23 July 2024   •   Agriculture
New agriculture minister is a man in a hurry

South Africa’s new agriculture minister, John Steenhuisen, says he is determined to improve things for farmers, farmworkers and agricultural exporters.

South Africa’s new agriculture minister, John Steenhuisen, says he is determined to improve things for farmers, farmworkers and agricultural exporters.

As set out by the Sunday newspaper City Press, Steenhuisen sees multiple areas where work is required, both in agriculture and in co-operating with other ministers to improve transport and water supply and to reduce corruption and rural crime.

Steenhuisen is leader of the opposition Democratic Alliance party, which is now one of the partners with the African National Congress in a government of national unity.

City Press said Steenhuisen had told parliament’s portfolio committee on agriculture that he would be very loud in the Cabinet to get things done. 

“I will be going to other ministries, knocking on their doors to advance the interests of the economy and stakeholders such as the farmers and farmworkers.”

Steenhuisen said the agriculture department had to create a comprehensive and coherent policy environment to ensure that the sector kept up with technology and innovation from around the world.

“We’ve got to focus on biosecurity and increased [agriculture] production. We’ve got to find new markets for South African products. We’ve got to support our farmers – whether you are a small farmer or a large commercial operation, you need the department working on your side.”

There was “huge low-hanging fruit” for job creation in agriculture. About 32% of South Africans were unemployed and a large part of them were unskilled. Agriculture and agri-processing were the easiest ways to get people into work and create job opportunities for unskilled people.

He also pointed to the need to improve the biosecurity issues that hindered agricultural exports.

Steenhuisen noted how farmers and food producers were affected by issues outside the agriculture sector.

“If you look at the agriculture and agri-processing master plan adopted in 2022 with broad support from industry, the real bottlenecks lie in rail, roads, ports and harbours. Safety and security, the collapse of municipal infrastructure, with sewage going into water schemes, damages crop and really puts them at risk.”

Steenhuisen said his job was mostly going to be about forming relationships with the role players in the agriculture sector – from representatives of small, emerging black farmers to big corporations.

That plus everything else he’s listed. It’s going to be a busy time.

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23 July 2024   •   Chicken Industry
Chicken imports down again

South Africa’s chicken imports were down again in May, according to the latest official statistics, and 2024 may be heading for another annual drop.

South Africa’s chicken imports were down again in May, according to the latest official statistics, and 2024 may be heading for another annual drop.

The decline comes despite the government’s unnecessary attempt to stimulate chicken imports through tariff rebates that were in force for the first three months of the year. The rebates had to be justified by a shortage of chicken on the local market, and that shortage had to have been caused by bird flu. The local poultry industry says there was no shortage in the first three months, or subsequently.

There has been no word yet as to whether the still unnecessary rebates will be extended retrospectively for the second quarter, which ended last month.

Chicken imports have been declining since they peaked in 2018, causing a crisis in the local poultry industry because of huge volumes of dumped chicken coming into the country. While anti-dumping duties have helped, the main factor behind the lower import volumes has been repeated outbreaks of bird flu in Europe and the United States.

After dropping to near zero, imports from the European Union are rising slowly again, with only three countries free of bird flu bans – Ireland, Spain and the Netherlands. Supplies from the US have been declining for several years as bird flu has spread across north America, and the US contributed only 3% to South Africa’s chicken imports in May.

Brazil, the world’s largest chicken exporter, has so far escaped the bird flu virus, and it remains the main source of chicken imports.

The exception to the five-year annual decline was 2023, when imports rose for the first time since 2018. However, chicken imports for the first five months of 2024 are 10% below the same period in 2023, so the decline may resume.

Local poultry producers will be pleased that the sensitive category of bone-in imports – the portions such as leg quarters that have been the subject of nine successful applications for anti-dumping duties – are dropping steadily. The year-to-date total for May was nearly 40% lower than last year’s already low total.

However, they will be watching rising offal import volumes with some concern. Offal imports (including chicken livers, heads and feet) have risen rapidly in recent years, doubling from 43 000 tonnes in 2017 to 86 000 tonnes last year. It looked like another annual increase was possible, but a 50% monthly decline in offal imports in May reduced the five-month total to 15% below the same period in 2023.

