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SAPA looks to 2023

This article is part of our 2022 Annual Report, which includes a FairPlay year in review, a 2023 forecast by the South African Poultry Association, an assessment of the state of infrastructure in South Africa by Donald MacKay and a profile on poultry farmer, Clive Tigere, and his new hatchery in Makhado.

By Izaak Breitenbach, General Manager: Broiler Division, South African Poultry Association.

2022 has been a challenging year for South African poultry producers. From backyard broiler farmers struggling to get small businesses off the ground, to larger producers which, like their smaller counterparts, continuing to contend with failing infrastructure, a lack of municipal service delivery, and avian influenza outbreaks in the latter half of the year. But it’s the industry’s relentless optimism and tenacity that has seen it grow into the R56-billion strategic national asset it is today; not only growing the sector but also transforming the face of South African agriculture.

Highlights and lowlights

The past year is decorated with a number of highlights for South Africans and the industry alike. Chief among which is the material reduction in imports that has allowed the industry – especially black entrepreneurs and start-ups – to grow their various businesses, both broilers and layers.

Additionally, the poultry industry has invested in excess of R2.4-billion into the local producers and the value-chain. This investment will be disbursed by 2024, and has already facilitated an increase of 10% in production capacity, while adding more than 2,600 new jobs – a material acceleration of the industry’s transformation.

With this investment and material growth, the broiler crop will keep increasing as a result of the increase in production capacity.

Prior to the signing of the Poultry Sector Master Plan, the industry suffered a decade of dumping and stagnation, but has accelerated its growth over the last three years.

Unfortunately, despite the industry’s growing successes, material transformation, and setting South Africa on a path to become more food secure, 2022 is dotted with a lowlight or two. While service delivery and failing infrastructure are certainly issues that lead to material harm for producers, and weaken SA’s road to complete food security, it is the ever-present threat of dumping – a menace that has plagued the industry for more than a decade, causing its sluggish growth – that has not been addressed.

While the International Trade Administration Commission and the Department of Trade, Industry and Competition found that dumping is causing material harm to local farmers, the DTIC still elected to postpone the anti-dumping duties against Brazil and four other European countries to August 2023, citing “consumer cost” as the reason for delay, despite there being no links between anti-dumping duties and the retail price of chicken.

Looking ahead at 2023, the Poultry Association and its members will continue the struggle to curb dumping as it is a core prerequisite for further growth for both the industry, and the broader value-chain. After all, dumped chickens don’t eat South African maize or soya.

Tariffs are a priority for the poultry industry. It is doing everything in its power to have the suspended anti-dumping duties against Brazil and four EU countries implemented. This will complete the actions against dumping and only once dumping against all the countries that subscribe to this unfair trade practice is completed, will the industry be free from the predatory trade with which it has to contend; only then will trade be on an equal footing.

Looming industry threats

While dumping continues to be a scourge, it is by no means the only threat facing local producers. The industry has to remain vigilant against outbreaks of highly pathogenic avian influenza (HPAI). In 2022, avian influenza spread to South Africa by wild birds migrating from Europe. At present, Europe and the USA have had multiple outbreaks, which puts South Africa’s poultry industry at risk.

While the disease used to be a winter disease, it seems that locally, and in both the EU and US, the disease has bridged to summer. It has become endemic and producers will need to explore the appropriateness of vaccination to mitigate financial losses and the negative impact the culling of birds has on the environment.

While the disease is not yet under control in Europe or the USA, and the South African wild bird population is still testing positive for the disease, poultry producers will be at risk this summer. If the wild bird population doesn’t start testing negative, we may be at risk next winter.

The avian influenza outbreaks are obviously not just a concern for broilers, but layers as well. In January 2021, SA’s national flock size was estimated at 28 million birds. In April of the same year, South Africa was hit by the HPAI resulting in a loss of about 2.8 million layers. Fortunately, since January 2022, SA’s national flock size bounced back to around 27 million birds, and the industry forecasts an increase back to 28 million birds for the next season.

However, HPAI is a threat that producers face globally. Locally, however, there’s a damper on the industry’s growth and progress, and that is the extremely high raw material cost that negatively impact the profitability of companies, and their ability to fully use their assets.

The prime driver of prices in the industry is feed cost or raw material cost. At present, there doesn’t seem to be any relief in terms of raw material cost on the horizon and that will keep the pressure on prices. This fundamental needs to change for prices to reduce. At present, local producers are subsidising the very high raw material costs on behalf of consumers. Chicken and eggs will remain one of the most cost effective and versatile animal proteins South Africans can enjoy.

Export potential

Exporting poultry products to the world is a core tenet of the master plan, despite very little movement from key stakeholders to prepare and export to identified markets. The South African Poultry Industry produces the cheapest chicken rands can buy, without compromising on quality.

To get to a point where South Africa is certified to, for example, export to the EU, takes a
long time – up to 24 months. Once that has been achieved, South Africa needs to prove through rigorous and constant testing that it is compliant with the EU import requirements – only then can exports take place. Exports are an important strategic move for the industry that will open up new markets, but it will take the industry at least another 24 months to effect and then export.

Volumes will grow slowly from the zero base at the start, but with the quality products produced at that price-point, we expect export volumes to accelerate rather rapidly once the process starts.

The EU market is being targeted to export cooked breast meat. The standards for export to the EU are the highest in the world and should the industry obtain that, it will automatically afford open access to other markets, like the Middle East.

Producers do export eggs to the SADC region with Mozambique as its biggest destination. Since the start of the 2021 HPAI outbreak, the producers have reduced exports in order to balance local supply and demand so as to prevent the need to attract imported eggs.

One of the industry’s key objectives under the Egg Master Plan is to drive export promotion using the African Continental Free Trade Agreement.