Johannesburg - Chinese steel and Mexican-made cars became
political dynamite last year as politicians including US President Donald
Trump championed anti-free trade rhetoric. Now chickens are at the centre of a
bitter fight between South Africa and Europe.
South African farmers and labour unions say the European
Union is selling chicken legs, thighs and wings at below cost, threatening
local companies and jobs. EU producers make enough money marketing breasts
in their home market that dark meat is sold as a waste product, they say.
Europe says its farmers are simply more competitive than their peers in South
Africa.
“We definitely have distress,” South African Trade
Minister Rob Davies said in an interview Jan. 24. “We will not have an industry
to raise the competitiveness of” if imports continue to flood the market.
The argument has left South Africa with a tough
choice: either upset relations with its biggest trading partner or watch
the demise of its chicken industry, which employs 60 000 people and is source
of 65 percent of all meat consumed in the country. The row marks a rocky start
to the European Partnership Agreement, a free trade deal signed last year by
the EU and southern African countries including South Africa.
“We’re moving into a more protectionist sort of world,”
said Mike Schussler, chief economist at Johannesburg-based research company
Economists.co.za. “South Africa has one of the most open agricultural markets
in the world and seems to be paying the price.”
Read also: Chickens in danger of starving
Europe’s share of South Africa’s bone-in chicken imports
has grown to 80 percent from 0.5 percent in 2012 when tariffs were removed,
according to data compiled by the South African Poultry Association. In
contrast, South Africa’s biggest chicken producers, including RCL Foods Ltd.,
are cutting 5 000 jobs and saying the industry is under threat.
Industry threat
“If things stay the same there will be no chicken
industry in a year’s time,” Scott Pitman, managing director of RCL’s consumer
division, said by phone.
Shares of RCL, which produces several food brands other
than chicken, are 35 percent below a 20-year high of R19.45 in 2014.
“The market is looking forward and anticipating lower
feed costs” as South Africa’s two-year drought eases, said Victor Dima, a
Dubai-based analyst at Arqaam Capital. Chickens in South Africa are fed corn
among other feed-stuffs.
South Africa is the world’s fifth-biggest consumer
of chicken per capita behind the US, Australia, Brazil and Peru, according to
the International Poultry Council.
Dumping accusations
The EU says its chicken exports comply with trade laws
and there’s no reason for South Africa to impose duties against them. The
accusation of dumping is a sensitive one for the EU, given that the bloc last
year imposed tariffs as high as 73.7 percent on Chinese steel that it says is
dumped in Europe.
“The real problems of the South African poultry industry
are not so much caused by the imports from the EU but that it is suffering from
structural problems affecting its competitiveness,” Cecilia Malmstrom,
the EU’s trade commissioner, said in a Jan. 11 letter to South African Minister
of Trade Rob Davies.
Davies agrees that producers must find ways of raising
efficiency. “But they’re not going to be solved if we just allow an influx of
spare parts from around the world to come in to take over the market,” he said.
Read also: Chicken farmers at risk - Davies | IOL
Frozen leg quarters imported to South Africa from Europe
cost R17.52 a kilogram ($2.8 per pound) before duties and storage this month,
about 30 percent cheaper than local producers, according to Astral Foods.
That rankles local producers who say their production
costs for whole birds are lower than European farmers’. Researchers at
Pretoria-based Bureau for Food and Agricultural Policy and the Netherlands’
Wageningen University found that South Africa’s whole-chicken costs were about
20 percent lower than in Europe in 2013, the latest available data.
Fat chickens
European farmers reject accusations of dumping. South
African producers inject chickens with brine, or salt water, increasing their
weight and reducing quality, Cees Vermeeren, secretary-general of AVEC, a trade
body for European chicken farmers, said by e-mail.
Still, South Africa’s chicken producers are asking the
government to increase protection from European imports.
South Africa’s government imposed anti-dumping tariffs
ranging from 4 percent to 73 percent on some chicken from Germany, the
Netherlands and the U.K. in 2015. In December it added a temporary 13.9 percent
“safeguard duty” while it investigates allegations of dumping.
“Chicken farming is in crisis and on the cusp of
collapse,” Kevin Lovell, chief executive officer of SAPA, said by phone. “The
trigger will be when the banks stop funding. That moment is getting close. Then
the industry will shrink permanently.”