Summary
EU poultry meat exports to South Africa continue to decline, but illegal and mis-reported imports from Brazil continue to put pressure on domestic producers. While progress is being made on the domestic dimension of the Poultry Sector Master Plan, serious challenges remain in curbing illegal import from Brazil. Given the curbing of imports from the EU is largely based on SPS measures taken in response to AI outbreaks in Europe, the South African poultry Association is urging the South African government not to lift AI based import restrictions until six months after the last reported AI outbreak in the EU. With EU governments declaring their countries free of AI, this could heighten EU-South Africa poultry sector trade tensions. The South Africa experience highlights: the importance of appropriate trade policy responses to AI outbreaks in major exporting countries; the need for joined-up action across all relevant government services; and the need for active stakeholder engagement in elaborating Poultry Sector Development Strategies. AI outbreaks and Covid-19 linked freight disruptions, could provide opportunities for the expansion of domestic poultry production across Africa, if appropriate comprehensive poultry sector development programme can be set in place
Overall, in 2021, EU poultry meat exports to South Africa have continued to fall, in line with the trend since the post-2016 resurgence in exports which saw a recent peak of 128, 308 tonnes in EU27 exports. While in 2019, South Africa accounted for 7.3% of total extra EU27 poultry meat exports, this was well below the peak share of 17.4% in total extra-EU27 exports which occurred in 2016. These trends since 2016, have been closely tied to Avian Influenza (AI) outbreaks in Europe and associated South African restrictions on imports from the EU (1). This means that for most of 2021 Spain has been the only EU member state permitted to export poultry meat to South Africa (2)
EU Poultry Exports to South Africa January to August 2021 and Annual Export 2012 to 2020 (tonnes)
| 2021
Jan-Aug |
2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |
| South Africa | 27,838 | 86,923 | 128,308 | 82,353 | 77,081 | 272,342 | 211,557 | 196,866 | 151,941 | 130,211 |
| Total EU | 1,269,055 | 2,271,745 | 1,768,434 | 1,648,031 | 1,548,962 | 1,568,725 | 1,421,778 | 1,417,773 | 1,345,568 | 1,347,260 |
| % SA | 2.2% | 3.8% | 7.3% | 5.0% | 5.0% | 17.4% | 14.9% | 13.9% | 11.3% | 9.7% |
Source: EC Poultry Trade Data,
https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html
In the first six months of 2021, the EC reported EU poultry meat exports to South Africa down 53% compared to the corresponding period in 2020. This depressed level of EU exports continued into July and August 2021. This decline came on top of a 32.6% decline in EU exports to South Africa from 2019 to 2020.
This has seen Brazil come to account for nearly 70% of South African poultry meat imports in the first half of 2021. However, this needs to be seen in a context where ‘the EU dominates when it is free of avian influenza’, with Brazil stepping in ‘when South Africa’s bird flu bans cut exports from Europe.’ Brazil’s share then falls as AI restrictions are lifted and EU exports resume. Thus, we find ‘the EU share of South African poultry imports rose from 2.2% in 2009 to 60% in November 2014 and 63% in November 2016. Then bird flu outbreaks cut the EU share to 14.6% in 2017 and 12.9% in 2018’ (3).
In 2021 in the face of Covid-19 related international trade disruptions and domestic disturbances in South Africa imports of poultry meat onto South Africa have been volatile, with import levels being below 2020 levels in 4 months to the end of July and up in 3 (February, March, and June) (2).
Based on recent historical trends there are concerns that if AI restrictions on imports from major EU poultry meat exporters are lifted then EU exports to South Africa could surge. The South African Poultry Association (SAPA) has pointed out that while a string of EU member states have recently declared themselves free of Avian influenza (including Denmark, the Netherlands, Hungary; France and Belgium), outbreaks of AI have been reported in June, July and August 2021 in Belgium, France, Denmark, the Netherlands; Germany and Poland (2).
This needs to be seen in the context of the free movement of poultry across internal EU borders, with the country of slaughtering rather than the country in which the chicken was raised being declared as the country of origin when poultry meat is exported to South Africa.
The Fairplay Movement has highlighted how it is recommended countries be free of bird flu for six months before resuming imports. Not surprisingly therefore, SAPA has urged the South African authorities to carefully review the AI situation in individual EU member states before taking a decision on whether to lift existing AI based import restrictions (2).
