Implementation of SA Poultry Sector Master Plan: stakeholder engagement, with Minister

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Trade, Industry and Competition

29 November 2022
Chairperson: Ms J Hermans (ANC)
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Meeting Summary


South African Poultry Sector Master Plan

The Portfolio Committee on Trade, Industry, and Competition held a virtual meeting to receive a briefing from the Minister of Trade, Industry, and Competition on the implementation of SA Poultry Sector Master Plan. The Committee also heard from various stakeholders participating in the master plan.

The poultry sector was an important source of protein for consumers and for producers and, through the implementation of the master plan, the industry had begun to recover from the reported decline faced in the pre-2019 period. New investments had resulted in increases in the local poultry-slaughter capacity per week. Additional jobs had been created in the poultry producer sector, the animal feed sector and emerging contract growers had been supported. South Africa was, however, still a large net importer of poultry, importing poultry worth R1,3 billion in Quarter 2 of the 2022/23 financial year. Two of nine provinces had been declared free of Avian influenza, i.e., Mpumalanga and the Eastern Cape. Challenges were still being experienced in the export field, although South Africa was currently exporting cooked poultry meat to several countries in Africa and the United Arab Emirates. Key challenges remained local procurement as there was scope to secure support from more retailers to buy local chicken. Poultry exports had been constrained by the outbreaks of avian influenza as well as sanitary and phytosanitary related issues. Although progress had been made, more could be done to increase the entry of black South Africans into the sector. The increasing cost of feed, which constituted 70% of production costs, the high cost and unreliability of electricity supply, rising fuel prices and water shortages remained severe challenges. The sector was engaging with Eskom and was seeking commitments from retailers to buy local, as well as investments to support contract growers. Also being addressed was a greater commitment to industry transformation and a focus on ownership throughout the value chain.

Representatives from the South African Poultry Association, the Animal Feed Manufacturers Association and the Food & Allied Workers Union made positive inputs. Animal feed was bought internationally and the price was determined in US Dollars by the Chicago Board of Trade. China was rebuilding its swine herds and that put pressure on the price of maize and soybeans. The Union called for more detail in the analysis of the progress of the sector.

Members asked if the objectives of the poultry master plan were appropriate and whether the master plan was supported by all stakeholders. Members asked for a comparative view of the poultry sector looking at jobs lost during the difficult period when there was almost a collapse within the poultry sector and current employment. Why was South Africa importing chickens when they could be produced in the country? Why did the government not say South Africa would no longer import chicken, even if it was an unpopular view, thereby protecting the industry and jobs in the industry? Why was the United States were allowed to dump chickens in South Africa? What was the impact of the decision to delay the implementation of anti-dumping measures on the poultry master plan and stakeholders?

When was the government going to put an amendment to the World Trade Organization to deal with the dumping of products? Were local producers not using the imported chicken prices to artificially raise the price of locally produced chicken? If the European markets commanded a greater price for white meat than the South African market did, why was the country not making greater efforts to export white meat? Another Member asked why local people should have to make do with the left-over brown and bone-in meat while the best meat was exported. What could be done to lessen the exposure to the volatility of feed markets? Were animal and environmentally friendly methods being pursued in the poultry raising sector?

Meeting report

Opening Remarks
The Chairperson informed Committee Members that the Minister would brief them on the progress made in terms of the implementation of the South African Poultry Sector Master Plan, as well as any outcomes of the plan.

Presentation by the Minister of Trade & Industry
The Minister introduced his colleagues and stakeholders, some of whom he would ask to provide a brief input later in the meeting.

The poultry sector was an important source of protein for consumers and for producers. Through the implementation of the Masterplan, the industry had, from 2020 to 2022, begun to recover from the reported decline faced in the pre-2019 period and made new investments, with increases in the local poultry-slaughter capacity per week. Since the master plan inception, R479m had been spent through the Industrial Development Corporation/ Department of Agriculture, Land Reform and Rural Development (IDC/DALRRD) Agri-Industrial Fund to build poultry infrastructure to support emerging farmers. 21 emerging contract growers had been supported as of September 2022, against the target of 50 farmers over three years. The implementation of the Masterplan involved balancing the interests of all stakeholders, including between producers and consumers but from January 2020 to September 2022, 1 888 additional jobs had been created in the poultry producers sector, 2 000 additional jobs in the animal feed sector, and 21 contract growers had been supported.
DALRRD had declared two of nine provinces free of Avian influenza, i.e., Mpumalanga and Eastern Cape. Although challenges were still being experienced with several countries, including the European Union (EU), United Kingdom (UK), and Saudi Arabia due to the avian influenza outbreaks, SA was currently exporting cooked poultry meat to Lesotho, Namibia, Botswana, eSwatini, UAE, Ghana, Zambia, and Zimbabwe. However, South Africa was still a large net importer of poultry, importing R1,3 billion in poultry in Quarter 2 of 2022.
Key challenges remained, firstly, local procurement as there was scope to secure support from more retailers to buy local chicken. Poultry exports had been constrained by the outbreaks of avian influenza and sanitary and phytosanitary (SPS) related issues. Although progress had been made with contract poultry producers, more could be done to increase the entry of black South Africans into the sector. The increasing cost of feed, which constituted 70% of production costs, the high cost and unreliability of electricity supply, rising fuel prices and shortages in water supply in some areas remained severe challenges.
Efforts in the sector to resolve the challenges included a work plan to focus on:
-Energy and facilitating an engagement with Eskom.
-Procurement, particularly commitments to buy local.
-Investment to reach the target of 50 contract growers by the end of 20.
-Greater commitment to industry transformation and a focus on ownership throughout the value chain.
-Urgent action to eradicate avian influenza, unlocking export markets to the Middle East and cooked products to EU, and
-engaging the Land Bank in the blended funding to support the industry investment.

