barriers to protect local industries and local jobs.

“We need to do the same in South Africa. This is a strategic industry which employs 85 000 people directly and 350 000 others indirectly. It would be irresponsible of government to fail at protecting it” according to Baird

These sentiments were echoed by FAWU General Secretary Katishi Masemola who said that Ramaphosa’s commitment to employ trade measures “within the World Trade Organisation (WTO) rules” is to be cautiously welcomed.

“The poultry and sugar sectors need meaningful steps to defend them without undue delay,” said Masemola.

FAIRPLAY ON THE AIR IN SUPPORT OF VAT FREE CHICKEN

In a number of media interviews FairPlay spokesperson Lionel Adendorf urged Parliament to include chicken on the list of items that will be added to the zerorated basket. FairPlay believes that zerorating chicken would be a simple and effective mechanism to provide targeted relief for lower-income households. For these households, “chicken is not a luxury but a necessity,” the FairPlay submission stated.

“The benefits of VAT-free chicken, particularly for lower-income households, are overwhelming.

“It is South Africa’s most popular meat, it is nutritious and is the major protein source for poor people. VAT-free chicken will therefore bring immediate economic and nutritional benefits to the poor.”

Combating malnutrition should be a national priority, and chicken is the highest-protein meat source per rand spent. Adding nutrient-rich food such as chicken to the VAT-free basked would bring relief to the poor and address the shocking statistics that show that 1.5 million children in South Africa suffer from often irreversible stunting.

FairPlay also urged consideration of the wider economic benefits of expanded chicken production which would follow reduced chicken prices. This could include 11 000 new jobs, R1 billion in tax revenue and an additional R3.7bn to gross domestic product.

“We can afford VAT-free chicken by fighting corruption and illicit trade that evades revenue collection,” FairPlay stated.

DTI SAYS SUGAR INDUSTRY WILL NEED TO DIVERSIFY

The Chief Director for agro-processing at the Department of Trade and Industry (the DTI), Ncumisa Mcata-Mhlauli has said the recently endorsed International Trade and Administration Commission (ITAC) recommendation by Minister Rob Davies to adjust the sugar and increase import duty of US$680/tonne will provide relief required by the industry to protect against the surge of imports. However tariffs alone cannot sustain the sugar industry.

The South African Sugar Association (SASA) Vice Chairman, Mr Hans Hackmann notes that the industry continues to find themselves on the wrong side of the scale even with the current sugar tariff.

“We have done some work on the outcome of the $680 tariff and we concluded that it is not sufficient to sustain our industry at this current level and within the next twelve months we probably can sustain the operation of the fourteen sugar mills only, I think our producers will earn negative margins and will be unprofitable,” said Hackmann.

According to Mcata-Mhlauli, tariffs form part of a set of measures considered by government in collaboration with industry in order to improve the sustainability of the industry and future prospects. She said holistic solutions are required to improve the sustainability of the sugar industry overall.

Mcata-Mhlauli noted in a recent statement released by the DTI : “In the long-term the industry will have to diversify and expand into new industries. At the moment, the industry is currently protected by Dollar based reference price which according to the South African Sugar Association is not responsive enough to protect the local industry.”

FAIRPLAY TAKES VAT-FREE CHICKEN FIGHT TO PARLIAMENT

IOL News reports that chicken came out as the clear favourite to be VAT-exempted for the support of South Africa’s poor, when stakeholders presented their responses to the Woolard Panel of Expert’s report in Parliament.

The overwhelming majority of organisations represented, which included FairPlay, Cosatu, the SA Poultry Association (Sapa), PWC, the Institute of Economic Justice and the SA Chamber of Banking called on MPs to vote for chicken to be added to the VAT-free basket.

FairPlay, which supports jobs and opposes dumping and predatory trade practices, has championed the cause of VATfree chicken, and expressed its gratitude that the other stakeholders agreed today.

“We were heartened by the support, because we believe is it essential VAT should be removed on the chicken portions most consumed by low-income households,” said FairPlay spokesperson Lionel Adendorf.

The committee is considering stakeholder responses to the report of the Woolard panel, which recommended a number of additional items for inclusion on the list of goods that are exempt from VAT.

The panel could not reach a consensus on making chicken VAT-free, despite noting strong arguments in its favour, and has effectively left the decision to parliament.

GOVERNMENT DECISION LEAVES SOUTH AFRICA SUGAR INDUSTRY AT A CROSSROADS

The South African government’s decision to increase the Dollar-Based Reference Price (DBRP) of sugar by only half what the industry appealed for, may have dire consequences for the SA sugar industry, reports Sugaronline.

“Government has missed a golden opportunity to put the local sugar industry on a growth path that would stimulate investment and expansion and create thousands of new jobs in an industry under severe threat because of dumped imports,” says Francois Baird, founder of the FairPlay movement, which fights for jobs and against predatory trade practices.

“Instead of acting to reverse the decade-long decline, the SA government has left the industry facing a very uncertain future by tabling a half-hearted increase.” Baird noted that the increase in the DBRP “is simply not sufficient to safeguard the thousands of jobs that are at risk from surging imports, particularly among small-scale black growers who are the most vulnerable.

“Perhaps worst of all, it will not spark the expansion and job creation so desperately needed in South Africa, as we watch our unemployment rate, already one of the highest in the world at 27%, creep ever higher.”

In its application for an increase the South Africa Sugar Association (SASA) stated that the industry is in “a state of rapid decline” and has reached a tipping point. It said farmers were buckling under a surge of imports and entire towns were vulnerable to collapse.

In 2017 imports rose to 500,000 tonnes, displacing 30% of local production and the equivalent to the output of three of South Africa’s 14 sugar mills. “The persistent flood of duty paid imports will, if not urgently stopped, destroy the industry”, it argued.

Baird noted that the DBRP remains well below the cost of production and local producers will still be unable to compete with cheap dumped imports. The crisis continues and thousands of jobs remain at risk,” he said.

A much rosier outlook would have realized, according to Baird, had the government granted the full increase that was recommended by the experts. As outlined in SASA’s application, a DBRP of US$856/tonne would spark long-term industry expansion. It would potentially result in more than 110,000 new jobs, increasing the area under cane and raising annual cane production from 17 million tonnes to 22 million tonnes.

The resultant rise in economic activity would raise sugar’s total proceeds by 50%, from ZAR14 billion to ZAR21 billion. There would be significant support for black cane growers, including land transfers that could double from the current 76,538 hectares to around 165,000 hectares

The FairPlay Movement is a not-for-profit trade movement that fights for jobs. Its goal is to end predatory trade practices between countries so that big and small nations play by the same rules. It supports the principle that penalties for transgressing those rules apply equally to everybody.

FairPlay was founded in October 2016. In alliance with existing organisations and experts it formulates and promotes strategies to defend communities made vulnerable by predatory trade practices and promote sustainable livelihoods.

These alliance partners are international, currently from the USA, Canada, UK, Ghana and South Africa.

FairPlay mission: To end the scourge of dumping as an immoral trade practice.

FairPlay vision: A world where dumping no longer exists, with free trade according to the rules.

http://fairplaymovement.org







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