South Africa’s poultry industry needs the government’s attention on important issues, says FairPlay founder Francois Baird. Here he provides new agriculture minister Willie Aucamp with a to-do list.
Key takeaways:
- Resolve bird flu and culling compensation issues: Minister Aucamp should facilitate bird flu vaccinations and end his department’s legal opposition to compensating farmers for ordered culls (bringing it in-line with global best practices).
- Support poor households and local trade: The government needs to make chicken VAT-free to fight malnutrition, while scrapping the US import quota and halting illegal dumping to defend local markets and boost export opportunities.
- Defend the integrated production model: Minister Aucamp should ask the Competition Commission to stop its market inquiry. Because breaking up large, vertically integrated companies will destroy the efficiencies that keep chicken affordable.
South Africa’s new minister of agriculture, Willie Aucamp, will have a lot on his plate. However, he should give a high priority to the poultry industry, the largest component of the agricultural sector, which has several urgent issues requiring his attention.
FairPlay suggests seven poultry issues which should be high on his to-do list.
They are:
- Getting the mass vaccination against bird flu underway.
- Ending his department’s opposition to compensation for culled chickens.
- The introduction of VAT-free chicken.
- Scrapping the AGOA quota for US chicken imports.
- Clamping down on dumped and illegal chicken imports.
- Boosting chicken exports.
- Asking the Competition Commission to abandon its inquiry into the poultry industry.
Vaccination
Removing the obstacles to vaccination may at last be possible, thanks to former minister John Steenhuisen. New regulations have been promised, and onerous conditions that have prevented large-scale vaccination have been revised, but not yet published.
Minister Aucamp needs to throw his weight behind these initiatives to ensure that the mass vaccination campaign promised a year ago is not further ensnarled in bureaucratic red tape. Bird flu is an existential threat to the poultry industry.
Culling compensation
Since South Africa’s first bird flu outbreak in 2017, the Department of Agriculture has refused to compensate farmers for the chickens it orders them to cull. When a court told the department to end this policy, it appealed against the ruling. This obfuscation must stop.
The law requires compensation to be paid. Minister Aucamp should ensure that it happens.
VAT-free chicken
Chicken is the meat protein favoured by low-income households, yet they are charged 15% VAT on every piece of chicken they buy. Hunger, poverty and unemployment are increasing and child stunting rates are rising because of malnutrition. Poor households are desperate.
Now is the time for Minister Aucamp to support VAT-free chicken.
The AGOA quota
The Africa Growth and Opportunity Act (AGOA) is a piece of United States legislation that provides preferential access to US markets for select African countries. In 2015, to ensure benefits for other industries, the US forced South Africa to accept an annual quota (now 72 000 tonnes) of US chicken free of the anti-dumping duties that should apply.
However, the AGOA legislation also says that if the benefits to other industries are lost, the quota falls away. Because of President Trump’s tariff regime, those benefits have been lost, so the quota should be history. However, under US pressure, the South African government has allowed it to continue, and is prepared to accept it as a permanent feature in a new trade deal. The US also wants all other chicken tariffs lifted.
Minister Aucamp should remind his cabinet colleagues of the size and importance of the poultry industry. It should be supported, not sacrificed whenever the US demands it.
Dumped and illegal chicken imports
Dumped chicken imports have declined significantly, thanks to a combination of anti-dumping dumping duties and widespread bird flu outbreaks in producer countries. Nevertheless, dumping still happens, with chicken portions coming in at half or a third of their production cost. This must stop.
In addition, some chicken imports can be mislabelled to get lower duties, or the value can be under-declared. Minister Aucamp needs to work with SARS to strengthen efforts to combat these illegalities.
Chicken exports
Chicken exports are a priority in the revised poultry master plan, now Phase 2. The problem is that they were also a priority in Phase 1, and chicken exports decreased instead of trebling.
Exports are critical for the poultry industry’s future, and many obstacles remain. Minister Aucamp needs to give this his personal attention, and ensure that, this time around, chicken exports can soar.
Competition Commission
The Competition Commission is conducting a needless “market inquiry” into South Africa’s poultry industry. Not only does this divert executive attention away from running successful businesses, but it could affect the industry’s ability to provide affordable chicken for the nation.
The commission is concerned about the fact that a few large and vertically integrated producers dominate the industry, and believes that this concentration is detrimental to smaller producers who buy feed and day-old chicks from the large companies.
The industry has explained repeatedly that vertical integration – one company handling all aspects of poultry production, from feed and chicks to processing and distributing chicken – is a feature of successful poultry industries worldwide.
It is also what enables them to supply smaller producers at reasonable prices.
Any attempt to break up these large companies would also break this successful business model. The result would be more expensive chicken for a country that desperately needs affordable meat protein.
The poultry industry feeds the nation. Minister Aucamp and John Steenhuisen, the new deputy minister of trade, industry and competition, should advise the Competition Commission to leave poultry alone.
