Overcoming Challenges: Unlocking South Africa’s Poultry Industry Potential

Overcoming Challenges: Unlocking South Africa’s Poultry Industry Potential

Expanding domestic production and access to lucrative export destinations is a key goal of South Africa’s Poultry Sector Master Plan.[1] However, the domestic industry faces a number of challenges that lead to production shortfalls and hinder its export potential. This blog aims to shed light on the challenges faced by the domestic poultry sector and provides actionable recommendations to overcome these obstacles.

Importance of Poultry

South Africa boasts a significant poultry meat consumption rate, ranking 9th globally according to OECD data from 2022.[2] South Africans have a strong preference for poultry, consuming nearly 40kg per capita in the 2020/21 period.[3] This is more than double the amount of beef and veal, the second-most consumed meat category. Chicken meat is the topmost food expenditure item for most South Africans, and one of only two meat protein sources included the top 10 food expenditure items for the poorest socioeconomic group.[4] Despite the substantial demand for poultry meat in South Africa, a consistent gap exists between production and consumption levels.[5] Over the years, local poultry production has fallen short of meeting consumption demands, resulting in a reliance on imports – South Africa is a net importer of chicken meat by a vast margin. To make matters worse, projections indicate a widening gap between the growth of domestic production and consumption.[6]  This gap will likely be filled by imports until a robust domestic poultry industry is developed.

Constraints facing the growth of domestic production

The inability to meet local demand, boost exports, and grow the domestic industry is due to multifaceted challenges.[7] High feed expenses, accounting for a significant portion of total costs, impose a considerable burden on local poultry producers.[8] The industry’s relatively small-scale production makes it vulnerable to competition from exporting nations that benefit from economies of scale. Additionally, regulatory limitations on brining have sparked concerns about increasing prices, reducing the industry’s size, and affecting the poultry value chain.[9] Most recently, the South African poultry sector has had to contend with outbreaks of avian influenza, persistent load-shedding, and the situation in Ukraine – contributing to higher input costs, and constrained production.[10]

Barriers to exports

Even when production does occur, South African exporters face significant difficulty in accessing lucrative markets. For example, the country’s exports cannot enter the EU due to its non-compliance with the health and safety standards. As a result, South Africa has strategically redirected its exports into Africa.[11] However, persistent Non-Tariff Barriers (NTBs) remain a major source of frustration for exporters.[12] These erode competitiveness and impose exorbitant costs. Among the NTBs faced by exporters are mandatory inspections, distinct national standards, overlapping regulatory responsibilities, and discriminatory enforcement of technical regulations targeting imported goods. Within the country, poor transport infrastructure has hindered the global competitiveness of domestic agriculture.[13]

Conclusion and recommendations

The growth of domestic production and expansion into lucrative export markets are constrained by high feed costs, limited economies of scale, poor infrastructure, and barriers to accessing international markets. Decisive action is needed to unlock the potential of South Africa’s poultry industry and overcome its impediments.

To address these challenges, the following recommendations are offered:

  • Provide support for local producers by addressing high feed costs through subsidies or other incentives.
  • Enhance efficiency through innovative technologies, as well as training and support.
  • Invest in infrastructure, particularly transport and electricity.
  • Address export barriers through constructive dialogues with trading partners.
  • Strengthen disease control measures.
  • Address non-compliance issues to gain access to lucrative export markets, such as the EU.

By implementing these recommendations, South Africa can unlock the potential of its poultry industry, improve domestic production, and expand into international markets. This will contribute to economic development, job creation, and a stable and secure poultry supply that meets domestic consumption requirements.

[1] The South African Poultry Sector Master Plan, 2019.

[2] OECD Data, Meat consumption, https://data.oecd.org/agroutput/meat-consumption.htm.

[3] Department of Agriculture, Land Reform and Rural Development (DALRRD), Abstract of Agricultural Statistics 2022.

[4] Living Conditions Survey by Stats SA, cited in Bureau for Food and Agricultural Policy (BFAP) COVID-19 Brief 2 – How South Africans spend their food budgets.

[5] Op. Cit. DALRRD, Abstract.

