Poultry Industry: briefing by Food and Allied Workers Union

Agriculture, Land Reform and Rural Development

10 March 2017
Chairperson: Ms P Semenya (ANC)
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Meeting Summary

The Portfolio Committee was briefed by the General Secretary, Food and Allied Workers Union (FAWU) on the crises ravaging the Poultry sector in the Republic of South Africa. The Union had believed in a job-creating as well as industrial strategy-inspired trade policy approach to trade relations and agreements between South Africa and the rest of the world. In 2012, the Union staged a protest to the Brazilian embassies because the imports from that Country negatively impacted the local industry. The European Union was engaged in dumping of poultry products as it sold breast portions in their own jurisdiction at a premium and dumped leg-quarters to RSA at ridiculously low prices. As a result, the biggest poultry farms in the country had reduced wages due to reduction in the hours of work, and closed some of its farms, which led to thousands of workers being laid off.  The proposed immediate actions included raising tariffs, imposing anti-dumping duties and embarking on a trade war with the European Union. Long term measures included interventions to assist the industry to compete with the countries that were more competitive. Government should move with speed to save the industry from decimation, and the Department Trade and Industry and Department of Agriculture, Forestry and Fisheries should implement measures proposed by the task team while the Portfolio Committee played its part to safeguard the country and the jobs.

Members said the issue of chicken dumping was serious as farms were closing up and workers were laid off. and called for a debate in the House to address the issue. Members asked if the Food and Allied Workers Union was happy with the speed of the task team, if government had the capacity to take over farms that were closed and if that could save the situation,; if the poultry industry was transformed; if the chicken from the European Union met health standards; if leg quarters were less healthy than the breasts of chicken; if the labour force was prepared to make concessions by sacrificing their salaries; and if the Union would like government to subsidise the input cost along the value chain. They questioned the potential impact of a trade war on other businesses with the European Union; how small scale farmers were affected by the dumping; if there were discussions with importers who created markets for dumped chicken; the potential of the USA becoming a problem in future since it has same eating pattern as the European Union; if there were value for money for those who used the dumped chicken; and if there were red tape that would hinder the task team. Members said the dumping reminded them of the colonisation period, the European Union was capitalising on the free trade agreement and playing dirty politics, and encouraged all political parties to join forces against the European Union dumping.

Members appreciated the Food and Allied Workers Union for ensuring that members were well treated in the work place and revealing the problems as well as the solution to the crises, but suggested that the Union should stop focusing on saving jobs and increase chicken production, and run a campaign against chicken from the European Union. Members also said there should be comprehensive research on various levels of value chain as well as a review of the marketing strategy. The interaction between the Food and Allied Workers Union and the Portfolio Committee would continue and there would be a correction of all wrongs in the industry, the round table discussion would be addressed and there would be a follow up on policies that should be tightened.

Meeting report

Opening remarks by the Chairperson 
The Chairperson said the Portfolio Committee had extended the invitation because of the crisis in the Poultry industry. There was need to understand the challenges so that together with those that were to take decisions, there would be better solutions to the challenges. Apologies were received from Minister Senzeni Zokwana as well as Deputy Minister Bheki Cele.

Mr Katishi Masemola, General Secretary, Food and Allied Workers Union (FAWU) briefed the Portfolio Committee on Agriculture, Forestry and Fisheries on its submission on the crises ravaging the Poultry sector in the Republic of South Africa. FAWU had believed in job-creating as well as industrial strategy inspired trade policy approach to trade relations and agreements between RSA and the rest of the world. In 2012, FAWU staged a protest to the Brazilian embassies because the imports from that country negatively impacted the local industry. The EU was engaged in dumping of poultry products. EU chicken producers were not as cost competitive as RSA’s because they enjoy advantages that made them embark on dumping. The chicken producers received support in a form of subsidy from their governments and they sold breasts portions in their own jurisdiction at a premium and dumped leg-quarters to RSA at ridiculously low prices. The argument that RSA chicken producers were uncompetitive is rebutted as a study found RSA to be more competitive than the rest of the EU and the fifth most competitive in the world after four countries including Brazil. The impact of EU dumping is that the biggest poultry farm in the country, Astral Foods Chicken had reduced hours of work leading to reduced wages. The second biggest, RCL Foods Chicken closed some of its farms leading to 1 350 workers losing their jobs while the third, Country Birds Holdings had announced closure of one of its three abattoirs.  The proposed immediate actions were to raise tariffs and impose anti-dumping duties, explore embarking on a trade war with EU by employing reciprocal technical barriers to trade. Long-term measures included interventions that would assist the industry to compete with Brazil and the three other countries that were more competitive than RSA. Government needed to move with speed in saving the industry from decimation. The Department of Trade and Industry (DTI) and Department of Agriculture, Forestry and Fisheries (DAFF) should package intervention measures agreed to in the task team and speedily implement same. The Portfolio Committee should play its part to save the country and the jobs that go with this mission.