(See Presentation)

Input by Stakeholders
The Minister called on four stakeholders to make brief inputs but, unfortunately, one person was not online.

Mr Izaak Breitenbach, Chief Executive Officer, South African Poultry Association (SAPA), stated that the Minister had given a very comprehensive rundown on what had been done in terms of the master plan, which was a success. Although the role players had done a lot of work, it did not stop. They had pledged commitments until 2024, which should see more investment, more job creation, more contract drivers and as the Minister had mentioned, they probably needed to focus a lot more on the non-contract growers and transformation part of the master plan. He was happy to report that the role players had submitted the residue programme for the European Union and the United Kingdom (UK), as well as the VPNs that support the programme which had to be sent to the Department of Agriculture, Land Reform and Rural Development (DALRRD). That needed to be finalised and then sent through to the EU and the UK, respectively. It represented a great progress in terms of efforts to export. A lot of work had gone into that.

Mr De Wet Boshoff, Executive Director (CEO), Animal Feed Manufacturers Association (AFMA), explained that AFMA was the major supporting partner of SAPA. It produced the majority of all the poultry feed in the country. His organisation was very aware of the cost of feed. Unfortunately, AFMA bought on the global market where the prices of commodities were set in US dollars. The exchange rate was sometimes not to SA’s benefit, but the prices of commodities were determined at the Chicago Board of Trade, which is an international platform or exchange. AFMA was a price taker from there, so prices in South Africa were derived from the Chicago Board of Trade. Unfortunately, there were several pressure points on commodities worldwide due to various situations in the world, such as climatic, unrest in the world and the war in Ukraine and Russia, etc.

Mr Boshoff added that it should not be forgotten that South Africa only makes 1% of the world's feed production. One of the big users of raw materials and commodities was, of course, China, which had lost a third of its swine herds and the Chinese were repopulating those. More than 300 million pigs were lost and those herds were being repopulated which put quite a demand on maize, as well as soya, both of which were also used to feed poultry. He had to raise the flag that there was a big demand for commodities out there and the prices were determined internationally. AFMA was always striving for the best price for its consumers, which was the poultry industry. AFMA was constantly looking at ways of curbing costs.

He added that, as Mr Breitenbach had said, he and AFMA regarded the poultry plan as a success, and fully supported it. He was eagerly looking towards the future as the larger they grew the local market, the more the whole value chain would benefit.

Mr Vuka Chonco, Provincial Organiser, Food & Allied Workers Union (FAWU), stated that his Union also strongly supported the master plan and the reason they had to embark on that road. One of the things he thought should be raised was the fascinating presentation itself. It was a good, comprehensive presentation, but he requested that in future it be presented with the figures relating to the key areas of the master plan, that it would be a monitoring measure to see if there were any gaps. The sector players needed to monitor themselves going forward because they might find places where they could do better and if they could not measure themselves, they would be unable to acknowledge the success. The presentation itself would work if it were twofold. For example, one of the slides was based on the threat of imports, and it was important that the Department monitored those figures. However, the threat should be explained as well as the measures designed to monitor it. Even the transformation should be explained. He was happy to see that assistance was offered in various provinces, including to the contract farmers and so on.

He would have in the Master Plan, the key areas being worked on as well as, from a transformation point of view, a reflection on whether the figures matched the demographics of each province, particularly in terms of black females and black males. Were those figures conforming to what could be considered a transformation? He appreciated the presentation because it assisted in being able to see the work that had been done.

Mr Chonco noted that good work had been done in terms of exports, but without figures, they could not say how much the sector had increased export in contrast with the imports flowing into the country. He had heard in the initial stage of the presentation that the protection of the sector had to be based on not just one issue, or one area, but had to be a combination of areas designed to protect the local economy, and in particular, the sector. FAWU agreed with that approach. However, one leg was at a disadvantage. FAWU would appreciate a space to have an interaction with the Minister, depending on what decision was made. For example, the Minister might have decided, based on food inflation, to delay the anti-dumping duties. That might have been important at the time but he requested space for engagement so that the Union could have a better understanding from the perspective of workers, especially the lowest paid workers. He completely understood that the Minister was a busy person but, if he could, at least, delegate someone with whom FAWU could engage, it would be appreciated. FAWU did not want to find itself discussing matters outside of committees or relevant structures where they could be engaging and finding common ground. Otherwise, he appreciated all those who had done so much work in supporting the master plan. FAWU would continue to support the master plan from a productivity point of view.

