Blame government for food inflation, says Astral

South Africa’s poultry industry was “on its knees” because of government incompetence and negligence in providing basic services, financial newspaper Business Day wrote in an editorial comment.

Failures in the provision of electricity, water and rail services were “destroying the poultry industry and endangering the country’s food security,” the newspaper stated.

“This lament is all too familiar in SA, where companies such as Astral Foods, the biggest producer of poultry, are groaning under an extremely unfriendly business environment that has wiped out margins, slashed profits and forced them to jack up prices for the staple protein.

“Food prices have been declining for almost a year across the world, according to the UN Food and Agriculture Organisation, but not in SA, where even cheaper alternatives such as chicken feet and gizzards are becoming a luxury for South Africans.

“Some might argue that the poultry industry should adapt to the challenges and invest in its own infrastructure and energy sources, but this is absurd and unfair as it shifts the burden of public service delivery from the government to the private sector, which already pays taxes for these services.

“The government must stop sleeping on the job and fulfil its duties to ensure reliable and affordable water, electricity and rail services for all sectors of the economy, especially those that produce essential goods such as food. If not, it will face the backlash of rising food prices, lower consumer demand, job losses and social unrest,” Business Day warned.

South Africa’s food price inflation is more than double the consumer price inflation index, according to the Bureau for Food and Agricultural Policy (BFAP).

The BFAP’s monthly food price inflation report showed that, while food price inflation dipped slightly in April 2023, it remained at a very high 13.9% year on year.

The consumer price index (CPI) also dipped in April, but was at a far lower rate of 6.8%.

This has been South Africa’s problem for the past year. Russia’s invasion of Ukraine in February 2022 sent global commodity prices soaring, and feed, fuel and fertiliser price increases made everything much more expensive all around the world.

Commodity prices have moderated, and global food prices have dropped for most of the past year, according to the United Nations Food and Agricultural Organisation (FAO). But not in South Africa.

A graph produced by the BFAP shows that CPI inflation peaked in mid 2022, and has been declining since then. Food price inflation, on the other hand, rose rapidly from April last year and just kept on rising.

Millions of South Africans go to bed hungry, as shown by figures from StatsSA. In 2021, 2.6 million households reported that their access to food was inadequate, and for 1.1 million households access was severely inadequate.

That was two years ago, and the year-long food price spike will have made things worse. Despite child support, food grants and basic income support, more South Africans are more desperate every month.

FairPlay founder Francois Baird has taken issue with chicken importing organisation the Association of Meat Importers and Exporters over the “facts” it is using to argue against import tariffs and anti-dumping duties.

In a letter to Business Day, Baird said AMIE CEO Paul Matthew had wrongly stated in an article that a shortage of chicken for fast food outlets last December was the result of higher import tariffs.

Matthew must have misunderstood the many news reports in which the poultry industry showed that tariffs had nothing to do with that temporary shortage, Baird wrote.

“The problem was load-shedding. Power cuts disrupted the slaughter schedule. Delays meant the chickens grew bigger than the maximum weight specified by fast food outlets.”

While Matthew talked of food security, his real target was the antidumping duties due to be imposed in August on chicken imports from Brazil and four EU countries. These were suspended for a year last August, and Matthew has urged the government to delay further rather than bring them into force.

“That is what is behind his attack on what he likes to call ‘short-term protectionist measures’. Perhaps he misunderstood the World Trade Organisation rules that make antidumping duties a specific remedy for the harm done by trade dumping. Nothing to do with protectionism.

“Finally, Matthew blames the poultry industry for the delay in getting chicken exports going to the EU. Maybe he failed to understand many reports that the main reason for the delay is the acute shortage of state veterinarians needed for health certification of exports. And now the EU has delayed the process further by changing its rules,” Baird said.

A sensible and pragmatic approach to localisation would benefit deserving South African industries and create local jobs, according to Eustace Mashimbye, CEO of Proudly South African.

In an article in Business Report, Mashimbye urged supporters and opponents of localisation to “put aside their ideological blinkers”. Internationally, views were changing on trade, tariffs, localisation and national security.

He called on people to be more pragmatic and adaptable, and follow evidence-based policies.

“Evidence shows that localisation works in the right cases.”

Mashimbye said the South African cement industry needed support, as it was being disrupted by foreign producers dumping excess supply at erratic intervals. This reduced local investment and, ultimately, put security of supply at risk.

Targeted tariffs could play a vital role in encouraging investment while ensuring sustainability in a critical sector.

“The same can be said about similarly labour-intensive sectors such as the clothing, textiles, footwear and leather (CTFL) and the poultry sectors.”

This was not just a South African phenomenon.

“In the US, the Biden administration has applied tariffs to Chinese solar panel imports to help sustain and grow the American renewable energy industry. If the world’s most advanced economies can benefit from trade protection, why shouldn’t developing economies benefit from the same targeted policies?”

Mashimbye called on all stakeholders to abandon ideological positions and work together to find pragmatic solutions suited to the times.

“A demand for local goods begets a demand for local jobs, and this can only be achieved with stringent pro-South African policies,” he said.

The Vietnam Poultry Association (VIDA) is warning that the poultry industry there is on the brink of collapse, with illegal imports accounting for a large portion of the problems.

According to a report by WATTPoultry.com, the Vietnam government is responding to the industry’s call for help, including by curbing harmful imports.

The Vietnam poultry industry is battling the prolonged impact of the coronavirus pandemic, record high input costs and weakened domestic demand.

It also faces a significant and growing challenge from illegal imports, particularly from neighbouring countries. The industry estimates these account for up to 25% of Vietnam’s domestic poultry consumption.

“In order to address these issues, the government of Vietnam is taking measures to encourage the local production of crops as feed ingredients, and tightening up on poultry product imports.

“According to deputy agriculture minister Phung Duc Tien, these will, respectively, reduce production costs for the sector, and help boost its competitiveness,” the report said.

South Africans will be forgiven a wry smile if Germany has to implement load shedding next year, as the government is warning.

According to a report in Freight News, Germany’s looming electricity shortage is caused not by supply failures, as in South Africa, but by a deliberate policy of switching the country from fossil fuels to electricity to heat homes and power cars, trucks and buses.

The cuts will not be nearly as severe as in South Africa, where homes and businesses can spend nearly half the day without power. But they will also, as in South Africa, be known as “load shedding”.

Because Germany will have to move so much of its power consumption to electricity, the national electricity grid agency Bundesnetzagentur, has announced that load shedding is coming.

The agency announced that it was introducing regulations to allow it so shut off devices in consumers’ homes, such as heat pumps and electric vehicle charging stations during periods of high demand, without the permission of those affected, the report said.

In South Africa, that mild level of load shedding would be a welcome relief.