The Chairperson said Mr Masemola referred to swine flu in the presentation. She asked if it was swine or avian flu as swine flu was associated with pigs.

Mr Masemola replied that it was avian flu.                                                                                                          

Mr S Mncwabe (NFP) commented that his constituency was in Pinetown, Durban, which covers Hammarsdale, where Rainbow Chicken farms were located. It is a miserable situation. The farm is literally closed. The issue of dumping is a serious one. He proposed the Committee should monitor what the task team was doing and meet with the task team to have a sense of what was going on. The EU was bulldozing South Africa. This matter should be put up for debate in the House. It was not only in Hammarsdale but in other areas as well. A number of employees had been retrenched. In as much as there was a promotion of international trade in South Africa, a priority should be placed on the people of South Africa. The Country would have to revisit its trade agreement with other Countries.

Mr P Maloyi (ANC) noted that the President of FAWU had indicated that some workers had reduced working hours, a lot of abattoirs had been closed and many workers had lost their jobs.  He was happy to hear that FAWU was part of the task team, was FAWU happy with the speed of the task team? It should be indicated if it were otherwise so that the situation can be arrested. The Portfolio Committee had an interaction with the South African Poultry Association (SAPA). Both FAWU and SAPA presentations were raising the same problems. FAWU had said South Africa should declare a trade war. SAPA said there should be a “Gigaba approach”, which meant tit-for-tat. Did FAWU think that the government should take over the companies that had been closed down or about to close down, to ensure there were no job losses? Did FAWU think that the Poultry industry is transformed and if not, what should be done? Was FAWU suggesting that the chicken from Europe did not meet the health standards and DAFF was not doing enough to make it so?

Mr M Filtane (UDM) asked if a test been done on the chicken to show that the leg portions of the chicken were less healthy than the breasts? Looking at the internal situation, when a person decided to go into the chicken business, the real motive behind the venture was how much profit could be made. Was the labour force prepared to make concessions by sacrificing their salaries? Would FAWU like the government to help to subsidise some of the input cost along the value chain? He wished FAWU had come to say these are the value chain and the input cost, then the Committee could then say the reason EU could dump chicken was because EU had lower input cost and the input cost of producing chicken in South Africa was so high as a result of this and that reasons. Had FAWU looked at the potential negative impact of a trade war on all the other businesses that South Africa was doing with the EU? Had FAWU foreseen a situation where it would lock heads with other labour unions in those industries if SA engaged in a trade war with the EU?

Mr H Kruger (DA) said the USA had the same eating pattern as the EU. Was FAWU also looking at USA so that the situation could be avoided where in two years’ time, the Committee would meet to hear presentations on USA? How were the small-scale farmer and cooperatives in the poultry industry affected by the dumping? Was there discussion with the importers in SA about the way they are doing their businesses because the problem lay with those who had created the market for this dumped chicken. Was there any value for money for our poor people when they used this dumped chicken?

Mr W Maphanga (ANC) said the President of FAWU was here to pay solidarity to the Portfolio Committee as an organ of government. The Committee as an organ of government had policies in place and set targets that needed to be achieved in the set time. The way the counter pact countries had operated was a reminder of the period of colonisation. EU countries were playing dirty politics with South Africa. He appreciated FAWU for their role in ensuring that employees were well treated in the work environment. The government of South Africa had agreed to have a free trade with other countries. The EU was capitalising on that. South Africa must deal with this matter politically. A union should be forged with the entire civil society of South Africa. There should be a fight until SA emerged victorious. People were losing their jobs out there. It was the role of the Committee to defend and protect the people of South Africa. All the political parties must forge unity and fight this battle. The Comrades from the Union were here to support the Portfolio Committee.

