Disbelief at poultry market inquiry

The South African government’s unexpected inquiry into the local poultry market has sparked disbelief among analysts and role-players. The South African Poultry Association says that it could exacerbate existing challenges faced by the industry.

An independent market analyst says he is mystified at why the South African government is “targeting” the local poultry industry, and suspects it may be a sop to voters in an election year.

Anthony Clark said he has been following the poultry industry for 20 years, and had reacted with “total disbelief” to the announcement of the poultry market inquiry.

Clark said the industry had invested billions of rand in expanded production in terms of the poultry master plan, but over the last two years the government and Minister Patel’s department had “done everything in their power to chip away and try to burn in flames the poultry master plan”.

One of these “harmful actions” was the decision on import tariff rebates. Clark noted that the poultry industry faced a host of government-created obstacles, including repeated power outages, failing infrastructure and water supply issues.

In an interview with radio station 702, Clark said these issues had caused losses last year. “The competition commission is going after a sector which basically makes no money.”

He noted that governments in other countries were encouraging poultry companies to consolidate in order to bring down costs. “Here the government is trying to break them up or make them even more fragmented”.

Clark said the inquiry made no sense and must have come “like a bolt from the blue” to the local poultry industry. “Is this an electioneering tactic?” he asked.

“Puzzled by poultry inquiry”

Equally surprised are Wandile Sihlobo and Prof Johann Kirsten of the agricultural economics department at Stellenbosch university.

In a letter to Business Day, they said that the 2019 poultry master plan aimed to boost inclusive growth in the poultry industry.

These efforts had been constrained by the covid-19 pandemic and growth-constraining factors such as the poultry industry “having to operate in an environment of failing municipalities, power cut issues, rising imports, higher feed prices and avian influenza, among other things”.

The industry had operated almost in a crisis mode, the challenges constraining inclusive growth persisted and the associated costs of these broad problems limited the participation of small players.

“This means if we care about inclusive growth in the poultry industry, we should focus on resolving issues of failing municipalities, power cuts and biosecurity, among other things.

“We are therefore puzzled by the idea that there is a Competition Commission inquiry into the poultry industry now, while the factors distorting progress in the industry remain unresolved, they wrote.

“We should first resolve these growth-inhibiting issues, assess whether the pace of inclusion of small players still won’t take off, and only then consider whether an inquiry is warranted.”

Industry sees no need for poultry market inquiry

The poultry industry has reacted vigorously to the announcement of a government investigation into the local poultry market.

While stressing that it would co-operate fully, the SA Poultry Association (SAPA) said the inquiry was unnecessary and that it was disturbed by the “hostility” shown in competition commission remarks.

“Through our contributions, we will try to ensure that the inquiry does no further harm to this strategic national industry,” SAPA said in a statement.

“Central to the inquiry will be the issue of the concentration of large companies in both the broiler and egg industries. There seems to be an underlying suspicion this is bad for the industry and for consumers. We will provide the inquiry with our views on these matters.”

The industry was also concerned about the commission’s statement that there are “ongoing demands for bailouts through ever-increasing tariffs and the imposition of anti-dumping duties.”

The poultry industry said it had never in its history asked for “bailouts”. The use of the term “indicates a hostility that we find disturbing,” the statement said.

“What the industry has asked for is protection against unfair and dumped imports. ITAC investigations have repeatedly found that these imports are harming the industry and costing local jobs.”

The industry rejected suggestions that it was not competitive. International research had shown repeatedly that South African poultry producers were among the most competitive in the world. However, the industry had been hit recently by cost increases from higher input costs, repeated power outages, other infrastructure failures and bird flu outbreaks.

“The result has been that the industry made no profits last year, and top companies recorded substantial losses.

“Additional stress on profitability is likely to be done by the government’s introduction of rebates on poultry import tariffs. This will bring in unneeded additional imports when the local chicken market is in oversupply,” SAPA said.

“The poultry industry has for decades supplied South Africa with affordable meat protein. If it is to continue to do so, it deserves understanding and support.”