What do the SA Poultry Association and its members have to hide? It is by now common knowledge that they have jointly applied for a huge (200 percent) increase in duties on imports into South Africa.
Yet this application makes no sense when considering the facts.
First, poultry is hardly an import-dominant industry, with local production equivalent to almost 90 percent of total consumption.
They then tell us that the industry is a distressed one, yet one of the larger members has as recently as two weeks ago released commendable trading results.
Furthermore, the majority of the other larger players have just embarked on acquisition and expansion trails.
This hardly tells the story of an industry in distress and in need of protection.
There may well be distressed companies within the sector.
So, welcome to the real world – in tough economic times there are distressed businesses in every sector.
Then we have the brining issue.
It is again common knowledge that the bulk of local poultry is heavily injected with a brine solution. In many cases as much as 43 percent of the mass of the meat consists of salt water and a few additives.
The Department of Agriculture, Forestry and Fisheries, which as far back as 2011 accused local industry of “brining abuse”, has prepared draft legislation limiting injected brine to 4 percent. Yet local producers are fighting this – why?
Next is their cry about jobs being lost due to imports.
First, a look at many of their financials tells a different story. In many cases there are fewer employees producing greater volumes. Does this have anything to do with mechanisation? Again they don’t tell us this.
Second, an elimination or severe reduction of imports will lead to huge job losses in the import sector.
Furthermore, it is a well-documented fact that protectionism leads to major job losses in the wider economy. One would think that an industry that claims to be “world class” would thrive on exports, especially in a climate of currency weakness.
But no, due to their apparent failure to meet international health and sanitary standards, exports are a non-starter. Again, no detailed explanations come from the local industry.
Finally the application for a duty increase was backed by a document full of incorrect assumptions and calculations, while claiming confidentiality regarding the underlying calculations. Why the secrecy?
The bottom line is that an industry that consists of both efficient and inefficient players, like most other industries, is crying wolf by saying it is suffering at the hands of a relatively small import sector.
The real question is why it does not address its genuine problems, instead of turning to the government to protect it, when it realises that any increased duties will be financed by hard-pressed and shell-shocked consumers.
We ask again – what does the uncompetitive poultry industry have to hide?
Chief executive, Association of Meat Importers and Exporters of SA, Rivonia
Realities and effects are misrepresented
It is disconcerting that David Wolpert of the Association of Meat Importers and Exporters of SA continuously misrepresents the realities confronting the local poultry industry, not to mention the implications an increase in tariffs on various chicken products is likely to have for the local consumer (“Tariff rise ‘will hike chicken prices’”, Business Report, May 20).
The tariff level requested for leg quarters, which make up two-thirds of chicken imports (excluding the mechanically deboned meat used in polonies and sausages, for example, where no tariff has been applied for), is only 56 percent – an increase of around 30 percent from the current level and far below the 82 percent mentioned in your article.
Chicken prices are lower now in real terms than they were two years ago. Any increases therefore could be viewed as natural food inflation and not an abnormally high price rise that would render chicken unaffordable.
Note, too, that the tariff is applied to the landed cost of the product. So if importers maintain a rand-based margin – and if retailers like Pick n Pay do likewise – then the price increases should be limited to between 10 percent and 15 percent, which is a far cry from the alarmist increase of “between 30 percent and 50 percent” as claimed by Wolpert, unless these businessmen choose to opportunistically take advantage of this critical situation.
What is really at stake is the survival of the local poultry industry and the 125 000 people who depend on it for their jobs.
When one adds to this the fact that the poultry sector accounts for one-quarter of South Africa’s agricultural gross domestic product and is the single largest source of animal protein for the country’s people, it becomes apparent that a minimal increase is a small price to pay to ensure the survival of an industry, protect jobs and guarantee the nation’s food security.
Chief executive, SA Poultry Association
SA produces efficiently in protectionist world
Contrary to the “poor operational performance” of South African chicken producers referred to by David Wolpert of the Association of Meat Importers and Exporters of SA (“Tariff rise ‘will hike chicken prices’”, Business Report, May 20), the fact is that South Africa is an efficient producer of chicken.
It is more efficient at producing chicken than the US and only slightly less so than Brazil, and this with absolutely no government subsidies, unlike the industries in Europe, North and South America.
Here are the facts. The crux of the issue is that the northern hemisphere’s developed countries desire breast meat over brown meat, and desire wings. The EU, the US and Brazil allocate most of the cost of producing a chicken to the breast and wings, which are in demand.
This leaves them with leg quarters (drums and thighs) as a “consequence”, and they treat these portions as a recovery cost, for which they will take whatever price they can get, even if it is below the cost of producing them.
In addition, the traditional importers, China and Russia, are rapidly becoming self-sufficient in chicken because of concerns around food security and have reduced imports, causing further oversupply of leg quarters worldwide. Africa prefers leg quarters and is therefore a prime target for these surplus, less-desired portions.
This is what has happened recently. Chicken meat (excluding mechanically deboned meat) imports into South Africa more than doubled from a long-term average of around 9 000 tons a month to around 20 000 tons a month in 2012.
Predictably, the vast majority of imports are leg quarters (almost 70 percent), with a small minority of breast fillets and virtually no imported wings.
In simple tonnage terms, imports currently equate to roughly 170 million chickens a year. And when mechanically deboned meat, which is used in polonies, sausages and other processed poultry products, is included, imports equate to approximately 265 million chickens a year.
In the past 18 months, five small to medium-sized poultry farms have closed or are in business rescue proceedings, with more than 2 000 jobs lost.
Over the same period, the larger poultry producers shed a further 3 000 jobs, with reports indicating that many more enterprises are sustaining losses on an unprecedented scale.
Should this continue unchecked, the industry faces losing another 20 000 jobs in the short term. Apart from the immediate impact, future investment will be severely – if not completely – curtailed and no new jobs created.
As the poultry industry sustains around a third of local maize consumption and almost all the soya consumption, the rural economy’s sustainability and development is also in danger.
This scenario represents an “industry in distress”, as acknowledged by the Department of Trade and Industry, which thankfully is well within its rights to consider measures that seek to assist producers to remain in business.
We are not seeking a ban on chicken imports. However, the South African chicken industry must be put on an equal footing with nearly all countries that have a developed chicken industry and must apply measures, including tariffs and quotas, to safeguard that industry and maintain the benefits that accrue to their own countries.
Interestingly, South Africa is not allowed to export to Brazil, the US, the EU, Russia, Australia and most of Africa! Why? Because they are all protecting their developed or developing chicken industries, jobs and food security, as we should be.
There is no reason why South Africa shouldn’t do the same.