Analysts call for greater export focus for South African poultry sector



The South African poultry sector is being advised to promote exports as part of the solution to the challenge arising from the rapid expansion of imports of poultry meat form the EU. However, the EU is also expanding exports of low priced poultry parts to other sub-Saharan African markets, exporting to no less than 38 sub-Saharan African countries, with these markets now taking 47% of total extra-EU poultry meat exports. Neighbouring African governments are also seeking to develop their own poultry industries and are using various non-tariff trade policy tools in order to do so. 

In June 2017 it was reported the end of the drought and consequent improvements in feed grain supplies, alongside bird flu outbreaks and the imposition of trade restrictions on imports from a range of EU member states, has seen the market conditions facing the South African poultry sector improve. Trade and Industry Minister Davies meanwhile continues to push for poultry meat to be designated as a product subject to local procurement by public sector bodies (1).

However industry players in the South Africa agro-food sector have suggested that while tariff protection may provide a short term solution to the challenges facing the local poultry sector in the longer term the industry needs to look at:

  1. serving niche poultry product markets and promoting greater value added processing of poultry meat as a means of expanding market share and enhancing competitiveness;
  2. supporting research and development to enhance efficiency, capacity utilization and underlying structure of the sector;
  3. developing export markets (2).

With regard to the latter it is noted that ‘only 1.4% of South Africa’s poultry is produced for export’, while the weakening Rand potentially opens up new opportunities for exports, particularly to growing markets in Africa, whose population is projected to double by 2050. Potential export markets identified include Mozambique, Lesotho, Namibia, Zimbabwe, Zambia, Botswana, Angola and Swaziland. The Middle East is also seen as offering opportunities, particularly markets in the UAE and Saudi Arabia (2).

Poultry sector experts are reportedly seeing demand for low cost poultry meat expanding across Africa far more rapidly than the capacity of local African producers to expand production. This is reportedly seeing international companies stepping in to fill the supply gap. Supply side constraints in Africa reportedly range from high feed costs through electricity outages and unreliable cold storage facilities to water shortages (3).  This is seen as presenting opportunities for South African poultry meat exports.

However South Africa’s highly integrated and concentrated poultry industry is already engaged within regional poultry value chains, providing key inputs such as day old chicks and animal feed to locally established poultry producers in Botswana, Namibia Swaziland, Mozambique, Zambia and as far north as Uganda. This focus on raw material supplies reflects the level of trade protection accorded poultry meat producers in these countries, where production is largely for the domestic market.  This protection takes the form of both tariffs and non-tariff measures, with non-tariff measures taking on more significance where moves to regional free trade are underway. Indeed, ‘most countries in the region have some form of NTBs for the poultry industry’ (8).

Comments and Analysis

The suggestion that the South African poultry sector should be looking to develop exports to Sub-Saharan African markets faces two major obstacles.

Firstly the strong focus of EU exporters on sub-Saharan African markets, which took around 47% of total EU poultry meat exports in both 2015 and 2016.  This was despite the outbreak of Avian Influenza in the EU towards the end of 2016 and the closure of the South African market to poultry meat from a range of EU member states.

This represents a more than tripling of the tonnage of EU poultry meat exported to sub-Saharan Africa in a seven year period. Given overall extra-EU exports of poultry meat only increased 63%, this saw a doubling of the importance of the sub-Saharan African market to EU poultry meat exports since 2009 (when these markets accounted for 23% of total extra-EU poultry meat exports).

Given these EU exports consist largely of poultry parts (or ‘brown meat’), the sale price of which bears no relationship to underlying costs of production in the EU, the question arises: how are South African exporters to compete on price in these sub-Saharan Africa markets? If the South African poultry sector is to pursue an export strategy then the issue of the international surplus of ‘brown meat’ will need to be addressed. This is an issue which Minister Davies again raised in June 2017 (1).

The second obstacle faced is the aspirations of a range of neighbouring sub-Saharan African governments to promote the development of their own poultry meat.  It was only in 2012 that Namibia launched its’ poultry industry (4), with the ultimate aim being to serve the whole of the Namibian market.  While this objective has not been attained and imports are still required, quantitative controls are applied to manage imports, many of which originate from beyond South Africa’s borders (5). In Namibia, as elsewhere, efforts to promote the local poultry take place behind non-tariff measures designed to create market space for local poultry producers in the face of both the scale and concentrated nature of the South African poultry sector and the growing international trade in low priced residual poultry parts.

Accessing poultry meat markets in countries such as Namibia, Botswana Swaziland, Mozambique, Zambia and Zimbabwe would require the South African government to persuade the governments in these countries to abandon this use of trade policy tools. This would be quite out of step with South Africa’s own agro-food sector industrial development policy, which looks to use trade policy measures in support of the development of local production. Alternatively South African poultry exporters would need to target markets where poultry meat import restrictions are already being relaxed, for example Tanzania (3).

More broadly, given the extent to which South African supermarkets source South African poultry meat (7), South African poultry companies could look to ‘piggy backing’ their expansion into regional markets on the back of the regional expansion of South African supermarket chains.  This could be reconciled with national poultry sector development aspirations if South African poultry companies were to supply technical expertise through the supermarkets in response to local political pressure to expand local sourcing of poultry meat. Short term South African export interests could then be reconciled with pan-African aspiration to reduce the continents external dependence on globally sourced low priced poultry meat. However, it is unclear how this would fit with existing South African corporate strategies for engagement in regional poultry value chains.

Beyond the export option, developing value added processing, to maximize the value obtained from each poultry carcass, alongside an enhanced focus on niche markets for poultry products and support for a concerted international initiative to address the global surplus of ‘brown’ poultry meat, could enhance the longer term prospects of the South African poultry sector.

(1), ‘SA Poultry Industry Showing Signs of Improvement’, 14 June 2017
(2), ‘Protection of the poultry industry is key to short term survival, but not the long terms answer’, 29 May 2017
(3), ‘African Poultry Wrap Tanzania Opens Up for Russian Imports’, 26 September 2016
(4) Intsika , ‘Launch of the Namib Poultry Industries’ 30 October 2012
(5) Namibia Economist, ‘Namibia Trade Forum looks into poultry dumping claims’, 13 February 2017
(6) Agritrade, ‘Use of policy tools to protect SACU poultry sectors raises trade policy issues’, 13 January 2013
(7) Business Day, ‘Retailers opt for local poultry’, 10 May 2017
(8) UN-WIDER, ‘The Southern African poultry value chain: Regional development versus national imperatives’, April 2017

Key words:          Poultry, South Africa, Botswana, Namibia Swaziland,
Mozambique, Zambia, Zimbabwe Uganda.
Area for Posting: Poultry sector, Southern Africa