The government is hindering poultry industry job creation

By Francois Baird

First published in the Mail & Guardian.

South Africa’s unemployment rate is dangerously high and keeps on rising. The government desperately wants more jobs. Why then does it keep on putting obstacles in the way of the poultry industry with its proven job creation capability?

This question arises out of two recent news developments – the first-quarter rise in unemployment to a new high of 32.9% and the government’s persistent refusal to compensate poultry farmers for the chickens they have had to cull during bird flu outbreaks.

The two are linked because other countries help farmers recover after bird flu outbreaks. South Africa does not – since the first outbreak in 2017, when it ordered the culling of 1.7 million chickens, to last year’s “disastrous” outbreak when 9.5 million birds had to be destroyed, no compensation has been paid.

The result is that jobs are lost, and possibly thousands more are not created. Large producers fall from profit to loss, and are now slowly recovering when they could have been expanding production for local and export markets. Many small-scale farmers went bankrupt, closed shop and laid off their workers.

This is disgraceful in a country where 8 million people are officially unemployed, and 16 million are classed as “not economically active”. Youth unemployment in the 15-24 age group is 60%, and in the 25-34 age group it is 40%. 

Many of these young people will be in impoverished rural areas where poultry production facilities are concentrated and where more jobs are desperately needed. Yet the answer on compensation for mandatory cullings remains “No”. Government should hang its head in shame.

Where is the focus on job creation, which should be the top priority for every government department? There has been lots of talk about economic growth needed to create the demand for jobs, but where is the concerted action to bring this about? The Reserve Bank is predicting GDP growth of only 1.2% this year, which means unemployment is likely to increase further.

South Africa’s poultry industry is an example of a sector where growth is frustrated, not because of industry actions but because of government.

For the past few years, when the poultry master plan should have resulted in growth and jobs, poultry executives must often have felt that the government was working against them, not with them.

The lack of culling compensation is a major contributor to poultry farmers’ losses, but it is only one of the government-related issues hindering poultry industry growth and job creation.

Last year was a disaster because of other factors, too. Record levels of load-shedding contributed to record poultry industry losses, as producers were forced to spend millions on alternative energy solutions. There has been no talk of government help to chicken farmers because of electricity-related losses, or because of the effect on production and distribution of other infrastructure failures such as road and rail transport and collapsing water supplies.

The poultry industry was both disappointed and damaged when, in 2022, Trade and Industry Minister Ebrahim Patel decided to suspend for a year the implementation of anti-dumping duties on chicken imports from Brazil and four EU countries.

Then last year Minister Patel proposed rebates on chicken imports, to fill a non-existent gap in supply to the local market. Despite vociferous opposition from the poultry industry, and evidence that the rebates were unnecessary, they came into effect from January to March this year.

More bad news followed this year when the Competition Commission – another part of Minister Patel’s empire – announced a “market inquiry” into the poultry industry, based on the supposition that the large-scale producers that enable a constant supply of affordable chicken are actually a market hindrance.

The inquiry may take a year or more, and it’s going to be an expensive exercise for the poultry industry. The industry will have to commission expert research and analysis to explain its position and avoid further nonsensical government decision-making.

All of this is contrary to both the letter and spirit of the poultry master plan, signed by government and the poultry industry amid much hope in November 2019. Much of that stalled when Covid-19 struck the next year, but that doesn’t explain the manifest failure of many master plan objectives.

The plan aimed to curb chicken imports and reduce their market share as the local industry grew and expanded production. Imports have indeed been curbed, albeit temporarily due to bird flu outbreaks in foreign producer countries.

The local industry was supposed to grow as a result of expanded local consumption and an ambitious export promotion programme.

The industry invested R1.8 billion in expanded production, creating nearly 2 000 jobs in the process, but some of this capacity is lying idle due to low demand and no export growth.

Chicken exports were to double and treble as new markets were opened and existing ones expanded. Last year exports were actually lower than in 2019, when the master plan was signed. One of the big hindrances is a lack of state veterinary capacity, which the master plan identified and planned to address, to provide the health certifications required by export markets.

Bird flu vaccination is the latest issue. The poultry industry is calling for a compulsory vaccination programme to prevent another devastating outbreak, but the requirements that producers must meet have been so complicated that few farmers will likely get permits to vaccinate their flocks.

There is some good news for 2024. Poultry industry executives met Minister Patel in March, detailed their government-related problems and were encouraged by his response. If Minister Patel remains in office after this month’s elections, the poultry master plan may be on a much more productive track.

Renewed growth is needed, not only in the poultry industry but throughout the economy. Chicken farmers are not the only ones to have borne the brunt of government failings, but their experience illustrates what can go wrong.

The unemployment statistics show that, when issues are not addressed, millions and millions of people are out of work. That is a national disaster and a threat to our future.