One On One

Q & A – Paul Matthew

There are growing concerns within the local chicken industry that a proposed 82 percent increase in import tariffs could make chickens unaffordable for most people and result in significant job losses. The Weekly’s Martin Makoni asked the Association of Meat Importers and Exporters of South Africa (AMIESA) chief executive officer Paul Matthew about the decision and how it could affect local industry and domestic consumers. Makoni also asked Matthew if information is shared adequately by players in the industry and how best the situation could be improved. Excerpts:

You have complained that the proposed 82 percent increase in import tariffs for chicken by South Africa could push up prices and possibly cause job losses, what reasons have been cited for that?

A number of reasons have been put forward, such as the fact that imports are killing local farmers and that imports are causing job losses, among others. We have taken the matter quite seriously.

But if look at the figures that have been published by some of the big players in the industry, they are making huge profits. We are talking billions here. So, our question is, how do go to government and justify a tariff by saying you can’t compete against imports, therefore higher tariffs must be applied? The import guys only have about 15 percent of the market. So, 85 percent of the market belongs to the local sector. Such a huge tariff cannot be justified. It’s okay to introduce tariffs to protect the local industry. But on the local market, you need to do something to gain advantage of the import tariffs in place. But unfortunately the local guys are not doing that. It’s about putting more profits in their pockets and obviously protecting the shareholders’ interests.

What’s likely to be the effect of such a tariff increase on the actual prices in the shops, say per kilogram of chicken?

We are worried that prices could go up quite significantly resulting in many households not being able to afford chickens, which are presently the cheapest source of protein in the country. Consumers might decide to switch to other sources of protein such as pork. We are against the reckless increases without considering the consumer as well as other important factors.

You have been quoted as saying the proposed increases could be based on incorrect facts and unconsidered research of the poultry industry, what do you know as AMIESA that government doesn’t know which could endanger your industry?

One major challenge we have is that the SA Poultry Association (SAPA) has the government’s ear and we don’t. So, in arriving at its decisions, it considers the input it gets from organisations like SAPA. We don’t have such an opportunity and we would like to have that too because we are also players in the industry. So, what I have suggested to the industry is that we need a proper study in order to understand what is happening on the local market as well as the import market. About four months ago, an independent study was commissioned. It’s finished now and as AMISA, we launch that next week Tuesday on the 16th. Now, if you have a look at the evidence in that report, it is very poor. What SAPA is putting out to government and the public arena is not fact. I could use the word propaganda to describe it.

Why would you say that, what’s wrong with it?

It’s all about creating a sense that importers are so bad and they are ruining the local guys. But that’s now the case. It’s absolutely not. If you look at what SAPA says and the situation of local farmers, it’s really not true. What happens is that the big players contract farmers to raise the chicks. They play an intricate parent in the industry and they determine to the farmer how much they will pay for the chicks, as well as the maize and other feeds. They also determine to the farmer when they must slaughter. Everything is controlled by the big guys. This means the smaller farmers don’t really make much money. They could make a little bit, but the fact that they are controlled, their growth is limited. They can’t make as much money as they would like to because they are governed the big guys. So, that’s what they play with in the media… claiming that some farmers are closing down because of imports. That’s nonsense.

Do you think players in the poultry industry are working together? What could be the problem and how would you like to see things being done?

Absolutely not. The big players are not working with all of us. We really want to work with everyone so that we can grow the local industry. We have just established that government has commission some poultry strategy. SAPA is driving that with government. So, the question I have been asking is: “We are an important part of the poultry sector, why aren’t we at the table with them?” We want to be part of the solution. I am hoping that through this study that has been done, I can start going to government and say, here are the facts, so, can we be part of this discussion and can we part of a long term solution to the poultry sector in the country… Otherwise every two to three years, we could be having the same fights. We will be spending lots of money on legal fees and other issues, yet all that money could be put to better use and grow the sector.

How many chicken producers does South Africa have and how many of those producers are black or upcoming farmers?

There are seven big producers namely; Rainbow Chickens which has 54 percent of the market, Astral has 22 percent, Country Bird, seven percent, Tydstroom, six percent, Daybreak, Rocklands, five percent, Fouries, six percent, others have a total of 25 percent and these could include small scale and indigenous farmers.

About 200 000 tonnes of chicken consumed in South Africa per month, of which 170 000 tonnes are locally produced, what are some of the reasons behind this shortfall?

It’s about the size of bird produced locally. The food chains have specific sizes that they want for the chicken portion that they sell. Now, the farmers in South Africa slaughter their birds quite early and as a result, they fail to meet the recommended portion sizes. They produce a bird that is very much driven by their market. Now, because of that, they cannot meet local demand. We have a few members that do a lot of pre-cooked chickens. What happens is that our guys want to buy and support the local market instead of importing. But the local guys say, we cannot supply, therefore they have to keep their plants going and they resort to imports. We have evidence of that. They have to import in order to meet the requirements for chicken wings thighs, breasts and so forth.

Is it really true that imported chickens are much cheaper compared to those produced locally and what can be done to address this?

It’s not true. The landing price might seem low, but it must be remembered there are several taxes that are applied including import duty, 15 percent Value Added Tax and others. The price could be much higher compared to the locally priced chickens.

There are fears that the proposed tariff increase could result in about 12 000 job losses, how many people does the industry employ and which jobs are most in danger?

When I talk about the job losses, I’m talking about the situation within the import sector. So, if this tariff comes in, it means that a third of AMIESA members are probably going out of business. They all employ people, so there will be job losses. The job losses extend to extended families because when one loses their job, it affects the family and all those that depend on that person. It affects more than just one mouth. It’s a huge problem. So, when I talk about job losses, I am talking about our members not being able to employ. If businesses shut down, it could lead to the loss of up to 12 000 jobs and this in turn, could affect 48 000 South Africans.

So, what would you like the Department of Trade and Industry to do regarding the proposed tariff adjustments?

I would like to see government saying to AMIESA and others, please bring your expertise to the table and be part of the South African poultry strategy going forward. That’s what I would like to see happening.

How important is the poultry industry to the country’s economy in terms of contribution to the economy and the importance of chicken to the diet of South Africans?

The poultry industry is the largest segment of the South African agricultural sector, contributing more than 16 percent to the gross domestic product. It provides employment, directly and indirectly, for nearly 108 000 people throughout its value chain and related industries. Many people also believe that poultry meat remains an affordable protein source.