Nonprofit organisation FairPlay has outlined two scenarios that may play out in the poultry industry by 2035, depending on whether policymakers choose to support job creation and local production, or allow stagnation to continue. 

FairPlay says in a special report issued on December 11 that the poultry industry’s fate hinges on decisions that will be made in the next few years, particularly how the State enforces trade protections, compensates farmers for Avian Influenza losses, handles infrastructure investment and interprets the Competition Commission’s inquiry into the poultry industry market structure. 

“Together, these choices will determine whether South Africa’s poultry industry becomes a driver of national growth or a casualty of policy drift,” FairPlay states.

In the “path of creation” scenario, government policy aligns consistently with the 2019 Poultry Sector Master Plan, certain countries face duties when they dump product below cost into the South African market and the 72 000 t/y quota for US poultry imports into South Africa expires without renewal.

South Africa in 2015 agreed to a huge yearly quota of chicken imports from the US free of the anti-dumping duties which should apply, as a condition of renewing the country’s benefits under the Africa Growth and Opportunity Act (Agoa), FairPlay says.

It adds that this quota continues to be offered as part of trade negotiations with the US, seemingly in perpetuity and not tied to Agoa, which has since expired. South Africa’s future participation in a renewed Agoa agreement or a similar agreement with the US is also not guaranteed.

FairPlay has long advocated and campaigned against the dumping of poultry in the country, as well as for value-added tax-free chicken to support food affordability and food security for South Africans.

In respect of the commission’s inquiry, FairPlay says it welcomes scrutiny of the industry but warns against conflating structure with abuse.

“Look at any poultry producing market: integration is central to efficiency and affordability.

“Disrupting this structure would increase costs and compromise food security,” FairPlay states.

It adds that, while domestic poultry producers faced questions about concentration during the inquiry, trade concessions continue to benefit large foreign exporters.

“Policy inconsistency shapes market outcomes long before any inquiry reaches its conclusions,” FairPlay notes.

TWO PATHWAYS

In the creation scenario, infrastructure investment continues, farmers are compensated for the culling of poultry affected by bird flu and vaccination protocols are funded and practical.

Under these conducive conditions, the poultry sector finally fulfils its potential and weekly slaughter rates grow from 21.5-million chickens to more than 22.5-million as new investments realise.

The industry’s economic contribution would surge from R72-billion currently to an estimated R100-billion by 2035, while protein affordability improves for consumers and, likewise, costs stabilise for producers.

Exports expand with better cold chain infrastructure and adherence to export standards, with poultry exports to the Southern African Development Community having the potential to double.

“Projected production climbs from 1.59-million tonnes in 2024 to 1.9-million by 2030 and potentially 2.2-million tonnes by 2035 – marking a 30% increase in output,” FairPlay says, adding that employment will also expand correspondingly in poultry production and in the poultry value chain with new investment.

The organisation estimates that the sector can grow from supporting 134 000 jobs currently to 175 000 throughout the value chain by 2035.

“This is a future where trade policy, industrial investment and social impact converge,” FairPlay emphasises.

In the “path of stagnation” scenario, however, FairPlay outlines how persistent policy contradictions and policy drift leads to lower production and value creation in the economy.

In this scenario, the quota of chicken imports from the US remain in place indefinitely and additional trade concessions erode local competitiveness.

Additionally, the commission recommends structural fragmentation that ultimately raises costs rather than reduce them and bird flu outbreaks continue to go uncompensated, while infrastructure decay continues.

FairPlay states that producers will respond rationally to irrational policy by retreating: weekly slaughter capacity will decrease from 21.5-million chickens to below 20-million, with employment reductions following suit.

FairPlay points out that, in the stagnation scenario, the poultry industry’s GDP contribution contracts from R72-billion to levels below R50-billion, while local grain farmers lose stable feed demand and chicken exports wane.

Naturally, countries such as Brazil and others will fill regional demand for chicken in Africa and, with imports dominating, South Africa loses the ability to uplift small black-owned businesses in the poultry industry and retail chicken prices rise.

FairPlay says it has seen how policy enforcement can work, for example, through imports of bone-in chicken portions that have dropped by 83% since 2019, yet new headwinds threaten those gains.

“Trade deals negotiated in secrecy, bird flu outbreaks without compensation and a regulatory inquiry that questions the structure sustaining local production all risk unravelling half a decade of progress under the Poultry Master Plan,” the organisation claims.

FairPlay deems the next ten years as critical in determining whether the local poultry sector fulfils its potential as a R72-billion national asset or whether it succumbs to the slow corrosion of neglect on the State’s part.