[6] BFAP, Baseline: Agricultural Outlook (2022-2031), https://baseline.bfap.co.za/wp-content/uploads/2022/08/BFAP-BASELINE-2022-ONLINE-Final.pdf.

[7] Op. Cit. Poultry Sector Master Plan.

[8] Portfolio Committee on Trade and Industry Engagement with stakeholders, Implementation of the South African Poultry Master Plan, Tuesday, 29 November 2022,  http://www.thedtic.gov.za/wp-content/uploads/Poultry-Master-Plan.pdf.

[9] News24, Chicken brining rules will devastate SA, poultry body warns, 4 May 2016, https://www.news24.com/fin24/chicken-brining-rules-will-devastate-sa-poultry-body-warns-20160504.

[10] Nicole McCain, Avian flu detected at five Western Cape poultry farms, News24, 31 May 2023, https://www.news24.com/news24/southafrica/news/avian-flu-detected-at-five-western-cape-poultry-arms-20230531; Karl Gernetzky, Quantum had to kill 420 000 chickens due to bird flu, warns of egg crunch in WCape, News24, 9 May 2023, https://www.news24.com/fin24/companies/quantum-had-to-kill-420-000-chickens-due-to-bird-flu-warns-of-egg-crunch-20230509; Given Majola, This is how fat chickens and load shedding is putting SA’s poultry value chain under pressure, IOL, 17 March 2023, https://www.iol.co.za/business-report/economy/this-is-how-fat-chickens-and-load-shedding-is-putting-sas-poultry-value-chain-under-pressure-4f205feb-12cd-42de-b1ab-20e21189c7e4#:~:text=%E2%80%9CLoad%20shedding%20is%20a%20factor,and%20not%20in%20the%20marketplace; Yogashen Pillay, Global affairs affect prices of poultry products in South Africa, IOL, 4 March 2022, https://www.iol.co.za/mercury/news/global-affairs-affect-prices-of-poultry-products-in-south-africa-dd74705b-f040-4212-adad-662e2009e468#:~:text=DURBAN%20%2D%20THE%20SA%20Poultry%20Association,higher%20prices%20for%20poultry%20products.

[11] Thabile Nkunjana, Phathisisa Thobindlala and Khodani Madula, Exploring opportunities of various agricultural commodities in the recently signed African Continental Free Trade Area (AfCFTA) agreement: An analysis of South Africa’s poultry export market, NAMC, Trade Probe Issue 90, August 2022, https://www.namc.co.za/wp-content/uploads/2022/11/Trade-Probe-Issue-90.pdf. 

[12] Willemien Viljoen, Non-tariff barriers frustrating South African agricultural exports, TRALAC, 2015, https://www.tralac.org/discussions/article/8224-non-tariff-barriers-frustrating-south-african-agricultural-exports.html.

[13] Fair Play, Poor transport infrastructure holds agriculture back, 20 October 2022, https://fairplaymovement.org/poor-transport-infrastructure-holds-agriculture-back/.


COP27 and the win for climate vulnerable nations

COP27 and the win for climate vulnerable nations

From the devastating impact of Russia’s war on Ukraine to the FIFA World Cup being hosted by a country accused of human rights violations to the atrocities committed against Iranian protestors, those who believe in true social justice have little to celebrate as 2022 draws to a close. This is, of course, apart from the agreement on a loss and damage fund, which was reached in the early hours of the (new) final day of the 27th session of the United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties (COP27).

Between 6 and 20 November 2022 (originally meant to close on the 18th) members of the UNFCCC gathered in Sharm El-Sheik for what was vastly regarded as the “African COP”. Given its informal billing (as the African COP), representatives from African countries, and those countries that hold a similar perspective on climate action and climate justice, were expected to turn up with a unified voice on these issues. And, to a degree, they did just that.

