Major pain for one of South Africa’s biggest employers – impacting 120,000 workers
South Africa’s poultry industry has been under considerable pressure over the last few years, which it has largely blamed on dumping. However, experts say this may not be the case.
Speaking to BusinessTech, Dr Gustav Brink, an extraordinary lecturer in mercantile law at the University of Pretoria and dumping expert, said that internal issues and government failures have had a much bigger impact on the industry.
“Poultry is the second largest employer in the agricultural sector and directly employs around 50,000 people. With the multiplier effect, it impacts an estimated 120,000 workers, which means it could impact the livelihood of around 600,000 people.”
“One cannot underestimate the industry’s impact on the economy as a whole and the agricultural sector in particular.”
Brink explained that even though the South African Poultry Association says the industry can meet South Africa’s chicken demand, this is not the case.
And even though the association has been vocal about the negative impact of dumping on the industry, the single biggest product imported is mechanically deboned meat (MDM), which is not produced in South Africa.
“Industry argues that a set number of jobs are lost for every 1,000 tonnes of imports. However, you cannot lose jobs if you never had the capacity to produce in the first place.”
In addition, more than 70% of the poultry produced in South Africa is sold as individually quick-frozen (IQF) mixed portions, typically in 2 kg and 5 kg bags, and it is not imported at all.
This raises questions about how much competition really exists between domestic poultry producers and importers.
Brink added that if the industry geared up its processes to become more efficient by maximising the prices at which they can sell products, “there is no reason why the poultry industry cannot create another 10,000 jobs”.
This would also have a multiplier effect, boosting the maize and soya industries as well.
“What we have seen is the entry into the industry of several new players in the last few years, many of those entries facilitated through technical assistance from SAPA, and most of that to BEE companies,” Brink said.
“The question, however, is how these new entrants can make it in the market if the big, established companies cannot. This again shows that there are internal problems, other than dumping, at the big companies.”
Apart from issues with how the industry is run, problems at the government level have also contributed to poultry producers’ struggles, he said.
“One must also not underestimate the massive impact government failure, especially at the local level and at Eskom, has had on the industry.”
“The industry combined has probably spent a few billion extra in electricity and water access over the past few years.”
“However, you cannot blame this on dumping, and you cannot impose duties to cover up these government inefficiencies, thus further penalising the consumers.”
Fortunately, South Africa has seen a respite in load-shedding this year, with Eskom recently announcing that it has successfully delivered over 200 consecutive days of uninterrupted power supply.
“With Eskom’s improved performance, and with several of the big producers having installed alternative power supply and water supply, things should stabilise for the industry over the next year or two,” Brink said.
“The avian influenza, of course, also had a major impact, and there, yet again, the government tried its best to shrink away from its legal responsibilities, claiming that it did not have to pay for culled birds as infected birds had no value.”
“The High Court rightly ruled that this was ludicrous and that producers had to be compensated as though the birds were not infected. At least that nonsense has now been sorted out, and there should not be problems if there is another outbreak of HPAI.”
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