Summary
According to analysis from the United States Department of Agriculture, Foreign Agricultural Service, the South African poultry meat sector is recovering following a post drought recovery of maize crops which has lowered feed costs, agreement on a Poultry Sector Master Plan and the application of new trade policy measures designed to provide relief from low cost poultry imports. However, there is a hole in South Africa’s poultry sector trade policy arising from the de facto effect of EU-South Africa trade agreements. These exclude EU exporters form general tariff changes and profoundly undermine the effectiveness of the anti-dumping and safeguard measures nominally allowed under these agreements. This situation is compounded by legal loop-hole challenges from the EC of South African safeguard measures, which if upheld would seriously undermine the development dimension of EU trade agreements with sub-Saharan African trade partners.
A strong recovery in poultry meat production is underway in South Africa. This has been supported by:
- A bumper maize crop which has reduced feed costs, thereby helping to restore competitiveness lost during an earlier drought period.
- The drawing up of joint government and business Poultry Sector Master Plan designed to address sector wide productivity issues
- The finalisation of a process for the further increase in MFN import duties on bone-in chicken and boneless chicken portions in March 2020 (1)
- The imposition of an import ban on poultry meat from Poland in response to AI outbreaks in January 2020 (2).
Together these developments have supported an expansion of South African poultry meat production. This saw production increase 8.2% between 2019 and 2020 (+115,000 tonnes), with a projected increase of a further 4% (+60,000 tonnes) in 2021 (1). This renewed growth in South African poultry meat production came on the back of 1% fall in production in 2019, which followed on ‘from the widespread highly pathogenic avian influenza (H5N8) outbreaks of 2017’ (3) and the 2015-2016 drought which affected maize production and inflated poultry feed costs (4).
South African Production Domestic Consumption Imports and Exports (2016-2021) (‘000 tonnes)
| 2016(4) | 2017(3) | 2018(5) | 2019 (1) | 2020* | 2021* | |
| Production | 1,235 | 1,335 | 1,407 | 1,395 | 1,510 | 1,570 |
| Total Dom Consumption | 1,665 | 1,794 | 1,876 | 1,895 | 1,895 | 1,876 |
| Imports | 504 | 524 | 520 | 545 | 480 | 357 |
| Exports | 74 | 65 | 51 | 45 | 50 | 51 |
| Imports % Dom Consumption | 30.3% | 29.2% | 27.7% | 28.8% | 25.3% | 19.0% |
Source: USDA FAS
* Projected
Although poultry meat is the most popular source of protein in South Africa, with South Africa having one of the highest per capita consumption rates of chicken in the world, after many years of sustained rapid growth, poultry meat consumption in South Africa is now stagnant (1). This is linked to structural economic problems which have seen a sharp economic downturn and rising levels of unemployment. This situation has been exacerbated by the impact of Covid-19 pandemic. The depth of the current recession is such that in 2021 South African poultry meat consumption is actually projected to decline.
The conclusion in November 2019 of a joint government and poultry industry Poultry Sector Master Plan has set out a roadmap for addressing sector wide productivity issues within what is a highly concentrated poultry industry (8 commercial producers, account for 70% of total South African poultry production, with this including RCL Foods and Astral Foods which ‘are by far the African continent’s largest two poultry companies’). According to USDA analysis, the ‘plan is intended to increase profitability and efficiency in the industry by protecting poultry producers against alleged unfair trade practices’ (1). However, this analysis ignores efforts underway in South Africa to:
- develop domestic soya production to enhance the competitiveness of local feed suppliers.
- address infrastructure constraints such as shortcomings in electricity and water supplies.
- invest in value added processing to reduce dependence on sales of undifferentiated poultry meat cuts.
- Develop export markets to maximise revenues derived from the marketing of individual poultry meat cuts.
- strengthen the functioning of local supply chains particularly for the benefit of smaller scale poultry producers; and
- enforce of labelling requirements for imports to ensure full traceability (9).
