Food security is the hot-button issue right now, but observers could be forgiven for thinking that poultry industry role-players don’t know their eggs from their elbows.

A number of commentators, from poultry producers to politicians to industry lobbyists and other role-players, agree that we are facing a crisis, and have called for an expansion of VAT zero-rating on certain foodstuffs and the reduction of tariffs.

No Consesus

But that is where consensus ends. No-one can agree on what is really causing the crisis and therefore no-one can agree on a solution. And the problem with a VAT exemption or a tariff rebate is that it is just a one-off short-term intervention and does not address the causes of the crisis.

Poultry producers want more protection from ‘unfair competition’. Importers want greater freedom to plug shortages and bring prices down. Commentators blame poor government policy and economic mismanagement.

Economists warn of a food ‘availability’ crisis rather than a food security crisis, saying there is plenty of food, it is just not affordable to the people who need it most.

Astral Foods – Catastrophic Drop

Astral Foods, responsible for a quarter of the country’s entire production, has announced a catastrophic drop in earnings (from a R1,4 billion 2022 profit) and blames infrastructure collapse, loadshedding…. and unfair competition from ‘dumped’ imports. Puzzlingly, though, their CEO Chris Schutte also warns that becoming dependent on cheap imports will cause prices to ‘skyrocket’.

Commentator David Wolpert, writing from Australia, states that the Australian poultry industry is healthy despite having no tariff protection from imports, but has no imports worth mentioning anyway.

Paul Matthew, from the Association of Meat Importers and Exporters, writes that one of the main reasons for shortages in the poultry industry is protectionism, and that there needs to be greater co-operation between producers, importers, and agricultural enablers.

Lapsed Poultry Master Plan

The arguments for or against protectionism and tariffs, unfortunately, miss the point. The problems within the South African poultry industry are structural and fundamental. The Poultry Master Plan, introduced to great fanfare in 2019, was supposed to address these structural imbalances but a lack of real progress saw most roleplayers withdraw their support.

Even now that the Poultry Master Plan has lapsed, the only significant item on its agenda that was successful was the introduction of anti-dumping tariffs – and one did not need a Master Plan in order to achieve that.

Transformation in the poultry industry remains stubbornly elusive, with small and emerging farmers turned into ‘contract growers’. This means their fortunes are tied to only one customer with no freedom to expand or sell their produce elsewhere.

Possibly the closest to identifying the real problem is DA shadow minister for finance, Dr Dion George, who blames weak and ineffective governance and poor policy decisions for record food inflation.

Poultry Industry

Loadshedding, infrastructure collapse, fuel and labour costs, competition from imports – all of these elements only add a burden to a system that is fundamentally skewed. The industry is uniquely dominated by five large companies that control production.

Small farmers have the choice to remain small or become ‘contract growers’ for the large producers. This effectively places a ceiling on their operations. So it is not only protection from imports that are demanded by the large companies, they do not want competition from other producers either.

Government policy not only protects this hegemony, but actively encourages it.

Chicken Feed

Another area where co-operation and policy have failed, is the issue of chicken feed.

The largest brake on poultry production in South Africa is the cost of feed. It affects huge entities and backyard farmers alike. Brazil’s success in poultry production is entirely due to their government’s investment in feed supply, which slashed input costs and has allowed Brazil to become the world’s largest exporter of poultry.

South Africa has no policy incentive to encourage organised agriculture to produce more chicken feed, so these input costs will remain excessive.

This has also acted as a barrier to entry for emerging farmers. Along with unreliable power supply, high labour and security costs and poor infrastructure, the local industry is uncompetitive.

Export Potential to Remain Limited

Until the structural problems in the industry are dealt with, and production is spread across more successful small businesses coming up through the ranks, South Africa will have chicken shortages which will have to be supplemented with imports.

Our export potential will remain limited. In the event, tariffs or the lack of tariffs will be academic. The price of poultry will continue to rise, and lower-income consumers will continue to carry the heaviest burden.