The Chairperson congratulated the leadership of FAWU. The Union had shown the Committee the problem and had suggested the solution so that the matter could be resolved with speed. The Committee had met with the small holder farmers at some point, as the discussions went ahead; it was not clear whether it was a problem of legislation or arrogance of the companies. The small holders had said they were not able to grow because the system was closed. She asked FAWU to help the Committee to understand how the system was closed? Also on the question by Mr Maloyi on the issue of transformation of the industry, FAWU should come with a proposal on how that issue should be approached using the opportunities that were there. A Professor had said SA wanted to change what it knew nothing about rather than resourcing, developing and creating its own products.  Chicken feeds were very expensive and some companies could not even afford it. When the Committee met with African Growth Opportunity Act (AGOA), she had asked why the chicken breasts from South Africa were not dumped in the EU. Now she understood it was because the systems were closed. How would SA reposition itself? There was a need for smart negotiators. Did the South African government have the capacity to take over those farms immediately? How could this intervention be sustainable to protect jobs? Did FAWU believe that the Country was moving at a required pace that could actually save the situation? If not, what was FAWU suggesting that the Portfolio Committee should do? Had the Portfolio Committee known there was a task team it would have had a joint session with the Committee on Trade and Industry so that forces could be joined to resolve these issues. Were the owners of the companies ready to sacrifice some of their profits because most SA companies want 100% of profit? Were the owners of companies and workers ready to meet halfway by sacrificing part of profits and salaries respectively? FAWU should comment on these questions so that there could be a better clarity

Responses by Mr Katishi Masemola
Mr Masemola said Mr Mncwabe had attested to the socio-economic impact in Hammarsdale. He could not belabour that point except to say that it would happen in all areas that farming operations were going to be closed as a result of EU dumping. Not only the three main chicken producers were affected; the medium sized chicken producers were also affected. In Polokwane, Mike’s Chicken was undergoing a business rescue. The small-scale chicken producers basically serve the villages and district areas. There was likelihood they would survive more than the large scale commercial farming. There was no research and FAWU could not speak authoritatively on EU dumping across the country from small scale to large scale. FAWU might want to do more research on the local level situation.

On the speed of the task team, FAWU was contented with the current speed. FAWU had hoped the task team would conclude by the next one or two meetings after the last meeting that was heard yesterday. Beyond the two meetings there would be of a cause for concern. There was a high-level team from the side of government. Government had sent DDGs and had taken the matter seriously and FAWU was happy with that. The Union hoped for a faster flow of communication between the respective Departments on this matter at ministerial level because there was not much time

FAWU was working with the SAPA on this matter. Differences between the two parties were put aside in order to solve this challenge in the poultry industry. FAWU and SAPA had disagreed on the continued employment of casual labourers. FAWU had been engaged in industrial action against SAPA for better wages but in this matter there was a united front between FAWU and SAPA because of a National state of emergency. The two had worked together in protest to the Brazilian Embassy in Pretoria and would continue to work together.

On the idea that government could buy the poultry farms, if dumping was not blocked, there would be no solution. Government buying poultry farms was not a solution to chicken dumping.

On transformation, it had to happen, it was imperative. The industry was beginning to recognise that. There was a debate. If there was no survival as a sector, there would be no agenda of transformation to talk about. Let us talk about survival first and thereafter post survival transformation discussions. South Africa can outperform EU when it came to competitiveness on chicken. An analysis by the SAPA it had said 25 000 jobs could be created by the Chicken Industry locally. There was potential to create more out of exports and this should be exploited.

The bulk of chicken coming here to Checkers, Shoprite and Pick and Pay, was a problem and an issue that should be looked at seriously. Mr Masemola could not say it was unhealthy. Government needed to be sure that it was healthy. He could not make accusations without any evidence.

On choice of chicken breasts, SA preferred the entire Chicken.

