Accusations by South African chicken farmers that imports from European Union countries are threatening the local industry will be put to the test in Parliament on Thursday.
The portfolio committee on trade and industry will hear evidence from poultry producers and trade experts about the effect of importing chicken from 10 European countries. The committee will make recommendations on whether calls for an import tariff are justified.
Local producers have blamed the imports for a rapid increase in job cuts, but importers have argued that the industry’s setbacks are of its own making.
In February, the country’s top poultry producer, RCL Foods, cut 1 350 jobs. This month, the country’s third-largest producer, Country Bird Holdings, said its Mahikeng abattoir will close and 1 605 will be jobs lost if the government does not grant protection against EU imports.
“Apart from the Mahikeng [abattoir], and in the absence of support, another 4 000 jobs will be at risk,” the company’s chief executive, Marthinus Stander, told the Mail & Guardian.
Poultry imports recently made headlines when the United States threatened to revoke South Africa’s participation in the preferential African Growth and Opportunities Act trade deal unless the importation of US chicken, pork and beef was allowed.
South African farmers had raised concerns about the US poultry health regulations poultry and how testing is done for disease. The department of trade and industry eventually conceded to the US’s demands, to the dismay of the local industry, because access to the US vehicle sales market and other industries would have been compromised.
But it is the EU chicken imports that could affect the most jobs.
Earlier this month, a hearing was held by Parliament’s portfolio committee on agriculture at which the Food and Allied Workers’ Union (Fawu) told MPs it would oppose salary cuts to save the industry.
On the one side of the battle is the South African Poultry Association, the Food and Allied Workers Union and a poultry-farming lobby group, the Fair Play Movement. On the other is the Association for Meat Importers and Exporters in South Africa (Amie-SA) and the Democratic Alliance, which are not convinced by the local producers’ arguments.
The poultry industry employs about 120 000 people. The Fair Play Movement has argued that the risk to local jobs is massive.
“There have been warnings that the industry might not survive beyond [the] end of December 2017 if importation continues at the current rate. Another 20 000 jobs may be at risk in related industries,” the Fair Play Movement said in its statement. The EU imports would be to blame for all of this, the movement charged.
The EU market prefers breast pieces. As a result, the poultry association said, its producers struggle to sell legs and wings, or so-called bone-end pieces, at cost price. Their solution is to sell them in South Africa.
But there is no consensus about the effect of the imports. The DA’s spokesperson for trade and industry, Geordin Hill-Lewis, believes the imports are being used to seek industry protection.
“They [local producers] used them [EU imports] as a very powerful tool to lobby for higher import tariffs and protection of the industry. But there are other factors at play here,” he said.
Amie-SA chief executive David Wolpert believes high maize prices caused by the drought are to blame for the collapsing industry and not imports. “The biggest problem they have had is the very high maize price. We think there’s going to be a natural correction because the maize price has already come down.”
There was also the court case in which the high court in Pretoria rejected an application by the poultry association to set aside the limitation on brining — when chickens are injected with salt water to make them look bigger and weigh more. The court imposed a limit of 15% brining of chicken portions and 10% brining of whole chickens.
It is these factors and not EU imports that are affecting South Africa poultry farmers’ ability to compete, say those opposing an import tariff.
But look at the evidence, says the poultry association.
In 2015, the International Trade Administration Commission (Itac), a South African body, found that three of the 10 EU countries that export chicken to South Africa were guilty of “dumping” — when chickens are sold at below the cost of farming, slaughtering and packaging them in the country of origin.
South Africa imports from the three EU countries — Belgium, Ireland and Denmark — that were found guilty of dumping by Itac.
Responding to Wolpert, the poultry association’s chief executive, Kevin Lovell, said imports prevented local producers from raising the chicken price when maize was scarce.
“Normal agricultural price-setting mechanisms couldn’t come into effect because of the imports. The chicken price was flat for the whole of last year.”
The two organisations also disagree on how much EU chicken is being imported and to what extent this affects job losses. Wolpert argues that 13% of all the chicken sold in South Africa is imported, but Lovell said, for to the bone-end market, that figure is 25%.
Culinary consensus holds that brining makes chicken juicier and more flavourful, but brining has also been criticised for making chicken pieces look bigger and more expensive. Last year’s high court case found that, in the worst case, 62% of the chicken was water, but the average was about 30%.
“They were essentially selling water at chicken prices and now they have to sell chicken at chicken prices. How much of the current job losses are because of brining?” Hill-Lewis asked.
The response from Lovell was that it is too early to tell: “Old product was permitted to be sold until 31 January 2017. It will take some time for the true effect of these regulations to be assessed. The current travails of the industry predate the change in regulations and the two issues should not be conflated.”
Both sides are hoping for different outcomes in Parliament later this month. For the producers, protection from EU imports with a tariff is the first prize. For Amie-SA, a full investigation into the causes of poultry industry job losses would suffice.
Hill-Lewis said the DA would change its position on importation if the evidence backs up the producers’ claims.
“If they can prove that dumping is taking place and that brining isn’t causing the job losses, I’ll be the first to lobby for protective tariffs. But I’m also not going to agree to protect an industry that is selling South Africans cheap water,” he said.