Mr W Thring (ACDP) asked for a comparative view of the poultry sector concerning jobs lost during the difficult period when there was almost a collapse within the poultry sector. Thousands of jobs had been lost; even Rainbow Chickens in Hammarsdale in KwaZulu-Natal had closed down. The growth was good but had the jobs lost at that time been regained or was it a deficit scenario?

Mr Thring asked, in terms of the poultry feed sector, whether South Africa and many other countries that were price takers were at the mercy of the volatility of the markets or the exogenous factors. What could be done to lessen the exposure to that type of volatility?

He pointed out that mass production understandably gave one economy of scale. But to lessen the damage to the economy, were there different models of poultry farming, which were less feed-intensive and less energy intensive? He presented an example of a farmer who used his chickens to eat insects during cropping, thereby allowing the chickens to feed off the insects and cutting back also on insecticide use. Were different models encouraged or was it mass production and economies of scale that the sector was chasing?                   

Dr M Tshwaku (EFF) noted R1.4 billion imports of chicken. Why was SA importing chickens when they could be produced in SA? Why was the government taking a counter-revolutionary position when SA could produce chickens? He himself had raised chickens. South Africa had the capacity to provide its own chickens. A good story would be that no chickens were imported and that chicken production created jobs. It did not make sense to import chickens. Why not say South Africa would no longer import chicken, even if it was an unpopular view? Why not come to a point where the government said that it was there to protect the industry and jobs in the industry? He did not want to hear about operating in a global economy.

He asked if there was any way that the existing agreements could be made permanent. Most of those agreements were taken away when the uptake was reduced. He also asked why countries like the United States were allowed to dump chickens in South Africa. He had never understood that point. Why was SA allowing other countries to do that? What was the logic behind that? Was it politics or the economy? What was stopping SA from taking steps to protect jobs by saying other countries could not dump chickens? The townships could create a lot of jobs. It was much easier than engineering because it was easy to raise chickens. When was the government going to put an amendment to the World Trade Organization? It was unfair that other people could do whatever when people in the township just wanted to be able to create jobs. What about food security? The Minister must remember that chickens were local produce. When there was a problem outside SA, what would happen to food security? He asked the Minister to think about that.

Mr D Macpherson (DA) said that the Minister had been correct in framing the problem but he rejected two objectives of the Master Plan because the Minister’s solution had made the problem worse. The price stability of poultry and reducing the price of meat had been exacerbated by the model of the poultry master plan.

Mr Macpherson declared that on those two key objectives, the master plan had, in fact, made the cheapest form of protein for millions of South Africans more expensive and less stable and that was problematic. If that was one of the two key objectives of the master plan, the solution to the problem had made the problem worse for millions of people. The government's answer to that was to put its hands up in the air and say that there was nothing it could do. He was pleased to hear the Minister speak of the war in Ukraine, which was refreshing terminology used by more and more government Ministers that he welcomed. But were the objectives of the master plan appropriate?

He had the opportunity to meet with a relatively large poultry producer with whom he had extensive discussions about the situation and the producer’s views were that the poultry master plan had essentially fallen by the way and was not assisting the industry anymore. If it was not assisting the industry, and if it was not assisting consumers, who was it assisting? One of the big gripes that the producer had, and it was something that had been going on for many years, was the total failure to open up markets for the export of white meat. As the Minister had correctly stated in his analysis upfront, the European markets commanded a greater price for white meat than the South African market did. So, if there was a balance to be found where South African poultry producers were able to achieve a higher export price for the white meat, why had that never been taken advantage of by the dtic? The problem was the continual shifting of responsibilities as to who was to do that.

Mr Macpherson declared that the big mistake, and that was where he fundamentally disagreed with many organisations and political parties on the virtual platform, was the idea that one could simply determine that there would be no exports. That was fundamentally wrong. There was a detrimentally low amount of competition within the poultry sector, which allowed the big JSE-listed companies that had made billions of rands in profits over the last couple of years, to simply lift the prices, to parity prices of imported chicken plus duties. They had not sought to lower the price of chicken but they were using the opportunity made available through the duties imposed on imported chicken to raise their prices, thereby inflicting further harm on the very poor and struggling households across the country.

One of the statistics that Mr Macpherson had been given by the producer he had met, and which he found fascinating, was that South Africa was the sixth most competitive poultry-producing country in the world. That was a statistic that was not often told because it was an inconvenient statistic that showed that SA’s poultry-producing market was exceptionally competitive when compared to some of the other markets, particularly in Asia. A myth and misnomer had been created that South African poultry was under attack by cheaper chicken imported into the country. One had to take a trip down memory lane when the big producers were selling seawater for the price of chicken and they had made billions and billions of rands in profits by doing that. Correctly so, the courts had intervened and opposed that shocking practice of pumping chicken with up to 85% seawater and making a lot of money. The next idea was to create the artificial idea of a market under siege, slap tariffs on all of the importers and raise their prices to that parity market, which allowed them to recoup the losses made when their scheme collapsed after the courts intervened. That was the truth of the matter.

