The South African poultry industry is at a pivotal crossroads. It is contending with trade barriers, economic policies, and biosecurity challenges that have far-reaching implications for producers and consumers alike.

To shed light on these pressing issues, Fred Hume, CEO of Hume International, offers a candid perspective on the current state and future of the industry.

 

The Impact of Stricter Import Duties

The local poultry industry has advocated for stricter import duties, aiming to protect domestic producers from international competition. However, Hume believes additional anti-dumping duties on bone-in chicken might be futile.

“At this stage, if we’re discussing additional anti-dumping duties on bone-in chicken, it’s purely academic,” Hume states. “Volumes have declined over the past seven or eight years. From the peak when South Africa was importing around 35,000 tonnes of bone-in chicken, we are now lucky if we import 3,000 tonnes a month.”

He points out that further duties will not significantly alter the market dynamics. “Importers and South African consumers are already essentially locked out of international bone-in chicken,” he explains. “More anti-dumping duties won’t change anything.”

 

Economic Implications of AGOA Exclusion

Hume highlights the broader economic ramifications of strained international relations and protectionist policies.

“It’s tragic for South Africa, a small open economy that depends heavily on exports,” he laments. “[South Africa’s] exports account for about 20% of Africa’s total exports. Being serious about exports means being careful about excluding imports from trading partners. The U.S. is an extremely important trading partner, second only to China. If excluded from AGOA, South Africa might impose a quota on U.S. chicken. This means when market conditions are favourable, we won’t be able to import from that country.”

He underscores the importance of balanced trade policies that do not jeopardise South Africa’s economic well-being. “Losing access to the AGOA programme would weaken the exchange rate, increase bond yields and interest rates, further slowing an already stagnant economy,” Hume predicts.

 

Balancing Protection and Fair Competition

When discussing solutions to benefit both local poultry producers and consumers, Hume advocates for policies that address the needs of the most vulnerable.

“You’re likely aware of the potential increase in VAT and the zero-rating of VAT on essential foodstuffs,” he says. “We’ve been advocating for the government to zero-rate VAT on edible offal. The local poultry industry has been calling for a VAT rebate on bone-in chicken portions. I don’t believe that would be a solution or benefit the intended recipients.”

He explains that importers and consumers are already locked out of the bone-in chicken market due to existing duties. “Domestic producers don’t have to compete with imports and would likely capture any price reduction quickly,” he asserts. “It’s different for offal, where we face a more reasonable 30% import duty.”

Hume suggests that reducing duties on items like chicken livers could have a profound impact on food security. “Rebating the duty and VAT on items like chicken livers and necks could halve the cost of these products, significantly impacting a country facing malnutrition,” he emphasises. “I applaud the government’s initiative and hope it succeeds.”

 

Biosecurity Measures and Market Stability

With recent bird flu outbreaks affecting poultry exporting countries, balancing strict biosecurity measures with market demands is a delicate task. Hume insists that adherence to international best practices is essential.

“South Africa already imposes stringent biosecurity measures,” he acknowledges. “We have been lobbying for South Africa to follow international best practices and reopen markets declared free of bird flu.”

He criticises current regulations requiring veterinarians to visit the country of origin to verify bird flu status, labelling it as a non-tariff barrier to trade. “Following international best practices would give us access to more products,” he argues.

 

Regionalisation as a Solution

Hume advocates for the adoption of regionalisation policies, which recognise disease-free zones within countries, rather than imposing blanket bans.

“Considering South Africa imports about 80% of its chicken from Brazil, regionalisation in policy is crucial,” he explains. “An outbreak in any part of Brazil currently shuts down the entire country’s imports. This approach needs to change.”

He cites Canada as another example. “Canada, which has been locked out of South Africa for years, is another example,” he says. “It’s impossible to apply a ban based on country borders rather than a radius around the affected area.

Regionalisation, already adopted for U.S. imports, should extend to countries like Brazil and Canada.”

 

Addressing Industry Misconceptions

Responding to concerns from the local poultry industry that more markets and chicken imports threaten local producers and job creation, Hume offers a unique perspective.

“When I started in this business 15 years ago, we imported a wide range of chicken products,” he recalls. “Now, we’re reduced to importing chicken offal and mechanically deboned meat (MDM) due to anti-competitive import tariffs and duties.”

He challenges the notion that imports pose a significant threat. “How can this be a threat to the local industry, which dominates the market for individually quick-frozen chicken portions?” he questions.

Hume warns against extending high duties to offal. “Extending this to offal, which the local industry doesn’t produce enough of, would be cruel,” he states. “It would deny millions of people an affordable protein source just to enrich local producers.”

 

Looking Ahead: Strategies for the Future

Navigating these complex challenges requires strategic planning and collaboration between industry stakeholders and the government. Hume suggests several approaches:

• Aligning with International Practices: “Following international best practices in biosecurity and trade can open up more markets and products,” he notes.
• Zero-Rating VAT on Essential Foodstuffs: “Rebating VAT on items like chicken livers could significantly lower costs for consumers,” he emphasises.
• Regionalisation Policies: “Adopting regionalisation allows for more nuanced trade policies that don’t punish entire countries for localised outbreaks,” he explains.
• Balancing Trade Relations: “Maintaining good relationships with key trading partners like the U.S. is vital for our economy,” Hume asserts.

 

Conclusion

The South African poultry industry faces a myriad of challenges that require thoughtful and pro-active solutions. Trade barriers, biosecurity concerns, and international relations all play critical roles in shaping the future of the industry.

Fred Hume’s insights underscore the importance of balanced policies that protect local producers while ensuring fair competition and access to affordable protein for consumers.

By aligning with international best practices, adopting regionalisation policies, and fostering positive trade relations, South Africa can navigate these complexities and pave the way for a resilient and prosperous poultry industry.

ChickenFacts remains vigilant on all matters impacting poultry, and consumer rights.

 

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