22 March 2017 2 Presentation Outline Acronyms Integrated Value Chains Global Consumption Global trade Challenges in the poultry sector Transformation Competition Issues Effect of imports ID: 804554
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PRESENTATION ON THE SITUATION OF THE POULTRY INDUSTRY IN SOUTH AFRICA
22 March 2017
2Presentation Outline
Acronyms Integrated Value Chains
Global Consumption
Global trade
Challenges in the poultry sector
Transformation
Competition Issues
Effect of imports
Responses to FAWU
inputs
Responses to SAPA inputs
SPS and TBT principles
Current interventions in the poultry value chain
Slide3Acronyms and abbreviations
ALOPAppropriate Level Of ProtectionAPS
Agricultural Product Standards
DAFF
Department of Agriculture, Forestry and Fisheries
DoH
Department of Health
EPAEconomic Partnership AgreementFAOFood and Agriculture OrganizationNTBNon Tariff BarriersSAPASouth African Poultry AssociationSPSSanitary and Phytosanitary TBTTechnical Barriers to Trade TDCATrade, Development and Cooperation AgreementUSDAUnited States Department of Agriculture
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Slide44Integrated Broiler value
chain
The value chain of the broiler industry is complex and very sophisticated;
The industry is integrated into several other industries like the yellow maize and soybean industry;
These industries show very strong competitive and comparative advantages;
South Africa produces enough maize for its own consumption and normally export to several other countries;
In the past South Africa were a net exporter of soybeans and a importer of high protein meal;
Processing capacity increase dramatically the past few years, this will lead to a scenario where South Africa will import less high protein soybean meal and do not export any soybeans anymore; andThe demand for soybeans will further increase and this will probably lead to an equilibrium situation where less land will be utilise for maize and more for soybeans.
Slide5Source: 2014 Post-Harvest Innovation Programme.
Slide6Global Consumption
Slide77
Global trade
Products
`
Whole bird frozen products
Raw products (IQF cuts)
Processed meat
Major Exporters
USA
Brazil
Major importers
Asia
Middle East
Russia
Africa
EU
Global Trade
USD$ 17,9
Slide8Global poultry trade: chicken meat exporters (2015)
Slide9Global poultry trade: chicken meat importers (2015)
Slide10Challenges within the Poultry Sector Various key input cost issues
Feed – impact of drought on maize and soya prices [import parity pricing]. SA pays more for maize and soya than Brazil and Argentina
Feed
costs up to 70% for broiler
production
Electricity
– increase in ESKOM tariffs; and
Labour – increase in labour cost [the question of labour being a sacrificial variable costEarnings before interest and taxes [EBIT] is one of the lowest [1.9%] if compared country to country with other poultry producing countriesUnprotected industry - unsubsidised production and relatively low tariffs on imports [211% increase in imports of bone in chicken over the past 6 years] Safeguard duty (13.9%) now in place on EU importsNew brining regulations – halved from 30% to 15% in Individually Frozen Portions ;
Global dynamics at play (Brazilian currency, Russian and Chinese demand,
Trade, Development and Co-operation Agreement (
TDCA)/ Economic Partnership Agreement effect, agricultural subsidies).
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Slide11TransformationSAPA has a Transformation
Agenda but has shown little progress regarding Transformation within the poultry value chain. Currently imports account to just over to ¼ of local consumption meaning that there is opportunity for growth in the sector.
The Agri-BBBEE Charter which is the sector code of BBBEE has five elements to address transformation in the commercial subsectors and developing sectors. These elements are (1) Ownership; (2) Management; (3) Employment Equity; (4) Skills Development; (5) Preferential Procurement; Enterprise Development and Poverty Alleviation.
SAPA
members
need to show commitment towards transformation.
T
ransformation is mandatory within the sector. It is not conditional and is not a trade -off arrangement for bargaining. It is a basic requirement for cohesion within the sector.