While the 2024 trend for chicken imports is downward, there will be no certainty until much later in the year. Monthly spikes such as happened in April show that anything can happen.

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23 July 2024   •   Agriculture
Take decisions in months, not years

South Africa’s new government must urgently address inefficiencies and delays to foster sustainable growth in the agricultural sector.

Donald MacKay is a trade policy expert and founder and director of XA Global Trade Advisors

Here he shares a few insights that may enable our new leadership to better assist our farmers and feed our most vulnerable.

Our new government certainly has its work cut out for it, especially when it comes to the sustainable growth of the agriculture industry. 

South Africa is a trade dependent economy; we have a tiny internal market and rely on imports to satisfy local demand. So we can discuss the merits of updating our infrastructure – which would undoubtedly benefit every South African and every local industry – but it is a given that this must be fixed. Let’s assume then that there’s already a plan to fix the harbours and railways, and look instead at other obstacles to growth. 

Let’s start by shedding some light on the hidden costs of trade policy implementation delays. Take anti-dumping duties as an example. Historically, once an application was launched and the investigation ran unopposed, such a case would seldom stretch beyond 12 months. In fact, duties were typically imposed within three to six months. 

Unfortunately, along with Covid came unnecessarily lengthy investigation and review processes. Or rather, unnecessary lengthy reviews of the findings of an investigation.

If you wait longer than 12 months, following an investigation, you make decisions on outdated information – Covid was a dramatic example of just how quickly things can change.

The norm then became 18 months. In some cases it has taken years for a decision to be made. The unmeasured cost of these delays is the jobs we lose due to inaction. 

When it comes to agricultural policy, we should be led by data, not ideology. Agriculture is supposed to be agile, adapting to disease and unpredictable weather – agriculture policy therefore cannot continue to be anti-agile.

Another area of turmoil is the government’s position on expropriation of land without compensation. This has caused tremendous uncertainty, which fosters a local and international reticence to invest. It’s a policy disconnected from the reality of the farmer – who makes a long term commitment to a lifestyle of trying to feed people.

Unfortunately, the tale of expropriation without compensation is an ideological tale, its mere telling inhibits those who want to feed South Africa and their investors from doing so. Do away with talk of expropriation – there are other instruments one could devise to achieve the ideology without the costly compromise. 

Speaking of financial instruments, when evaluating risks in the agriculture industry, a risk that one can’t simply “hand-off” is that of avian influenza. Farmers are left to fend for themselves following an outbreak, and it’s about time that we get some sort of insurance product off the ground to better mitigate this risk. If a private insurer can work with government as an underwriter to develop and cost such a product, it could relieve tremendous financial pressure from both the farmer and the fiscus. And when it comes to avian influenza, it’s a case of “when”, not “if”. It has been a problem since 2017, and we should really try to fix in the next five years, if not sooner. 

Finally, any application to remove VAT on certain portions of chicken has my full support. It’s criminal that we charge VAT on chicken livers, giblets, walkie talkies and the like. The economic impact of this removal will be relatively muted, but can you imagine the societal impact? Fed students can focus and learn, fed workers can work harder and longer. 

But I wouldn’t restrict our new government to removing VAT from just chicken – look at all meat cuts consumed by poor households, and help to feed South Africa more cheaply. 

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15 July 2024   •   Agriculture
Steenhuisen promises to be a champion for agriculture

New agriculture minister John Steenhuisen has pledged to champion the whole agriculture sector, but particularly the empowerment of black and emerging farmers.

New agriculture minister John Steenhuisen has pledged to champion the whole agriculture sector, but particularly the empowerment of black and emerging farmers.

“I have a passion for agriculture and what it can achieve,” Steenhuisen said in an interview with the Sunday Times. “It’s a department where you get some quick wins in terms of job creation and getting things done.”

He said his party, the Democratic Alliance which joined the ANC in a new government of national unity, had always fought for small-scale black farmers.

“I intend to be a strong fighter for everybody in the agriculture sector. Whether you are a big commercial producer or a small emerging farmer, you’re going to have a minister who’s in your corner fighting for you and your industry. 

“And I will be obsessed with turning small farmers into big farmers, because [by doing so] you [not only] increase their product yield and profitability, but also their ability to employ more people.”

He stressed the job-creation potential of the agricultural sector.