This is a particularly important issue, for with the collapse of EU exports of poultry meat to the UK (down 18%, in a context where in 2020 the UK took 32% of total extra EU27 poultry exports), there is likely to be an increase in the availability of frozen poultry meat for export (4). This is particularly the case since following the 4.7% decline in production year on year in the first half of 2021, a strong recovery in EU production is projected in the second half of 2021, with overall annual production expected to be down only 0.9% (5).
Against this background an escalation of EU-South Africa poultry sector trade tensions would appear likely in the final quarter of 2021. This is particularly the case given the ongoing trade dispute over South Africa’s use of trade defence mechanisms under the EU-SADC EPA.
Recent trade developments and evolving concerns in the South African poultry sector need to be seen in the context of the progress of South African Poultry Sector Master Plan, where after a slow start, progress is being made on domestic components of the plan, while problems remain in regard to the trade component.
In terms of the domestic component the following progress is being reported:
- ‘Nearly 80% of the R1.5 billion committed in the master plan to expand production capacity by 9.8%’ has already been invested (6).
- Growth in the grain and feed manufacturing industry has been stimulated by increased poultry sector demand, with the production acreage up by of more than 5%.
- An expansion of black contract farming is underway, aimed at broadening participation in the poultry sector, with new hatcheries producing 50,000 birds a week in support of black contract farmers (7).
- Progress is shortly expected on preferential procurement of locally produced chicken by all South African government agencies (8)
This progress has been achieved on the back of the engagement of all concerned stakeholder ‘from government, the poultry industry, importers and unions’, which ‘makes it easier to identify issues and bottlenecks and sort out problems’ (7).
On the trade component the situation is more difficult. While after a number of false starts progress has been made in actively using trade policy tools to halt dumping (notably through the use of anti-dumping duties), problems remain around the implementation of announced trade policies. This is particularly the case in dealing with ‘illegal imports’.
It is increasingly recognised that if South Africa’s trade policy is to be effective there is a need for the more thorough implementation of border control measures, particularly by the customs service. A review of official statistics from the South African Revenue Service reveals a series of anomalies in the reporting of categories of poultry imports, largely with a view to importers minimising the import tariffs for which the consignment is liable.
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Feet on the Ground Needed to Combat Tariff Fraud In July 2021 statistic revealed imports of frozen chicken feet nearly trebled in the past year, but with an ‘average free-on-board (FOB) price of R14.59/kg, while the more popular leg quarters, which retail for far more than feet, were imported at an average of R14.23/kg.’ Since chicken feet are classified as offal, they attract a tariff of 30% while leg quarters (reported imports of which only rose marginally) face a tariff of 62%. The suspicion is that South African in consumers are not suddenly eating more chicken feet, but that rather importers are recording leg quarter imports as chicken feet to reduce the duty levied by more than half (from 62% to 30%). This has led to calls for more rigorous inspections by customs officials of consignments prior to them being allowed to enter the country. Fairplay Bulletin, ‘Some puzzling aspects to chicken imports’, 7 October 2021 |
According to Izaak Breitenbach of the SA Poultry Association (SAPA) there is widespread mis-declaring or under-declaring chicken imports, with this issue needing to be addressed if the existing nuanced South African poultry sector tariff policy is not to be undermined. Concerns have also been expressed over a lack of thoroughness in the conduct of phytosanitary inspections (9).
Overall SAPA maintains, with domestic production expansion underway, the local poultry sector is capable of meeting more and more of domestic South African demand, although given the projected long-term growth in consumer demand, there will always be space for imports to take place if traded fairly.
Evidence cited in support of this contention was the absence of the predicted market crisis following the closure of the port of Durban in July 2021, as domestic producers stepped in to fill the supply gap. According to SAPA, the Covid-19 depression of consumer demand in South Africa has created a situation where there is under-utilised capacity within the South African poultry sector (6). SAPA discounts importer claims that imports are essential to fill a 20% supply deficit.