Among the most crucial wins for lower-income nations was the establishment of the loss and damage fund, which aims to provide financial assistance to those countries that are vulnerable to the negative impacts of climate change, which include, inter alia, rising sea levels, ocean acidification, prolonged heat waves, and desertification.[1] The importance of the loss and damage fund stems from the fact that richer countries are historically responsible for most of the anthropogenic greenhouse gases (GHGs) present in the atmosphere (see Figure 1), while poorer countries, are least responsible for historical GHG emissions,  but are forced to endure the devastation of extreme climate events. In this vein, it is important to note that the establishment of the loss and damage fund was deadlocked for decades due to wealthy nations’ fears of the degree of liability they may face.

Figure 1. Per Capita GHG emissions, 1990-2019. HERE

Source: Consultants computation using data from Our World in Data.

To put it into perspective, Pakistan, which emits less than 1% of global emissions has seen USD 30 billion worth of damages, more than 1500 lives lost, and a third of the country plunged underwater from severe flooding. Similarly, it is estimated that Africa, which contributes the least to climate change, will see its countries spending five times more on climate adaptation than on healthcare.[1] Thus, the establishment of the loss and damage fund will serve as a beacon of hope in mitigating the financial impacts of catastrophic climate events.

Despite the creation of the fund, however, several decisions have been postponed to next year. Representatives from 24 countries will work to determine, among other aspects, the fund’s form, which countries qualify for the funds, and which countries will contribute to the fund. Within this context, the United States (US) and European Union (EU) are advocating for China to contribute to the fund and not receive from it due to its position among the largest economies and leading emitters in the world.[2] The world waits with bated breath to be informed of the full outcome of the agreement at COP28.

Ultimately, COP27 represented a win for lower-income countries as much was done to assist in adapting to the impacts of climate change. Conversely, the outcomes may represent a loss for those countries advocating for reduced fossil fuels reliance as little was done to further the commitment to curbing emissions. This puts on display the differing perspectives on climate change and climate action that perpetuates between developed countries and those of a less developed status.

Nevertheless, it makes little sense for rich countries to prevent fossil fuels-driven prosperity in poor countries (particularly in those abundant in these resources) while their own riches were obtained via the same means. It makes even less sense when one considers that those at the fore of the phase-out fossil fuels agenda have recently green-lit the development of a new coal mine.[3]

Unless those advocating for reduced fossil fuels use can provide all which is necessary to secure lives and livelihoods, including infrastructure to meet growing energy demands and FDI to secure jobs lost in traditional energy sectors, time should be given to lower-income countries to prosper from the use of fossil fuels – albeit using cleaner technologies – and naturally, transition to renewable energy sources in a manner that is akin to rich countries.

[1] https://www.unep.org/news-and-stories/story/what-you-need-know-about-cop27-loss-and-damage-fund#:~:text=What%20does%20it%20mean%20exactly,species%20extinction%20and%20crop%20failures.

[2] https://www.nytimes.com/2022/11/19/climate/un-climate-damage-cop27.html.

[3] https://edition.cnn.com/2022/12/07/europe/uk-coal-mine-cumbria-energy-climate-intl-gbr/index.html.

[1] https://www.unep.org/news-and-stories/story/what-you-need-know-about-cop27-loss-and-damage-fund#:~:text=What%20does%20it%20mean%20exactly,species%20extinction%20and%20crop%20failures..

WEF Davos 2022: Youth holds the key to unlocking Africa’s potential, but action is needed

WEF Davos 2022: Youth holds the key to unlocking Africa’s potential, but action is needed

Africa’s potential in the global context has been highlighted yet again – this time at the World Economic Forum (WEF) Annual Meeting. In May of this year, the WEF held its first in-person Annual Meeting since the advent of the COVID-19 pandemic. Themed “History at a Turning Point: Government Policies and Business Strategies”, Davos saw delegates from across the globe, including those from selected African countries, attend the long-awaited, in-person event. Among the prominent issues that were raised, which included rapidly rising food and fuel prices, the war in Ukraine, climate change, and the ongoing COVID-19 pandemic,[1] one stood out – the potential of Africa’s youth and, by extension, that which must be done to unlock their potential and the likely consequences of inaction.[2]