As the Minister knew, Mr Macpherson did not buy the argument that many of the producers put forward but many producers had told him that what would be extremely helpful was labour market stability for their businesses, input cost stability, that is fuel, water, electricity, and an end to local government incompetence, and collapse. That was what made many businesses uncompetitive. A bogeyman had been created to cover up for many of the failures of national, provincial and local governments when the government could have a hand in resolving many of the issues. And the loser was the consumer, particularly poor consumers who lived off low wages and were forced to pay more and more for the cheapest form of protein. That was why 27% of all children suffered from malnutrition – parents and guardians simply could not afford to put food in their bellies. And the poultry plan was exacerbating that problem for them.

He thought, with respect, the problem had been misdiagnosed and the solution even more misdiagnosed. Lobby groups and special interest groups, as well as people who sought to create closure agreements in the poultry sector, had led the process. It was necessary to go back to the drawing board and to get to the nub of the problem and what needed to be done about it. He only saw the situation becoming worse and worse with failures all around. Someday someone would need to answer for the lack of access to duty-free chicken exports to the European market that SA had not taken advantage of over the last five years.

Mr Macpherson knew the Minister enjoyed constructive inputs, even if he disagreed with them. It was a subject that Mr Macpherson was passionate about and a lot more could be done. There was an opportunity for growth and for competitiveness. But there had to be an honest look at the sector and the big players, particularly at the lobby groups in the sector.

Mr C Malematja (ANC) noted that the poultry industry had suffered a huge blow during Covid. He noted that the labour section was behind the Master Plan; so, who were the Members to object when the labour union was satisfied? The upcoming producers were enjoying support. Challenges mentioned by the Union had to be tackled so there was no vacuum. Members of the Union wanted to hear the Minister’s voice because he provided the voice of hope.

The other thing that had impressed Mr Malematja was seeing how the upcoming and emerging (poultry producers) enjoyed support. He was very happy to learn that South Africa was not America in the 1930s which had applied an isolationist economic policy where Americans could not go to other countries and did not let other countries into the States. The Minister had to explain to Members how the government was dealing with the export of goods and not suppressing locals. The free trade policy had to remain.

He assured the Minister that the issue of Ukraine and Russia was a non-starter. SA could not be jumping as if it were not affected by the high price of oil which touched every sector. He understood that the Minister had to be very calculating when dealing with those challenges. It was for the Minister to say how best to relieve the small producers that were affected by debt. The high number of jobs created during those difficulties had to be highlighted and appreciated. The Minister had given the target for the coming year. That would be a good story to tell. DALRRD should assist, especially in the field, working with the dtic to determine how many entrepreneurs were being produced and how they could be assisted financially.

Mr Malematja noted that the avian flu and other SPS-related issues affected production. The producers should be advised on the measures they should put in place to prevent such outbreaks. The other aspect was the control of the premium meat so that the people did not have to make do with the left-over meat while the best meat was exported. How could that be controlled?

Mr S Mbuyane (ANC) had heard about the increase in local production following the tariff increase and the anti-dumping measures, etc., but what about transformation in the sector and job opportunities created per province? He wanted the demographics per province. Localisation and beneficiation were key for industrialisation. Concerning the protectionist approach, he asked if companies or individuals were mentoring or monitoring, so the new producers were protected by tariffs from the global value chain economy. Were the poultry producers able to engage in local distribution to nearby Shoprite stores?

He said that he had been disturbed by the question of price because locally-produced poultry was much more expensive than imported poultry. What was the reason for that? Was there an intergovernmental relationship between DALRRD and the DTIC in terms of funding for small companies and SMEs so that they formed part of the value chain in terms of the economy?

Mr Z Burns-Ncamashe (ANC) said that everyone was aware that electioneering was taking place so there would be a lot of commandeering and scoring of cheap political points at the expense of what was real and factual. He did not believe that the Committee should be distracted from the realities of the impact on the people after the wonderful excellent presentation by the Minister. The Minister, as was always the case, gave a meticulous, clinical presentation, giving clarity and scientifically showing in terms of verifiable statistics what was happening and where the ANC-led government was on those matters.

He stated that one of the serious challenges was around the dumping of poultry which affected local producers. The Minister spoke about the anti-dumping duties imposed on poultry from Brazil, Denmark, Ireland, Poland, Spain, and so on which were approved around July 2022. He was mindful of the spike in international food prices, which arose out of, amongst other issues, the war between Russia and Ukraine, which was fuelled in ways that undermined the efforts of multilateral institutions to engage the parties. One had to be honest about the analysis of the situation and very clear about the position that South Africa had taken, i.e., that of ensuring that those involved were brought to a table to find one another.

Mr Burns-Ncamashe asked the Minister why the people had to make do with the left-over meat while the best meat was exported. How could that be controlled? What impact had the decision to delay the implementation had on the poultry master plan and stakeholders? Given that it was a large industry, one would expect it to vary. He requested Mr Chonco to respond.

