Trading Chickens for a Fragile State

Africa is littered with the economic debris of predatory trade practices like dumping. Amid the growing debate about the exclusion of South Africa from the African Growth and Opportunities Act, another trade twist arrives. South Africa’s minister for Trade, Industry & Competition, Ebrahim Patel, will soon decide whether or not to reimpose suspended antidumping duties on chicken from Brazil and various European countries after opting out a year ago. At stake is the future of the South African poultry industry and that of an increasingly unstable country. When chicken, the primary source of meat for South Africans becomes unaffordable, state fragility looms.

Alarmingly, the most industrialized country in Africa is sliding in political stability rankings: the “rainbow nation” boasts shaky infrastructure, widespread institutional corruption, and a staggering official unemployment rate of more than 32 percent. In addition to regular power outages, called “loadshedding,” the country labors under soaring input costs and monthly poultry imports from countries such as the United States, Brazil, and Argentina have more than doubled since October 2022. As a result, the South African poultry sector is under the whip.

If anyone needs hard proof of the crisis, look no further than Astral Foods, one of the country’s largest poultry producers, listed on the Johannesburg Stock Exchange. The company recently announced an 88 percent decline in operating profit, having incurred costs of $38.5 million due to blackouts. It had processed about 17 percent fewer broilers, resulting in a drop in production of about 1.1 million broilers a week. Soaring input costs mean domestic producers are subsidizing the price of chicken by about 8 cents per pound.

Since the South Africa trade minister postponed the imposition of antidumping duties in August last year for twelve months, the country’s economic crisis has deepened, smashing business confidence and jobs. Opening the door to dumping, as Patel did last year in the hope of containing food inflation, now becomes a question about how soon South Africa wants to be classified as fragile.

The country is already sitting in the “Elevated Warning” category of the Fund for Peace’s Fragile States Ondex (FSI), along with fellow travelers such as Sri Lanka, Colombia, Senega, and Kyrgyzstan. On almost every key metric South Africa’s global risk ranking has degraded significantly over the past ten years. Even the ruling ANC party secretary-general Fikile Mbalula has conceded that South Africa is at risk of becoming a failed state.

Nigeria, another African giant, which for years has been crippled by similar challenges, now sits in the alarming “Alert” category of the FSI. Nigeria is Africa’s largest oil producer, but its power sector is a mess, with frequent blackouts affecting businesses and households.

The effect on Nigeria's poultry industry has been devastating. Compounded by the same pressures South Africa’s industry is experiencing, farms are closing and scarce jobs are being shed, according to the Poultry Association of Nigeria. One study suggests that about 25 million people in Nigeria, which has a population of 95 million, are supported down the poultry industry’s value chain, making its decline a contributor to that country's slide towards fragility.

Haiti, one of the poster children of failed states, can testify to the effect of dumping. Their local rice production collapsed in the face of cheap U.S. imports—dubbed “Miami rice”— in the 1990s. Haiti, already struggling with weak institutions and rampant corruption, sank further into fragility. Today it stands at the 11th worst spot on the FSI.

Imports of poultry from Brazil to South Africa rose from $114.3 million in 2020 to $171.5 million last year, according to Trade Data Monitor, its import market share soaring from 44 percent to nearly 73 percent. If the import tariff suspension is not ended in August there will simply be a continued decline in domestic production that threatens long-term domestic food security.

The South African government has a role to play in curbing this slide towards fragility, by urgently tackling the endemic power, corruption, and other systemic issues. These admittedly are hard problems to solve. An easier one is ensuring a fair and just trade regime that does not sell precious jobs down the river. While ensuring affordable chicken for the SA population is vital, so is safeguarding the local poultry industry and the jobs it provides

South Africa’s poultry crisis is not only a threat but a wake-up call. North America, Europe, and the UK have a stake in the outcome, beyond the chicken trade. Ghanaian president, John Mahama told the United Nations in 2016 that poultry imports were responsible for massive job losses and increasing migration.

Trading partners from Brazil, the UK, the EU, and the United States should not play chicken with South African state fragility.

Francois Baird is the founder of the FairPlay Movement against predatory trade.

Image: Shutterstock.