Africa is the fastest-growing continent with the youngest population, and it is estimated that, by 2035, more young Africans will enter the workforce each year than in the rest of the world combined.[3] While a young and fast-growing population may present many opportunities, it may also pose several challenges. Thus, various prerequisites must be satisfied. Most prominently, human capital investment, energy poverty alleviation, technological advancements and private sector growth are musts. While the opportunities include higher employment rates, a higher standard of living and increased state revenue collection (which could result in further investment and a further improved business environment), the challenges could be dire.[4]

Without the abovementioned conditions, many school-leaving youths will be inadequately trained or not have the expected employment opportunities even if they are adequately trained. On the lower end of the scale, the absence of the above reforms, in conjunction with rapid population growth, results in joblessness, lowered living standards and a potential increase in petty crimes. On the higher end, it could see unemployed youth, out of financial desperation, affiliate themselves with terrorist organisations or “throw themselves in the ocean and try to immigrate somewhere.”[5]

Whether on the higher or lower end of the scale, the potential impacts will not bode well for countries of the continent, surrounding regions, and the world’s entirety. While leading economies and prominent entities have supported Africa’s development, more must be done. A greater intensity of relief initiatives from multilateral groups and institutions, such as that on debt repayments, must also be extended. This is of necessity, especially, within the context of the post-pandemic recovery and the Russia-Ukraine war, as a failure to do so could see many developing countries, including those in Africa, to face the prospect of economic collapse.

This blog is, therefore, a call, however small, for country leaders, the political elite, multilateral institutions, and captains of industry to invest in Africa. Not to make pledges or promises, and, especially, not to offer loans in exchange for natural resources and proceed to claim critical infrastructure should one default on repayments. Instead, the continent needs transparently conditioned investment in energy, technological advancements, human capital and the private sector to unlock potential via its youthful population. This will not only benefit the continental context, but countries of the world will be able to enjoy greater access (market or otherwise) to a peaceful, stable, and economically growing Africa.

[1] Business Standard, ‘WEF 2022: Ukraine conflict to climate change, here’s what happened at Davos,’ https://www.business-standard.com/article/current-affairs/world-economic-forum-wef-2022-ukraine-conflict-to-climate-change-here-s-what-happened-at-davos-122052700400_1.html

[2] World Economic Forum, ‘Preparing for Africa’s Growing Global Role – Original,’  https://www.weforum.org/videos/davos-annual-meeting-2022-preparing-for-africa-s-growing-global-role-original

[3] Ibid.

[4] Ibid. 

[5] Ibid.

Inequality vs Disinvestment: The case for a South African Wealth Tax

Inequality vs Disinvestment: The case for a South African Wealth Tax

Last week, Minister of Finance, Enoch Godongwana, delivered his maiden Budget Speech and, like many economists, I was eager to delve into the country’s financial standing. I was equally eager to attend Mazars Budget Analysis, a virtual event that took place the day after Budget 2022. The event, cleverly entitled From Viral Dis-ease to Sustainable Growth, provided expert, between-the-lines analysis of the National Budget. Among the financial successes and failures that were reiterated and the potential consequences of the Russia-Ukraine conflict that were alluded to, one area of the analysis remained with me – the mooted wealth tax and potential to reach it in South Africa.

The 2022 Budget Review indicates, inter alia, that provisional taxpayers with assets more than ZAR 50 million are expected to declare assets and liabilities at market value for their 2023 returns. Previously, the declaration would have been at cost rather than market value. This change is expected to assist with the detection of non-compliance or tax fraud.[1] It has also been speculated that another implication of government’s new requirement is that the information gathered may be used in the formulation and implementation of a wealth tax in South Africa.[2] Given the deep inequalities which plague South African society, the desire to implement such a tax is unsurprising, but the broader implications could prove harmful.

In 2019, almost three decades into its democracy, South Africa was recognized as the most unequal country in the world.[3] Figures indicate that the top 10% of the country’s earners take home 65% of total income, while 90% get the remaining 35%. Similar inequalities are apparent in wealth – the top 10% controls 93% of the country’s wealth while the other 90% controls a mere 7%.[4]  Inequalities are also found to perpetuate on racial, gender, and spatial grounds.[5] Between 2011 and 2015, whites earned an average monthly salary more than three times that of Africans, females earned 30% less than males, and individuals in Gauteng and Western Cape had the highest provincial annual mean and median expenditures while those living in Limpopo and Eastern Cape had the lowest.[6]

Figure 1. Earnings among South African race groups

Source: Own computation using information from Stats SA 2020.

