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Presentation to the

PORTFOLIO COMMITTEE:Department of Agriculture, Forestry and Fisheries

By

South African Poultry Association (SAPA)

PARLIAMENT: CAPE TOWN13 March 2015

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OVERVIEW OF PRESENTATION

• Poultry Industry in Perspective• Poultry Industry Employment• Industry Challenges

– Trade matters– AGOA– Brining– Transformation

• Other issues• Recommendations

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•Largest agricultural sector - represents majority of broiler and eggs

– Long term potential growth for both broiler meat and eggs – best value proposition for consumers

– Based on international data can grow substantially and address food security as well as job creation

•Potential growth dependant on economic growth•Broiler and egg industries going through tough times•Export potential for the two industries- if fair trade conditions exist

Poultry Industry in Perspective

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Broiler Industry Employment- egg industry adds another 20 000 jobs

Number of employees (including contract workers)

Junior Staff (Paterson A and B grades)

Supervisory and Senior Staff

(Paterson C grades and above) Total %All farming activities 12 889 1 592 14 481 25,9Broiler Processing 25 534 2 030 27 564 21,9Broiler Distribution 4 468 1 605 6 073 4,8Grand Total for Direct Employees 42 891 5 227 48 118Grand Total for Employees in Support Industries - Indirect Employees 59 739 47,4Grand Total of Direct and Indirect Employees 107 857Grand total of related field crops, i.e. white and yellow maize and soya 48 509Poultry share of related field crops 18 150Grand Total of direct and indirect employment 126 007 100

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Working Relations with Government

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• Poultry now the world’s largest and most exported meat type • Only 13% of production is exported and 50% of global trade value is in

dark meat surpluses• Total exports are worth about $ 18 billion a year• 7 countries supply the bulk of the exports• South Africa is the 9th biggest importer in the world importing >20% of

consumption mostly as surpluses and waste products• South Africa exports <2% of production• South Africa less than 2% of global production and at risk from

dumped and other low cost imports from the big players• We are extremely vulnerable because we eat all parts of a chicken

unlike the developed world• We need an enabling environment to drive further transformation

TRADE MATTERS:Overview of World Trade

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Global Egg Production

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SA consumers will eat more chicken

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IMPORTERS & EXPORTERS

• Annual imports equate to 84% of largest South African company annual sales volume• Positive switch in import volumes to local with EU tariffs

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TOTAL POULTRY IMPORTS

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The Product that Hurts = 40% of imports

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The Switch to Europe

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Effect of Provisional Measures

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TRADE MATTERS:What needs to be done

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TRADE MATTERS:Effect of imports on job creation: The volume effect

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Exports

• Opportunities for frozen broiler and shell eggs exports hampered by SPS measures and NTB’s applied to South Africa

• DTI driving market access issues with DIRCO and DAFF• Target countries include Middle East (Bahrain, Jordan,

Qatar, UAE, etc) countries and Angola• SPS Risk analysis identified by the OIE PVS report as a

local weakness• DAFF, UP and PDMA (SAPA) working on resolving SPS

regulatory requirements• Extra veterinary export assistance would be

appreciated

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AGOA

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AGOA cont.

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• We believe that Regulation is needed• Our concerns

– Technical concerns: current draft flawed– Socio- economic impacts:

• consumers will pay more• Negative impact on nutrition and food security• Potential collapse of industry• Unemployment – many 000’s

– Consumers are going to be the main losers

Brining

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•Our concerns– Misconceptions about the health impacts of brining:

• Product is safe• DoH confirmed no health risk• Compared to alternative products IQF has lowest sodium values• IQF less sodium less sodium than bread

– Industry uncertainty:• Investment/ expansion• Shrinkage• Loss of employment

– Lack of solid consultation– How to resolve the impasse

Brining – our concerns cont.

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BRINING – how important is it to consumers?