This has seen the South African poultry industry commit to investing US$90.3 million in an expansion programme for the sector (1).
A critical part of the Poultry Sector Master Plan is the final implementation of a requested increase in MFN tariffs on certain poultry meat imports. These increases were finally approved by the ‘International Trade Administration Commission in March and entered into effect on 13th March 2020. This raised the MFN duties on imports of bone-in chicken ‘from 37% to 62%, and from 12% to 42% for boneless portions.’
South Africa’s Revised MFN Tariffs and Wider Tariff Treatment (March 2020 revision)
| Tariff Code | Product | Old MFN | New MFN | EU | EFTA | SADC | Mercosur |
| 0207 | Old New | Old New | |||||
| 02071210 | MDM | Free | Free | Free | Free | Free | Free |
| 02071220 | Carcasses (necks, offal frozen) | 31% |
31% |
Free | 31% | Free | 31% |
| 02071290 | Frozen Whole Birds | 82% | 82% | Free | 82% | Free | 82% |
| 02071410 | Boneless Cuts | 12% | 42% | Free | (12%) 42% | Free | (12%) 42% |
| 02071420 | Offal | 30% | 30% | Free | 30% | Free | 30% |
| 02071490 | Bone in Portions | 37% | 62% | Free | (37%) 62% | Free | (37%) 62% |
| Special Measures | Anti-dumping duty for USA R9.40/kg outside of 96,972 tonne TRQ | Safeguard Duty 25% to be phased down | |||||
Source: South Africa Revenue Service (special measures section analysis USDA)
(EU- European Union, EFTA – European Free Trade Association; SADC – Southern African Development Community
‘On January 3, 2020, South Africa instituted a ban on poultry imports from Poland due to recent outbreaks of Highly Pathogenic Avian Influenza’ (2). This needs to be in a context where Polish poultry meat exports to South Africa have increased 10-fold since 2016, coming to account for fully 40% of total EU28 poultry meat exports to South Africa in 2019, up from a mere 1.8% in 2016 (6).
EU28 and Polish Poultry Meat exports to South Africa 2016-2019 (Tonnes)
| 2016 | 2017 | 2018 | 2019 | |
| Poland | 4,944 | 0 | 22,045 | 50,950 |
| EU28 | 272,196 | 76,554 | 81,126 | 126,914 |
Source: EC MADB
These MFN tariff increases alongside the application of anti-dumping, safeguard and AI related import bans are seeing a dramatic change in South Africa’s patterns of poultry meat imports.
South Africa’s Chicken Meat Imports Total and by Source 2017-2020 (tonnes)
| 2017 | 2018 | 2019 | 2020* | |
| Total | 556,874 | 566,208 | 539,564 | 277,242 |
| EU Share | ||||
| EU | 77,9005 | 71,196 | 124,521 | 50,521° |
| Brazil | 337,476 | 348,155 | 268,869 | 151,231 |
| USA | 87,059 | 91,374 | 89,598 | 47,640 |
| Argentina | 32,816 | 33,278 | 37,939 | 17,949 |
| Others | 21,619 | 22,204 | 18,639 | 9,901 |
| * Projected ° This being noted the latest EC poultry meat export figures from 25th November covering the period from January to September put EU exports in 2020 at 70,380 tonnes (8), suggesting EU poultry meat exports will be substantially in excess of USDA projections. |
||||
Source: USDA, FAS Report
After a peak in imports in 2018 at 566,208 tonnes (of which Brazil accounted for fully 61.5%) while South African imports fell 4.7% to 539,564 tonnes in 2019. More significantly, the USDA is projecting a massive 48.6% decline in South African poultry meat imports in 2020 to a mere 277,242 tonnes. Such a low level of South African imports has not been seen since 2010 (7).
Such a development in imports would be attributable to:
- The projected dramatic fall in imports of poultry meat from Brazil (despite the decline in the value of the Real), down some 56.6% compared to the 2018 peak.
