South Africa

No paltry measures as poultry master plan aims to fix chicken industry challenges

No paltry measures as poultry master plan aims to fix chicken industry challenges

The broiler business is beset with commercial challenges, including the rising cost of feed, disease control barriers to exports, as well as the influx of cheap imports from Brazil, the EU and the US, mainly of bone-in chicken portions.

The Poultry Master Plan is said to be the road map to remove these friction points. Localisation, transformation and regulatory reform are the common themes, which coincide with the objectives of the president's economic recovery plan and create more jobs.

The SA Poultry Association (Sapa), says some progress has been made on these fronts. 

In a presentation on Thursday to the ministers of agriculture, land reform and rural development, and trade industry and competition, Thokozile Didiza and Ebrahim Patel, Sapa's general manager Izaak Breytenbach revealed that the contribution to GDP by the poultry industry over the past year increased from R48bn to over R50bn — and is expected to reach R54bn by the end of 2022. 

He said 980 new jobs were created in the sector as a result of investing in expanding local capacity. R1.15bn was spent upgrading and improving the efficiency of facilities.

That covers the first two pillars stipulated in the poultry plan.

The other pillars address the monopolies in the industry by promoting black players. One action was to look at the B-BBEE status of the industry. 

Breytenbach says this so far is the biggest disappointment in deliverables.

Last week, however, Ncumisa Mcata-Mhlauli, chief director of the agro-processing unit at the trade and industry department, told the National Council of Provinces committee on trade & industry, economic development, small business, tourism, employment & labour that 13 new contract growers had been assisted in putting their plans together.

Furthermore, Mtshiza stated that they had launched the Agri-Industrial Fund with the Industrial Development Corporation (IDC) in March 2021.

“The intention was not for black farmers to be only growers but by 2030 the entire industry should be completely transformed. R200m had been set aside for the transformation of the industry, as well as up and downstream business,” she added.

This was the first time the committee had engaged with the Poultry Master Plan.

The trade & industry and agriculture, land reform & rural development departments have confirmed that they met with the industry and were looking for a captain to lead the transformation process. The B-BBEE Commission was also involved.

Unati Speirs, chairperson of Emerging Black Importers and Exporters SA (EBieSA) said: “To date, far fewer than 50 black contract farmers have been helped to secure access to the market, a pitiful number when compared to the vast number of black farmers in SA.

"These desperate farmers are unable to open the door, because the key is being held by a small group of oligopolistic white-owned producers who are doing virtually nothing to transform their own ownership.” 

Speirs is also member of the poultry master plan pillar 2 and transformation committee, and the head of lobbying and advocacy for the Farmers’ Association of SA. 

Speirs said: “Certainly, we are pleased there is now a master plan for the poultry industry, to address the many structural challenges and other problems facing the local chicken industry, which include a failure to transform, an inability to grow to meet local demand, and the failure to develop a poultry export programme.

“The impact of the initiatives contained in the Poultry Master Plan need to be carefully weighed up against the impact of the increase in MFN duty rates levied in March 2020 (from 37% to 62% for bone-in cuts and 12% to 42% on boneless cuts) and the impact of Covid-19 on the local and global economies. These factors have distorted the chicken market.

"It is thus critical that the market is allowed to settle and understand the true impact of the increased tariff regime before there is any consideration given to any further changes or modifications to the tariff structure.”

Sapa statistics show that chicken imports doubled between 2010 and 2018, discouraging investment in expansion and job creation.  

The DTIC recommends that there is an 80/20 split between locally-produced and imported goods. The poultry industry is already compliant in this regard.

Currently, SA only imports 20% of poultry consumed in the country, Speirs says.

Sapa, however, applied for another anti-dumping application earlier this year, this time on bone-in chicken from Brazil, Denmark, Ireland, Poland and Spain. 

Chicken anti-dumping cases are notoriously complex and we are dealing with one of the most protected industries in the country, says Donald Mackay, trading specialist at XA International Trade Advisory.

“If the duties are imposed, they will be imposed on top of the duties already in place. In the case of Brazil, this means the anti-dumping duties would be added to the 62% duty already in place,” he said.

If these duties are imposed at the requested levels, what would happen to chicken prices in SA? Undoubtedly they will rise and rise significantly. Given that over 60% of all protein consumed in SA is chicken, what will the people eat?

“Cake, I suppose,” McKay said, referencing the famed Marie Antoinette “let them eat cake” refrain.

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