Could chicken row threaten Brazil-South Africa friendship?
- 3 October 2012
- From the section Africa
South Africa proudly joined the Bric nations of major emerging economies last year, hoping it would boost its economy and give it far greater diplomatic clout.
But the ink has barely dried on the paper and South Africa is already involved in a murky trade row with one of its new-found friends, Brazil.
South Africa's poultry industry is accusing Brazil of dumping chickens on its market and farmers say they are now forced to cut jobs because they cannot compete with Brazil's "unfairly low" prices.
Brazil has denied this and has taken the matter to the World Trade Organization (WTO).
South Africans eat more than one billion chickens a year - more than double the amount of beef eaten in the country, authorities say.
This means chicken farming has always been good business but local producers say the market has shrunk drastically in recent years, citing the 40% year-on-year increase of Brazilian exports.
"We cannot afford to have chicken dumped in South Africa. Our people are losing jobs, our companies are losing profits. It will impact negatively on the country's economy," says Tumi Mokwene, a small-scale poultry farmer.
The local poultry industry employs more than 48,200 people directly and 59,700 indirectly but close to 3,000 people could lose their jobs in the next few months, authorities say.
Some job cuts have already started.
Astral Foods, the second-biggest chicken producer in the country cut 150 jobs in recent weeks.
The company, which employs more than 12,000 people, said this was as a result of "cutbacks on production" caused by a surge in the price of grain and a drastic increase in chicken imports.
Small-scale producers such as Mr Mokwene are no better off.
He owns a 13 hectare farm outside Pretoria and agrees that job cuts have become inevitable.
His farm has the capacity to produce almost 50,000 chicken per 35-day cycle but he is now producing a fraction of that.
"In our farm, we've had to change our business model in order to survive and in the process we had to tell some of our employers that we can no longer keep them on," says Mr Mokwene.
There are concerns that the row could spread to other sectors such as wine and pork.
Local poultry producers want the government to introduce stricter measures against imports - especially for goods South Africa is already producing in mass.
Brazil is the leading poultry exporter in the world, but the South African Poultry Association (SAPA) says its Brazilian counterparts are abusing their power.
Earlier this year, the South African government provisionally imposed additional import duties on two categories of chicken from Brazil, after a report by local trade body.
The International Trade Administration Commission of South Africa (ITAC) at the time said a preliminary investigation found that Brazil has exported huge numbers of chicken into South Africa at unfairly low prices since 2008 - a claim Brazil denies.
Last year alone, close to 60% of all poultry imports came from Brazil - far higher than any other country, according to official figures.
Although the import tariff imposed on Brazilian poultry expired last month, Brazil still wants the WTO to set up a panel to adjudicate.
It says South Africa was wrong to impose the tariff in the first place.
"It is a big deal for us as Brazilians. We are not dumping, we are not undercutting. If we don't take any action, we will be saying other countries are right in accusing us of dumping," Brazil's ambassador to South Africa Pedro Luiz Carneiro de Mendoca told the BBC.
Analysts say the chicken row is not enough to harm trade between the two but the matter certainly needs to be handled delicately and speedily.
"Both countries are emerging economies and there are bound to be complexities in trade relations here but these need to be managed strategically," says Siphamandla Zondi, head of the independent foreign policy think-tank Institute for Global Dialogue.
According to Evans Chinembiri from think-tank Trade & Industrial Policy Strategies (Tips), trade between Brazil and South Africa has quadrupled since 2001 but it is too early to say whether this has been further boosted by South Africa's membership of the Brics grouping.
Mr Zondi said Brazil was more generally advanced and efficient and South Africa would need to significantly improve how it does business if it wants to compete at the "high table".
"Brazil has got to look for new markets because the traditional markets have problems and that may hit South Africa where it hurts the most but that is the nature of international economic trade, it is about taking competitive advantage where you have it," he said.
Back on his Pretoria farm, Mr Mokwene hopes his poultry business will still be around to support his two young children when they are older but he says this will not be possible if local farmers are not protected.
"The threat to jobs is very real. We need to look at ways of ensuring that the industry is sustainable - this is where the government needs to play an active role," says Mr Mokwene.