The shock 12-month suspension of punitive anti-dumping measures against five countries found to have been dumping bone-in chicken in SA has dealt a blow to the grind that has gone into the poultry master plan over the past two years.
The government has developed master plans for the sugar, poultry and textiles sectors to tackle the challenges faced by these industries. State intervention also takes the form of import duties to protect them from cheap imports.
Signed in 2019, the poultry master plan laments that potential growth in local production has been displaced by imports. This has mainly been due to the lower prices at which imports have come into the local market.
It unambiguously lists tariff measures as an important way to stop dumping, alongside ensuring that locally produced product makes up an increasingly larger proportion of consumption over time.
Yet trade, industry & competition minister Ebrahim Patel’s latest decision to rescind his earlier choice to implement the recommendation of the International Trade Administration Commission of SA (Itac) and impose anti-dumping duties, has left producers puzzled about the policy objectives his department has been spearheading.
CEO and founder of XA International Trade Advisors Donald Mackay points out that proper processes have not been followed in how the decision came about.
Mackay lamented that Itac had decided to implement definitive anti-dumping duties on the product but had not released an investigation report on its website, nor indicated what the duties implemented will be.
“The Itac investigation report is not available ... and it is unclear exactly how the duties will come into operation when the time comes,” he said.
The SA Poultry Association lamented that the decision would not assist the country’s efforts towards localisation, job creation, transformation plans, investment or development of the rural economy.
“The decision calls into question the trust all have invested in the master plan process, as the latest decision seems to demonstrate that dumping is OK, even if for only a period of 12 months,” said association GM Izaak Breitenbach.
The body has fiercely denied claims that the decision would cushion consumers, saying no evidence exists that dumped chicken is sold by importers at a low price to the consumer.
“Unfortunately, in the interim, local producers feel that they will have to consider suspending further investments and projects in the pipeline for at least 12 months, given the uncertainty that exists in the near term.”
Local chicken producers have threatened to cancel or postpone up to R570m in new investments in protest against the suspension of additional duties on imported chicken from five countries for 12 months.
Owing to its low barriers to entry, chicken farming is a prevalent economic activity in SA’s rural countryside, with big players such as Rainbow Chicken, RCL and Quantum dominating the commercial chicken and egg-laying space.
The Fairplay movement, which has thrown its weight behind poultry producers, said all industries, not just poultry, needed to be protected from predatory trade practices, which it believes the master plan seeks to do.
Fairplay founder Francois Baird said Patel’s decision had angered small chicken farmers across the country.
‘Destruction’
“The small chicken farmers are so upset; they’re so angry they want us to march against the minister,” said Baird, adding that farmers were livid because the decision signalled the destruction of their livelihoods.
Though Fairplay, a trade NGO, is not a signatory to the plan, it said it was in full support of the poultry master plan because the plan was not premised on import replacement or localisation but rather as an anti-predatory trade plan.
SA’s poultry sector has been battling the crushing effects of elevated soft commodity prices, infrastructure collapses in electricity and water, and soaring fuel costs.
Baird maintained that the price reduction hoped for by the minster was unlikely “unless the minister has made a deal with the importers that they won’t be as greedy as they used to be”, said Baird, highlighting that the SA Revenue Service is now losing the revenue from the dumping duties.
Consumption of chicken meat in SA has grown substantially since 1994, yet since 2008 production has stagnated as imports have risen. Imports have risen fourfold over 20 years.
Signatories to the plan have agreed that among the biggest threats to the poultry industry are unfair trade practices from countries like Brazil, Ireland, Spain and Denmark, which dump their products in SA.
“But the minister has just decided not to fight dumping and the importers and exporters have not exported [to scale],” said Baird.
Agriculture and food producers’ analyst Anthony Clark said the suspension dealt a bitter blow to the poultry sector, which has endured elevated input costs.
“This is a noble and just cause but goes against the spirit of the poultry master plan and the domestic expansion and investment made by the poultry sector,” said Clark.
He added that the suspension comes at a time when imports have been rising despite anti-dumping duties and a weak rand, with much of it due to a surge in US exports, which tie in with the annual African Growth and Opportunity Act (Agoa) round, where US exporters usually catch up on any exports given their annual Agoa tariff-free quota.
In the meantime, imports are free to come into SA with the standard duties, with both opposition and supporters of the surprise verdict agreeing that scrapping VAT on multiple chicken pieces will bring relief for both consumers and producers.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.