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Association concerned about assumptions in commission's poultry market inquiry

13th February 2024

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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Industry organisation the South African Poultry Association (SAPA) has expressed concern about some of the statements and assumptions in the Competition Commission’s announcement of a market inquiry into the poultry industry value chain.

The commission on February 9 announced the market inquiry, saying it has reason to believe there are features in the poultry market that may impede, distort or restrict competition.

SAPA says the poultry industry is "extremely concerned" at the commission’s statement that there are “ongoing demands for bailouts through ever-increasing tariffs and the imposition of anti-dumping duties”.

The association states that the domestic poultry industry has never asked for “bailouts", saying the International Trade Administration Commission of South Africa (Itac) and the Department of Trade, Industry and Competition are aware of that.

“The use of this term indicates a hostility that we find disturbing. What the industry has asked for is protection against unfair and dumped imports. Itac investigations have repeatedly found that these imports are harming the industry and costing local jobs,” SAPA says.

The 2019 Poultry Master Plan committed the government to helping to curb imports, to act decisively against illegal and dumped chicken imports and to promote local industry growth and job creation, it reiterates.

Central to the commission's inquiry will be the issue of the concentration of large companies in both the broiler and egg industries. "There seems to be an underlying suspicion that this is bad for the industry and for consumers," SAPA notes.

"The industry's biggest competitor is imports, and we are competing with companies in the US that slaughter more than 45-million birds a week, compared with the 21.5-million a week produced in South Africa," it points out.

Further, the inquiry also questions the competitiveness of the South African poultry industry.

“Our producers are among the most competitive in the world. Year after year, research by Wageningen University in the Netherlands has found that our producers are among the most competitive in the world, producing a chicken cheaper than all European Union countries, similar to the US and outperformed only by Brazil,” SAPA emphasises.

Costs of production have recently increased owing to the rapid rise in feed costs following Russia’s invasion of Ukraine, and local factors, such as the billions of rands that producers have to spend to counter the government’s failings to produce reliable electricity and water supplies, and the poor state of roads and railways, it states.

“The result has been that the industry made no profits last year, and top companies recorded substantial losses.

“Further stress on profitability is likely to be added by the government’s introduction of rebates on poultry import tariffs. This will bring in unneeded additional imports when the local chicken market is in oversupply. We are surprised that the inquiry is considered necessary,” SAPA notes.

The poultry industry is a substantial industry and, as the commission announcement notes, it accounts for 65% of all animal protein consumed in South Africa.

It is the largest contributor to the agricultural sector with a total annual gross value of production of almost R72-billion in 2022, accounting for 17.1% of total agricultural gross value and 40.3% of total animal product gross value.

The poultry industry has, for decades, supplied South Africa with affordable meat protein. If it is to continue to do so, it deserves understanding and support, SAPA emphasises.

“We will cooperate and seek to contribute to the terms of reference of the inquiry and its eventual conclusions through the provision of facts, data and opinions to illustrate the workings of the South African poultry industry, as well as the factors that help or impede growth, production, employment and profitability.

“Through our contributions, we will try to ensure that the inquiry does no further harm to this strategic national industry,” the organisation says.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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