South Africa’s poultry master plan has delivered some notable successes, but there is an urgent need for the implementation of important aspects that have fallen behind.
This was the message from panellists during the FairPlay – Farmer’s Weekly digital summit on the master plan last week.
More than 350 people registered to attend and hundreds listened to the online discussion, hosted by FairPlay founder Francois Baird and moderated by Farmer’s Weekly editor Janine Ryan.
The areas singled out for a lack of action included implementation of anti-dumping duties on chicken imports which the government has suspended, the export drive which has yet to take off, and support for small-scale black poultry farmers who are feeling left out.
In addition, panellists noted a lack of communication over the past year from Trade, Industry and Competition Minister Ebrahim Patel, who has been the driving the master plans for the poultry sector – and other industries – and had previously had regular interactions with master plan stakeholders.
The main discussion and action points are being collated into a joint statement to be agreed by the panellists, after which it will be sent to Minister Patel.
It’s a big plan with big impact
The master plan successes were highlighted by Izaak Breitenbach of the SA Poultry Association (SAPA).
He said that by the end of 2023, the industry would have invested some R2.4 billion in upgrading and expanding poultry production, much of it to accommodate new supplies from black contract growers. This is way in excess of the industry’s R1.5 billion commitment in the master plan.
The result would be the creation of 2 600 jobs and a 10% increase in chicken production. The industry’s annual turnover, estimated at R50 billion, would rise by about R2 billion, and growth created space for transformation.
So far 18 new contract growers had been established out of the planned 50. These are substantial operations – each contract grower takes about R35 million to set up, with funds provided by the Land Bank and the Industrial Development Corporation.
More than 1 000 people have been through skills training programmes.
“We produce the cheapest chicken your rands can buy,” Breitenbach said. “We have been supplying cheap chicken since 1904.”
Progress was being hampered by the suspension of approved anti-dumping duties on chicken imports from Brazil, by a lack of progress on exports and by the government’s failure to announce a restructuring of import tariffs, despite an investigation being completed.
Breitenbach said success of the master plan was essential for South Africa’s poultry industry. “This is a big programme that has a big impact. We can’t afford not to have it.”
Exports are the master plan’s unfinished business
The failure to develop a significant and growing chicken export operation was identified as one of the big unfulfilled objectives of the poultry master plan.
The export drive is an important focus of the master plan, which envisages chicken exports doubling in the three years to 2023, redoubling by 2028 and continuing to grow after that. The result would be a substantial portion of expanded local chicken production aimed at the export market.
Instead of growing, chicken exports have dropped every year since the master plan was signed in 2019.
A major drawback has been the lack of state veterinary resources to provide the health certificates required for export, particularly of raw chicken meat to the EU. In addition, new export markets need to be developed for the export of cooked or partially cooked chicken to the Middle East and elsewhere.
Everything has taken longer than expected, but the local poultry industry says it will be “export ready” by the end of this year. SAPA’s Izaak Breitenbach told the online discussion that exports were a strategic need, and a lot of planning had been done in the last two years on the export of cooked chicken and on facilitating exports to the EU.
However, increased government capacity to support exports was “desperately needed”.
De Wet Boshoff, CEO of the Animal Feed Manufacturers Association (AFMA) said the poultry industry needed to export if it was to grow. If the industry expanded without export markets to take the excess, local producers would be competing against each other in the South African market and “prices will implode”.
Trade advisor Donald MacKay said South Africa’s infrastructure problems were a “competitive hindrance” to exports because they added to producer costs. Water and electricity supply problems and poor roads also put an “automatic cap” on industry growth.
These additional costs mattered. Even though South African chicken would have duty free access to the EU, and would get premium prices, it would still have to compete there with chicken from EU producers and other countries.
“It is a pity the government is not here today, because they have arguably the most important role to play in making sure that the economic basics are in play, that the ports work, that the roads work, that electricity works, in order to get a truly competitive chicken sector,” MacKay said.
Minister Patel on radio silence
Two master plan signatories – Izaak Breitenbach of the SA Poultry Association (SAPA) and Vuka Chonco of the Food and Allied Workers Union (FAWU) – said master plan progress was being hampered by a lack of any interaction with Minister Patel.