Mr Chonco said his observation was that there were job losses before the master plan was implemented and those were a result of what the union had raised publicly. With regards to the influx of imported chickens, which was ultimately presented as chicken dumping, one of the things that assisted was that the master plan was designed to protect or regain the lost jobs. The initial master plan was designed to create 3900 jobs in total by 2020. But, as a result of COVID-19, there were challenges. Job losses were on the periphery of the master plan and were not in any way directly addressed in the process. He had raised the point earlier. When there was a presentation, there should be a comparison with what was designed in the master plan to determine whether jobs were growing or not. However, there had been job creation; he was not going to dispute that. In terms of job losses, the situation was that the employers were hiding behind COVID-19. The Union sat with the big players, but at the periphery, in rural areas, the union needed to zoom into those workplaces. The union needed to make sure that all other areas were not reducing indirectly the number of jobs.

Mr Boshoff stated that AFMA was benchmarked against international prices. He agreed with Mr Macpherson that South Africa was the most competitive industry in the world for growing poultry and in the effectiveness or efficiency of the poultry farmer in South Africa. The feed industry believed the problem was the exchange rate volatility, and AFMA could not control that. The volatility was a result of international happenings, political instability, etc. His view was that there was a need to look to the primary sector because it was a total value chain approach that went from fertiliser to seed and included the producers of grains and oil seeds in the value chain. He would focus on assistance with the primary inputs. Fertiliser was the main driver of prices on the primary level, so he would consider that. Infrastructure, i.e., transport, water, electricity, ports, etc., was a state function although, the industry was trying to assist where it could. When it came to big investments to improve infrastructures, the industry left that to the government, but would gladly assist in rolling out those plans.

Mr Boshoff suggested that it was necessary to look into the local pricing of soybeans and soybean meal, as well as sunflower seed and sunflower oil. AFMA had been looking into the possibility of trading local contracts on the JSE for the products that did not have derived prices, although he acknowledged that even those products were subject to receiving signals from the international market. However, if local contracts were traded on the JSE, AFMA would have a more accurate price determination. It would also be more transparent and good for the market. He believed that if AFMA could request some assistance from the dtic, it could look into that. Assistance should be given to the crushing fraternity in South Africa because the big issue was storage capacity and crushing facilities to deliver the products. One had to remember that a broiler diet was 60% to 65% maize and around 30% to 35% was soya. Some sunflower seeds were also included. To improve things, he would spend a lot of time specifically looking at the two big commodities as well as the primary sector, seed fertiliser, the price-determining factor or mechanism on the JSE. He would also look at more local contracts that were not internationally derived. He illustrated the infrastructure challenge by informing Members that it was cheaper to import soybean meal from Argentina than to transport soybean meal from Randfontein to Cape Town by truck. That was why the coastal regions preferred imports. Transport would further enhance the development of the soya value chain as well as the whole value chain in agriculture within the ambit of the poultry industry.

Minister Patel noted that Mr Boshoff had raised some interesting ideas that were worth following up. He suggested that the DG of dtic could put a team together to follow up on the matter of local contracts and how to work with grain producers to reduce volatility. He found Mr Thring’s question about whether the master plan looked only at scaled production or whether there was niche production that was less energy intensive and feed intensive, quite interesting because he had raised questions about the form of future production in a world that was becoming a lot more conscious about the environment, sustainability issues and food production, which would become the next big frontier where consumers would be probing the conditions under which foods were made. The egg market was a good example. The premium price was for organic eggs, or free range eggs, compared to lower prices for eggs that were produced in large indoor units that formed the bulk of the SA production system. Historically, it had been a trade-off between price and conditions. He anticipated that a growing number of consumers would show a preference for poultry that was produced in more sustainable conditions. South Africa needed to be part of that approach to chickens, but at the same time, millions of South Africans battled to buy protein at affordable prices.

Responding to Mr Tshwaku, he suggested there were two points to raise in respect of poultry imports. On the one hand, the plan was to bring down the level of imports over time by improving the overall capacity inside the industry: issues relating to feed costs, input costs, energy supply, the logistics and trucking costs from one part of the country to another. On the other hand, was the judicious use of trade measures. The government could take the view that it was going to close the South African economy and put the highest barriers on every single item, but the truth is if SA did that, and every other country did the same, everyone in the world would be poorer because South Africa sold more than R600 billion worth of manufactured products to the rest of the world every year and those products created and sustained an enormous number of jobs. Those economic opportunities would be lost if SA were unable to sell those goods.

The Minister explained that the view taken was to try to avoid the two fundamentalisms: one fundamentalism said that the market should be opened up and tariffs for all produces reduced to zero to maximize consumer welfare. He did not see many countries doing that, not even countries that espoused free trade. He had just come back from the United Kingdom which supported free trade in theory, but when they had talked about access to South African sugar, South African fruit, South African wine and South African products, then he met the hard reality that countries made calculations about what was in their best interest. And so, in theory, simply reducing tariffs to zero would enhance consumer welfare, but it would come at an enormous cost to the income of those consumers. In other words, SA would have goods that were theoretically cheap, but nobody would have jobs to pay for the goods because the economy would not be able to sustain the large numbers of young people coming into the job market every year. So, fundamentalism on the one side was not going to help. On the other hand, one had to avoid fundamentalism on the other side, which saw every industrial problem being resolved only by imposing the highest level of tariffs that would just close SA’s borders and stop imports of every single item. That strategy would support the localisation strategy but the price of closing SA to the world would be a rise in prices and a world in which people did not trade with each other. As seen in the past, that was a world where human welfare was compromised and where innovation was limited. The big breakthrough in civilization had come when people traded with each other and engaged with each other. Those ideas needed to be retained.