On concessions by workers, in one of the operations of Astral Chicken 70% of the workers doing permanent work were actually casual workers, and were paid far less than the going rate of permanent workers. Chicken producers realised they must convert workers into permanent employees. FAWU could not commit to such concessions to cut wages.

On the trade war, this was a question the Government of South Africa must answer because they may know certain things that FAWU did not know in terms of the consequences of engaging in a trade war.

On the chicken from the USA, there was an impact but not as big as that of the EU. On whether two years later, USA would be a problem, the Country should be alert as this might likely happen.

There was no research information on the impact of EU dumping on small holder chicken farmer; there was need to research as a country

On whether there was value for money poor workers, he was not sure. Retailers were putting small margins above the prices of local producers so that consumers could focus on no-name brands. That tens of thousands of jobs could be sacrificed because millions of poor consumers could get access to cheap food coming from Europe was a policy issue which our country must address. It was a question which South Africa must deal with.

On the commendations that the Committee had given to FAWU for raising this issue, the Union must do it to assist the Country. Close to 40% of South Africans were unemployed. FAWU as a Union must contribute to saving the current jobs. More could even be created if the EU could open their markets and give access SA chicken produce.

On the comments from the Chairperson, FAWU could not say there were barriers to the chicken business so that the small holders can come in.  Local retailers could play a role in ensuring that there was space on their shelves for the small chicken holders. There could be other barriers that made it difficult for small holders to get access to the main stream.

 On the mapping of the Poultry industry in South Africa, some research must happen in that area.  There should be a total mapping of the entire industry including the sources of input such as maize and soya beans. This would assist to plug in small holders’ participation in the chicken industry.

Responses by Mr Atwell Nazo (FAWU)
On the question on transformation, Mr Nazo added that the industry was not yet transformed. FAWU was engaging with small scale farmers as well as those in the rural areas to see how they could be brought in so that they could also experience transformation.

On the issue of government buying up poultry farms, government could be encouraged to buy the farms. Government would do a lot in terms of empowering the workers on the necessary skills of how to run the industries.

On the question of subsidising part of the cost in the current situation, it was difficult but it could be a short-term solution rather than a long one so that the industries could be sustainable on their own. By June 2017 if nothing was done, the majority of the Workers would lose their jobs.

Responses by Mr Abraham Davids, Research Officer, FAWU
For the small-scale holders to grow with the sector, the dumping must stop. Otherwise the livestock part of operation Phakisa cannot be achieved.

There was a round table discussion that was scheduled to be launched in November 2015 but did not materialise. The Portfolio Committee should encourage that discussion to continue.

Mr Kruger asked if there was any red tape that would be problematic to the working of the task team.

Mr Filtane said perhaps FAWU needed someone who could do a comprehensive research on various levels of value chain. FAWU should be totally informed about the input cost. There should be a review of the marketing strategy and a close look at the alternative areas where the products from SA should go. Stop focusing on saving the jobs. Increase the cake and automatically there would be a market for it. Businesses were very competitive. There was a need to look at it from the angle he suggested. FAWU should run a campaign that asked how healthy the chicken from the EU was.

 Mr Maloyi said the suggestion from Mr Filtane’s was a good one and should be experimented.

 Mr Masemola said that principle was something that FAWU would have to consider. FAWU would take EU to the cleaners as SA Chicken producers. More job creation out of increased cake was something FAWU would support.

On the issue of red tape, Mr Masemola replied the Union was satisfied with the senior level of involvement in the task team as well as the delivery of report. The sense of urgency was overwhelming and the Union was sure that Cabinet would not hesitate to sign off the outcome from the task team.

 Mr Nazo said FAWU had addressed today to the best of its ability.

The Chairperson said the interaction would continue as the Committee and FAWU would continue to work together to join forces to save the industry. There must be a correction of the wrong that might have happened in the industry. The Committee had noted some of the issues that affected South Africa as it strove to achieve food safety. The issue of round table discussion must be addressed. If it was not working it meant that government was not following the plans that it had presented to the Committee. There was a clearer picture now than before the commencement of the meeting of today. The Committee will follow up on policies that needed to be tightened up. She thanked all the Members and FAWU for their contributions.

The meeting was adjourned.

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