Feathers fly in chicken war

A war to stave off bulk imports of frozen chicken cuts from Brazil into the Namibian and South African markets has been brewing for years.

12 April 2019 | Agriculture

While international poultry players are battling it out over local market share, Namibian consumers are likely left to carry the burden of higher prices.

Of late, the South African Poultry Association (SAPA) has been making headlines in Namibia, expressing its support for the local broiler industry while lashing out at the dumping of Brazilian chicken products in the sub-region.

SAPA's recently appointed general manager of the Broiler Organisation, Izaak Breitenbach, has taken aim at the Brazilians for quite some time, starting with an open letter to the South African media in February this year to warn consumers about the “dangers” of eating Brazilian chicken.

Brazil is the third largest broiler producer in the world after the United States and China but its exports have exponentially increased and it has overtaken the United States as the world's largest chicken meat exporter. The country also exports beef and pork.

Brazil's meat industry has not been without its challenges and in 2017, Operation Carne Fraca, or 'weak meat', showed serious loopholes in the safety mechanisms at beef, poultry and pork processors in that country.

After that, the European Union banned imports from 20 Brazilian meat-processing plants (including beef, pork and poultry) while China banned all imports from Brazil and Saudi Arabia halted imports from five of the 58 companies involved.

But Brazil still exports far and wide and according to local economists, it makes all the profits it requires from high-value chicken breast exports.

The remaining leg quarters can then be sold at any price and that is what it exports to countries like Namibia and South Africa.





This is described as dumping - selling products at prices lower than their production cost.

Namibia's broiler industry is very small and it constitutes roughly 2% of South Africa's production.

What makes Breitenbach's recent statements of support for Namibia so surprising is that SAPA has been locked in a High Court battle since 2014, turning to the Supreme Court in the process, to have Namibian import restrictions set aside.

Experts say it is precisely this court action and the risk of a negative outcome that have restricted investment in the local broiler industry.

The entire industry is currently buoyed by Namib Poultry Industries, which is backed by Namib Mills.

Research performed by Cirrus Capital indicated that under the right conditions, which would include regulatory frameworks, the local chicken industry could grow to account for 2% of the gross domestic product.

Breitenbach told Namibian Sun that he could not comment about the court case “for obvious reasons”, adding that South Africa had a good relationship with the Namibian industry and “it certainly assists greatly in terms of technical matters and input to grow the industry”.

He added that they saw Namibia as an ally, not a threat, and would not dump products in Namibia “as the Brazilians do”.

The Namibian public's response to reports of dumping by Brazilian chicken producers has been one centred on cost.

The most recent Labour Force Survey indicates that the highest mean wage for Namibians is N$12 662 per month, with a low of N$1 113.

Namibian consumers are not exactly spoilt for choice when shopping and have to take that which is cheapest.

“Imports lower GDP, destroy jobs and make a nation poorer. One strategy for an economy that needs to catch up with countries that are ahead in industrialisation would be to create investment incentives to facilitate new expansions and create industries that can compete in export markets, while at the same time ensuring regulations are in place to restrict imports as far as possible,” Pieter van Niekerk, commercial manager at Namib Mills, told Namibian Sun.

“This will facilitate growth and ensure industries are in place when this, and future, generations look for jobs.”



Long-term regulation

Van Niekerk argues that the local industry could only grow and be competitive if there is long-term regulation surety.

“An effective regulation should ensure higher incentives for producing than for importing; otherwise we will just see an increase in imports and decrease in production.

“Very few large investments have been made in the poultry sector, as the current quantitative measure is being challenged in court. SMEs have grown quickly in a short period of time, but are stagnating as they struggle to find sufficient markets for their products, due to low-priced imported poultry,” he said.

“Namibian producers agree with SAPA's statement that Brazilian poultry is dumped into the region, putting much pressure on current jobs, new sector investments and GDP.”

Namibian poultry would become cheaper if production increased, but that would depend on import restrictions to protect the local industry.



According to Breitenbach, SAPA's support for Namibia will be “the increased import duties that it has applied for”.



SAPA last year applied to the International Trade Administration Commission (ITAC) to increase the general rate of customs duty on bone-in chicken portions from 37% to 82%, and that of boneless chicken portions from 12% to 82%.



SAPA is effectively seeking a substantial hike in import tariffs to protect the South African poultry industry, while at the same time asking Namibian courts to set aside Namibia's “procedurally unfair” import limitations.

It alleges that the Namibian government has violated the Protocol to the SADC Agreement and also the SACU Agreement.







Monopoly claims

Asked whether SAPA was trying to stop Brazilian imports so that SAPA could have the monopoly on chicken products in the sub-region, Breitenbach said: “In the sub-region, and more so South Africa, the industry is very competitive as indicated by weekly price changes.

“At present 33% of poultry meat is imported into South Africa. Brazil, however, does not reciprocate to allow imports from any country in the region.

“Imports from Brazil and other countries have decimated the poultry industries in Mozambique, Angola, Ghana, DRC, Congo Brazzaville and many more. That is why all trade must be on a fair playing field.

“Some 47% of the 370 small farmers that SAPA surveys and assists on a regular basis have gone out of production in the last six months due to imports.”

The Brazilian Association of Animal Protein holds a different view, saying the argument that South Africa, as a “globally efficient producer of chicken”, faces profit challenges and job losses because of imports of frozen chicken “does not sustain itself”.

It says that bird flu outbreaks since 2017 were the main reason why the poultry industry in South Africa is facing challenges.

SAPA reported that the impact of bird flu had resulted in a loss of revenue of N$954 million. The poultry industry in South Africa is worth around N$46 billion.



YANNA SMITH

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