Trade, industry & competition minister Ebrahim Patel will have to make a call soon on reimposing suspended antidumping duties on chicken from Brazil and other countries. At stake is not only the future of an industry but that of an increasingly fragile country.
SA is exhibiting symptoms synonymous with officially classified fragile nations: shaky infrastructure, institutional corruption, and a staggering official unemployment rate of more than 32%. This paints a bleak picture and the poultry industry, a significant employer, stands at the epicentre of this storm.
With endemic power outages, soaring input costs and monthly poultry imports from countries such as the US, Brazil and Argentina having more than doubled since October 2022, SA’s poultry sector is under siege along with the rest of the economy.
If anyone needs hard proof of the crisis, look no further than Astral Foods, one of the country’s largest poultry producers. The company said in its latest results presentation announcing an 88% decline in operating profit, that it had incurred costs of R741m due to blackouts. It had processed about 17% fewer broilers, resulting in a drop in production of about 1.1-million broilers a week. Further, soaring input costs mean domestic producers are subsidising the price of chicken by about R3/kg.
Since Patel postponed the imposition of antidumping duties in August last year for 12 months, our self-made power crisis has deepened, smashing business confidence and jobs. Opening the door to dumping, as Patel did last year, increasingly becomes a question about how soon SA wants to be classified as a fragile or failed state rather than a debate about food prices or an industry’s interests.
SA is already sitting in the “Elevated Warning” category of the Fund for Peace’s Fragile States index (FSI), along with fellow travellers such as Sri Lanka, Colombia, Senegal and Kyrgyzstan. On almost every key metric our global risk ranking has degraded significantly over the past 10 years. Even ANC secretary-general Fikile Mbalula has conceded that SA is at risk of becoming a failed state.
Consider Nigeria, another African giant, which for years has been crippled by similar challenges and now sits in the alarming “Alert” category of the FSI. Nigeria is Africa’s largest oil producer but its power sector is a mess, with frequent blackouts affecting businesses and households.
The effect on Nigeria’s poultry industry has been devastating. Compounded by the same pressures SA’s industry is experiencing, farms are closing and scarce jobs are being shed, according to the Poultry Association of Nigeria. One study suggests that about 25-million people in Nigeria, which has a population of 95-million, are supported down the poultry industry’s value chain, making its decline a contributor to that country’s slide towards fragility.
And this is the impact in a country that has no discernible trade data showing significant imports of poultry from the main dumping culprits — Brazil, Ireland and Spain. Imagine then the position in SA, which has experienced all that fragile Nigeria cites — and is hit by an onslaught of poultry coming in from Brazil and others.
The statistics from Brazil tell the story vividly. Imports of poultry from Brazil rose from R2.2bn in 2020 to R3.3bn last year, according to Trade Data Monitor, its import market share soaring from 44% to nearly 73%. That’s like setting off a nuclear bomb in our economy. For the poultry industry this terrible, perfect storm has in effect wiped out the gains in capacity in which it invested in terms of the sector master plan backed by Patel.
If the import tariff suspension is not ended in August there will simply be a continued decline in domestic production that threatens long-term domestic food security — a non-negotiable in anyone’s book. The outlook for the rest of 2023 is grim and worsening. Local trade data shows chicken imports rose for a fifth successive month in March and the imports for the first quarter exceed the same period in 2022. Imports from Brazil remain the highest in four years.
Even more concerning is the increase in bone-in portion imports, which do the greatest damage as they compete directly with local bulk pack sales. An increase of 164% was recorded in November, 31% in January, 81.4% in February and 37.7% in March. The SA poultry industry, an important employer, is arguably being choked even more now than when the now suspended antidumping duties were agreed upon.
Haiti, one of the poster children of failed states, can testify to the effect of dumping. There local rice production collapsed in the face of cheap US imports — dubbed “Miami rice” — in the 1990s. Haiti, already struggling with weak institutions and rampant corruption, sank further into fragility. Today it stands at the 11th worst spot on the FSI.
It is important to see the woes of SA’s poultry industry as a microcosm of wider national challenges, but this crisis can also be seen not just as a threat but a wake-up call. The government has a role to play in curbing this slide towards fragility, by urgently tackling the endemic power, corruption and other systemic issues.
These admittedly are hard problems to solve. An easier one is ensuring a fair and just trade regime which does not sell precious jobs down the river. While ensuring affordable chicken for the SA population is vital, so is safeguarding the local poultry industry and the jobs it provides. This is the kind of challenge we need to confront decisively to avert a slide into increased fragility. Patel holds that power in his hand.
• Baird is founder of the FairPlay movement.
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