Chicken Industry

Chicken importers cluck loudly to hide profits while costing SA jobs

Chicken importers are clucking loudly. They must be panicked, believing that their fat profits from dumping might soon be ended by a reasonable tariff to level the playing field in South Africa’s chicken market. This is the only rational explanation for importers shrilly hiding facts and twisting logic (“Chicken import tariff increases will not solve industry problems,” Engineering News, 10 July).

They are desperate because higher tariffs, particularly on the flood of Brazilian imports, will mean lower profits for importers, who have made many millions in recent years as the local industry has suffered and shed jobs. The clucking campaign, led by the Association of Meat Importers and Exporters (AMIE) with loud assists from its junior partner, the Emerging Black Importers and Exporters South Africa (Ebiesa), takes both the public and the authorities for fools.

In a series of articles and statements, continued in Engineering News, Ebiesa chairperson Unati Speirs leaves a trail of obviously inaccurate assertions that failed to inform the public of the true state of affairs.

Think false claims that imports are not damaging the local industry. Think blindly ignoring the job losses and contractions that have resulted from nearly a decade of ever-increasing chicken imports, much of it dumped in South Africa below the cost of production. Think forgetting to mention that authorities have already determined harm by the dumping that importers are defending. All that remains to be decided by ITAC is the level of tariffs needed to enable the industry to compete on a level playing field.

A favourite argument of importers is that the local industry can meet “only 70%” of local demand. This is actually a brazen insult by importers who have managed to grab 30% of the local chicken market, thanks to practising predatory trade with near impunity, pushing small producers out of production, allowing importers to grab a bigger market share than any one of South Africa’s large chicken producers.

The only reason why South African producers still have 70% of the market is because they are among the world’s most competitive producers, as a recent independent study proved.

Excluding mechanically deboned meat (MDM) which South Africa does not produce in large quantities, chicken imports in 2018 totalled just under 384 000 tonnes. This is chicken that created no South African jobs in production, or in the maize and soya industries which provide substantial amounts of poultry feed, but instead supported jobs in the scandal-ridden Brazilian meat industry.

Rejoicing in their 30% market heist, import cluckers then add insult to injury by actually berating the local industry for ostensibly failing to invest and expand. Amie and Ebiesa take no responsibility for the jobs losses and contraction of local business in the face of ever-increasing dumped imports. And despite representing exporters too, these organisations do virtually nothing to facilitate the export of locally produced chicken.

Importers present themselves as saviours, claiming that the local industry can’t meet local demand. An opportunistic argument indeed, considering that most local producers have spare capacity, largely because import surges have forced them to sit on their potential. It ignores the estimate by the SA Poultry Association that 30 000 local jobs could be created by largely replacing imports with local production.

Importers like to claim that all imports, or sometimes even all chicken, will be affected by a tariff increase, which will lead to price increases for the consumer. This is patently untrue. The increase being sought does not affect the European Union, which has duty-free access to the South African market, or members of the Southern African Development Community (SADC). It also will have no effect on the price of locally produced chicken. The main target of the application is Brazil, which now dominates chicken imports into South Africa and against which the local industry is investigating dumping charges.

Finally, importers create the myth of a supposedly monopolistic local industry which it then attacks, calling it inefficient, untransformed and unable to solve the problems it faces. Again, it ignores the fact that the industry crisis has been precipitated by predatory imports, which is why the industry has applied for tariff protection as it is entitled to do under World Trade Organisation (WTO) rules. They ignore the thousands of small-scale farmers under threat and the progress already made with transformation in the South African chicken industry.

The purpose of the tariff application is precisely to crack down on unfair trade in terms of these rules, and to allow the local industry to invest and expand, including into export markets. This includes those thousands of small-scale black farmers, who have been among the hardest hit by imports that force them out of business.

Importers love the status quo that gives them fat profits unfairly gained at the cost of local producers and consumers. They gorge on fat profits made from cheap dumped chicken because low import prices are not passed on to consumers. And they pretend this is in the national interest. It’s a national disgrace.

By Francois Baird. Original article published in Engineering News. 15 July 2019.