Recent analysis has also brought into question the assertion that poultry meat imports ‘provide cheap meat to poor consumers.’ Analysis from agricultural economist Professor Johan Willemse has shown the ‘low prices of imported portions were not passed on to the consumer.’ He highlighted how ‘the price in June of frozen imported chicken thighs was for example listed as about R14/kg, but the domestic price was nearly R75/kg.’ It was suggested imported products were ‘priced slightly lower than the domestic product’, thereby providing ‘fairly good profit margins for importers’, while at the same time exerting a ‘downward pressure on the prices of domestic producers.’ Professor Willemse conclude the argument that imports ‘provide cheap meat to poor consumers has yet to be properly substantiated’ (10).
| Comment and Analysis The decline in imports of poultry meat from the EU is providing market space for the renewed expansion of the South African poultry sector. This is despite the difficulties faced in implementing trade policy measures in regard to imports from Brazil, which have come to dominate South Africa’s poultry meat import profile. This implementation challenges need to be urgently addressed. Critical to this will be improving the efficiency of the South African customs service when it comes to controlling the reporting and labelling f import volumes and product categories. The difficulties faced in South Africa in effectively implementing a nuanced tariff policy (with different tariff rates for different products) is particularly relevant for other ACP countries, who face even greater customs service constraints than those faced in South Africa. However, with the growing use of electronic trade documentation and good movement tracking technology, IT investments in customs operations could help address some of these constraints. This is particularly the case if close public-private sector collaboration is fostered between the official customs and phytosanitary inspection services and private sector supported poultry sector technical services. Electronic trade documentation could also facilitate the forensic auditing of recorded trade, to progressively eliminate false reporting and generate a closer correlation between reported and actual poultry meat imports. More broadly the South African trade experience highlights the importance of Avian Influenza linked trade measures, to creating a ‘breathing space’ for local poultry sector development. This would appear to be particularly important in West Africa, where this area of poultry sector trade policy appears to be severely underdeveloped (see companion epamonitoring.net article ‘EU Frozen Chicken Exports to Ghana and Wider West African Region Continue to Rise’, 4 November 2021). Intra-African policy collaboration would appear to be required in this area. The South African experience also highlights the importance of stakeholder dialogues to the formulation of comprehensive and coherent poultry sector development plans. It needs to be recognised however, that drawing up such plans is simply the first step, with the various inter-related components of these plans needed to be effectively implemented. As the misreporting of Brazilian poultry meat imports highlights, this can require actions in government departments far removed from the agricultural departments responsible for drawing up poultry sector development initiatives. Finally, recent research in South Africa explodes the myth that cheap poultry meat imports from the EU make significant contribution to feeding the poor. Research on price transmission along poultry meat import supply chains in South Africa, shows low import prices while undercutting domestic poultry meat prices, yield only marginal benefits in terms of lower consumer prices, with the importers and distributors pocketing most of the commercial benefits of the extremely low import prices. What is clear from the South African experience is that AI outbreaks in Europe and Covid-19 linked freight disruptions, could provide opportunities for the expansion of domestic poultry production in Africa, if an appropriate comprehensive poultry sector development programme can be set in place, which has the effective buy in from all concerned stakeholders. |
Sources
(1) EC Poultry Trade Data
https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html
(2) Fairplay Movement Bulletin, ‘The EU poultry assault may resume’, 23 September 2021
https://fairplaymovement.org/the-eu-poultry-assault-may-resume/
(3) Fairplay Movement Bulletin, ‘Brazil rules the roost’, 19 August 2021
https://fairplaymovement.org/brazil-rules-the-roost/
(4) EC, ‘EU Market Situation for Poultry,’ Committee for the Common Organisation of the Agricultural Markets, 23 September 2021
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf
(5) EC, ‘Short Term Outlook: Meat Products,’ Autumn 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/short-term-outlook-autumn-2021-chapter-meat_en.pdf
(6) Fairplay Movement Bulletin, ‘Local chicken farmers can feed South African consumers’, 30 September 2021
https://fairplaymovement.org/local-chicken-farmers-can-feed-south-african-consumers/
(7) Fairplay Movement Bulletin, ‘Poultry master plan counts its wins’, 10 June 2021
https://fairplaymovement.org/poultry-master-plan-counts-its-wins/
(8) Fairplay Movement Bulletin, ‘No localisation order on poultry yet’, 3 June 2021
https://fairplaymovement.org/no-localisation-order-on-poultry-yet/
(9) Fairplay Movement Bulletin, ‘Some puzzling aspects to chicken imports’, 7 October 2021
https://fairplaymovement.org/some-puzzling-aspects-to-chicken-imports/
(10) Fairplay Movement Bulletin, ‘Low priced imports don’t benefit consumers’, 30 September 2021
https://fairplaymovement.org/low-priced-imports-dont-benefit-consumers/