The lockdown helped South African chicken producers protect their market but with imports now increasing, the hike in the import tariff in March may not be enough to protect smaller producers. In March the department of trade, industry & competition increased import tariffs on poultry to protect SA’s industry, with the tariff on frozen bone-in chicken portions rising to 62%, and to 42% for frozen boneless portions.
In return the industry agreed to invest in the Poultry Sector Master Plan that was signed in November last year. In terms of the plan the industry aims to increase local and export markets for locally produced chicken. Izaak Breitenbach, general manager of the Broiler Organisation at the South African Poultry Association (Sapa), said Rlbn of the R1.7bn investment by the industry to expand capacity has been activated.
He said 5% more chickens per week are being produced for slaughter and Sapa and its members are establishing 50 new black contract-grower farmers, in addition to the 70 who are already active and productive. But Beverly Mhlabane, MD of Zapa Holdings, said although “the tariff increase is good for the industry as a whole, how does it help us [small-scale farmers]? There won’t be a chance for us to grow.” Mhlabane, who is also the owner of the small-scale poultry farming operation in Benoni, Gauteng, said the increase in import tariffs will benefit only the large poultry businesses in SA, as “less than 10 companies own 90% of the market”.
Retailers, she said, don’t buy from small companies like hers. She said the barriers to entry for small- scale farmers are cumbersome and red tape makes it almost impossible to scale up production. She has just paid R100,000 for environ- mental impact assessment certification, and Sapa assisted her with R100,000 to help pay for the water usage rights certification she requires. Mhlabane called on local retailers to support small-scale farmers. “The poultry industry needs serious transformation to progress,” she said. Lennox Xolile Mtshagi, president of the Black Farmers Association of SA (BFASA), concurred. He said: “Transformation is just a word and this is very upsetting.”
– Limpopo producer Clive Tigere.
Covid-19 was good for our business. With limited stock coming into SA, it
gave local producers a chance to shine.
He said the problem is not the pricing but that “nobody is buying from our [black] farmers” as the regulatory hoops that the retail sector expects small-scale farmers to jump through are too onerous and expensive. One farmer who has benefited from the industry’s investment, to the value of R100m, is Clive Tigere, the 26-year-old MD of K Hatchery. His business hatches 28,000 chicks every week, and these broilers are sold to chicken farms to be reared for consumption. Tigere said the target of his Limpopo- based, two-year-old business is to produce 80,000 broilers a week. He credits the Covid-19 lockdown – more than the tariff increase – with contributing to the growth of his business.
“Tariffs aside, Covid-19 was good for our business. With limited stock coming into the country, it gave local producers a chance to shine because people needed to source chickens locally,” said Tigere. He maintained that even if the tariffs were to fall away, the quality of the birds he hatch- es and his competitive pricing on what he refers to as a fair and level playing field would ensure his business continues to grow.
Paul Matthew, CEO for the Association of Meat Importers and Exporters, disagrees with the increase on import tariffs. He said the increase in price for the imported product just gives the “local guys a chance to match the new higher price from imports”.
- This article was first published in the Sunday Times / Business News on 4 October 2020.
