“The word crises means it can be fixed. If the state intervenes with various trade measures, the tariff application being one of them, we can come out on the other side,” Lovell, Chief Executive Officer of the South African Poultry Association (SAPA) told CNBC Africa.
He believes that if the government delays or does not act aggressively enough to deal with this predicament, a number of companies, including large ones, could potentially be shut down in the next 18 months or so.
SAPA has called for stricter import tariff measures to be put in place by government, by as much as 82 per cent, in order to level out the trading field between domestic and international poultry companies.
“We are not trying to restrict imports. All we are trying to do is have imports compete fairly, which they currently do not,” said Lovell.
He explained that the reason the playing field is so uneven at the moment is because importers, mostly from European countries, have enjoyed a free trade agreement which was signed with the South African government in the 1990’s.
As a result, the local poultry industry has been severely impacted, mostly by issues of importers dumping product into South Africa as well as the increasing feed raw material costs.
“In South Africa, we pay more for maize and soya than a farmer would in America,” Lovell pointed out.
Even though the pricing of grain cannot be changed as it is priced according to the Chicago Board of Trade, he explained that the South African government has had the right to subsidize agriculture up to 2.1 billion rand per annum in direct interventions.
The rights have existed since the 1980’s, according to Lovell, however they have never been used by the state.
“We’re the second biggest user of maize in South Africa after consumers and the biggest users of soya so if we fail, the grain industry suffers because they now have to export more of their products,” he added.
Another detrimental factor to consider, Lovell indicated, is that nearly 130 000 jobs could be lost if the crises is not resolved.
“There are about 130,000 people directly and indirectly living off the broiler meat industry, which is the part of the industry that is suffering,” he said.
Lovell therefore believes that it is essential for government to become more proactive when developing policies related to the agricultural industry. He also added that cooperation between SAPA and the state had finally commenced.
“Government and SAPA have at last started cooperating more productively and we are working on a comprehensive strategy which will deal with the travails of the industry in a more overarching manner. It hasn’t yet been reduced to writing but it’s in the discussion phase,” he concluded.
“It is definitely a big step forward for both parties.”