Chicken Industry

SA’s trade policy is a dumping gateway to neighbours

SA must not chicken out of fighting unfair poultry trade practices. When it comes to unfair competition in the form of excessive imports and dumping, the South African chicken industry’s plight is widely understood. What is less known is the fact that our country’s trade policies have made South Africa a gateway into neighbouring countries, allowing chicken imported into South Africa to cause untold damage to the poultry industries and the economies of neighbouring countries.

At a recent meeting between fair-trade-advocacy movement FairPlay, the South African Poultry Association (SAPA) and representatives from the chicken industries in Zambia, Namibia and Eswatini, the message from South Africa’s neighbours was clear: your exporters are part of the problem. “Imports dumped in South Africa end up in neighbouring states and hurt producers there as well,” explained Izaak Breitenbach, GM of SAPA’s Broiler Organisation. “And due to inadequate regulation in Southern Africa or poor implementation of existing regulations chicken industries in our neighbouring countries are increasingly at risk.”

South Africa’s trade agreements, notably AGOA (with the United States) and EPA (with the European Union), have resulted in a surge of imported chicken flooding our market. Although AGOA includes many other African countries, only South Africa had conceded to accept an annual quota of US chicken in exchange for allowances to export steel and aluminium to the US. Under the EPA, European chicken producers have largely unfettered access to the markets of countries comprising the Southern African Development Community (SADC).

As the largest and most lucrative market in the region, South Africa is the EU’s main export target in the region. Many tonnes of the chicken that enter South Africa in terms of both agreements (plus an avalanche of dumped chicken from Brazil) are now also finding their way into neighbouring countries, in ways both legal and illegal.

Said FairPlay founder Francois Baird, “According to the SADC chicken industry representatives this situation allows unscrupulous importers and exporters to slip through the cracks caused by poor functioning of the Southern African Customs Union (SACU) and deficiencies in South Africa’s regulatory processes.”

Dysfunctions in SACU, especially the current lack of regular engagements between member states, result in fuzzy understanding of the rules by custom officials, Baird said. “For instance, US chicken gain duty-free access into neighbouring states via South Africa under the AGOA banner – despite the fact that the US quota applies to South Africa only.”

Poor enforcement of regulations in South Africa allows round-tripping, a practice in which the origin of an imported product is obscured in the interest of tax evasion. It is claimed that chicken that comes into South Africa duty- free in terms of trade agreements is thawed and repackaged, fraudulently claiming to be a local product, and then exported to SACU member states, thus evading tariffs.

In another form of round-tripping, imports that are supposedly intended for a neighbouring state (which means they are just supposed to be transported through South Africa and hence do not attract South African taxes) only make it as far as a border post such as Komatipoort, but never actually cross the border. Instead, the chicken products end up in the hands of South African retailers or small-time traders. Again, local products are displaced and unpaid taxes hurt all member states of SACU. Some of these transgressors have been reported, found guilty and sanctioned repeatedly.

The African Continental Free Trade Agreement (AfCFTA) was launched in July and once this comes into full effect, round- tripping and other tax-evading practices are likely to cause immeasurable damage across the continent. Add to this the reality of porous borders between SADC countries themselves and neighbours further north, such as Zambia, and blatantly illegal practices employed by unethical traders – such as the perennial phenomenon of chicken “falling off the back of a van” – and you end up with a toxic mix of local markets being flooded by products that undercut local producers, governments not collecting rightful taxes, and tariffs designed to ensure fair trade being circumvented.

According to SAPA’s Izaak Breitenbach, there was general consensus at the meeting that the shared objective is to protect local industries, local jobs and local consumers; and that a coordinated regional approach is the only way forward. “It was agreed that, for example, the entire region has to enforce the same food-safety and traceability regulations to make it impossible for products rejected by one country to end up on store shelves in another,” he said. “All of the industry players and governments across SADC have to work separately and jointly to prevent unfair trade practices from visiting further, and entirely preventable, hardship on the region.”

South Africa has the power to make an immediate, significant difference, firstly by announcing and implementing tariffs that will curb undesirable imports, and secondly by finalising and implementing the chicken industry master plan that was agreed to in November. Said FairPlay’s Baird, “The longer nothing is done, the greater the injury to not only our own economy, but those of our neighbours as well.”

By Charmain Lines. First published in the Pretoria News on 9 December 2019.