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Johannesburg - Chinese steel and Mexican-made cars became political dynamite last year as politicians including US President Donald Trump championed anti-free trade rhetoric.
Now chickens are at the center of a bitter fight between South Africa and Europe.
South African farmers and labour unions say the European Union is selling chicken legs, thighs and wings at below cost, threatening local companies and jobs.
EU producers make enough money marketing breasts in their home market that dark meat is sold as a waste product, they say. Europe says its farmers are simply more competitive than their peers in South Africa.
“We definitely have distress,” South African Trade Minister Rob Davies said in an interview January 24.
“We will not have an industry to raise the competitiveness of” if imports continue to flood the market.
The argument has left South Africa with a tough choice: Either upset relations with its biggest trading partner or watch the demise of its chicken industry, which employs 60 000 people and is source of 65% of all meat consumed in the country.
The row marks a rocky start to the European Partnership Agreement, a free trade deal signed last year by the EU and southern African countries including South Africa.
Europe’s share of South Africa’s bone-in chicken imports has grown to 80% from 0.5% in 2012 when tariffs were removed, according to data compiled by the South African Poultry Association.
In contrast, South Africa’s biggest chicken producers, including RCL Foods, are cutting 5 000 jobs and saying the industry is under threat.
“If things stay the same there will be no chicken industry in a year’s time,” Scott Pitman, managing director of RCL’s consumer division, said by phone.
Shares of RCL, which produces several food brands other than chicken, are 35% below a 20-year high of R19.45 in 2014.
Chicken demand
“The market is looking forward and anticipating lower feed costs” as South Africa’s two-year drought eases, said Victor Dima, a Dubai-based analyst at Arqaam Capital.
Chickens in South Africa are fed corn among other feedstuffs.
South Africa is the world’s fifth-biggest consumer of chicken per capita behind the US, Australia, Brazil and Peru, according to the International Poultry Council.
The EU says its chicken exports comply with trade laws and there’s no reason for South Africa to impose duties against them.
The accusation of dumping is a sensitive one for the EU, given that the bloc last year imposed tariffs as high as 73.7% on Chinese steel that it says is dumped in Europe.
“The real problems of the South African poultry industry are not so much caused by the imports from the EU but that it is suffering from structural problems affecting its competitiveness,” Cecilia Malmstrom, the EU’s trade commissioner, said in a January 11 letter to South African Minister of Trade Rob Davies.
Davies agrees that producers must find ways of raising efficiency.
“But they’re not going to be solved if we just allow an influx of spare parts from around the world to come in to take over the market,” he said.
Cheaper birds
Frozen leg quarters imported to South Africa from Europe cost R17.52 a kilogram before duties and storage this month, about 30% cheaper than local producers, according to Astral Foods.
That rankles local producers who say their production costs for whole birds are lower than European farmers’. Researchers at Pretoria-based Bureau for Food and Agricultural Policy and the Netherlands’ Wageningen University found that South Africa’s whole-chicken costs were about 20% lower than in Europe in 2013, the latest available data.
European farmers reject accusations of dumping. South African producers inject chickens with brine, or salt water, increasing their weight and reducing quality, Cees Vermeeren, secretary-general of AVEC, a trade body for European chicken farmers, said by e-mail.
Seeking Protection
Still, South Africa’s chicken producers are asking the government to increase protection from European imports.
South Africa’s government imposed anti-dumping tariffs ranging from 4% to 73% on some chicken from Germany, the Netherlands and the UK in 2015. In December it added a temporary 13.9% “safeguard duty” while it investigates allegations of dumping.
“Chicken farming is in crisis and on the cusp of collapse,” Kevin Lovell, chief executive officer of SAPA, said by phone. “The trigger will be when the banks stop funding. That moment is getting close. Then the industry will shrink permanently.”
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