Research undertaken by analysts at the Botswana Institute for Development Policy Analysis has highlighted the costs and benefits of the use of trade policy tools in the poultry sector. Over the past 30 years, self-sufficiency in poultry meat and egg production in Botswana has largely been attained, with Botswana ‘now consuming more poultry than beef on a per capita basis’.
According to this analysis, imports of poultry meat since 1979 have ‘been subject to import controls and largely outright bans’. Import licences are only issued ‘where local scarcities exist’. The imports of day-old-chicks and feed grain for the poultry industry are also regulated, although these measures have been challenged in the courts.
These trade arrangements have given rise to poultry prices in Botswana that appear to be ‘considerably higher than in South Africa’, where prices are inflated by the maintenance of ‘a 27% import duty on chicken from highly competitive countries like Brazil and the USA’. Additional anti-dumping duties are also applied (see Agritrade article, ‘Debate intensifies over South African poultry tariff policy’, 3 March 2012).
The poultry industry in Botswana however disputes this claim, maintaining that the price differential is an illusion. It is claimed that the South African poultry industry practice of glazing and injecting brine into frozen chicken inflates the weight of chicken parts sold and results in a lower cost per kg. In reality, on a ‘chicken meat for chicken meat’ basis, prices are held to be comparable.
The analysis also highlights the close corporate links and cooperation between poultry industry players in Botswana, maintaining that this lack of competition not only inflates prices, but reduces the quality of locally sourced poultry sector inputs (particularly of day-old-chicks), making it very difficult for smallholder producers to survive.
The analysis argues that ‘a healthy and competitive poultry industry is good for Botswana’, creating jobs, developing linkages to other sectors and promoting value-addition activities. However, after 32 years of infant industry protection, the Botswana poultry industry is neither healthy nor competitive. The analysis calls for a relaxation of restrictions on imports of day-old chicks and feed grains to promote greater competition in the industry.
Meanwhile in South Africa (which accounts for 80% of the SADC region’s poultry production), despite complaints that Brazilian poultry-part imports are undermining local production, South Africa’s largest poultry producer, Rainbow Chickens, has posted a 24.5% increase in ‘headline earnings per share in the six months ended December 2011’, a 15.8% increase in revenue and a 27% increase in operating profits. Earnings from value-added processing of chicken meat were up to 53.1% of total revenue in December 2011, compared to 47.8% in June 2011.
These earnings gains need to be seen in the context of ongoing competition authority investigations into the business practices in the South African poultry sector, which is dominated by two companies that together account for 46% of national production.
In the light of the experience in Botswana, and with infant industry protection being invoked in Namibia to promote national self-sufficiency in poultry products (see Agritrade article ‘ New Namibian poultry investment aims for self-sufficiency’, 12 November 2011), considerable attention is likely to be focused on the fulfilment of commitments to the phasing out of infant industry protection. Currently this would involve the 6% levy being reduced to 30% after 4 years, 20% after 6 years and elimination after 8 years. Phasing out such infant industry protection in Namibia under the relevant SACU provisions could lead to a requestioning of the current use of infant industry protection in Botswana.
Questions also arise regarding the agricultural trade provisions of the proposed trilateral FTA. If import licensing and special levies are allowed to be used within a customs union, what kind of non-tariff trade tools are likely to be retained in the poultry and other sensitive sectors under the proposed trilateral FTA? The use of restrictive trade policy measures in the poultry sector by Botswana, and now Namibia, could thus carry implications beyond both the poultry sector and the SACU.
Any regional trade arrangements in the agricultural sector in Southern Africa, however, have to take into account the potentially overwhelming economic dominance of South African producers, the growing role played by South African retail chains, and the absence of effective national and regional competition policies that are capable of preventing abuse of a dominant market position.