Chicken Industry

EU study is no answer to SA chicken industry crisis

Statement by Francois Baird, founder FairPlay.

The latest European Union funded study on the South African chicken industry, is going to please the EU but it will not help to solve the industry’s problems or create more jobs. Far from it.

Like the EU, the study focuses on the export potential of the South African chicken industry, and the many problems associated with that, but pays little attention to the damage done by an ever-increasing flood of imports, mainly from Brazil and the EU.

The challenge facing the local industry is not exports – it is creating the conditions in which local production can expand to claw back some of the 25% of the local market grabbed by chicken imports at the cost of thousands of South African jobs.

Exports can be an important addition, but only once the industry has been stabilised and is growing again after more than a decade of relentless assault from predatory imports which have increasingly captured the local market. The poultry sector is a strategic South African agro-industry underpinning the country’s food security . It cannot survive on exports alone nor would it be in the country’s interests to try to do so.

The study notes the huge increase in chicken imports, from 200 000 tons in 2001 to the present 550 000 tons and doubling between 2010 and 2015 alone. Despite this, the EU’s economists seem baffled by the fact that local production has hardly increased over this period, and that most of the increase in demand has been taken by imports.

They would not ask why this should be had they consulted the industry’s current application for higher tariffs particularly against imports for Brazil. There the industry sets out why investment in new production and new jobs has been discouraged by the huge volume of imports. There is unused spare capacity which is lying idle because of imports. And the local industry says it would be able to meet all of the local demand currently taken by imports.

The study notes that two major producers – RCL Foods and Sovereign – have both diversified their production away from lines that compete with imports, and that RCL has reduced chicken production by more than a million birds a week. It notes that imports may expand to take 37% of the local market by 2017. But it still sees nothing wrong with imports. Exports are an end point, not a starting point. If the EU really wants to help the South African chicken industry and its thousands of workers, it would take steps to halt the attack on those jobs by EU producers. It would help to revive the industry and encourage it to grow its local production and then expand into export markets such as the EU.

If the EU is going to help to heal the South African chicken industry, it must begin by acknowledging how much damage it has done and would robustly ensure that it is meeting its legal obligation to ensure policy coherence for development. Up to now it’s been in denial.

Photo credit: Phil Magakoe. Lionel Adendorf of FairPlay and Inés Godinez Aguirre de Cárcer, Trade Advisor to the Delegation of the European Union to SA.