- A 47.9% decline in imports from the US since 2018.
- A projected reversal in the recent renewal of imports from the EU, linked largely to AI related import bans, rather than the immediate impact of the safeguard measures against EU poultry meat.
| The South African Safeguard Duties Against Poultry Meat Imports from the EU
Following the presentation of the findings of the full ITAC safeguard investigation the South African Revenue Service on 28th September 2018, published a notification that a safeguard duty of 35.3% would be imposed on EU bone-in chicken, with immediate effect. This safeguard duty will decrease over 4 years, falling to 30% from 12th March 2019, 25% from 12th March 2020 and 15% from 12th March 2021 until 11th March 2022. Rates of Safeguard Duty on Bone-in Chicken Exported to South Africa from the EU
USDA, ‘South Africa Extends Safeguard Duty on EU Bone-in Broiler Meat’, 17 October 2018 |
These safeguard duties against imports form the EU were imposed in September 2018, under the terms of the 1999 EU-South Africa Trade Development and Cooperation Agreement (TDCA). The EC is however in the process of formally challenging the application of these safeguard duties, although pursuit of the process has been held back by Covid-19 linked travel restrictions and social distancing requirements (see companion epamonitoring.net article ‘EU Formally Challenges Application of SACU Safeguard Duties in the Poultry Sector’, 27 June 2019).
| Comment and Analysis While the South Africa poultry sector is on a trajectory for a strong recovery and a renewal of growth across the sector, there is unfortunately a major hole in South Africa’s MFN tariff policy arising from the de facto impact of the provisions of EU-South Africa trade agreements.As a result of the tariff ‘standstill’ commitments included both in the initial 1999 concluded EU-South Africa TDCA and the subsequent EU-SADC EPA, imports from the EU are exempt from any South African MFN tariff increases. The impact of this trade policy measure therefore falls on all other global poultry meat exporters except the EU. What is more, the provisions of EU-South Africa trade agreements be they anti-dumping or safeguard provisions have proved singularly ineffective, as a result of the pan-European nature of many EU poultry companies. Despite the introduction of country specific anti-dumping duties on imports from individual EU member states in July 2014, between 2013 and 2015 EU poultry meat exports to South Africa grow 40% (from 151,075 tonnes to 211,310 tonnes) and continued to grow in 2016 (+ 80%) to 272,196 tonnes. This occurred as the country of origin in the EU of exports to South Africa was shifted in response to the company and country specific anti-dumping duties. While given the parallel introduction of AI related import bans, it is difficult to obtain an accurate picture, the introduction by South Africa of EU safeguard duties against imports from the EU also appear to have had little effect, with as AI imported restrictions were lifted, EU exports expanding. Total EU Poultry Meat Exports to South Africa 2012-2019 (0207) (Tonnes)
Source: EC Market Access Data Base Only the resumption of AI related import bans saw EU poultry meat exports to South Africa impaired, with the EC reporting a 29.4% decline in EU28 poultry meat exports to South Africa from January to September 2020, compared to the corresponding period in 2019. As a consequence, according to the USDA analysis the March 2020 MFN tariff increases ‘are expected to grant the EU a competitive advantage over the other trading partners like Brazil and United States’ (1). This could potentially serve to return the EU to the dominant position as a supplier of poultry meat to the South African market which it enjoyed in 2016. In 2016 the EU accounted for fully 15% of all poultry meat consumed in South Africa and over half of all South African poultry meat imports. The incredible growth in EU poultry meat exports to South Africa coincided with the complete phasing out of import duties on poultry meat under the EU-South Africa TDCA, with despite ‘back loading’ in the poultry sector this process being completed by 2012. This was 4 ½ years before ethe the EU-SADC EPA came into