1. PRESENTATION ON THE SITUATION OF THE POULTRY INDUSTRY IN SOUTH AFRICA
22 March 2017

2. Presentation Outline Acronyms Integrated Value Chains
Global Consumption
Global trade
Challenges in the poultry sector
Transformation
Competition Issues
Effect of imports
Responses to FAWU inputs
Responses to SAPA inputs
SPS and TBT principles
Current interventions in the poultry value chain

3. Acronyms and abbreviations
ALOP
Appropriate Level Of Protection
APS
Agricultural Product Standards
DAFF
Department of Agriculture, Forestry and Fisheries
DoH
Department of Health
EPA
Economic Partnership Agreement
FAO
Food and Agriculture Organization
NTB
Non Tariff Barriers
SAPA
South African Poultry Association
SPS
Sanitary and Phytosanitary
TBT
Technical Barriers to Trade
TDCA
Trade, Development and Cooperation Agreement
USDA
United States Department of Agriculture

4. Integrated Broiler value chain
The value chain of the broiler industry is complex and very sophisticated;
The industry is integrated into several other industries like the yellow maize and soybean industry;
These industries show very strong competitive and comparative advantages;
South Africa produces enough maize for its own consumption and normally export to several other countries;
In the past South Africa were a net exporter of soybeans and a importer of high protein meal;
Processing capacity increase dramatically the past few years, this will lead to a scenario where South Africa will import less high protein soybean meal and do not export any soybeans anymore; and
The demand for soybeans will further increase and this will probably lead to an equilibrium situation where less land will be utilise for maize and more for soybeans.

5. Source: 2014 Post-Harvest Innovation Programme.

6. Global Consumption

7. Global trade Major Exporters Global Trade Major importers Products
USA
Brazil
Global Trade
USD$ 17,9
Major importers
Asia
Middle East
Russia
Africa EU
Products
`Whole bird frozen products
Raw products (IQF cuts)
Processed meat

8. Global poultry trade: chicken meat exporters (2015)

9. Global poultry trade: chicken meat importers (2015)

10. Challenges within the Poultry Sector
Various key input cost issues
Feed – impact of drought on maize and soya prices [import parity pricing]. SA pays more for maize and soya than Brazil and Argentina Feed costs up to 70% for broiler production
Electricity – increase in ESKOM tariffs; and
Labour – increase in labour cost [the question of labour being a sacrificial variable cost
Earnings before interest and taxes [EBIT] is one of the lowest [1.9%] if compared country to country with other poultry producing countries
Unprotected industry - unsubsidised production and relatively low tariffs on imports [211% increase in imports of bone in chicken over the past 6 years] Safeguard duty (13.9%) now in place on EU imports
New brining regulations – halved from 30% to 15% in Individually Frozen Portions ;
Global dynamics at play (Brazilian currency, Russian and Chinese demand, Trade, Development and Co-operation Agreement (TDCA)/ Economic Partnership Agreement effect, agricultural subsidies).

11. Transformation
SAPA has a Transformation Agenda but has shown little progress regarding Transformation within the poultry value chain. Currently imports account to just over to ¼ of local consumption meaning that there is opportunity for growth in the sector.
The Agri-BBBEE Charter which is the sector code of BBBEE has five elements to address transformation in the commercial subsectors and developing sectors. These elements are (1) Ownership; (2) Management; (3) Employment Equity; (4) Skills Development; (5) Preferential Procurement; Enterprise Development and Poverty Alleviation. SAPA members need to show commitment towards transformation.
Transformation is mandatory within the sector. It is not conditional and is not a trade -off arrangement for bargaining. It is a basic requirement for cohesion within the sector.

12. Competition Issues
Concentrated Industry: several anti-competitive fines & investigations over
the past few years
Previous investigations by the Competition Commission and fines levelled
on the Industry related to:
Collusion & Price fixing
Information exchanges
Abuse of dominance
Mergers and acquisitions
Commission tracking retail prices and continue to monitor the industry
• Rising feed costs as issue of concern
• Retail mark-ups an issue of concern

13. Poultry within SA agriculture: effect of imports
Multiplier effect on jobs: For every tonnes less meat that we produce we will shed direct and indirect jobs
Some companies are about to shed a few thousand jobs in total
Rainbow retrenching workers, including managers, at present
Country Bird will close down their Mahikeng abattoir, and 939 direct and 1605 indirect jobs will be lost without government intervention
Mike’s Chickens in business rescue/ shut down (38 year-old company)
Daybreak, first significant black owned producer, in major difficulties
Other companies cutting back on production (Astral on short-time)

14. Poultry within SA agriculture: effect of imports….
The number of direct and indirect (including grain) jobs that could be created if we did not import any chicken meat (excluding mechanically deboned meat and offal)
The number of direct and indirect (including grain) jobs that could be created if we did not import any chicken meat (including mechanically deboned meat and offal)

15. Food and Allied Workers Union
Proposed Wayforward by FAWU The response of DAFF
Immediate measures
We immediately need to raise tariffs and implement safeguard measures and explore imposing anti-dumping duties.
A safeguard duty of 13.9% was implemented on all bone in portions from the EU in December 2017 ) now in place on EU imports (International Trade Administration Commission)

