There are always three versions to every story; yours, mine and the truth. And one of the best forms of finding a semblance of this truth is through robust debate. The discussion unfolding below is around tariffs and chicken imports. We recently published an opinion piece by Unati Speirs, chairperson of Emerging Black Importers and Exporters of South Africa, in which she argued against higher import tariffs and how they are hurting small business. Below Francois Baird, founder of FairPlay, argues against her. Worth reading both pieces back to back. – Stuart Lowman

Twisted logic in defence of chicken imports

By Francois Baird*

Having grabbed 30% of the local chicken market, and killed thousands of local jobs, chicken importers are claiming victory and arguing that the assault on local jobs should continue.

This is the unfortunate conclusion to be drawn from the article by Unati Speirs, chairperson of Emerging Black Importers and Exporters of South Africa (Ebiesa) arguing against higher tariffs to protect the local chicken industry and its jobs (“Imported chicken tariffs: a boom for big business, bust for live-saving small”, Biznews, 23 May).

Chicken importers have made millions over the past decade as cheap, subsidised and often dumped chicken imports of questionable quality have put the local chicken industry into crisis. Huge volumes, rising every year, have cost jobs and prevented expansion which would create new jobs.

Ms Speirs argues for open markets and global trade. So does FairPlay. The difference is that we believe also in fair trade and in safeguards under World Trade Organisation (WTO) rules that ensure a level playing field on which all chicken producers can compete fairly. Unfair pricing and import surges, both of which South Africa has suffered, fall under those rules.

The assault on the local chicken industry is neither fair trade nor fair competition. On the contrary, it is a classic case of abuse of dominance. What’s happening is that major producers like Brazil and the EU make their profits from selling chicken breast meat at a premium in Europe and America. That leaves them with a huge surplus of dark meat – mainly drumsticks and leg quarters – which is frozen in bulk packs and sold off cheaply to markets like South Africa where these cuts are popular.

South African chicken producers, employing 120,000 people directly and indirectly, are highly efficient – and more efficient that every EU country – despite receiving no government subsidies, yet EU chicken is sold to SA importers at way below their cost of production and putting each of these jobs at risk. Brazil, a more efficient producer with a vast industry built up on subsidies, does the same. It comes as no surprise that this price differential doesn’t reach South Africa’s consumers – imports are sold at or near local market prices, and huge profits are made by importers, middlemen and retailers.

Importers have managed to snatch 30% of the local market, including most of the growth in demand as chicken’s popularity increases. Imports account for a bigger slice of local sales than any of our local chicken producers. It is unfair and predatory trade, designed to take over local markets and kill the local industry. And now it seems that the global producers are using small black businesses in the name of transformation as their stalking horse to convince us of their good intentions.

And what Ms Speirs fails to acknowledge is that the victims are not only the large producers. Small-scale, emerging farmers are being forced out of business by imports cornering their markets, leaving them and their families destitute, and spreading despair in poor rural areas where unemployment levels are highest. The knock-on effect is massive with thousands of jobs on farms, small businesses in rural towns and related value chains such as the grain industry being imperilled.

This should continue, says Ms Speirs, because local producers are “only” able to produce 70% of local requirements and the remaining 30% “has to be” imported because “we need importers to plug the gap”. In other words, we’ve crippled local producers so we need more imports because local producers are crippled. How’s that for twisted logic? It is the same as blaming the victim for a crime.

That missing 30% constitutes 539,000 tonnes of chicken not produced locally and not providing local jobs; chickens not eating maize and soya produced on South African farms; another agri sector that depend on the local chicken industry to flourish. The SA Poultry Association (SAPA) has estimated that 30,000 jobs would be created by replacing imports with local production; a concrete figure that offers hope in South-Africa’s dire unemployment scenario.

Ms Speirs asks, possibly naively, why SA is not exporting chicken to the EU, where it has duty-free access. The fact is that until our government sets up the laboratories and creates the inspectorate to enable the certifications required by the EU, no exports to those countries are possible, duty-free or not.

Ms Speirs points to profits being made by the local industry in 2018 and claims producers only want to protect these profits. She doesn’t mention that the two largest producers – Astral and RCL Foods – have both reported sharply reduced profits this year and warned of worse to come if imports continue unchecked. Nor does she mention that the RCL chicken business returned to profitability after years of losses only by cutting production, retrenching 1 300 workers and refocusing its business away from market segments dominated by imports.

This is the reality behind the local industry’s application for higher tariffs on Brazilian chicken. It is the reality behind previous tariff decisions by the local arbiter, the International Trade Administration Commission (ITAC). It is the reality behind previous anti-dumping penalties imposed on EU countries, and the local industry has a legal opinion that Brazil, despite its efficiencies, may be dumping chicken in South Africa.

Ms Speirs does not tell Biznews readers that ITAC has already determined that imports from Brazil and other countries are harming the local industry. All that is up for determination is the rate of tariffs to be imposed to help level the playing field.

That decision is imminent, and we hope it will be a fair one in the interests of all South Africans.

• Francois Baird is founder of FairPlay.