Summary
EU poultry meat exports to South Africa and Ghana rose 23.7% and 13.3% respectively in 2016, while exports to Benin fell 16%. Beyond these three main destinations EU exports of poultry meat to African ACP countries increased 4.9% in 2016. The debate continues in South Africa over the use of trade policy measures which it is alleged harm poor consumers, while enabling poultry companies to avoid addressing structural challenges. The South African government is looking at a combination of trade policy measures and support in addressing underlying competitiveness issues. However the issue of the structural surplus of ‘brown meat’ will need to be addressed, potentially through a structured ACP-EU dialogue aimed at promoting responsible patterns of trade in ‘brown meat’ which avoids undermining local ACP poultry production

The latest EC statistics on EU poultry exports in 2016 shows total EU poultry meat exports increased 8.3% compared to 2015. Once again the largest increase in extra-EU poultry meat exports in volume terms was to South Africa (+49,839 tonnes), an increase of 23.7%.

South Africa now takes 18.0% of total extra-EU poultry meat exports, almost 1 in every 5.5 tonnes of EU poultry meat exported beyond the EU’s borders. This is up from a mere 0.6% of extra EU poultry meat exports in 2009.(1) Despite outbreaks of Avian Influenza in EU member states which saw the introduction of import restrictions on some EU member states, 46,397 tonnes of EU poultry meat were still exported to South Africa between October and December 2016.

Exports to Benin, the EU’s second most important ACP destination were down 16% compared to 2016, (2) with this largely being attributable to depressed ‘import’ demand for poultry meat in neighbouring Nigeria and stricter Nigeria customs controls, implemented in an effort to curb the smuggling of rice, frozen poultry meat and second hand cars from Benin into Nigeria.

EU poultry meat exports to Ghana in contrast, were up 13.3% compared to 2016, (1) after short lived efforts to control poultry meat imports in 2014.(2)  This took EU export volumes to levels above the earlier high attained in 2013. However, it was reported in February 2016 that the government of Ghana was once again looking at adopting ‘a policy aiming to reduce poultry imports and improve local production’. This needs to be seen in a context where imports, mainly from the EU and the US now account for 58% of local poultry meat consumption and local producers only 42%. (3)

Overall in 2016 EU poultry meat exports to the 3 main ACP markets rose 8.9% compared to an overall increase in extra-EU poultry meat exports of 8.3%. These 3 main ACP destinations took 31.3% of total extra-EU poultry meat exports, up marginally from 31.2% in 2015. (1)  EU poultry meat exports to all other ACP African countries meanwhile increased 4.9% in 2016 compared to 2015.

The share of Sub-Saharan Africa in total EU poultry meat exports appears to be stabilising at around 47%, up from a share of 20.3% in 2009. Sub-Saharan African markets have thus more than doubled in importance as a destination for extra-EU poultry meat exports in the past 7 years, while total overall export volumes have more than tripled (up from 204,844 tonnes to 674,931 tonnes).

EU Poultry Meat Exports (0207): Top Destination 2015/2106 (tonnes)

	2015	2016	% change
Total extra EU	1,331,506	1,442,683	+8.3%
South Africa	209,971	259,810	+23.7%
Benin	137,650	115,608	-16.0%
Ghana	67,154	76,126	+13.3%
Other ACP African countries	212,816	223,333	+4.9%
Main Non-ACP Main Destinations
Philippines	72,712	93,434	+28.4%
Hong Kong	99,851	121,770	+22.0%
Ukraine	66,151	82,644	+24.9%

Source: EC, Market Access Data Base, http://madb.europa.eu/madb/statistical_form.htm

Meanwhile the debate continues in South Africa on how best to respond to ever increasing imports of poultry meat, which are leading to retrenchments in the local poultry sector (see companion articles ‘Will South Africa’s introduction of poultry safeguard duties by challenged by the EC?’, 14 February 2017 and ‘EU frozen poultry meat exports to South Africa begin to bite’, 23 January 2017).

In a presentation to the South African Parliament the South African Department of Trade and Industry set out:

• the importance of the poultry sector (48,000 ,direct jobs and 63,000 indirect jobs);
• the growing consumer demand for poultry meat up to 2010 and the subsequent slow-down in demand growth;
• the structural investment challenges faced, particularly in order to make full use of the chicken carcass;
• the challenges arising from the drought and associated increases in feed costs;
• an analysis of the competitive challenges faced, linked to rising domestic costs (up from R15/kg to R20/kg), the low cost of imported bone-in quarters (R15/kg from EU and US) and mechanically de-boned meat (R4.10/kg from Brazil) and trade distorting agricultural support and trade policies in OECD countries (notably the EU, where policy support is estimated as equivalent to 18% of poultry production costs);
• the limited export opportunities for South African poultry meat arising from strict SPS measures in many potential markets;
• the scale of the phenomenal increase in imports of poultry meat from the EU in recent years;
• the potential respite for hard pressed South African poultry producers arising from the Avian Influenza outbreak in Europe.
• the global structural surplus of ‘brown meat’ arising from different consumption patterns in developed countries compared to South Africa and the bad news this represents for developing country poultry producers. (4)

In a radio interview in January 2017, South Africa’s Trade and Industry Minister had earlier called for an international initiative to address the structural surplus of ‘brown meat’. (5)

The South African governments’ use of trade policy measures has faced criticism in a paper commissioned by the retailer Shoprite. The analysis by the Econex consultancy, focused on the negative effects on consumer welfare of the South African governments’ use of safeguard duties in the poultry sector, with some of the poorest households in South Africa carrying the costs of government safeguard duties which target low cost poultry meat imports.