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• Improves the eating experience– Improves texture and succulence– Improves taste

• Makes the product cheaper• Brining the most effective marinating

technique• Best possible price and value proposition• The peoples choice

What is brining?: technical and commercial effects

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The impact on consumers

CURRENT2 kg

70:30

R40.00

185g / pc

10.8 pcs

NEW 2 kg

85:15

R47.24

153g / pc

13.1 pcs

+20%

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Brined IQF is actually the cheapest chicken meat source

CURRENT ADVERTISED

FrozenBrined

IQF

Imported Leg

Quarters

FreshBraaiPack

FreshSkinlessFillets

VALUE PROPOSITION

70/30Meat / Fat & Skin Grams 489.7 703.7 703.7 1 000.0 Bones Grams 214.3 296.3 296.3 - Brine Grams 296.0 - - - Total content Grams 1 000.0 1 000.0 1 000.0 1 000.0 On shelf price RSP kg 19.50 26.99 29.99 49.99 Excluding brine & bones RSP kg 39.82 42.62 51.14 49.99 Protein Content per kg Grams 91.08 130.89 130.89 213.90 Protein percentage % 13.94% 18.60% 18.60% 21.39% Protein cost per kg R/kg index 92% 98% 118% 100% Composition values can vary depending on product mix and bird size

Positive effect of brining -January 2015 pricesPositive effect of brining -January 2015 prices

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BRINING:Market Prices

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Brining is safe

• All products sold locally have to be safe (FCD Act)– Brined or un-brined

• No evidence that current brine based marinade formulations have any health concerns

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Salt levels – a non issue

• Brining increases the salt (sodium) content of chicken from a low salt (sodium)product to a medium salt (sodium) product (WHO definition)

• Alternate price point products are all higher in sodium - except eggs

• IQF has less than 40% of the sodium levels of standard bread – and 1/3 of All Bran flakes

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• Transformation Committee established• Engagements with the dti’s BEE Unit at

instruction of Minister Davies• Industry commits to improving market access –

several companies have good stories to tell already

• Can accelerate if imports/ dumping and brining issues resolved i.e. if industry more stable

• Working with DAFF and sector departments to set targets

INDUSTRY TRANSFORMATION

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• Working with DAFF to introduce new preferred breed (SASSO)

• Trying to partner with LEDA on Lebowakgomo abattoir• Partnership with GDARD – R5million• Village chicken cooperation with DAFF• Looking at an equipment scheme• Requesting assistance to get poultry (meat and eggs)

declared designated products for government procurement

• Desiring a partnership to capacitate extension officers• Commodity line support at national and provincial level

needed

INDUSTRY TRANSFORMATION:Continued

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• APS Act – need to expedite production scheme amendments• R 725 – industry concerns re draft revised regulation• Independent Meat Inspection-

– want to expedite approval– Do not support red meat position

• Research Chair – greatly appreciate the support of DAFF• AMIE statutory levy – counterproductive in our view• IDC/ BFAP competiveness study in process• Municipal by-laws/ DoH• National monitoring scheme developments• Price and the national diet

General comments

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Recommendations

It is recommended that the Portfolio Committee (PC) help SAPA to

maintain a national organisation for the promotion, development

and guidance of the poultry industry by:

– Helping enforce phytosanitary measures;

– Helping ban all illegal imports and exports from the EU and

elsewhere; Countries such as Australia and New Zealand have

for years banned all imports

– The USA currently bans SA exports of chicken for spurious SPS

reasons

– Encouraging DAFF to ensure compliance at all ports of entry,

especially Durban

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Recommendations

– Treating SAPA as genuine partners and regularly communicating with

us on issues of mutual concern

• Helping us to improve food security, policy and legislative

framework to militate against high global food prices, and

market manipulation. Countries around the world protect their

chicken industries for food security and employment reasons.

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• Chicken and eggs the cheapest and best value for South Africans;

• Industry needs to be protected against foreign invasion;

• Industry keen on transformation;• Industry not anti-brining regulations• Together we can make a difference

CONCLUSION

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RE A LEBOGA

ENKOSI

DANKIE

THANK YOU

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