South Africa: Poultry industry seeks more anti-dumping protections

However, the South African poultry industry has a bone to pick with cheap chicken imports from Brazil, the US, and some EU countries – Denmark, Ireland, Poland and Spain – that it says threaten the viability of the key domestic agricultural sub-sector.

SAFTU says government has failed to limit massive imports of chicken from the EU and Brazil. The South African Federation of Trade Unions says chicken imports have already cost South Africa thousands of jobs. Courtesy #DStv403 pic.twitter.com/w2uITEwuVo

— eNCA (@eNCA) March 12, 2020

The South African Poultry Association (SAPA) successfully petitioned the country’s International Trade Administration Commission (ITAC) to impose provisional anti-dumping duties on chicken imports from Brazil, the US, and the EU.

In December 2021, ITAC introduced provisional anti-dumping duties of up to 30% on the affected countries and chicken producers effective from January 2022 to June 2022. Further anti-dumping measures will be readdressed in June.

In South Africa’s Poultry Industry Master Plan of 2019, a 15% reduction in imports is envisaged using various instruments, including anti-dumping duties.

However, as Frans Van Heerden, the MD of Astral Foods’ commercial poultry division, says, a few factors influence chicken imports, making it difficult to benchmark a single cause for a decrease.

“We’re not sure if it’s only the duties,” says Van Heerden. “We are awaiting further instructions to see whether the duties remain. We are all eagerly awaiting [communication from ITAC].”

Despite the imposition of the provisional anti-dumping duties, Van Heerden says “imports are only down by about 6% year-on-year… That is why it’s difficult to say whether any … [anti-dumping duties] have influenced [imports].”

He explains that the weakness of the South African rand and the bird flu outbreak in the EU are additional variables that might have affected import volumes.

“The bird flu in Europe has closed down some imports into South Africa because of the health status. The moment that health status improves, and there’s no bird flu, we need to wait and see what will happen,” says Van Heerden.

Although South Africa’s 2021 bird flu outbreak was not as pervasive and prolonged as the one the country experienced in 2017, it did disrupt supply because there were fewer birds available in the market, says Van Heerden.

“But where we stand now, according to the information I have, is that the entire market – not only Astral – has mostly recovered to pre-avian flu outbreak levels,” he says.

Astral performance

In addition to poultry, the Astral business includes the production of animal feed, sale of day-old chicks and hatching eggs, breeder and broiler production, as well as abattoir and other processing operations.

Astral has a feeding mill and poultry unit in Zambia, as well as feed and poultry operations in eSwatini and Mozambique. The company is however exiting eSwatini and Mozambique, selling its interests and assets in the two countries, the proceedings of which it will use to plough into Zambia says Van Heerden.

“In eSwatini, that transaction is completed. We don’t see any growth prospects in eSwatini. It’s a small economy. The same goes for Mozambique,” says Van Heerden.

“We expect the Mozambique transaction to be completed before September, our financial year end. It’s a difficult environment. There’s limited growth. Our plan [is] to invest the proceeds of eSwatini and Mozambique into Zambia,” he adds.

In the period under review, Astral reports that:

• The poultry division contributed R7.9bn ($494m) to group revenue, up from R6.1bn in the previous comparable period (an 8.6% increase).
• Broiler sales volumes rose 15.7%, boosted by an additional 400,000 birds processed a week.
• Feed division revenue increased to R4.5bn, a 13.8% improvement. The division benefited from higher selling prices fuelled by the spike in raw material costs.

Operating environment

Feed input costs, which are affected by international price movements in maize and soya, as well as energy, remain a concern, says Van Heerden.

“At this stage we are not seeing a relief there. I think as long as the Ukraine-Russia war continues, and as long as there is drought in South America, we might see a high market,” says Van Heerden.

The prices of gas, coal, and diesel, energy sources used in the Astral business, have also risen, says Van Heerden.

South Africa’s load-shedding, which results in production down time that incurs Astral’s 24/7 operation millions, is an added complication, he says. “It adds to operational costs.”

Because of dumping, Ghana now produces less than 5% of total poultry – and chicken meat in Ghana is more expensive than steak in South Africa.

“We are about to spend R65m on diesel generators because the cost of business interruption is higher than the cost of running those diesel generators,” says Van Heerden. “We’ve had to spend about R50m on a water recycling plant because we’re not being supplied [with] water.”

“That money could have been spent on expansion to create jobs,” he says.

The challenges notwithstanding, the MD believes: “We’ve had a positive six months coming out of Covid-19. The general poultry market has come out of that fairly successfully.”

Duties and access

SAPA CEO Izaak Breitenbach says it would be “disastrous” if South Africa did not extend the provisional anti-dumping duties, insisting that the local sector can meet demand.

“What happens in June is that the minister [of trade, industry, and competition] will decide [what to do]. It doesn’t mean there won’t be duties after June. We have done a presentation to ITAC [motivating for the retention of] … the provisional anti-dumping duties, and to make them permanent,” says Breitenbach.

He says what happened to Ghana’s local poultry production 20 years ago is a cautionary tale about how dumping can devastate domestic capacity.

“Ghana had its own poultry industry. Because of dumping, Ghana now produces less than 5% of total poultry – and chicken meat in Ghana is more expensive than steak in South Africa,” he adds.

Breitenbach’s response to criticism that the South African poultry industry’s insistence on anti-dumping duties constitutes non-competitive conduct, is that the World Trade Organisation proposes this instrument as legitimate relief to unfair trade practices.

FOOD FOR THOUGHT: Chicken meat is one of the most sought-after sources of protein, and Mzansi imports a lot of it. Senior economist Dr Moses Lubinga takes a look at how chicken meat imports have affected the poultry industry in South Africa. https://t.co/Z16mp5m5Uq

— Food For Mzansi (@foodformzansi) May 4, 2022

Between 2009 and 2019, the poultry industry was in distress because of dumping, says Breitenbach. Since the adoption of the master plan, however, the industry has invested R1.3bn into processing plants and slaughterhouses to increase output. “We have seen about 1,400 jobs created in poultry – not taking into consideration the total of the value chain,” says Breitenbach.

While the industry is eagerly anticipating the June anti-dumping review, it is also working on gaining market access to the EU.

“We would be disappointed if, by the end of the year, we don’t have access to the EU for exports, and during the next year start to export to the EU,” says Breitenbach.