Minister Patel posed the question of how one found a balance between the two extremes. The Department attempted that balance in trade and industrial development. The dtic opened up markets where it was helpful and provided some level of support where local industry required such support. The challenge was that providing support to local industries could lower the level of innovation, competitiveness and the incentive to produce goods quicker, cheaper and better. To address that challenge, the dtic had introduced a greater level of reciprocity in trade where those who sought tariff support had to show that they were investing in their workers, equipment and work processes. They had to spend money on capital equipment to make their production processes inherently more competitive. Trade support could be a temporary shield for those prepared to make that commitment, as long as it did not become a long-term crutch.

He explained that in the previous political dispensation, markets were closed in many instances, but the dtic had been on the road of rapid liberalisation since 1994/1995. The country had liberalised its tariffs on several industrial products very rapidly and that approach had seen the loss of an enormous number of jobs and huge levels of de-industrialisation. A more careful industrial strategy was required. If the dtic received an application to increase tariffs in a particular sector, it might support the application if it were in the country's interest. The dtic’s position was based on an evidence-based pragmatic case-by-case analysis, as opposed to a position based on a matter of principle. He noted that the trade policy based on the length of contracts for producers was very limiting according to some producers and so he would like the Department to pay more attention to that matter. When new and smaller producers were able to get longer production and procurement commitments, it allowed them to invest more heavily in their business and that could only assist with the long-term sustainability of those businesses.

On why SA allowed the United States to dump chicken in South Africa, Minister Patel explained that South Africa had undertaken an anti-dumping investigation that included the United States and so had put quite significant anti-dumping duties on American chicken. SA had provided a quota, which had been negotiated with the US, and any product above that quota attracted high levels of anti-dumping duties. ITAC had been looking at the expiry of those duties and had concluded some of their work in that regard. Whenever there was dumping, whether it was from the United States or any other country, anti-dumping duties were applied.

Minister Patel said that Mr Macpherson had moved the dialogue forward in acknowledging the correct framing of some of the issues and policymaking. Mr Macpherson would appreciate there was always a careful balancing act to achieve several distinct policy objectives. Sometimes the policy objectives were in tension with each other and a way had to be found to navigate that situation. The critical policy goal was to create more jobs, to provide more economic opportunities for young people, more entrepreneurship opportunities, and more economic inclusion. If that were the measure, it would mean following policies that enhanced producer welfare to support local industry to the maximum. At the same time, government sought
to promote consumer welfare and to improve the quality of life of South Africans, which meant having access to food at affordable prices. If that were the only goal, consumer welfare would be maximised, which meant the lowest possible prices. Did that mean the jobs goal should be dropped? That could not be done but neither could the consumer goals be dropped. A careful balance was required.

Where Mr Macpherson saw tensions inherent in the master plan in how government sought to address multiple goals, the Minister would say welcome to the world in which tensions were inherent in decision-making. He hoped that it was with a degree of wisdom that the public sector choices were made to create a careful balance. On the one hand, the decision was to increase tariffs in March 2020; on the other hand, the implementation date for the anti-dumping duties was postponed by 12 months. Producers were not very happy with that, and they had verbalised their position in the public domain but that delay had assisted consumers with a careful blend and balance in pricing. And that was really what the conduct of policy was all about.

Minister Patel was happy that Mr Macpherson had met with a large poultry producer, and he asked to be favoured with the details of the poultry producer so that he could see what the challenges were. However, he imagined that the producer was represented by SAPA. Mr Macpherson had met with one large poultry producer and had taken its view as gospel, namely, that the master plan was not supported by the industry or was not supporting the industry. On the other hand, Mr Macpherson also made the point that the master plan unduly supported large players and allowed those large players to make profits. One could not have it both ways – either the master plan was supported and supportive, or not. The decision was to start the master plans largely in the most difficult sectors of the economy and not the relatively easy sectors like the Global Business Services, or foreign production areas because that was not where there were enormous numbers of jobs at immediate risk of being lost. Although it was going to be a difficult road, the government took the view that part of governance was not to walk away from difficult sectors but to confront them. The CEOs of the poultry producers were all present in a recent meeting of the master plan executive oversight committee and they all indicated they found the master plan helpful to long-term planning. They could see the approach that the government was taking and they, in turn, could make long-term investment commitments. That did not mean that the industry would support every decision of the government or that every part of the master plan was comfortable for them. The CEOs recognised that government would put pressure on the industry to transform and they had to provide space for young people to come in and for women-owned poultry farms, abattoirs and hatcheries to emerge. That was uncomfortable for the players who had dominated the market to date. At the same time, thinking maturely about the industry, it was critical to retain the strengths of existing players, for them to focus much more on export and the opportunities in the export market. It was also necessary to curb any predatory pricing, abuse of dominance, or unfair conduct in the market. The competition authorities kept a watchful eye on practices in sectors such as those.