“If you look at economies that have moved from less-developed to more developed, agriculture and agro-processing have always been the catalyst.

“There’s low-hanging fruit in this department because the large number of South Africans who are unemployed are largely unskilled. So agriculture and agro-processing give you an opportunity to absorb unskilled labour.”

Steenhuisen used to own a farm in the KwaZulu-Natal midlands, Freight News reported. However, he had said in a radio interview that a cabinet minister did not need to be qualified in the department’s area of expertise. Ministers fulfilled a facilitative function at executive level.

“The minister’s job is collaborative, a policy position and pulling people together,” he said.

“Trevor Manuel was one of our best finance ministers and didn’t come from that particular background.”

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15 July 2024   •   Dumping and predatory trade
Importers want permanent rebates

Chicken importers have fallen so much in love with rebates on chicken imports that they would like them to be implemented permanently.

Chicken importers have fallen so much in love with rebates on chicken imports that they would like them to be implemented permanently.

Importers were hugely in favour of the unnecessary and unjustified rebates the government put in place for the first three months of the year. There was no shortage of chicken at the time, and certainly no shortage caused by outbreaks of bird flu – the only factors the government is supposed to consider when deciding if rebates are warranted.

Nevertheless, the rebates went ahead, mostly retrospectively because they were announced at the end of the three-month period to which they applied. That would have given importers refunds totalling millions of rand on tariffs they had already paid. No wonder they were so enthusiastic!

There’s no evidence that the rebates worked as intended – they were incentives designed to result in additional imports of specific categories of chicken. Yet, for the first three months of 2024, the two highest-volume import categories were down on the same period in 2023. Offal import volumes dropped 12.3% and bone-in portions such as leg quarters were a huge 41% below the previous year.

Nevertheless, there was a spike in April, when everything except bone-in portions rose substantially. Whether these were meant to arrive in March but were delayed in South Africa’s clogged ports, or whether importers had hoped the rebates would continue into April, we will probably never know.

So far, the rebates have not been renewed beyond March, though they can always be applied retrospectively once again, giving importers another fat bonus. FairPlay hopes this will not happen, because there is – and was – no justification for them.

Importers think differently. Hume International’s Roy Thomas has been vocal on the subject, most recently making a convoluted argument linking import volumes with the demands of low-income consumers, who are certainly not the ones ordering billions of rand’s worth of chicken from Brazil.

Where Thomas is clear, however, is on the desire of importers for permanent rebates on all chicken offal imports, and specifically on imports and chicken liver destined for school feeding schemes. It is becoming a theme in his statements.

Increased import volumes will of course increase importers’ profits. Whether it will benefit consumers remains to be seen. Yet again, importers make no commitment that lower import prices will be passed on to consumers. That, too, has become a theme.

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15 July 2024   •   Dumping and predatory trade
SA could face new pressure on chicken imports

With China importing less chicken, poultry exporting countries like Brazil and the United States will be looking for new markets, according to the food and agribusiness bank Rabobank.

With China importing less chicken, poultry exporting countries like Brazil and the United States will be looking for new markets, according to the food and agribusiness bank Rabobank.

Reporting on Rabobank’s latest animal protein report, the Poultry Site says China and Japan are exceptions to a relatively strong global environment in which growth was driven by strong local market conditions rather than trade. 

The global poultry trade dropped by 5% year on year in the first quarter of 2024, with a 40% reduction in Chinese imports a notable cause.

Nan-Dirk Mulder, Rabobank’s senior analyst for animal protein, said key exporters to China – Brazil, and US and Russia – had all felt this decline.

 “We expect that these countries will seek alternative markets to offset the impact of reduced Chinese trade, particularly affecting chicken feet and leg markets.” 

Another producer country that would be seeking alternative markets was Ukraine, Mulder said, because of a new European Union import quota on chicken from Ukraine. 

The report does not speculate which “alternative markets” might be targeted, but South Africa is likely to be on the list.

Rabobank said that the outlook for global poultry markets is improving, driven by accelerated growth in poultry meat consumption and disciplined supply growth in many markets. Chicken remains a competitively priced protein option compared to pork and beef. Feed prices have risen slightly after two years of decline.

“After four years of highly disruptive conditions, global poultry markets are moving toward more ‘normal’ market conditions,” the report said.

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