Poultry demand in Africa likely to continue growing, but not all local producers are benefitting

Regional expansion

South African poultry companies have expanded into the rest of the continent. RCL Foods, formerly known as Rainbow Chicken, produces a range of poultry products and is a supplier to fast food outlets such as KFC. It has bought a 49% shareholding in Zam Chick, a subsidiary of Zambian agribusiness firm Zambeef.

Another South Africa firm, Astral Foods, has been operating a poultry feed business in Zambia for many years. In June 2010 the company opened Tiger Chicks, a state-of-the-art broiler breeding farm and hatchery in Zambia.

But this growing demand for poultry doesn’t necessarily mean that all African producers are benefiting. In South Africa, poultry producers say they are struggling to compete with imports from countries such as Brazil.

In its recent annual results announcement, RCL Foods highlighted record imports with dumping of product as the major issues facing the industry. “The poultry industry is at crisis point and anti-dumping protection will be key to the survival of the industry,” said the company in a statement.

The South African Poultry Association has called for higher import tariffs. In an article published on the company’s website, RE:CM analyst Faure Heymans recently wrote that South African poultry producers are facing significant headwinds because chicken prices have remained static for six years while feed costs have increased 18% and electricity costs have trebled.

However, he downplays the negative impact of imported chicken, saying the poor prices producers receive for their poultry is mainly due to oversupply and high capacity in the local market.

Competing with imports

According to the USDA Foreign Agricultural Service, only 10% of Ghana’s demand for broilers is supplied by the local market. Imported poultry from regions such as Brazil, the US and Europe are about 30%-40% cheaper.

The organisation says local producers are uncompetitive due to the high operating costs – feed, drugs and energy – and inefficient production methods. This has resulted in a shift from meat production towards the production of layer birds for eggs.

However, Nyamekye says despite the cheaper price of imported chicken he still finds a market for his broilers due to the fact that many chefs in Ghana prefer buying local produce.

“When you compare the price of our chicken versus the imported chicken, the imported chicken is cheaper than our chicken, but every chef will confirm that the chicken produced in Ghana is tastier, it is juicer than the chicken from the outside… What I’m supplying now, I slaughtered yesterday morning, I’ve frozen it, and this morning I’m delivering… Some of the chefs at hotels insist that we need local chicken… They always prefer local and it is also creating jobs for us,” he explains.

Cheap imports are also not a problem in every African country. Goldenlay’s Broad says “this is not an issue in that Zambia is land-locked and the poultry industry is safely guarded”.

Although it is likely that demand for poultry will continue to grow, it is difficult to generalise about a continent with more than 50 countries, different market conditions and diets. While some countries struggle with cheap imports, this is not a problem in others.

Large-scale producers also face different challenges than small-scale operators. However, what is true is that with the right business strategy, poultry industry operators can certainly find a lucrative market in Africa.

This article first appeared in African Trader.