At the end of January, USDA published a report on supply and demand for broiler meat in South Africa. According to the report, poultry production grew at an average of 6% per annum between 2004 and 2008, but is now growing at around 1.6% a year. This reflects a slowdown in consumption growth linked to the economic recession (+70% between 2000 and 2010, but down to 4% in 2012, with a projected 3% increase in 2013) and an increase of almost 60% in maize prices in 2012.
The report shows that the situation has been compounded by rising levels of poultry imports, which increased by 32% between 2010 and 2011, and by a further 13.2% between 2011 and 2012. A further 7.3% increase in imports is projected for 2013. By 2013, imports of broiler meat are projected to be equivalent to 28% of South African production, a level in excess of the production of South Africa’s largest poultry producer.
South African poultry broiler meat production, consumption, exports and imports 2011–13 (tonnes)
Source: USDA (see below), p. 15
From October 2011 to October 2012, prices of poultry products rose faster than price increases for other meat products, however, South African producers were still unable to pass on the full cost increases.
According to USDA, the rate of increase in poultry meat imports into South Africa correlates strongly with the value of the rand against the US dollar.
Significant changes in the source of poultry meat imports have occurred. Brazil’s share of South Africa’s imports fell from 73% in 2010 to 53% in 2012, as a result of both the imposition of anti-dumping duties on certain Brazilian poultry meat products (which slowed down import growth to 7% in 2012) and rising levels of imports from the EU.
Imports of poultry meat from the three main EU exporters – the Netherlands (14%), Germany (6%) and the UK (6%) – reached 26% of total imports in 2012, up from a mere 3% in 2010. These countries account for 60% of imports of frozen, bone-in portions, which account for fully 40% of total poultry meat imports. According to the CEO of the South African Poultry Association (SAPA), “in the three years from 2010, the EU has gone from a market share of 0.5% in chicken pieces to 70%”.
This follows continued growth in EU production, a decline in EU consumption and active export strategies pursued by EU companies targeting African markets (for details of trends in the EU poultry sector, see Agritrade article ‘EU poultry sector developments and prospects’, forthcoming 2013).
According to a press statement issued by the Congress of South African Trade Unions (COSATU), these developments are causing concern to the South African Food and Allied Workers Union (FAWU), which has called for an urgent tripartite summit to “thrash out strategies to save the sector from being wiped off the manufacturing map”. According to the statement, “of the 272 small poultry farms surveyed by SAPA in November 2012, half have ceased operating and four of the medium-sized producers…have gone bankrupt”, while others have “cut back production by between 25% and 50%”.
However, moves to increase tariffs have been criticised in a statement by the country’s Democratic Alliance for harming the poor, by increasing the cost of a cheap source of protein. The Alliance maintains that around one-third of all poultry meat imports take the form of a paste (used for producing processed products such as polony and sausages) that is not produced by South African poultry processors.
The South African government is looking to apply a more sophisticated and transparent tariff policy in support of industrial development objectives. The debate on future poultry sector tariffs needs to be seen in this light. The EU’s sophisticated poultry tariff regime could well hold lessons in this regard.
The situation in South Africa is however complicated by the link between exchange rate movements and poultry trade flows, and compounded by rising domestic feed costs. Questions arise in relation to not only the poultry tariff regime, but also the grain trade policy framework (see Agritrade articles ‘ South Africa’s export profile complicates regional food security situati...’, 2 December 2012 and ‘ Debate on the regulation of maize exports intensifies in South Africa’, 12 February 2012).
The broader approach being explored thus relates not only to the appropriate tariff levels within bound ceilings, but also to the wider range of policy measures required to sustain the development of a local poultry sector that is capable of delivering safe, low-cost sources of protein to South African consumers.
As the SAPA has suggested, tariff policy formulation may well be complicated by tariff elimination commitments included in the South Africa–EU TDCA, which may require “other measures” to deal with rising EU exports of poultry meat. This is potentially an important issue for ACP negotiators to take note of in ongoing EPA negotiations.