Both said there had in the past been frequent meetings with Minister Patel, such as meetings of the master plan oversight committee. This had stopped more than a year ago, without explanation.
Breitenbach said the committee met every quarter for the first two years, and had included government, producers, labour unions, small farmer representatives and importers.
Unfortunately, that has stopped and we don’t have that interaction with the minister. “We are unable to get a meeting with Minister Patel to discuss various issues relating to the master plan such as tariffs, and we need help with exports”.
Chonco said the trade union had been given no reason for the sudden lack of transparency.
“We used to sit on committees and subcommittees, and there was progress because we discussed how far we have gone with the master plan. That is no longer taking place.” Chonco said FAWU would write to Minister Patel proposing that the committee meetings be revived.
Master plan overlooks small-scale farmers
The poultry master plan needed to pay far more attention to the needs of small-scale farmers, said Amanda Mdodana, who farms near Emalahleni in Mpumalanga.
She said small-scale farmers should be far more involved in the implementation of the master plan. Small scale farmers like her did not qualify for the support going to contract growers who operated on a much larger scale.
Small-scale farmers were battling to keep their businesses running. Feed and electricity prices were rising and “we are close to making no money at all”. She had had to install a solar plant because of regular electricity outages.
“We have not received anything because the system is flawed. It would be great to receive some of the things promised in the master plan.”
It would be incredibly difficult for a small-scale farmer producing 5 000 to 10 000 birds per cycle to scale up to 200 000 birds per cycle.
Izaak Breitenbach of SAPA agreed it was difficult to scale up “from small to big”, but said SAPA had supported a number of small-scale poultry farmers who wanted to expand. There was also a poultry fund at the Industrial Development Corporation to which famers could apply.
Tariff suspension will hurt small-scale farmers
Minister Patel’s suspension of anti-dumping duties against Brazil and other countries would hurt South Africa’s small-scale farmers, according to Vuka Chonco of the Food and Allied Workers Union (FAWU).
He recalled that when the poultry master plan was signed in 2019, Minister Patel had described it as “a licence for us to start protecting the sector and the economy.”
Chonco said FAWU had already expressed “a high level of discontent” at the decision not to implement the anti-dumping duties immediately. Importers were likely to take advantage of the situation and there could be an influx of chicken imports.
Referring to the difficulties being experienced by small-scale farmers such as Amanda Mdodana, he asked how she would compete against imports that were “way cheaper” than the chicken she was trying to sell. “Most likely, in the long run she will have to close her business.”
Instead of suspending the anti-dumping duties, Minister Patel should have protected local suppliers, Chonco said.
Don’t wait for benefits from the African Free Trade Agreement
Trade advisor Donald MacKay advised exporters to concentrate on neighbouring countries rather than hoping that the African Continental Free Trade Agreement (AfCFTA) would soon facilitate trade to countries further afield.
The Africa-wide agreement officially commenced in January 2021. It is the world’s largest free trade area by number of states, and was signed by 44 of the 55 member states of the African Union. It aims to eliminate tariffs on most goods and services over a number of years, boosting intra-African trade by 52% and lifting more than 30 million Africans out of extreme poverty.
Unfortunately, that’s not going to happen any time soon, MacKay told the online discussion.
“That agreement is so far behind that we should not expect any short-term benefits to flow from it,” he said, advising exporters to take advantage instead of the existing Southern African Development Community (SADC) trade agreement.
“Trade is more likely to happen with countries close to us, and the farther away you go the harder it becomes, especially in Africa where the cost of transport is crippling.
“We should not forget what is on our doorstep. We have a functioning SADC agreement and we are part of a customs union. Those opportunities should be explored,” MacKay advised.
Government and importers were not there
Missing from the discussion on the poultry master plan were three important signatories – two government ministers and the association representing chicken importers.
They were Minister of Trade, Industry and Competition, Ebrahim Patel, the Minister of Agriculture, Rural Development and Land Reform, Thoko Didiza, and the CEO of the Association of Meat Importers and Exporters, Paul Matthew.
All were invited and none accepted. FairPlay founder Francois Baird expressed disappointment, saying it seemed government had decided that negotiation, consultation and communication were no longer needed.
