The ongoing trade war saga is being fuelled by tariffs. And as the President of the United States, Donald Trump, keeps saying, it’s to protect the local economy. And we should not forget that one of his strap lines when electioneering was to make America great again. And while there are contrasting theories on how such a move may impact the US economy, the knock on damage to surrounding economies is becoming more evident. So what if one applies a similar type tariff increase to the South African chicken industry. Who are the winners and losers? In the below editorial, Unati Speirs, chairperson of Emerging Black Importers and Exporters of South Africa, argues that such a move will only protect the big players, and ultimately harm the smaller emerging ones. Sound familiar? – Stuart Lowman
By Unati Speirs*
The research is clear; jobs and wealth creation are not going to come from the big corporates, they are going to come from small businesses. This is also where true transformation will happen, with the creation and growth of black owned businesses; building a stronger economy than the monopolies. The success of this country and indeed for all of us who live here depends on this growth strategy. But for this to happen, we need open markets and to be able to participate in global trade. Despite the evidence for this, large corporates operating in our concentrated local market continue to call for greater protection at the expense of growth and the consumer.
Nowhere is this more evident than in the South African poultry market. South Africans love their chicken and last year alone they consumed 1.845 million tonnes. But last year, South African poultry produced only produced 1.365 million tonnes. In other words, South African producers are only able to produce about 70% of the chicken required to feed the country’s consumers. The remaining 30% has to be imported from other countries, except when the South African industry faces outbreaks of avian flu and drought, in which case South Africa has to import even more chicken to meet local demand and ensure security of supply.
As a black entrepreneur I have personally been witness to this as I try to build a business here based on the import and export of chicken products. I started my business because, like any entrepreneur I saw an opportunity to participate in the market. This means there is clear gap in the supply and demand for chicken. Bottom line is that we need importers to plug the gap between what we are able to produce locally, and what we consume – hence we have the opportunity.
However, to great our distress, the South African Poultry Association (SAPA), a lobby group established to protect the interests of the large South African poultry producers, has applied to the International Trade Administration Commission of South Africa (ITAC) for import tariffs on chicken to increase to 82%. SAPA’s members include RCL, Astral Foods and Rainbow Chickens. Their rationale is that imports are damaging the local industry, but we believe they are simply seeking to protect their profits to the detriment of emerging black importers – and consumers.
All South Africans should be worried about these extreme tariff increases. According to the Bureau for Food and Agricultural Policy (BFAP), increasing tariffs on imported chicken could hike local chicken prices by up to 32%, putting South African consumers under further financial strain and impacting food security for the poor.
Chicken crisis in South Africa. Imports dumped on SA at cost less than production were up 1/3 in 2018 from 2015, with 61% from Brazil but also EU and US. SA poultry companies can't grow. South African Poultry Association says SA could create 30 000 jobs by ending chicken imports. pic.twitter.com/2KggE3ePtz
— James Hall (@hallaboutafrica) February 22, 2019
Almost every day, SAPA and its ally Fair Play feed a barrage of misinformation into the media, creating the wrong impression that imports, no matter whether from Brazil, the US or EU, are negatively impacting the large local producers. This is not true. In 2018, some local producers posted bumper profits of more than R1.4bn for the year. What is true, is that this perception is being created in order to drive further protection for local producers, in an already concentrated and untransformed market.
SAPA claims that imports will destroy local jobs, however there are also many thousands of jobs that depend on both the import and export market. The import market extends to clearing agents, employees handling processing and packaging, cold storage, transport and administrative staff. Besides the 365 direct jobs which EBieSA’s members sustain, the historical importers employ between 10,000 and 12,000 people here in South Africa. These jobs would be at risk if tariff increases were to effectively close off the import market to Brazil, or other markets.
This is the sixth time that the local industry has applied for protection since 2011. For example, in 2013, import tariffs on whole chicken already increased from 27% to 82%, frozen bone-in chicken increased from 18% to 37% and frozen boneless cuts, from 5% to 12%.
South Africans are not stupid. The large local companies have employed the same tactics against the EU, US and Brazil over the course of many years, and the modus operandi is always the same. First they claim that the country in question is dumping, then that their products are of poor or inferior quality, that they are costing jobs, that they are victims, and so it goes. It is simply a way to shut down competition. This is an irresponsible campaign that completely sidelines the impact of extensive tariffs on people like us. But more than that, it has a profound food security and price impact on the poor.
Instead of trying to shut out our trade partners, we should be strategic in developing mutually beneficial relationships with them. Instead of vilifying them, we should learn from them. Instead of the government protecting local industry, it should be investing in the local industry to gear it up to expand and participate in the export market. Both imports and exports create valuable jobs and revenue, yet local producers continue to ignore export opportunities. For example, the EU has opened up its borders to our chicken at 0% duty, and we could be selling our chicken breasts in the US. Why is the local industry not doing it? Certainly, it’s a competitive world out there, but I have to ask – are they just chicken?
- Unati Speirs, Chairperson of Emerging Black Importers and Exporters of South Africa.Â
