Grief for poultry industry players Chimax
THE poultry industry is big business, and for a market like Zimbabwe, chicken meat consumption has replaced the traditional beef as a staple on most tables.
A February report by the Zimbabwe Poultry Association (ZPA) said the “broiler industry continues to grow from strength to strength and set new monthly and yearly records”.
“The stock feed industry continues to grow in parallel with the increase in broiler day old chick production and in 2014, poultry feeds accounted for 71 percent of the monthly feed production of 38,500 metric tonnes,” said the ZPA report signed by chairman, Solomon Zawe.
An industry player said the poultry industry grew by 22 percent last year, by far the highest growth of any sector in the country’s frail economy. But, in actual fact, the local poultry industry is in grief.
Last week, reports suggested that local poultry producers had cut chicken prices by 23 percent, with indications that the market was flooded by cheap imports mainly from neighbouring South Africa.
“The poultry industry is collapsing at the moment and there is no business to talk about. Farmers have stocks which they can’t move while abattoirs are full of chickens,” Zawe told news agency, The Source.
“Prices have gone down drastically with a kilogramme of chicken now going for US$1,55 from US$2. Wholesalers are also finding it difficult because they are selling a kg for US$1 as they are failing to move stock,” Zawe said.
As a result, he said, local farmers had started divesting from the sector to avoid incurring further losses.
One industry player said the situation in the poultry industry was “very complicated”.
Most of the growth witnessed in the sector, he said, was a result of increasing backyard chicken rearing projects.
“With over 90 percent unemployment, everyone wants to earn money by keeping chickens. This accounts for the growth we have witnessed,” he said, adding these players had taken up about 20 percent of the market share.
Industry players indicate that like most of Zimbabwe’s productive sectors, the major poultry industry players had embarked on recapitalisation programmes since dollarisation of the economy in 2009.
There had been slow but fragile recovery, said one industry player who indicated that a number of challenges, among them erratic power supplies and restrictions on the import of genetically modified feeds, had undermined the competitiveness of local poultry products against imports. Zawe said the crisis facing the sector started last year.
A report by the Livestock and Meat Advisory Council last year said imported meat products, including chicken, were once again dominating the local market, resulting in what the report said was “a dramatic slowdown in sales, increased stockpiling of local products and softening producer prices”.
As a result, the report said, stakeholders were considering downsizing to prevent losses. Yet indeed the sector registered further growth in the first quarter of this year. According to the ZPA, the broiler industry remained on a growth path, with new monthly and annual records.
The poultry industry recorded a 22 percent growth after producing 17 million broiler day old chicks in the first quarter of 2015. Growth in the second quarter is projected at between 10 and 15 percent, according to Zawe, buoyed by maize imports from Zambia by government to cover a huge supply deficit on the local market.
Government came up with measures to save the poultry industry in 2012. This included a review of customs duty applicable to imported chicken products from 40 percent to US$1,50 per kg, or 40 percent, whichever was higher, with effect from November 16, 2012.
The idea behind this review was to level the playing field between imported chicken and locally produced poultry.
This apparently provided impetus for growth of the local poultry industry, particularly the major players who included Irvines, Suncrest and Lunar Chickens.
But one producer insisted cheap imports were still finding their way into the local market.
“They are being smuggled,” he said. “There are discrepancies in the statistics coming from South Africa and those coming from our own statistics agency.
South African figures show that there were higher exports of poultry into Zimbabwe; our own statistics show a much lower figure of these imports. Something is happening at the borders.”
One industry player said they had reported an operator who was caught with lots of smuggled chickens, but noted that they were not sure how widespread the problem was.
There are suspicions that some unscrupulous players were smuggling chickens into the country and repackaging them for sale on the local market. But still, there is no evidence of this to trigger serious policy intervention.
In a paper on the competitiveness of Zimbabwe’s poultry industry, Tatenda Zengeni, a South Africa-based researcher,
said the sector is dominated by companies that are relatively large and have economies of scale associated with their size.
They are also highly integrated in the poultry value chain, which gives them advantages over medium and small scale producers due to their integration along the chain which ensures the availability of feed and day-old chicks, including likely at lower prices.
Zengeni warns that with globalisation, Zimbabwe will find it increasingly difficult to engage in protectionist policies particularly in light of various free trade agreements with trading partners.
Therefore, government should embark on measures that allow local products to become competitive, while at the same time encouraging new investment in the poultry industry.
“The current policy on banning GMO maize needs to be reviewed as it is indirectly affecting the competitiveness of the poultry sector since from the onset of land reform maize has not been sufficient for the stock feed manufacturers. If government decided to maintain the ban on GMO maize policy then it also has to introduce a ban on imports of chickens fed with GMO maize,” said Zengeni.
Apparently, most of the chickens imported into the country are fed from GMO feeds, making them more competitive than those produced locally.
Zengeni added: “Government also needs to improve on the business environment, particularly electricity generation. Poultry producers are ending up relying on charcoal as substitute for electricity which is unnecessarily increasing the cost of production.”
On their part, local players are working on mergers and other initiatives to growth their businesses and withstand competition.
Weekend reports suggested that Lunar Chickens, owned by the family of former Reserve Bank of Zimbabwe Governor, Gideon Gono, was in talks for mergers or cooperative arrangements with Bulawayo-based Drummonds Chickens, and may also be pursuing synergies with local feeds producers.
It would appear that the plan is to create a well-integrated structure. Irvines, a family-controlled business started in the mid 60s by the late William Irvines, has successfully created a very effective, vertically integrated group after giving up a 49 percent shareholding to the Innscor Africa group, which has a controlling interest in Zimbabwe Stock Exchange (ZSE)-listed National Foods, a stock feeds manufacturer.
Crest Breeders and Suncrest Chickens are also part of a vertically integrated group, the ZSE-listed CFI Holdings which also owns stock feeds manufacturer, Agro Foods, as well as inter-related businesses – Agrimix, Hubbard Zimbabwe, Vetco and Windmill.
Whatever the woes besetting the big poultry industry players, the truth is that chicken is now the meal of choice for both poor and rich. It’s an industry no one would want to easily walk away from.