He also noted that Mr Macpherson raised the issue of access to export markets. That was an area that needed a lot more aggressive work. The problem in recent times had been avian flu. Even the European Union, which had enormous resources for inspecting their poultry farms and was able to meet high hygiene standards and so on, had seen an outbreak of avian flu which had resulted in a massive reduction in exports to the rest of the world, including to South Africa. He was sure Mr Macpherson would not blame the European Department of Trade and Industry, or the European Department of Agriculture, for not doing their work when avian flu arose. Similarly, as SA emerged from avian flu, the expectation was that there would be a lot more work to be done in the export market The industry had indicated that it had completed some work on the residue monitoring that would enable SA to put a more compelling case to the European Union for access to the markets.

The Minister appreciated Mr Macpherson’s recognition of some of the competitive strengths of local industry. The government would like the poultry industry to improve that competitiveness even more and input costs were a key part of that, but some of the input costs were quite difficult to address. For example, cutting the wages of workers was not an option for South Africans who were trying to make a decent income to feed their families. The focus had to be on partnerships to improve productivity on farms and to address many of the logistics challenges. Certain input costs were outside of the government’s direct control, like fuel prices, but by improving some of the infrastructure, it might be possible to reduce the reliance on trucking at excessive costs. Building more local capability near markets was an important way of doing that.

Mr Macpherson had raised the issue of the extensive challenges of poverty and malnutrition and that had to be a focus. Minister Patel agreed that it was an area of common focus across the different political parties in Parliament as they were all committed to the same goals of fighting poverty and providing economic opportunity. One of the biggest drivers of poverty was unemployment. When people did not have jobs, they did not have the means to buy food and so there was a need to have less expensive food, but also a need to have jobs for South Africans. And that was the careful balance in the master plan.

Minister Patel moved on to the points raised by Mr Malematja. The issue around small producers was an area of particular importance and poultry was a means to bring smaller players into the market, but they faced enormous challenges and could very often not compete with the large players who used economies of scale to reduce costs and secure the market. There needed to be a greater effort at coordination amongst smaller players. One of the case studies highlighted the presentation was of a cooperative venture involving several farmers. A South African female engineer had brought them all together. What she had done was very, very interesting. She had brought different players together to see whether by combining the efforts, she was able to secure at least some degree of scale output, and at the same time, bring in economic opportunities for smaller players. That was an instrument that was used by farmers in the pre-1994 era very, very extensively. Clover Dairy started as a farmers’ cooperative; KWV was a farmers’ cooperative. The Minister had been working on a roadshow by dtic entities in local areas and district municipalities to expose all of the services of government to local players. It could be done in partnership with DALRRD in areas where there was a significant farming footprint. He hoped to kick off those roadshows in the first quarter of the following year.

Mr Malematja had made some very useful comments about target setting. The Minister had challenged the master plan players to look at tighter and better targets in the period ahead and he assured Mr Malematja that the dtic was working on addressing the issues around the avian flu through DALRRD. He clarified the difference between premium meat versus discounted meat. It was not about the quality of the meat. It was just a different cut of the chicken. Many people preferred the cheaper meat, i.e., brown meats and bone-in meats. Not everybody preferred boneless chicken. It was a matter of preference and in some of the world markets, people preferred a certain cut of the chicken. What it did was to provide dtic with a really good signal of what SA might be able to export to wealthier markets and the more SA was able to export, the greater the scale of production and the more the unit cost could be reduced which would enable producers to provide affordable products in the domestic market. That would mean more consumers would switch to poultry as the preferred form of protein. He had asked the industry to look at a Bantam metric to measure production, not by the number of farmers but by the volume of meat. They could measure what percentage of meat was being produced by smaller players, by women-owned businesses, by businesses in the provinces that had historically not had big exposure to industrialisation, by black-owned businesses, etc. It was a big project but he was looking forward to getting that information at the next executive oversight committee meeting. As the measure became more and more accurate, it could be put in the public domain.

When it came to localisation and beneficiation, the Minister noted that Mr Mbuyane had mentioned an important area, i.e., mentoring and how to provide support to smaller players who were coming into commercial production for the first time and had not been through all the cycles of high feed prices, low feed prices, high levels of imports, low levels of imports, shifts in consumer tastes and so on. That was where the grey beards in the industry could play a big role. There was not, as Mr Mbuyane suggested, a need to protect some of these smaller players from the global value chain dynamics; the job of dtic was to expose them to those dynamics, expose them to some of the fierceness of competition by providing them with a little bit of support, but increasingly lowering the levels of support at which they must be able to swim. If the intention were to build competitive black-owned businesses, businesses must survive and thrive in those markets, although it was recognised that they came in without all of the advantages and incumbents of people that had been there for many years. So, they often needed initial support, but eventually the industry, and new players, needed to be able to compete in that market.

