chicken Industry on SA

South Africa’s Poultry Farming Industry: A valuable economic contributor

The Value of the Poultry Industry

South Africans have a taste for chicken. Current industry statistics show that of all the meat bought and consumed in the country, chicken makes up 60% of it. This is not surprising as chicken is a relatively low-cost, good source of protein which takes well to freezing. With the demand for chicken as big as it is, it’s also no surprise that South Africa’s poultry industry accounts for 20% of our total gross agricultural value. The broiler industry (chicken bred for consumption) itself, is South Africa’s largest agricultural sector which as of the end of 2018 was producing approximately 1.41 million tonnes annually. Poultry agriculture, and the broiler production sector is greatly valuable to South Africa not only in terms of sheer production output and contribution to our GDP, but also through employment. The broiler industry alone employs approximately 113 547 people across the value chain, both directly and indirectly. These figures are staggering, and in an industry that looks poised for growth, the future seems bright.

Current Challenges faced by the Industry

The European Union (EU) and Brazil have a preference for what is called ‘white portions’ of chicken, most often in the form of deboned breasts. As a result of this, the rest of the chicken or the ‘brown portions’ of thighs, drumsticks and wings on the bone are then frozen and sent for export to countries like South Africa. Across SA there are 70 large-scale chicken producers who contribute most of the output that goes to market. Many of these producers have solid corporate backing and sustained demand for their products. Although these 70 big names are sitting at the apex of their industry, they are still seeking ways to grow and transform the industry but are increasingly hampered by global market activity. The South African market’s taste for chicken does not show signs of slowing down, so much so that 33% of our total demand now comes from foreign imports.

The importing of frozen brown portions from the EU certainly answers to SA’s consumer preference, which is directly inverse to the taste in many EU countries. Frozen ‘bone on’ brown portions make up 60% of all chicken bought nationally. Sustained demand for chicken shows that this competitively priced perishable stands up to the effects of rising inflation and shrinking disposable incomes of consumers. What makes chicken even more palatable for SA’s consumers is that brined, frozen individual portions have a good shelf life and allow the consumer to stretch their spend while enjoying the luxury of consuming meat. However, the effects of EU chicken dumping are threatening our local industry to the point where the price/Kg (price-per-kilogram) on imported chicken is so low, that our local producers would have to make a loss in order to compete. The challenges of ongoing chicken imports aside, the cost of producing chicken locally continues to rise with chicken feed accounting for 70% of this cost. What’s interesting is that South Africa is Africa’s top chicken producer, yet also one of the globe’s top 10 chicken importers – 2 accolades which are at odds with each other. Our local industry is poised for growth yet is largely stymied by factors from beyond our borders.

Solutions for the future of Chicken Farming

No doubt, protecting our local industry remains priority but the simplest solution is not always simple. Hiking up import tariffs on chicken may seem a viable solution to curb further negative effects on the industry. However, others argue that hiking up import tariffs does not work to serve the consumer, and that the chosen approach must consider price sensitivity to inspire consumer confidence and affect buying decisions. The truth is that local producers cannot just simply sell their product for less – they need the adequate support in order to make it viable. The same viewpoint argues that the Government needs to step in to help supply a steady labour force at better rates, as well as working to improve transportation and infrastructure and lower, or at least incentivise running costs like electricity. If we are able to do this, then the industry will likely grow in quantum leaps to regain lost market share and become robust enough to withstand external competition from the EU.

In 2019, Government, the broiler industry and key industry stakeholders came together to establish the Poultry Sector Master Plan, with the express aim of growing and transforming the industry for the future. Its key endeavours are to support industry growth and transformation within SA’s broiler production sector, to increase broiler production by 10% by 2023 and to invest R1.7 billion to help establish 50 commercial-scale producers. Part of the Master Plan also addresses steps to be taken to increase import tariffs on chicken from the EU and Brazil. The Master Plan is certainly a silver lining, but may take years to come to fruition and for the positive effects to be felt. For now, our local industries and affiliated agricultural sectors need to support one another and foster the existing advantages along the value chain. Within KZN alone, the timber, broiler production and sugar cane farming sectors stand side by side as heavyweights. Furthermore, all 3 sectors exist within what could be described as a symbiotic value chain – where one sector’s production inadvertently affects another’s. Timber is grown and processed within the local mills to become unfinished and semi-finished timber goods and by-products like wood shavings. As a leading wood shavings supplier, we sell vast quantities of shavings directly to the broiler sector.

Wood shavings are extremely important to the health and wellbeing of broiler chicks which in turn has a direct impact on broiler production output. The used or soiled wood shavings are taken from the broiler houses and sold to sugar cane farms as a natural fertiliser. This fertiliser is valuable as it helps to re-nutrify the soil and convert Nitrogen into plant-available Nitrogen (PAN), which in turn helps to increase crop yields.

Although the Poultry Master Plan is already making some positive strides, it is up to the affiliated industries that co-exist along the poultry industry value chain to help support each other and maximise on the advantages of this. Survival for now may rest on short-term solutions, at least until the Government can move to shake up the industry as a whole and put proper measures in place to protect and support our country’s poultry producers.