16. Food and Allied Workers Union
Proposed Wayforward by FAWU The response of DAFF
Short run and Medium Term Measures
In a short run and immediate term we need to explore embarking on a ‘‘trade war’’’ with the EU by employing reciprocal technical barriers to trade placed on the leg-quarters that our country’s retail-chain stores are importing from the EU.
Any proposed measure should be in observance of the provisions and principles of the World Trade Organization with specific reference to the Agreement on the Application of Sanitary and Phytosanitary Measures (WTO SPS Agreement) and the Agreement on Technical Barriers to Trade (WTO TBT Agreement). Furthermore the measures should be in line with the provisions of the international standards setting bodies in the field of animal health; food safety, plant health and quality assurance.

17. Food and Allied Workers Union
Proposed Wayforward by FAWU The response of DAFF
Short run and Medium Term Measures
It cannot be that our poultry products, specifically breasts, are forbidden from entering the EU
owing to some swine-flu [highly pathogenic avian flu] in ostriches but enveloped to be covering
the poultry products by the EU yet EU does experience swine-flu [highly pathogenic avian
influenza] , as they just did recently, in actual poultry sector and we quickly remove the safeguard
measures as soon as they unilaterally claim to be swine-flu free without us embarking on
thorough going verification of their claims.
The DAFF within its mandate ensures that measures are adopted that exporting countries do not export products which may be an Avian Influenza risk. South Africa imports from mainly from 10 EU member countries. Currently, 8 of those countries are still suspended due to outbreaks of HPAI . Appropriate actions are taken all the time by suspending imports from these affected countries until satisfactory information in line with international standards has been supplied by the affected country . The information is on the surveillance conducted. If the information supplied is not satisfactory, then South Africa does not re-open the market for those countries.

18. Food and Allied Workers Union
Proposed Wayforward by FAWU The response of DAFF
Long-term Strategic Issues
The long- term measures including working on interventions that will assist in further upscaling the cost other competitive moves in getting our industry to deal with even competing with the likes of Brazil and three other countries that are more competitive than RSA….. To this end, we need to ensure that the input side of the value, especially the maize and soya, is domestically reliant on instead of importing or to only import from the region of SADC.
The recently concluded Operation Phakisa on Agriculture, Land Reform and Rural Development further firmed strategies on the value chain approach towards production including on poultry and linked feed value chains on soya and maize. The strategies from Operation Phakisa strengthen the work as already done under the Revitalization of Agriculture and Agro-processing value chains and the Agricultural Policy Action Plan.

19. SAPA desired short and long term outcomes
DAFF response
Desired short and long-term outcomes
Create a regulatory framework that:
Requires exporters to produce products for South Africa - not simply dispose of stored waste
Is WTO and treaty compliant
Ensures imports are based on national needs, not unconstrained importers greed
Reduces imports by at least half
Supports:
Industry sustainability
Industry reinvestment
Industry growth
Food security
Job creation
Rural development and transformation
In principle agree with SAPA on the short and long term outcomes.
Any proposed measure within the regulatory framework of the DAFF should be in observance of the provisions and principles of the World Trade Organization with specific reference to the Agreement on the Application of Sanitary and Phytosanitary Measures (WTO SPS Agreement) and the Agreement on Technical Barriers to Trade (WTO TBT Agreement). Furthermore the measures should be in line with the provisions of the international standards setting bodies in the field of animal health; food safety, plant health and quality assurance, the World Organization for Animal Health Codex Alimentarius Commission and the International Plant Protection Convention respectively.

20. South African Poultry Association
Disease Management
DAFF Response
High disease pressure with high socio-economic impact
Food security
Poverty alleviation
Provision of employment opportunities
Threat of new diseases or new outbreaks through trade
Need for a PPP
Industry commitment - Poultry Disease Management Agency formed
Needs formalised relationship with DAFF that allows for optimisation of disease management resources
Urgent need for improved disease management
Improved disease management is critical for sustainable development of the poultry industry. Effective disease control is captured in Operation Phakisa, APAP, RAAVC and the Veterinary Strategy. This includes pre-border, border and post border interventions in disease control.
DAFF will explore the concept of a Poultry Disease Management Agency in the context of revolutionising veterinary services in South Africa.

21. South African Poultry Association
Measures proposed
DAFF response
Export Agency supported by government
Dedicated support to remove SPS barriers
Government to resolve Namibian access matter
The matter needs further deliberation.
Yes a dedicated unit to conduct risk analysis is currently under consideration by the DAFF.
The matter has been discussed at thedti interactions.

22. South African Poultry Association
Measures proposed
DAFF response
Removal of soya bean and oil cake tariffs
Indirect maize price management
Mechanically deboned meat production
Could have negative effects on domestic soy production [as outlined in APAP]. The impact of such measures needs in-depth investigation.
Proposal reversal of certain aspects of the deregulation of the SA markets. Exploration through studies is important.
Supported.