Slide12Competition IssuesConcentrated Industry: several anti-competitive fines & investigations over the past few yearsPrevious investigations by the Competition Commission and
fines levelledon the Industry related to:Collusion & Price fixingInformation exchanges
Abuse
of dominance
Mergers
and
acquisitions
Commission tracking retail prices and continue to monitor the industry• Rising feed costs as issue of concern• Retail mark-ups an issue of concern12
Slide13Poultry within SA agriculture: effect of importsMultiplier effect on jobs: For every 10 000 tonnes less meat that we produce we will shed 1 069 direct and indirect jobsSome companies are about to shed a few thousand jobs in total
Rainbow retrenching 1 350 workers, including managers, at presentCountry Bird will close down their Mahikeng abattoir, and 939 direct and 1605 indirect jobs will be lost without government interventionMike’s Chickens in business rescue/ shut down (38 year-old company)Daybreak, first significant black owned producer, in major difficulties
Other companies cutting back on production (Astral on short-time)
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Slide14Poultry within SA agriculture: effect of imports….26 725 - The number of direct and indirect (including grain) jobs that could be created if we did not import any chicken meat (excluding mechanically deboned meat and offal)
48 853 - The number of direct and indirect (including grain) jobs that could be created if we did not import any chicken meat (including mechanically deboned meat and offal)
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Slide15Food and Allied Workers UnionProposed Wayforward by FAWUThe response of DAFF
15Immediate measuresWe immediately need to raise tariffs and implement safeguard measures and
explore imposing
anti-dumping duties.
A
safeguard duty of 13.9% was implemented on all bone in portions from the EU in
December
2017 ) now in place on EU imports (International Trade Administration Commission)
Slide16Food and Allied Workers UnionProposed Wayforward by FAWUThe response of DAFF
16Short run and Medium Term MeasuresIn a short run and immediate term we need to explore embarking on a ‘‘trade war’’’ with
the EU
by employing reciprocal technical barriers to trade placed on the leg-quarters that
our country’s
retail-chain stores are importing from the EU
.
Any proposed measure should be in observance of the provisions and principles of the World Trade Organization with specific reference to the Agreement on the Application of Sanitary and Phytosanitary Measures (WTO SPS Agreement) and the Agreement on Technical Barriers to Trade (WTO TBT Agreement). Furthermore the measures should be in line with the provisions of the international standards setting bodies in the field of animal health; food safety, plant health and quality assurance.
Slide17Food and Allied Workers UnionProposed Wayforward by FAWUThe response of DAFF
17Short run and Medium Term Measures
It cannot be that our poultry products, specifically breasts, are forbidden from
entering the EU
owing to some swine-flu [highly pathogenic avian flu] in ostriches but enveloped
to be covering
the poultry products by the EU yet EU does experience swine-flu [highly pathogenic avian influenza] , as they just did recently, in actual poultry sector and we quickly remove the safeguardmeasures
as soon as they unilaterally claim to be
swine-flu free
without us embarking
on
thorough
going verification of their claims.
The DAFF
within its mandate ensures
that
measures are adopted that exporting
countries do not export
products which
may be an Avian Influenza risk.
South Africa imports from mainly
from 10 EU
member countries
.
Currently,
8 of those countries are still suspended due to outbreaks of HPAI . Appropriate actions are taken all the time by suspending imports from these affected countries until satisfactory information in line with international standards has been supplied by the affected country . The information is on the surveillance conducted. If the information supplied is not satisfactory, then South Africa does not re-open the market for those countries.
Slide18Food and Allied Workers UnionProposed Wayforward by FAWUThe response of DAFF
18Long-term Strategic Issues
The long- term measures including working on interventions that will assist in further upscaling the cost other competitive moves in getting our industry to deal with even competing with the likes of Brazil and three other countries that are more competitive than RSA….. To this end, we need to ensure that the input side of the value, especially the maize and soya, is domestically reliant on instead of importing or to only import from the region of SADC.
