Chicken Industry

Controversial poultry market inquiry powers ahead

The inquiry, announced in February, will look into various aspects of the poultry industry and its value chain which the commission believes could hinder competition.

It has drawn strong criticism from the industry, with Astral Foods, South Africa’s largest poultry producer, calling it “an attack” on the industry.

Competition Commission economist Kagiso Zwane told OFM that “a market inquiry is instituted where the commission has reason to believe there are distortions in the competitive process in the market”.

Zwane said the Competition Act outlined aspects that the authorities believed were not beneficial to consumers. These included:

  • High levels of concentration throughout the value chain;
  • High degree of vertical integration; and
  • Large enterprises acting as both competitors to independent smaller players, but also as suppliers of crucial inputs such as feed and genetic material.

These aspects are likely to be contested by the poultry industry, which believes that consumers benefit from lower prices because of the economies of scale for large integrated companies with operations that span feed production, chicken rearing, slaughtering and processing.

Rainbow, the country’s second largest poultry producer, said in a results statement this month that “in order to produce the cheapest possible chicken, scale and an integrated value chain are required.”

Producers will be making this case to the inquiry, which will start once the final terms of reference have been published. The final report is expected to be completed within 18 months.