23. WTO TBT SPS Coverage of SPS and TBT Agreements Protect Animal Life
Technical Barriers to Trade Agreement
Sanitary and Phytosanitary Agreement
Technical Regulation
Any other
Objective
Protect
Human Life
Protect
Animal Life
Protect
Plant Life
Protect
a Country
From risks arising from
From risks arising from
From risks arising from
From risks arising from
Additives contaminants toxins or disease-causing organism in their foods
plant or animal carried diseases
Additives
toxins
pests
diseases
disease-causing organisms
Pests
diseases
disease-causing organisms
The multilateral framework makes provision for the protection of human life, protect animal life, protect plant life and protect the country and TBT issues mainly deal with issues of quality assurance and labeling.
TBT
SPS

24. Implementation of SPS and TBT measures
Basic principles for implementation of Non Tariff measures in terms of the WTO
Least trade-restrictiveness: Measures should be no more trade restrictive than necessary to achieve the appropriate level of protection;
Scientific justification: The measures should be based on science and on an assessment of the risks involved;
Harmonization: Members are encouraged to base their SPS and TBT measures on international standards set by international standard setting bodies;
Equivalence: Members should recognize that different measures can achieve the same appropriate level of protection (ALOP);
Non-discrimination: SPS and TBT measures should be applied equally to imports and similar products produced locally. Members should not arbitrarily discriminate between trading partners where identical or similar conditions prevail;
Transparency: Reliable and accurate information on existing SPS and TBT should be made available. New or revised measures should be notified in accordance with procedures established in international bodies.

25. Current interventions within the poultry industry

26. National Development Plan Winners

27. THE POULTRY VALUE CHAIN PROBLEM STATEMENT
Consumption of white meat is expected to expand by 34% ( BFAP, 2023). This increase is currently supplemented through high levels of imports (especially low-cost frozen portions). .
High animal feed prices dampens domestic production. For Soya oilcake, SA still imports a significant amount as compared to what is locally produced.
Despite an increase in domestic soya production of over 300% since 1999, this is not keeping up with a rising demand for animal feed.
The strategy is to increase production of poultry and animal feed with the aim of lowering feed costs.
POLICY LEVERS
RISKS
ITAC after investigative studies to provide protection against a surge of low-cost subsidised imports of poultry products.
Industrial Development Cooperation investment in crushing facilities for soya bean
75% local procurement by government and business geared towards localising value chains.
BBBEE codes aligned to developing local food networks
Increasing energy prices (electricity)
Unstable energy supplies
Delays and costs of Environmental Impact Assessments and water licences
Increasing input costs – fertilizer, animal feed, fuel and mechanisation

28. ASPIRATIONS ACTIONS – poultry
Add jobs to the current jobs (direct and Indirect) through increased tonnage of poultry production by 2019
Add jobs through expansion of hectares – Soya production
Increased contribution to gross value of Agriculture GDP from R32.9 bil (21.8%) to (25%) by 2019
Increasing current levels of smallholder and subsistence producers by 5% by 2019.

29. ACTIONS – poultry CONFIDENTIAL LEAD DEPT. / SUPPORT OUTPUTS LOCATION
SIP11: Economic infrastructure development programme – Integrated Poultry value chain
• Provide agro-logistics infrastructure to support development of an integrated value chain and coordinate basic services support to farmers
• Revitalization of old irrigation schemes and development of new schemes along rivers
NAMC; DAFF; DRDLR;EDD
Eastern Cape; KwaZulu Natal; Limpopo; Mpumalanga; Gauteng
Increased trade/procurement linkages between smallholder, commercial farmers and feed companies - off-take agreements with feed companies
DAFF
DTI
Land Acquisition: Strategically located land (considering water access, land use capability, proximity to markets etc. acquired to support smallholder farmers).
DRDLR; DAFF;DWS;DEA
National Poultry Production Programme:
• Recapitalisation and development support provided (smallholder); farm infrastructure to new farmers
• Standardised & targeted input supply package - smallholder & commercial (soybean/maize)
• Standardised & targeted input and on-farm infrastructure supply package (poultry)
• Support provided to equity schemes linked to identified value chains
DRDLR
Poultry research programme, identifying more energy-efficient broiler production systems; and to develop higher yielding soybean varieties, through partnerships with private sector seed companies. Further, a need for Vaccine Development in general bird health research – integration of disease resistant
DST
ARC
National Management Plan for pest and disease - Poultry:
Develop integrated national surveillance and monitoring programmes for poultry diseases of importance (e.g., Avian Influenza and Newcastle Disease), residue and food borne diseases
ACTIONS – poultry
CONFIDENTIAL

30. SPATIAL MAPS: GUIDE PROJECT SELECTION AND VALUE CHAIN PLANNING
National
Free State at District and Local Municipalities

31. Conclusion
The South African broiler industry is the mainstay of agricultural production in South Africa: mainly for food security, job creation and economic growth.
Sustainability of this sector is of prime importance to the sector and the country.
Addressing current challenges should have a measured approach, taking into consideration the growth of the sector in totality.
Application of any measure relating to the WTO has to be within the confines and provisions of the WTO .

32. THANK YOU