South Africa’s R65 billion giant under siege

South African poultry producers are the dynamo of the country’s agriculture industry, but find themselves under severe pressure.

Rainbow Chicken CEO Marthinus Stander believes more can be done to support and protect this crucial sector of the economy.

In presenting Rainbow’s latest annual results, Stander described South African poultry as a “national asset” and added that it should be protected as it is crucial to sustainable food security.

In an interview with Daily Investor, Stander explained the vital role South Africa’s poultry industry plays in the country’s economy.

The domestic poultry industry is worth around R65 billion, making it the country’s second-largest agricultural sector.

It is also the sector’s largest employer, employing almost 58,000 South Africans across the value chain.

“The whole maize side of agri, apart from human consumption, we are the second biggest user, and we’re probably the reason for the soy industry. So, the agri value chain is largely supported by the chicken industry,” Stander said.

“And then obviously, food security and chicken being the most versatile and the most affordable protein.”

According to the South African Poultry Association, the industry has made significant investments to increase its slaughter capacity from 19.5 million birds per week to 22.5 million birds per week.

Grainfield managing director Sas Kasselman estimates that South Africans consume approximately 23 million chickens a week. Of that number, 19 million are locally farmed. 

He said South Africans consume more chicken than any other meat – 49% of animal protein consumed per person is poultry, 26% is beef, 13% is eggs, 7% is pork, and 5% is mutton and goat.

Stander explained that the industry is also critical for rural development, as many poultry producers operate in small towns across the country and, therefore, support thousands of jobs and households.

From a global perspective, South Africa’s poultry producers are also critical, as local producers are highly competitive, low-cost players.

South Africa is among the world’s top six lowest-cost chicken producers, and is cheaper than any European country.

Despite poultry producers’ critical role in South Africa’s economy, the industry has come under severe pressure in recent years.

Frequent bouts of load-shedding and a devastating bird flu outbreak weighed heavily on local producers in 2023 and 2024.

Many producers saw their profits dwindle and swung into a loss, and millions of birds had to be culled over that period.

This period marked one of the most challenging times for local producers in recent history, and many have only recently started to recover.

Protecting agriculture’s crown jewel

Stander emphasised that while there are currently some protections in place to better support South African poultry producers, more can be done.

Currently, he said tariffs provide protection where it is needed, but South Africa’s unique poultry market still puts it at risk when faced with dumping.

Stander explained that, in the United States and Europe, many consumers prefer chicken breast meat. 

Since this part of the chicken sells at a higher price, US and EU producers can cover most of their input costs from selling just the breast meat.

This means the rest of the chicken, like leg quarters, can be sold cheaply in other countries where the demand for those parts is high.

South Africa is one of those countries, as many consumers prefer to eat chicken on the bone. Stander described pieces like leg quarters as local poultry producers’ “crown jewels”.

However, this means that when foreign producers sell their cheap ‘leftovers’ in South Africa, local producers struggle to compete as the prices become artificially low.

“We are vulnerable from that point of view. You cannot compete against dumping because the price of that leg quarter has got nothing to do with the cost of production in those countries; it’s the price of spare parts,” Stander explained.

He said this is where the government’s Poultry Sector Master Plan can help. This plan, developed in 2019, provides a framework for the local sector’s future growth path.

One of the plan’s key pillars is exports, as this is seen as critical to the sector’s continued growth.

Stander explained that the local poultry industry needs access to the lucrative breast meat markets abroad for it to continue growing.

“This is where we need the government to assist, because we need independent laboratories to verify that our product is good, we need the veterinary services to access the markets, we need government-to-government interventions to open the door,” he said.

United States tensions

Stander added that one major challenge facing the local industry is the African Growth and Opportunity Act (AGOA), which South Africa is expected to lose access to.

The AGOA is a preferential trade agreement between the United States and various African countries that allows these nations to export certain goods to the US duty-free.

South Africa has participated in the program since its inception in 2000 and is one of its largest beneficiaries. 

However, the imposition of higher tariffs and a worsening diplomatic relationship between South Africa and the United States are threatening the country’s continued inclusion in the AGOA.

Stander explained that when the AGOA first started, the United States demanded a quota for chicken exports to South Africa.

At the time, the local industry agreed to this. Even though it did not benefit local poultry producers, the AGOA presented advantages for other sectors to increase their exports to the US.

However, now, Stander said AGOA has effectively fallen away, as the United States imposed 30% tariffs on South African goods imported to the US.

According to Stander, by the original terms of the AGOA agreement, the United States’ chicken quota to South Africa should no longer exist, as it was tied to AGOA’s benefits.

“I understand the government doesn’t want to anger the Americans, but now they’re also scurrying to find an alternative package that they can offer. And the USA is interested in chicken and more chicken,” he said.

“We’re quite willing to go and sit at the table and see how we can help, but we’ve been giving since 2015. So, unless there’s a benefit to other industries or to ourselves, there’s no point in doing it, you know.”