Johannesburg - Local producers are crying foul after Poland and South Africa entered a poultry export deal, which they claim may open the door to other EU deals.
Poland would launch poultry exports to South Africa for the first time from this month in a deal granting one of the EU’s top poultry producers unlimited access to Africa’s most industrialised country, Andrzej Krezel, the head of trade and investment at the Polish Embassy, said yesterday.
The deal, negotiated since 2013, would see Poland export poultry meat bone-in, mechanically deboned meat, as well as offal to South Africa, he said.
Purchasing power
Krezel said according to the health certificate the deal kicked in on June 20.
“The first container will reach South Africa within two or three months if not earlier,” Krezel said. “The limit is the capacity of the market to absorb the product, so it is unlimited in terms of quota imposed by government, but is limited by the purchasing power and the interest in the product.”
In so doing, South Africa might have opened the door for the other 18 European countries to export their poultry to South Africa.
Yesterday, the Department of Trade and Industry said South Africa had been guaranteed access to the African Growth and Opportunity Act (Agoa) until 2025.
The department’s spokesman, Sidwell Medupe, said the country had resolved all of the issues regarding beef, poultry, and pork, “thus paving a way for continued preferential access into the US market for the duration of Agoa”.
Medupe said: “The priority remains leveraging market access opportunities that arise from Agoa and there are currently no discussions on a free trade agreement with the US within the Southern Africa Customs Union.”
Imported chicken has been a contentious issue in South Africa, with local producers accusing their overseas counterparts of “dumping” their unwanted chicken here and flooding the market with an uncompetitively priced products.
Kevin Lovell, the chief executive of the SA Poultry Association (Sapa), said: “We do understand about the trade treaty our country has with the (EU). But we are very upset about the decision because it means other countries in the EU will also come to compete in this already small poultry space. As I have said before, the imports are a threat to our jobs in the country, but unfortunately there is nothing we can do at this stage because the authorities have agreed.”
Casualties
Paul Makube, a senior agricultural economist at FNB, said there would be casualties in the local industry because of poultry from Poland.
“The small poultry producers will exit the industry and there will be a period of consolidation in order to survive. We must also expect job losses in the long run as competition intensifies. Our local producers are already squeezed for margins and… can’t afford to drop their prices further,” he said.
“Our producers are struggling already because of the high feed costs and the drought. They have to contend with high electricity prices as well, so there is no doubt the local producers are fighting for survival,” he added.
Tinashe Kapuya, a senior agricultural economist at Agricultural Business Chamber (Agbiz), said: “South African poultry is relatively less competitive compared to major global producers. The reason for this is because, unlike Brazil and other big poultry producers, South Africa is in any given production year a net importer of a key feed input ingredient, which is soya bean cake.”
The country was a net importer of yellow maize – another input feed cost component, which added to the total cost of production, he said.
Expensive
“About 70 percent of input costs in the production of poultry are feed costs. Given that we import all inputs – which are dollar denominated, against which the rand has depreciated substantially – means that South African production costs are relatively high compared to Brazil, Argentina, Ukraine and the US,” Kapuya said.
Kapuya said the cost of producing a live bird was expensive in South Africa and was between $1.28 (R18.50) and $1.38 compared with $1.05 and $1.19 in Brazil and $1.01 in the US.
The local industry was already facing challenges before the US quota was implemented. The price of quarter-chicken portions was already on the rise, increasing by more than 25 percent between 2013 and last year with the sharp depreciation in the value of the rand being a major contributing factor. The quota allocated to the US is for bone-in portions.
Kapuya said of South Africa’s total poultry imports of 370 000 tons in 2014, about 133 000 tons were bone-in. This meant the category constituted 36 percent of South Africa’s total poultry imports.
The annual quota was 65 000 tons, he said.
* With additional reporting by ANA
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