This week’s contribution to our Poultry Industry Insights series comes from Chris Coombes and Gerald Walter of Sovereign Foods. They explain what government and the poultry industry must do to realise the export potential for South African chicken.
While South Africa’s poultry industry has long recognised the strategic importance of exporting to international markets, very few producers have actually engaged with these markets. Despite hurdles such as regulatory challenges and the complexities of market development, there is a compelling case for why South African poultry producers should expand their exports, especially to rapidly growing regions like the Middle East.
While the South African market is large, the international market is much larger and to grow local consumption per capita by just 10% is a massive undertaking, not to mention that the size of the internal market is one of the core reasons domestic poultry producers are so vulnerable to predatory trade, like dumping, or import rebates.
There are ready-made markets abroad just waiting for South African products, and by tapping into these markets, the industry can ignite growth and expand its operations without the need for a significant increase in domestic demand.
Exporting poultry is not just a strategic move, it also makes strong economic sense. A large portion of the inputs into the South African poultry industry such as maize, soya beans, soya oil cake and capital equipment are all denominated in dollars and the South African poultry industry is therefore a net “importer” of dollars, meaning that it is highly vulnerable to fluctuations in the rand. Exporting provides a much-needed hedge against currency risk, allowing businesses to earn revenue in dollars and stabilise their financial positions.
It is crucial for the industry to overcome its fear of exporting. Like the South African motor industry has thrived by exporting vehicles, the poultry industry can achieve significant success by embracing international trade. While exporting involves risks and challenges, it also offers opportunities for growth and profitability.
To capitalise on these opportunities, the South African poultry industry needs to address regulatory barriers and adopt a more outward-looking, or internationally oriented approach. Instead of focusing solely on domestic competition, businesses should set their sights on international markets and compete on a global stage.
The potential is immense, but entering and sustaining a presence in another market is rife with challenges – but that is what we as businesspeople do, we solve problems.
Unfortunately, securing regulatory access is the first major hurdle. The South African Department of Agriculture needs to be more proactive and flexible in helping producers meet the diverse regulatory requirements of different countries.
For instance, while much of the market is open for South African imports, only three domestic poultry plants have been audited and approved for export to the Middle East by the Ministry of Climate Change and Environment (MOCCAE) in the UAE.
One of the most significant frustrations for exporters has been the issue of geographic compartmentalisation for exports following outbreaks of Highly Pathogenic Avian Influenza (bird flu). Compartmentalisation involves agreement between countries on regions from which exports will be banned in the event of a bird flu outbreak.
The UAE has designated South Africa’s nine provinces as geographic compartments. This means that, in the event of one isolated outbreak (which may be 400km away from a designated export facility), exports from all facilities in that province can be banned for up to a year. We are seeking government help to reduce those compartments, preferably to an area surrounding each of our production facilities.
The Middle East has consistently been an attractive market for South African poultry exports, primarily due to its limited domestic production capabilities, its high income and strong poultry consumption per capita. The region lacks a robust local poultry industry, largely because of its harsh climate, which hinders the cultivation of essential feed and the establishment of large-scale poultry farms. Consequently, Middle Eastern countries are heavily reliant on imports to meet their high demand for chicken.
The consumption of chicken in the Middle East rivals that of South Africa, underscoring the vast opportunities available for exporters.
Fifteen years ago, the potential of the Middle Eastern market caught Sovereign’s attention. Since then, Sovereign has built relationships and secured customers in the region. This effort has intensified in the last five years as we pursue market share.
South Africa has a unique opportunity to expand its poultry exports to the Middle East, a region with high demand and limited domestic production. By overcoming regulatory challenges and adopting a more aggressive export strategy, the industry can unlock new markets, diversify its revenue streams, create more jobs, and ensure long-term growth and stability.
The time to act is now, and the rewards will be well worth the effort.