The recently concluded Operation
Phakisa on
Agriculture
, Land Reform and Rural Development
further firmed strategies on the value chain approach towards production including on poultry and linked feed value chains on soya and maize. The strategies from Operation Phakisa strengthen the work as already done under the Revitalization of Agriculture and Agro-processing value chains and the Agricultural Policy Action Plan.
Slide19SAPA desired short and long term outcomesSAPADesired short and long-term outcomes
Create a regulatory framework that: Requires exporters to produce products for South Africa - not simply dispose of stored waste Is WTO and treaty compliantEnsures imports are based on national needs, not unconstrained importers greed
Reduces imports by at least half
Supports:
Industry sustainability
Industry reinvestment
Industry growth
Food securityJob creationRural development and transformationDAFF responseIn principle agree with SAPA on the short and long term outcomes. Any proposed measure within the regulatory framework of the DAFF should be in observance of the provisions and principles of the World Trade Organization with specific reference to the Agreement on the Application of Sanitary and Phytosanitary Measures (WTO SPS Agreement) and the Agreement on Technical Barriers to Trade (WTO TBT Agreement). Furthermore the measures should be in line with the provisions of the international standards setting bodies in the field of animal health; food safety, plant health and quality assurance, the World Organization for Animal Health Codex Alimentarius Commission and the International Plant Protection Convention respectively.19
Slide20South African Poultry Association Disease Management DAFF Response
Improved disease management is critical for sustainable development of the poultry industry. Effective disease control is captured in Operation Phakisa, APAP, RAAVC and the Veterinary Strategy. This includes pre-border, border and post border interventions in disease control.DAFF will explore the concept of a Poultry Disease Management Agency in the context of revolutionising veterinary services in South Africa.
High disease pressure with high socio-economic impact
Food security
Poverty alleviation
Provision of employment opportunities
Threat of new diseases or new outbreaks through trade
Need for a PPP Industry commitment - Poultry Disease Management Agency formed Needs formalised relationship with DAFF that allows for optimisation of disease management resourcesUrgent need for improved disease management
Slide21South African Poultry Association Measures proposedExport Agency supported by government Dedicated support to remove SPS barriers Government to resolve Namibian access matter
DAFF responseThe matter needs further deliberation. Yes a dedicated unit to conduct risk analysis is currently under consideration by the DAFF.The matter has been discussed at
thedti
interactions.
Slide22South African Poultry Association Measures proposedRemoval of soya bean and oil cake tariffs
Indirect maize price managementMechanically deboned meat production DAFF responseCould have negative effects on domestic soy production
[as
outlined in
APAP]. The
impact of such measures needs in-depth
investigation.
Proposal reversal of certain aspects of the deregulation of the SA markets. Exploration through studies is important.Supported.
Slide23Coverage of SPS and TBT
Agreements Technical Barriers to Trade Agreement Sanitary and Phytosanitary Agreement
Technical Regulation
Any other
Objective
Protect
Human Life
Protect Animal LifeProtectPlant LifeProtecta Country
From risks arising from
From risks arising from
From risks arising from
From risks arising from
Additives
contaminants
toxins or disease-causing organism in their foods
plant or animal carried diseases
Additives
toxins
pests
diseases
disease-causing organisms
Pests
diseases
disease-causing organisms
TBT
SPS
WTO
Slide24Implementation of SPS and TBT measuresBasic principles for implementation of Non Tariff measures in terms of the WTO
Least trade-restrictiveness: Measures should be no more trade restrictive than necessary to achieve the appropriate level of protection;
Scientific justification:
The measures should be based on science and on an assessment of the risks involved;
Harmonization:
Members are encouraged to base their SPS and TBT measures on international standards set by international standard setting bodies;
Equivalence:
Members should recognize that different measures can achieve the same appropriate level of protection (ALOP);Non-discrimination: SPS and TBT measures should be applied equally to imports and similar products produced locally. Members should not arbitrarily discriminate between trading partners where identical or similar conditions prevail;Transparency: Reliable and accurate information on existing SPS and TBT should be made available. New or revised measures should be notified in accordance with procedures established in international bodies.24
Slide25Current interventions within the poultry industry
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Slide26National Development Plan Winners26
Slide27THE POULTRY VALUE CHAIN PROBLEM STATEMENT
Consumption of white meat is expected to expand by 34% ( BFAP, 2023).