It argues that at root, the current South African poultry industry crisis is not a product of unfair trade practices (the normal cause for invoking safeguard measures), but rather a failure to address underlying competitiveness issue, which the long history of protectionist measures have simply enabled the local poultry industry to avoid addressing.  It argues there is no causal connection between the increased imports and the serious injury requirements for the invocation of safeguard measures. The Econex analysis therefore concludes the current crisis would be better address ‘through targeted industrial policy’ measures.

To a certain extent the South African government would appear to concur with the need for an industrial policy response as part of a multi-pronged strategy in the poultry sector.  While the areas for policy intervention are still under elaboration the South African government is exploring 6 inter-related areas of intervention:

• addressing competitiveness issues by lowering input costs, upgrading technologies and improving the functioning of supply chains;
• the provision of concessional finance for competitiveness related investments;
• addressing the demand situation through preferential state procurement and dietary based promotion of poultry meat consumption;
• providing support for export market development, in a context where only 1.4% of South Africa’s poultry meat production is exported;
• supporting industry transformation via the creation of new opportunities for value creation and value addition across the supply chain for previously disadvantaged groups;
• the use of trade policy measures, including tariff, non-tariff measures and SPS measures aimed at establishing equality of treatment between South African imports and exports of poultry meat.

Source:
(1) EC, Market Access Data Base
http://madb.europa.eu/madb/statistical_form.htm
(2) Agritrade, ‘Review of Ghana’s poultry sector trade policy under way’, 22 June 2014
http://agritrade.cta.int/Agriculture/Commodities/Poultry/Review-of-Ghana-s-poultry-sector-trade-policy-under-way
(3) wattagnet.com, ‘Ghana restricts poultry meat imports’, 22 February 2016
http://www.wattagnet.com/articles/26000-ghana-restricts-poultry-meat-imports
(4) DTI, ‘Summary challenges facing the SA poultry sector’,  Presentation to the Select Committee on Trade and International Relations , 1 February 2017
http://www.dti.gov.za/parliament/2017/Status_SA_Poultry_Sector.pdf
(5) 702.co.za, ‘Minister Rob Davies in the UK to discuss Brexit and trade with SA’, 25 January 2017 9:36 AM
http://www.702.co.za/articles/240372/minister-rob-davies-in-the-uk-to-discuss-brexit-and-trade-with-sa
(6) Econex, ‘‘Safeguards in the South African poultry sector: an economic perspective’, Research Note 43, January 2017
http://econex.co.za/wp-content/uploads/2017/02/ECONEX_researchnote_43.pdf

Comments and Analysis The suggestion that EU exports of poultry meat have no causal connection to the current crisis in the South African poultry sector (as implied in the econex analysis) is counter-intuitive. The underlying reality is that, despite the slow-down in growth in South African poultry meat demand since 2010, imports of poultry meat from the EU have soared. Imports increased from a mere 5,138 tonnes in 2009 to a massive 259,810 tonnes in 2016. This represented a shift in EU exports away from the Russian market (which was taking around 20% of total EU exports) towards South Africa. This was driven by two processes: · the progressive introduction of Russian import restrictions which culminated in the closure of the Russian market to EU poultry meat; and · the final removal of all tariff and non-tariff restraints on EU exports of poultry meat to South Africa, as a result of the implementation of measures negotiated as part of the EU-South African Trade Development and Cooperation Agreement. The surge in EU poultry meat exports to South Africa which began in 2010 and continued in subsequent years, clearly had market effects which became progressively more pronounced over time. EU Poultry Meat Exports to South Africa – heading 0207, tonnes (2009-2015) 2009 2010 2011 2012 2013 2014 2015  2016 South Africa 5,138 22,007 94,084 131,832 158,481 203,414 209,971 259,810 annual change +10.5% +328.3% +327.5% +40.1% +20.2% +28.4% +5% +45% % total extra EU 0.6% 1.7% 6.7% 9.2% 11.1% 13.5% 15.8% 18.0% Total EU Exports 885,289 1,124,301 1,265,872 1,274,794 1,268,956 1,330,487 1,331,506 1,442,683 The debate in South Africa highlights some of the contradictions and challenges other ACP governments face in formulating poultry sector trade policies. As with many ACP governments, the South African government finds itself on the horns of a dilemma. Chicken meat is a low priced source of protein increasingly in demand by urban consumers, who have an interest in securing cheap, safe poultry meat. Yet the structural surplus of low cost ‘brown meat’ means imports are available at such low prices they threaten to undermine domestic poultry production. Such a development gives rise to serious long term costs in terms of lost local employment opportunities in both the poultry sector and beyond. This is a particularly serious issue in South Africa, where the poultry value chain is well developed and any poultry sector crisis would trigger ‘further de-industrialisation across the economy’ and generate serious employment losses in the maize and soya sectors. Yet this basic dilemma of balancing consumer and producer interests replicates itself across the ACP. Getting to grips with the structural problems of the surplus of ‘brown meat’ at an international level as suggested by South Africa’s Trade and Industry Minister, Rob Davies, potentially offers a way forward.  An ACP-EU dialogue on the responsible conduct of trade in residual ‘brown meat’ poultry cuts, could potentially offer a way forward which allows ACP governments to better balance consumer and producer interests. Potentially this could pick up on the suggestion by the pan-European dairy company Arla, which has proposed the establishment of a stakeholder generated Code of Conduct to guide and promote responsible EU trade practices, which try to minimise adverse effects on local African/ACP producers (see companion article, ‘Arla’s Senegalese milk powder repackaging plant begins operations’, 23 January 2017).

 

Key Words: Poultry, EU South Africa, Benin, Nigeria, Ghana Area for Posting: Poultry, Southern Africa, West Africa