Business Report, 04 September 2016
By Nabeelah Shaikh
Durban - The South African poultry industry is being crippled due to the influx of cheap chicken imports that have flooded the market.
Stakeholders have given the industry a lifespan of 12 to 18 months should imports continue at the current rate.
This week, Rainbow Chicken which falls under the RCL Foods group, released their annual financial results reflecting an 11.9 percent decrease in headline earnings.
The company’s managing director, Scott Pitman, told the Sunday Tribune that the main reason for the decrease was the import of chicken quarters, mainly from Brazil and Argentina.
“Africa is the only continent left for these countries and the EU to dump leg quarters (bone in). Russia has banned all poultry imports and China is focusing on developing their own poultry market.
“This leaves us as their only target,” said Pitman.
He said chicken landed in Durban at a cost of R12-R14 a kilogram, which resulted in a massive surplus for the local market and left them unable to compete.
Over a period of 24 months, imported chicken has more than halved the production of individual quick frozen (local chicken) from 600 tons, to 260 tons a day.
Detrimental
“The imports are retailing at 30 000 tons per month which is far more than what Rainbow Chicken retails in a month. There is now an oversupply of chicken which has had a detrimental effect on the market,” he said.
Pitman believes that a restoration of normal trading conditions is required for the poultry industry to survive.
“This industry will die in the next 12 months if we do not impose quotas on the number of imports.The market is suffering and this is the only way we can help cure it,” he said.“Most African countries have banned chicken imports to protect their own industries while other countries around the world use non-trade health standard barriers to achieve the same end,” said Pitman.
The African Growth and Opportunity Act (Agoa ) between the US and SA was renewed earlier this year, after prolonged negotiations.
The renewal of the agreement ultimately hinged on the lifting of the anti-dumping duty on chickens from the US and culminated in an agreed 65 000 tons of US chicken into SA, without anti-dumping duty.
Chris Coombes, the chief executive of Sovereign Foods, which is also one of the country’s major poultry suppliers, said a combination of suppressed selling prices (due to high import volumes) coupled with the increase in maize and soya costs caused the current state of the industry.
“Of the total of 133 000 tons of bone-in product that came into the country in the six months to June 2016, 79 percent was from Europe.”
Kevin Lovell, the chief executive of the South African Poultry Association, said that it was devastating to the industry that imports were as high as they are.
“Imports are now even bigger than SA’s biggest suppliers.
“How do we compete with this?” he said.
“What’s even more devastating is the thousands of jobs that are going to be lost as a result of the impact these imports have on the market.
“If we want to save the market, the government needs to take action to limit the number of imports coming to us,” said Lovell.
Department of Trade and Industry (DTI) spokesperson Sidwell Medupe said there was an investigation into whether imports were harming the local industry.
He said that in instances where the local industry felt that imported products caused them harm, they could apply to the International Trade Administration Commission (Itac) for an increase in import duties, or look at other trade remedies, such as the imposition of anti-dumping, countervailing or safeguard duties.
“Itac will then investigate whether imports are causing harm and how this can be addressed. Once Itac has concluded its investigation, a recommendation will be made to the minister of DTI.”
Medupe said with regards to the poultry industry, they should lodge a safeguard application with Itac against bone-in chicken imports from the EU.
“The minister is awaiting Itac’s report and recommendations,” he said.