The South African poultry industry is set to lose thousands of jobs by the end of the year, brought on mainly by an oversupply of chicken imports flooding the market.
So says Kevin Lovell, chief executive of the SA Poultry Association (Sapa). He was commenting on the pending job losses at Rainbow Chicken which could affect about 1 200 workers.
Lovell said for every 10 000 tons of chicken imported into South Africa, a little more than 1 000 jobs could be lost in the country.
He said the government was constrained by international trade protocols and only they could solve the problem.
Lovell said chicken was imported at lower prices, but not sold cheaper and did not benefit the consumer.
“We expect that by the end of the year about 6 000 jobs could be lost. We don’t see any light at the end of the tunnel.”
Edwin Mkhize, KwaZulu-Natal provincial secretary for Cosatu, said the union was concerned by the looming retrenchments at Rainbow Chicken. Out of desperation and panic, Rainbow workers had approached the union to report the meetings the employer was convening with workers to inform them about the intentions to retrench.
He said that out of 500 workers on farms, the company intended to retrench 300, and out of 1 500 workers in processing, the firm planned to cut 900. The three shifts in processing would be reduced to one.
“Workers reported that even those who will be saved from retrenchment will have to reapply for their jobs into lower grades.
“This will cause a serious harm to employment since other provinces where there are Rainbow companies are also at risk, including other stakeholders and service providers aligned with Rainbow Chicken, whether as suppliers or receivers.”
Food producer firm, RCL Foods, which owns Rainbow Chicken, among other brands, said it was looking to restructure its commodity chicken category in response to current market conditions, which have deteriorated as a result of an increased level of dumped chicken products in the local market.
The firm said total chicken imports were an average of 27 500 tons a month for the 12 months ended June this year – a 43% increase on the previous year.
With such massive oversupply in the market, it has become impossible for local producers to compete, ultimately threatening the industry’s viability.
It added any resulting rationalisation in the chicken industry was expected to have a knock-on-effect on the wider value chain, such as animal feed and distribution, as well as other service providers and suppliers, including maize farmers.
Miles Dally, RCL Food’s chief executive, said: “Our chicken business has operated on average at a loss for the past five years. Although we have implemented various corrective measures to return profitability, the excessive increase specifically in dumped commodity chicken over this period had cancelled out the gains we have made. Without immediate relief on the horizon, we have to consider a restructure of the commodity chicken component of our business.”
Meanwhile, US Senator Chris Coons, who played a crucial role in opening the South African market to US poultry imports this year, said he did not believe the imports had hurt the South African poultry industry.
Coons, a Democratic senator for the state of Delaware, briefed visiting South African journalists in his home state this week.
For 15 years, US poultry imports to South Africa had been effectively blocked by prohibitively-high anti-dumping duties. Coons helped negotiate the deal to allow 65 000 tons a year of US poultry at a more manageable import tariff of 37%.
The US government had threatened to suspend South Africa’s preferential access to the US market through the African Growth and Opportunity Act if it did not lift the anti-dumping and health restrictions on poultry, pork and beef.
Coons said the impression he had gained from his most recent visit to South Africa a few months ago was that US imports of poultry were still well below the quota because of many disagreements over inspections and handling and market access.
“At that point it did not seem to me relative to the size of the total market and relative to the potential under the quota, that complaints of significant negative consequences were well-founded.”