Is the South African Poultry Association becoming irrelevant?
The deal of the century?
When the Western Cape investment agency Wesgro announced an exciting deal to export R300million worth of chicken feet to China, the response from the poultry industry was not what they were expecting. Within a week, the South African Poultry Association labelled the announcement as a hoax. FreightNews and Farmer’s Weekly carried a disclaimer that the Association and the Department of Agriculture was not aware of any such trade agreement between South Africa and China. The implication was that if SAPA did not approve of an export arrangement, it could not be true.
Not only did SAPA deny that the deal happened, but they denied that it ever could happen. According to SAPA CEO Izaak Breytenbach, South African birds were too small for the Chinese market and the processing and export logistics would be too onerous.
“Any undertaking to supply 540t of chicken feet monthly, as announced in the Wesgro statement, is a mammoth undertaking that can’t be taken lightly,” he told Farmer’s Weekly. It was SAPA themselves who announced in an industry report recently that exports of poultry in South Africa had ‘failed to take off’. This is despite export expansion being one of the main pillars of the Poultry Master Plan, which expired in 2023 with most of its targets not being met.
‘Large local producers really don’t want the industry to grow unless they can control that growth’
Breytenbach was previously quoted in a newspaper article as saying that local production did not need to increase as enough birds were being produced to meet local demand. But the ‘yoke’ is on SAPA. Not only is the deal in place, but SAPA was made aware of it in the early stages and declined (either through an oversight or a misunderstanding) to participate. With regard to the Agriculture Department’s apparent ignorance of the deal, Wesgro issued a statement to say that the department was indeed aware of the contract but that it was ‘crucial to outline the difference between a commercial export deal and a trade agreement between countries.’
The China agreement has brought together almost 500 poultry farmers (mostly from Mpumalanga and Western Cape) with support industries and other role-players. Apart from a few established partners such as Standard Bank and Wesgro, the participants who will be building up the value chain are all small emerging businesses. Kobedi Pilane, Chair of African Poultry Producers, has long been critical of transformation in the industry, which SAPA claims to be coming about through their investment in contract growers. Pilane insists that by empowering only contract growers SAPA is installing a glass ceiling that would stifle local independent producers.
“They say that are empowering emerging farmers,” he said in an interview. “But they still control production and output and the market, the entire value chain. This is not transformation.”
The Wesgro deal can build an entirely independent value chain
The Wesgro deal, by comparison, is empowerment at its finest. The emerging farmers who are participating are mostly black women with small farms of between 2 000 and 5 000 birds. As a collective, and under the guidance of AskCarlaKote, a specialised trading consultancy, they are organising their own logistics for slaughter and transport. Working with a number of different agencies, they are controlling the process and taking responsibility in delivering the product. The long-term effect of this catalytic deal is that small and emerging role-players in the poultry industry are being given the opportunity to create and maintain their own independent value chain outside of the SAPA stranglehold.
Further sidelining SAPA is the recent announcement that the Competition Commission is conducting a market inquiry into the poultry industry value chain. In its Terms of Reference, the Commission refers to the historical structure of the South African poultry industry in which 63% of all production is controlled by five large companies, and notes that despite a number of interventions (including recommendations in the Poultry Master Plan) this has not changed.
The Competition Commission investigates the market
In an echo of Pilane’s criticism, it notes the ‘vertical integration’ of the poultry industry in which every aspect of production is still controlled by the five large companies, and asks if this is not a factor in high chicken and egg prices. Further, while it admits that unfair imports might affect local producers, there is a danger that protectionism will merely increase prices without adding value to the local industry. SAPA was a signatory to the Poultry Master Plan in 2019. Two of the main pillars of the Master Plan concerned transformation of the industry and the expansion of capacity for exports. In these two pillars, SAPA – by their own admission – have failed.
The Chinese deal is set to be a game-changer for the industry. China has a robust demand for chicken feet, with approximately half of the country’s imports consisting of this popular delicacy. The deal has also generated excitement in other countries, particularly from Africa. And it is the fulcrum around which an entirely independent poultry value chain will emerge. And this has all happened despite SAPA, not because of it.
So now the emerging poultry industry is saying:
“Get out of our way. SAPA. We are doing it for ourselves.”
Have a look at our latest Poultry Analysis