Notes: The figure above displays mean real monthly earnings among South African race groups over the period 2011-2015.

Exacerbating the issue of inequality in South Africa were the harshest days of the COVID-19 pandemic and the nationwide lockdown which followed. In terms of access to water and sanitation, job security, education, internet access, and food security, the hard yet much-needed response served to highlight and indeed, deepen the gross divide between those with and those without.[7] Thus, the driving force behind the implementation of a wealth tax should be to narrow this divide. At the same time, however, it may serve to drive investment to other destinations, further dampening the country’s economic growth prospects. Over the last decade, approximately 4,200 high net-worth individuals left the country, and the prospect of higher taxes may cause this figure to grow.[8]

Should the South African government be certain about the implementation of a wealth tax, stringent monitoring is a key requirement. The South African Revenue Service, due to the upskilling of personnel and investment in their information and communications technology (also discussed at the Mazars event), may very well be able to pull this off. However, a cushion to the brain drain and disinvestment blow must be found. To this end, government must reinvest revenues received from the wealth tax in developments within the realms of water and sanitation, healthcare, energy, education, telecommunications, and stimulating innovation rather than simply handing the funds out. But even if these recommendations are followed and even if funds are correctly appropriated (which is a tough ask in South Africa), it may be long before the benefits materialize.

Nevertheless, credit must be given to the government for requiring provisional taxpayers with assets greater the ZAR 50 million to state them at market value as it will assist in determining the structure and distribution of wealth in South Africa[9], thus, allowing for better planning should a wealth tax truly be under consideration.[10]

[1] Business Tech, ‘Government knows wealthy taxpayers are leaving the country’, February 24, 2022, https://businesstech.co.za/news/finance/562204/government-knows-wealthy-taxpayers-are-leaving-south-africa-analyst/.

[2] Business Tech, ‘Government knows wealthy taxpayers are leaving the country’, February 24, 2022, https://businesstech.co.za/news/finance/562204/government-knows-wealthy-taxpayers-are-leaving-south-africa-analyst/.

[3] Khanyi Mlaba, ‘5 Shocking facts  that show why South Africa is the “most unequal country in the world”’, Global Citizen, November 27, 2020, https://www.globalcitizen.org/en/content/facts-why-south-africa-most-unequal-country-oxfam/.

[4] Dennis Webster, ‘Why South Africa is the world’s most unequal society’, Mail and Guardian, November 19, 2019,  https://mg.co.za/article/2019-11-19-why-sa-is-the-worlds-most-unequal-society/.

[5] Dennis Webster, ‘Why South Africa is the world’s most unequal society’, Mail and Guardian, November 19, 2019,  https://mg.co.za/article/2019-11-19-why-sa-is-the-worlds-most-unequal-society/.

[6] Government of South Africa, Department: Statistics South Africa, How unequal is South Africa?, (online), http://www.statssa.gov.za/?p=12930.

[7] Lauren Graham, ‘Pandemic underscores gross inequalities in South  Africa and the need to fix them’, The Conversation, April 5, 2020, https://theconversation.com/pandemic-underscores-gross-inequalities-in-south-africa-and-the-need-to-fix-them-135070.

[8] Business Tech, ‘Government knows wealthy taxpayers are leaving the country’, February 24, 2022, https://businesstech.co.za/news/finance/562204/government-knows-wealthy-taxpayers-are-leaving-south-africa-analyst/.

[9] Business Tech, ‘Government knows wealthy taxpayers are leaving the country’, February 24, 2022, https://businesstech.co.za/news/finance/562204/government-knows-wealthy-taxpayers-are-leaving-south-africa-analyst/.

[10] Amanda Visser, ‘Wealth declaration is not all negative’, Moneyweb, February 28, 2022, https://www.moneyweb.co.za/mymoney/moneyweb-tax/wealth-declaration-is-not-all-negative/.

