State of the SA Poultry Industry

Growth despite challenges

2022 was beset by challenges for the South African Poultry Industry. The first half of the year saw Russia invading Ukraine, denoting a sharp increase in feed and input costs for local producers. Minister Ebrahim Patel suspended the implementation of anti-dumping duties despite ITAC reporting material harm to the local industry due to dumping. Avian influenza outbreaks in the latter half of the year meant that South African producers weren’t slaughtering at the newly created capacity of 22.5-million birds per week. And the national electricity provider announcing Stage 5+ loadshedding has increased the average price for farmers (who are fortunate enough to still be in business) to grow their birds by approximately R0.75/kg.

However, despite continued dumping and failing state infrastructure that has slowed development, the industry has accelerated its growth exponentially over the course of the last three years while fastidiously combatting these challenges. South Africa’s poultry industry – a national strategic asset – has grown from a R56-billion industry to a R59-billion, as a result of the additional investment made by the industry participants. While the Poultry Sector Master Plan had called for an investment of R1.5-billion to be concluded by 2022, SA’s poultry industry has already invested R1.8-billion, with an additional R600-million earmarked to be invested by the end of 2024.

Poutry Sector Masterplan (PSMP) Implementation Report

Pillar 1: Expanding and Improving production

1. Poultry production has expanded from 19.7-million birds per week, to meet its target of 22.5-million birds per week.
2. The PSMP sets a target of 3600 new jobs from 2019 to 2022; 1900 new jobs have been created in the poultry sector, with AFMA reporting an additional 2000 jobs being created throughout the value-chain; this is forecast to increase to 2600 by the end of 2024. This is a material acceleration in the industry’s transformation.
3. The PMSP calls for developing enhanced training initiatives aimed at greater efficiency, clear career progression and improved employment equity. More than 100 farmers were trained in biosecurity risks (including HPAI), 150 biosecurity audits were completed for emerging farmers, 60 farmers days were held, with an additional 22 state veterinarians being trained in biosecurity. In the last year alone, more than 300 farmers were trained on the principles of incubation and hatching of eggs; Bio-security; Financial Record keeping; Agro-processing; General farm management; Poultry feed management; Record keeping, and market access.
4. SAPA to initiate and implement a support programme for emerging farmers; From 2019 to 2022, the industry financed R466-million to cover the cashflow for emerging black contract growers. This amount will increase to R474-million by 2023.
5. Increase the level of black ownership and empowerment: The industry has established 21 new contract growers at a cost of approximately R35-million each. The target is to establish 50 contract growers by the end of 2024.

Pillar 2: Driving domestic demand and improving affordability

1. Comparing Q3 2022 to Q2 2022, chicken giblets, whole fresh chickens and frozen chicken portions (non-IQF) increased by 9%, 6% and 2%, respectively. While IQF chicken portions (2kg) declined by 1%. A poultry price monitor report is continuously being updated and circulated to stakeholders to monitor prices.
2. The Bureau for Food and Agricultural Policy has completed a competitiveness study on the local broiler industry. This is part of the research package into cost drivers.

Pillar 3: Driving Exports

1. Industry has submitted a residue plan to the EU, however, it was returned on the basis of a change in the EU’s legislation. DALRRD is reviewing both the split system plan and together with industry it is incorporating the changes desired by the EU.
2. The African Continental Free Trade Agreement process is ongoing. The import requirements for selected countries have been developed.
3. Progress is being made in terms of exporting to Saudi Arabia; the questionnaire has been completed, and we the industry is awaiting an inspection by the Saudi delegation.

Access to world markets

To get to a point where South Arica 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 is an important strategic move for the industry that will open access to 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 export, volumes are expected to accelerate rapidly once the process starts. 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. While service delivery and failing infrastructure are certainly issues that lead to material and financial harm for producers, and weakens SA’s intention to achieve complete food security, it is the ever-present threat of dumping – a scourge that has plagued the industry for more than a decade – that has not been addressed. Tariffs are a priority on the poultry industry’s agenda. 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 prescribe 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. 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 price. This fundamental needs to change for prices to reduce. Local producers are subsidising the very high raw material cost on behalf of the consumer. Chicken and eggs will remain one of the most cost effective and versatile animal proteins South Africans can enjoy.

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