force. This growth in EU poultry meat exports to South Africa also coincided with the imposition of anti-dumping duties imposed on US and Brazilian poultry in 2012 and the first generalised increase in South Africa’s MFN Tariffs in October 2013. Given the second March 2020 round of MFN duty increases, seeing a 25 and 32 percentage point increase of MFN duties on bone-in chicken and boneless portions, the application of EU safeguard duties which are being progressively reduced until final elimination in March 2022, ongoing EC efforts to secure the early removal of safeguard duties can be seen as largely irrelevant to the competitive position of EU exporters. Since March 2020 the EU’s margin of tariff preferences over major competing suppliers in the US and Brazil have actually increased despite the continued application of safeguard measures taken under the provisions of the EU-South Africa TDCA, provisions which the EC is seeking to challenge solely on a legal technicality. The EC challenge, is based on the legal lapsing of the provisions of the EU-South Africa TDCA less than three months before the safeguard duties came into effect, as a result of its replacement by the marginally changed EU-SADC regional EPA. However, this needs to be seen in a context where the internal South African proceedings for the introduction of the safeguard duties had been initiated fully a year before the provisions of the EU-South Africa TDCA lapsed. If the EC continues to pursue its legalistic challenge to the South African safeguard measures, this will violate the spirit of such provisions when included in trade and development agreements. The intention of these provisions is to provide protection against market disruptions which could undermine local production – powers which the EU itself routinely users in defence of vulnerable EU producers. To seek to overrule the South African safeguards through a legal sleight of hand, would be a breach of the spirit of such provisions and would undermine any pretence of EU trade agreements being concluded and implemented on the foundation of wider EU development policy objectives. |
Sources
(1) USDA FAS, ‘Poultry and Products Annual Country: South Africa – Republic of’, 1 September 2020
https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Poultry%20and%20Products%20Annual_Pretoria_South%20Africa%20-%20Republic%20of_09-01-2020
(2) USDA,FAS, ‘South Africa Bans Poultry Imports from Poland’, 7 February 2020
https://agriexchange.apeda.gov.in/IR_Standards/Import_Regulation/SouthAfricaBansPoultryImportsfromPolandPretoriaSouthAfricaRepublicof02032020.pdf
(3) USDA, ‘RSA South African Poultry, South Africa Continues Positive Trend in Chicken Meat Imports as Government Considers Increasing Tariff’, 3 Sept 2019
https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Poultry%20and%20Products%20Annual_Pretoria_South%20Africa%20-%20Republic%20of_9-3-2019.pdf
(4) USDA, ‘RSA South African Poultry, As Domestic Industry Recovers from Bird Flu, Poultry Imports Forecast to Increase Marginally’, 4 September 2018
https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Poultry%20and%20Products%20Annual_Pretoria_South%20Africa%20-%20Republic%20of_9-4-2018.pdf
(5) USDA, ‘RSA South African Poultry Imports Forecast to Increase Due to Avian Influenza’, Poultry and Products Annual, 23 October 2017
https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Poultry%20and%20Products%20Annual_Pretoria_South%20Africa%20-%20Republic%20of_10-20-2017.pdf
(6) EC, Market Access Data Base
https://trade.ec.europa.eu/access-to-markets/en/statistics?includeUK=true
(7) USDA FAS, ‘The South African meat market’, 15 September 2015
https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=The%20South%20African%20meat%20market_Pretoria_South%20Africa%20-%20Republic%20of_9-15-2015.pdf
(8) EC, ‘DG AGRI DASHBOARD : POULTRY MEAT’, 25 November 2020
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/poultry-meat-dashboard_en.pdf
(9) USDA, ‘South Africa Extends Safeguard Duty on EU Bone-in Broiler Meat’, 17 October 2018
https://gain.fas.usda.gov/Recent%20GAIN%20Publications/South%20Africa%20Extends%20Safeguard%20Duty%20on%20EU%20Bone-in%20Broiler%20Meat_Pretoria_South%20Africa%20-%20Republic%20of_10-17-2018.pdf