Concerning the significant question around the pricing of imported products and local products, the Minister had looked at some data earlier in the year, which had given quite interesting insights into price movements for food products in general. What was striking was that for the products that SA was producing domestically, the price increases were generally lower than the price increases of several imported products and the price index for locally produced food was growing at a slower level than the global indices. South Africa had a good domestic food-producing sector. That was something the country should not lose. He had had a very lengthy conversation at the World Trade Organisation (WTO) in June 2022 where SA had asked the European Union to drop all subsidies to their farmers so that other farmers could compete with them on equal terms. Europe was very insistent on the need for food security and so it was providing enormous subsidies to its farmers. That was done also in other countries, such as Japan that supported their farmers through public stockholding measures. So, the agricultural market, globally, was not quite a free market. It is a market where countries want to make sure that in difficult times, they also had local production of food. South Africans expected that from the government. Local production of food, as well as finance for small businesses, was quite an important part of what needed to be done. The work that the IDC had started recently by launching a R1 billion fund was an important response to that need.

The Minister recognised that in the poultry industry the interests of the parties were not well aligned. The importers and the local producers had a history of quite a robust public engagement in the newspapers and they loved it because it gave them the opportunity to sell the headline: The feathers are flying in the fights between the producers and importers. It must be understood that it was not possible to eliminate the different economic interests inherent in a market economy. Such differences could even provide enormous strengths to society if those different interests were carefully mediated and balanced, but there was an increasing number of areas where the parties could collaborate. The big opportunity lay in the African Continental Free Trade Area and as that was switched on, the enormous energy of the import community could be used to export South African-produced poultry to other parts of the continent. As soon as SA resolved some of the SPS issues, it could also sell more poultry to the European Union, and also to the Middle East where, during a recent trip to Saudi Arabia, the question of anti-dumping duties and the delays in putting measures in place, as well as the value of socialising those decisions, was discussed.

He explained that anti-dumping duties were not principally driven by a policy decision of government; they were evidence-based and subject to quite significant and tight rules put in place by the WTO. In South Africa, an applicant brought an application for tariffs to ITAC and provided the evidence for requiring a tariff on goods. The ITAC process allowed any other party to challenge the evidence and provide alternative evidence or alternative information that the Commission might not have. ITAC then finally made a recommendation to the ministry where an often difficult decision had to be made. The Minister had to apply himself to the facts, to the law, and to any additional policy considerations that might be relevant.

The challenge of COVID-19 had severely disrupted food value chains across the world. The Minister said that, as in all industrial policy, issues arose in a world that was rapidly changing. What was striking was that more and more countries were recognising the value of local industrialisation. Food security was a particularly important area, but increasingly, so were the areas of medical security and the high-tech sectors. High technology was seen as a critical part of future jobs and future national security. Each of those areas was getting governments across the world to begin to use the very language that South Africa was using. Of course, with all the issues, there were always trade-offs, careful balancing, and decision-making, as well as working closely with social partners, at the end of the day,

Minister Patel concluded by appreciating the work that the social partners were doing, but it was the government's job to put more pressure on them to increase the level of investment and to increase the jobs in the sector, while keeping prices affordable for South Africans and creating more opportunities for black South Africans to enter the market, not only in poultry production but also in that entire ecosystem. They had to have the preparedness to see through tough export markets because export markets could not be switched on and switched off as it took many years to make the first export breakthrough and many years to protect that breakthrough. Eventually, over time, that exposure to global markets would provide additional jobs for South Africans.

The Chairperson thanked the Minister for the very enlightening presentation. She noted, as he had said, that the implementation of the master plan on poultry involved balancing the interests of all stakeholders, including producers and consumers, and that was not an easy task.

Minister Patel wished the Committee well on behalf of the Department, the Deputy Ministers, and himself for the festive season. Members should come back energised to take forward the common effort across different political parties and all Members of Parliament to make South Africa a better place for citizens and for residents.

Committee Programme First Quarter 2023
The Chairperson requested Members to be aware that the Committee Programme was flexible and that certain items were subject to approval and would be adjusted, if necessary.

The Committee Secretary presented the programme to the Committee. The following items would occupy the Committee in the First Quarter 2023:
Oversight visit to Limpopo and the Office of National Lottery Commission (NLC)
Competition Committee
National Consumer Regulator (NCR), The National Consumer Commission (NCC)
The Minister of Trade Relations
Industrial Development Corporation, National Empowerment Fund
Companies Tribunal, Companies and Intellectual Property Commission
South African Bureau of Standards
The dtic Third Quarter report
the International Trade Administration Commission of South Africa, National Treasury, South African Revenue Services
The Research Institute on African Continental Free Trade Area
Dtic, NCR, NCC
Study Tour to South Korea and Vietnam – 20 March to 31 March 2023.

Consideration of Minutes
The Committee considered the minutes of 15, 16, 22, and 23 November 2022. The minutes were adopted by the Committee without amendments or objections.

Closing Remarks
Mr Thring wished the Chairperson and Committee Members well.

The Chairperson thanked the Committee Members and wished them well over the festive season.
The meeting was adjourned.

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