Competition Commission targets SA’s already struggling poultry sector

South Africa’s poultry industry has barely recovered from the ravages of the bird flu outbreak, rolling blackouts, collapsing infrastructure, access to clean water and depressed consumer demand. 

Three of the country’s major poultry producers — Astral Foods, Quantum and RCL reported losses for the year, caused by the outbreaks of bird flu and the costs associated with culling, plus rolling blackouts.

Now, the Competition Commission has stepped in to deal what could be the death blow to the foundering sector, by announcing that it will embark on a market inquiry targeting the poultry industry value chain.

This comes weeks after temporary rebates on the import duties of chicken were introduced and at the worst time for the poultry sector. Last year, Astral Foods posted its first losses in 23 years, due to the impact of the power crisis and bird flu. It also spent more than R2.1-billion in the 2023 financial year on water, culling and alleviating the impact of rolling blackouts.

Egg producer Quantum Foods reported a R35-million loss in the year to end-September, while RCL Foods issued an update in October, stating that profits were likely to be a thing of the past, as most of its inland sites had been affected by avian flu, forcing it to cull about 410,000 birds, which cost it R115-million.

Last month, producers appeared to be slightly more hopeful. On 31 January, Astral said it expected to return to profitability in the first quarter of the financial year ending 30 September, after it had made good headway in addressing some of its recent issues.

It had maintained emergency backup generator capacity at all its operations; benefited from lower stages of rolling blackouts, which helped reduce diesel costs; put uninterrupted water supply systems in place to reduce downtime; kept feeding costs low; and normalised the poultry sales mix, which was previously affected by heavy promotional discounting.

However, the commission is convinced that the poultry industry is uncompetitive. Its chief economist, James Hodge, said that its market inquiry was aimed at improving the competitiveness of the industry to the benefit of consumers and smaller participants — particularly previously disadvantaged producers.

The poultry industry supplies 65% of all animal protein consumed in South Africa. It is also the largest contributor to the agricultural sector, with a total annual gross value of production of almost R72-billion in 2022, which accounted for 17.1% of total agricultural gross value and 40.3% of total animal product gross value. 

The SA poultry industry is dominated by a few, large companies that meet most of the demand for eggs and chickens, feed and day-old chicks.

South Africa’s Poultry Sector Master Plan has been in place since November 2019 — it is designed to promote the development and transformation of the sector, but the commission said because it was a negotiated agreement between the public sector and the industry, it cannot address the structure, outcomes and conduct that are likely to adversely affect competition, so it is complementary to a market inquiry. DM