The heritage of looting

My 27th birthday, this year, like last year’s 26th, was spent under lockdown. Unlike last year, however, the lockdown under which I found myself extended further than that related to the government’s response to the coronavirus pandemic. Instead, I was barricaded within the confines of my neighborhood as part of my community’s response to the July unrest which transpired in parts of KwaZulu-Natal and Gauteng.

In July 2021, South Africa experienced the worst bout of politically motivated uprisings since the advent of democracy. What began as a semi-peaceful demonstration outside the homestead of the former president, Jacob Zuma, quickly spiraled out of control, into all-out looting, arson, vandalism, and violence parade.

According to reports, the week of riots in South Africa could cost the country ZAR 50 billion in lost output, while approximately 150 000 jobs have been put at risk. Further casualties came in the form of approximately 150 000 informal traders and 40 000 businesses, 1 400 ATMs, 100 malls, 11 warehouses, and eight factories.[1] By July 18 it was reported that 3407 arrests were made and by August 3 it was reported that 342 lives were lost.[2],[3]

Although these actions were, initially, termed the “Free Zuma Protest”, it became apparent that additional elements were at play – those outside the strict realm of Zuma’s support base. We have since been informed that the unrests were part of an attempt to derail the state, orchestrated by a well-oiled machine that took advantage of the country’s constitution, made use of our nation’s criminal elements, and leveraged the desperation of the impoverished.[4]

While the meaningless destruction of property, intimidation of people, and incitement of violence cannot be excused, one would find themselves at a moral crossroad if they were to group together the poverty-stricken looters with the criminal elements behind July’s rampage. Undoubtedly, such a crossroad would arise when one considers that the participation of the desperate in the heinous activities, which led to the costs described above, could very well have been a side-effect of looting at a higher level – looting of the state.

It was this notion that quelled the disappointment of a birthday spent under an even harder lockdown than that imposed by the government. I found myself asking the question, how much anger could I have toward impoverished looters when the country’s (former) health minister, during a global health crisis, in a country with the deepest of inequalities, was found to have channeled ZAR 150 million of department funds to his cronies from which his family was shown to have benefitted or when a former member of the National Health Laboratory Services (NHLS) recently appeared in court for tender fraud?[5],[6] The answer was that I couldn’t hold any anger. Why? Because the actions of the impoverished looters were merely a reaction to the actions of some of our leaders.

This brings me to my conclusion. As we prepare to celebrate our 27th Heritage Day as a democratic nation, we must remember that among the brilliant myriad of cultures in South Africa, there exists a few which we are better off without. In this regard, that is a culture of corruption and heritage of looting.

[1] S’thembile Cele and Leah Wilson, ‘South Africa economy set to take $3.4 billion hit from riots’, Bloomberg,  https://www.bloomberg.com/news/articles/2021-07-20/south-african-economy-set-to-take-3-4-billion-hit-from-riots

[2] Kyle Zeeman, ‘Three alleged instigators of violent unrest arrested and expected in court this week’, Timeslive, July 18, 2021, https://www.timeslive.co.za/news/2021-07-18-three-alleged-instigators-of-violent-unrest-arrested-and-expected-in-court-this-week/.

[3] Paddy Harper, ‘Phoenix killings: 22 suspects held’, Mail and Guardian, August 3, 2021, https://mg.co.za/news/2021-08-03-phoenix-killings-22-suspects-held/.

[4] Andrew Harding, ‘South Africa riots: The inside story of Durban’s week of anarchy’, BBC News, July 29, 2021,  https://www.bbc.com/news/world-africa-57996373.

[5]Pieter-Louis Myburgh, ‘SIU flags ‘corrupt’ payment into Department of Health staffer’s bank account’, Daily Maverick, September 14, 2021, https://www.dailymaverick.co.za/article/2021-09-14-siu-flags-corrupt-payment-into-department-of-health-staffers-bank-account/

[6] ‘Former NHLS CEO charged in R113 million tender fraud case,’ SABC News, September 6, 2021, https://www.sabcnews.com/sabcnews/former-nhls-ceo-charged-in-r113-million-tender-fraud-case/.