Chicken Industry

The poultry sector as a growth stimulator for agriculture

By Wouter de Wet, chairperson: AFMA (Animal Feed Manufactures Association).

Arguably one of the biggest challenges president Cyril Ramaphosa and his newly appointed cabinet will face, is the issue of land reform and how to address it without risking food security and agricultural growth. Healthy growth within the agricultural sector will simplify this task.

The South African poultry industry utilises 40% of the 11 million tons of feed produced within the country’s borders. The feed industry utilises 50% of the maize produced and demand for soya currently exceeds supply. It is clear that a healthy and growing poultry industry could stimulate significant growth in the agricultural value chain.

The topic of imported chicken, seen from various perspectives, has been debated countless times.The negative impact on and risk to the local industry is well documented, with thousands of jobs having already been lost in recent years as factories had to close or scale down.

The case for local production

The purpose of this article is to look at imported chicken from a slightly different perspective. A switch from imported volumes to locally produced chicken would not only stimulate agricultural growth, but it would also provide a springboard for hundreds of thousands of start-up, small-scale farmers, which can potentially address some of the socio-political challenges faced in South Africa.

The current volume of imported chicken per annum exceeds 500 000 tons. Various independent international studies have confirmed that South Africa has a very competitive poultry industry. Political interference and/or subsidies, however, make it possible for countries to use South Africa as a dumping ground for imported chicken. If government supports local production, this situation could be turned around.

Advantages of the informal market

Let’s look at the informal broiler market. Across South Africa a growing number of informal farmers are buying day-old chicks that they raise in coops in their backyards, until they can be sold as live birds in the farmers’communities. Many of these farmers have grown their businesses to a point where they raise thousands of birds at a time, consequently converting their live bird businesses from cyclical to constant daily supplies.

The beauty of this type of informal, small-scale business is that it is within reach of many South Africans. It is easy to start out by saving enough money to buy day-old broiler chicks and a bag of feed. This way, any person can transition from being unemployed to being part of the informal sector of the economy.

Here are a few interesting numbers to consider:

1. An informal farmer who raises 100 broilers every 45 days will raise 770 broilers a year (allowing for 5% mortalities).

2. At a selling price of approximately R55 per bird, he/she will generate R42 000 revenue in a year.

Assuming it’s theoretically possible to replace all 500 000 tons of imported chicken with locally produced chicken from informal farmers, it would mean:

1. An additional 800 000 informal farmers who will be raising 100 broilers every 45 days.

2. Additional feed per year of roughly one million tons from the feed industry. For context – that would generate 30% growth in the broiler feed sector and almost 10% growth in total feed produced in South Africa.

3. An extra one million tons of maize and soya that must be produced – which means a roughly 7% increase in local demand for maize.That would mean more than 200 00Oha of farmland planted with maize and soya.

The opportunities relating to increased growth in the rearing, laying and hatchery sectors have been excluded to simplify matters, but it will obviously also generate additional growth in agriculture.

Transformation and opportunities These calculations are based on a 100% conversion of imported volume to volume growth in the informal market. A scenario where 25% of import volumes are replaced with volumes produced by the local informal market would still require 250 000 informal farmers, as well as thousands of additional jobs in the formal broiler market where the remainder of the volume would be produced.

With transformation and land reform currently high on the agricultural agenda, transformation can be accelerated significantly if it coincides with a growth event or opportunity such as this.

I believe we live in an amazing country that, despite all the challenges, still offers exciting opportunities. Unlocking these opportunities will require public-private partnerships. It will also require a joint effort by the various agricultural value chains to work together constructively, agree on the objectives as well as discuss the role each party needs to play to achieve these objectives.

By Wouter de Wet, chairperson: AFMA (Animal Feed Manufactures Association). Reproduced courtesy of AFMA. First published in AFMA Matrix July 2019.