He also singled out the three parties as those that had not fulfilled their commitments in terms of the master plan they had signed. Most of the outstanding actions were their responsibility.
“It is no good having a plan if the participants to the plan don’t implement it. Both importers/exporters and the government have failed miserably,” he said.
There was no need for a new master plan. The focus should be on executing the plan to which everyone had agreed.
Then Baird referred to the decision by Minister Patel to approve but to suspend for 12 months the implementation of anti-dumping duties against Brazil and four European Union countries – Denmark, Ireland, Poland and Spain.
“Part of that (master) plan is to contain imports by ending dumping. Dumping is not illegal, but it is wrong, and it is against the rules of the World Trade Organisation. Therefore the minister did a wrong thing. He acted against international rules by provisionally allowing dumping.”
Baird said the government was acting unilaterally against an agreement it had made.
Look to the value chain
The importance of the poultry value chain was stressed by De Wet Boshoff, CEO of the Animal Feed Manufacturers Association (AFMA).
He noted that the poultry industry took 31% of South African maize available for processing, 97% of the soya and 78% of sunflower production available for processing.
Therefore the growth of the poultry industry, and development of export markets, would benefit grain farmers, and jobs would be created on their farms. An expanding poultry industry would lead to growth in the feed industry, and support others in the poultry value chain.
Boshoff also produced calculations on the amount of local feed production displaced by chicken imports, and the jobs not created as a result.
In 2017, chicken imports had displaced the production of 13 averaged-size feed mills, and 2 289 jobs, he said. In 2021, it was 6 feed mills and 1 165 jobs.
He said it was unrealistic to expect all imports to be stopped, as some imports were necessary, but the imports needed to be fair.
Feed will remain expensive
International feed prices will stabilise but remain high, according to projections by the Animal Feed Manufactures Association (AFMA).
De Wet Boshoff said prices had shot up earlier this year following Russia’s invasion of Ukraine. Both countries are major grain producers and exporters.
Without any unforeseen developments, markets would now stabilise but were unlikely to go down.
There was huge demand for maize and soya from China, European buyers who could not get wheat had switched to maize, and crops in Brazil and Argentina had been affected by weather. All this resulted in more pressure on maize prices. “I can’t imagine prices going back to previous levels. They will remain at high levels,” he said.
Support for VAT-free chicken and feed
Several panellists agreed on the need to remove South Africa’s 15% value added tax (VAT) from chicken portions and from chicken feed for small-scale farmers.
The FairPlay proposal was supported by trade advisor Donald MacKay, Thabile Nkunjana from the National Agricultural Marketing Council (NAMC), Amanda Mdodana, a small-scale poultry farmer and Vuka Chonco of the Food and Allied Workers Union (FAWU).
Thabile Nkunjana said that poultry demand was increasing and would continue to do so, specifically for South Africans, as it was affordable. “The issue of VAT-free chicken will gain momentum in the near future,” he said.
FairPlay founder Francois Baird said the principle of VAT-free chicken was accepted. The detail of which portions were to be zero-rated, and whether it was local chicken or all chicken, could be worked out at a later stage.
It could be contained to the portions most bought by poor people, for whom “an immediate discount of 15% on consumer prices, retail prices, by scrapping VAT is the simplest, most effective and immediate relief”.
Meanwhile a petition is circulating calling on government to scrap VAT on feed for small-scale farmers.
It is being promoted by Ade Camngca, a small-sale poultry farmer from Nigel, east of Johannesburg.
The petition says 5 000 small-scale farmers would benefit from the removal of VAT on feed, which makes up 65% to 70% of their input costs. It has so far been signed by 3 897 people and they are aiming for at least 5 000 signatories.
A joint statement is being compiled setting out the main points agreed during the discussion and the actions needed. It is being circulated to all panellists to ensure that everything is covered.
FairPlay founder Francois Baird said the document would then be sent to Minister Patel and Minister Didiza and the directors-general of their departments “so that they can understand there is a real job to be done”.
The parties to the discussion, both panellists and the wider audience, had a real stake in what had to happen to implement the poultry master plan.
“We need urgency. We need execution,” he concluded.