This increase is
currently
supplemented through high levels of imports
(especially low-cost frozen portions). .
High animal feed prices dampens domestic production
. For Soya oilcake, SA still imports a significant amount as compared to what is locally produced.
Despite an increase in domestic soya production of over 300% since 1999, this is not keeping up with a rising demand for animal feed.
The strategy is to increase production of poultry and animal feed with the aim of lowering feed costs.
POLICY LEVERS
RISKS
ITAC after investigative studies to provide protection against a surge of low-cost subsidised imports of poultry products.
Industrial Development Cooperation investment in crushing facilities for soya bean
75% local procurement by government and business geared towards localising value chains.
BBBEE codes aligned to developing local food networks
Increasing energy prices (electricity)
Unstable energy supplies
Delays and costs of Environmental Impact Assessments and water licences
Increasing input costs – fertilizer, animal feed, fuel and mechanisation
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Slide28ACTIONS – poultry
ASPIRATIONS
Add 14 481 jobs to the current 107 784 jobs (direct and Indirect) through increased tonnage of 663 500 poultry production by 2019
Add 14 173 jobs through expansion of 238 500 hectares – Soya production
Increased contribution to gross value of Agriculture GDP from R32.9
bil
(21.8%) to 41.13 (25%) by 2019
Increasing current levels of smallholder and subsistence producers by 5% by 2019.
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Slide29ACTIONS – poultry
CONFIDENTIAL
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OUTPUTS
LEAD DEPT. / SUPPORT
LOCATION
SIP11
: Economic infrastructure development programme – Integrated Poultry value chain
• Provide agro-logistics infrastructure to support development of an integrated value chain and coordinate basic services support to farmers
• Revitalization of old irrigation schemes and development of new schemes along rivers
NAMC;
DAFF; DRDLR;EDD
Eastern Cape; KwaZulu Natal; Limpopo; Mpumalanga; Gauteng
Increased trade/procurement linkages between smallholder, commercial farmers and feed companies -
off-take agreements
with feed companies
DAFF
DTI
Land Acquisition:
Strategically located land (considering water access, land use capability, proximity to markets etc. acquired to support smallholder farmers).
DRDLR;
DAFF;DWS;DEA
National Poultry Production Programme
:
• Recapitalisation and development support provided (smallholder); farm infrastructure to new farmers
• Standardised & targeted input supply package - smallholder & commercial (soybean/maize)
• Standardised & targeted input and on-farm infrastructure supply package (poultry)
• Support provided to equity schemes linked to identified value chains
DAFF
DRDLR
Poultry
research programme
, identifying more energy-efficient broiler production systems; and to develop higher yielding soybean varieties, through partnerships with private sector seed companies. Further, a need for Vaccine Development in general bird health research – integration of disease resistant
DAFF
DST
ARC
National Management Plan
for pest and disease - Poultry:
Develop integrated national surveillance and monitoring programmes for poultry diseases of importance (e.g., Avian Influenza and Newcastle Disease), residue and food borne diseases
DAFF
Slide30SPATIAL MAPS: GUIDE PROJECT SELECTION AND VALUE CHAIN PLANNING
Free State at District and Local Municipalities
National
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Slide31Conclusion The South African broiler industry is the mainstay of agricultural production in South Africa: mainly for food security, job creation and economic growth.Sustainability of this sector is of prime importance to the sector and the country.
Addressing current challenges should have a measured approach, taking into consideration the growth of the sector in totality.Application of any measure relating to the WTO has to be within the confines and provisions of the WTO .
Slide32THANK YOU
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