The South African Association of Meat Importers and Exporters (AMIE), hosted a briefing on 26 May 2022 to explore how South Africa can develop a poultry export market as quickly as possible.
South Africa is missing an opportunity to export to chicken-hungry EU
Success would benefit entire value chain, including large and small chicken producers, exporters, processors and SA Inc
SA must work urgently to resolve health and safety challenges to access export markets
Creating a robust, successful poultry export market for South African chicken would bring material value to the entire value chain, from local producers and their shareholders, to medium and small scale farmers, exporters, processors, and consumers. Unfortunately, the country is missing a massive opportunity because it does not meet the health and safety standards required by trade blocks such as the EU.
Paul Matthew, CEO of AMIE said: “In 2019, all parties, including the local industry, importers and Government, signed and agreed to a Poultry Master Plan. One of the key requirements of the Plan is for the South African poultry industry to grow the export of local products. While there is enormous opportunity to do so, there is very little progress in this regard.”
In order for South Africa to export poultry to the global market, there is a checklist of items which the country and its poultry sector needs to urgently tackle. This includes: gaining access to countries with whom South Africa has preferential trade agreements; meeting the international health and safety standards and requirements of countries to which South Africa will export; and for local producers to reorientate their operations to extract value from certain poultry cuts in markets that will pay a premium for them.
AMIE intends establishing a dedicated export task group, which will, together with key stakeholder, facilitate access to export markets and provide processing capacity for cooked poultry product, which is especially desirable in the EU. Matthew said: “We are eager to work with our partners in Government and with local producers to fast-track our country’s export potential. Government plays a critical role in securing the necessary trade conditions for export, and local producers will need to urgently resolve the health and safety challenges required to meet the standards of potential export markets.”
Donald MacKay, founder and CEO of XA International Trade Advisors says South Africa continues to miss huge export opportunities because it’s simply not ready to export. He cites the EU as a priority. “The EU imports 900 000 – 1m tons of chicken breast per year, and it was buying that breast for about 6 Euros per kilogramme in March 2022. South African producers, who have a surplus of chicken breasts, are selling their breasts locally at a third of that price, so the upside for local producers is enormous.
“What’s more, is that South Africa has duty-free status in the EU, which means it pays no duties to sell its product there. The EU has already said that it will buy SA product once the country meets the required health and safety standards.”
The EU is not the only potential market for SA poultry. South Africa has favourable, zero-duty trade conditions under the African Continental Free Trade Agreement (AfCFTA).
south Africa does export many agricultural products successfully, notably citrus which, like chicken, needs to meet the health and safety standards set by export markets. Nonetheless, in 2021, South Africa exported 1.5 million tonnes of citrus, fetching R15.9 billion in export value. Conversely, the country currently exports a mere 26 000 tonnes of chicken per year (1.8% of citrus’ market), with an export value of R622 million (3.9% of citrus’ value).
Getting health and safety right
MacKay says that by getting our health and safety standards on track, we could vastly accelerate our entry into the EU. Furthermore, if South Africa is able to meet the stringent standards set by the EU, access to other global markets will be relatively simple.
The EU will only import chicken products that are free from antibiotics, hormones, brine, and feed that contains animal by-products. South Africa will need to work hard to meet these requirements.
Brining is particularly problematic, as it is prohibited in the EU and most of South Africa’s potential export partner markets. It also has a chequered history in South Africa. Local chicken contains up to 15% brine. This limit was legislated in 2016, after authorities found that domestic chicken pieces contained up to 60% water.
Balancing the chicken carcass
“While the local industry is technically efficient in producing product for the South African market, and perhaps becoming more so as it mechanises its operations, it will need to rethink its strategy to succeed in the global market,” says Matthew.
Successful export countries balance their carcass, which is a term used to differentiate cuts by selling different pieces to markets that will pay a premium for them.
Chicken breast meat fetches a premium in Europe, so these markets sell their breast meat there, also at a premium. The same goes for wings, which fetch a premium in the US, or chicken feet, which are similarly prized in China. Conversely, South Africa cuts up a whole chicken and puts it into a bag, selling all the pieces at the same price.
“There is enormous upside economic value if local producers reorient their operations to extract value from product preferences and price premiums in the different markets,” says Matthew.
Part of developing a premium export product market, would involve the production of cooked chicken, which is in high demand in certain markets, including the EU. AMIE says that a number of South African processors already have the required facilities set up to meet this need.
Creating export-oriented jobs
Matthew says that with an unemployment rate of 35.3% and youth unemployment at a staggering 65.5%, all parties need to do everything they can to grow the size of the overall chicken pie. The best way to do this is to build a successful export market.
“A thriving export market increases production capacity and employment across the board, not only for large-scale producers, but also for medium and small-scale farmers, many of whom are black-owned, and that is an opportunity that must not be overlooked.”