Lack of urgency over water and power irks Astral chair

• Not enough is being done about problems despite numerous promises, says Theuns Eloff

The government’s lack of urgency in dealing with the water and energy crises is “becoming more and more frustrating”, particularly in the light of the worsening power cuts and water shortages, says Theuns Eloff, chair of Astral, SA’s largest chicken producer.

In the company’s annual report, released on Friday, Eloff said bird flu, power interruptions and water shortages have devastated the poultry industry.

He called on the government to do more to address infrastructure failings.

Astral is building its own pipeline from the Vaal river at a cost of R100m to supply water directly to its Standerton factory, which has faced continued outages. But Eloff said not enough is being done about SA’s power and water problems “despite numerous promises of action”.

In its 2023 financial year, Astral made its first loss since listing on the stock exchange in 2001 after being spun out of Tiger Brands. The loss came as chicken farms were hit hard by bird flu and load-shedding. When Astral could not slaughter birds due to outages, it had to keep feeding them at high cost.

Business leaders — including SA’s richest man, Johann Rupert, who highlighted logistics and power problems at Remgro’s

AGM last week — have spoken out about declining infrastructure and the government’s poor response.

Eloff hopes next year will bring change. He hopes 2024 will be a “watershed year ... one in which the inevitable political change would usher in a new phase for our democracy”.

Eloff called on South Africans to vote in the national election. In local government elections in 2021, less than half of those registered to vote showed up, with millions of young adults not registering to cast their ballots.

DEMOCRATIC DUTY

“Several surveys are indicating that the governing party’s electoral support could fall below 50%, and it is clear that we are entering a period of coalition politics,” Eloff said. “This makes it even more important that eligible voters should register and do their democratic duty and bring out their votes.”

He also highlighted pressure on consumers, low business confidence and rising costs.

He bemoaned “weakening sentiment towards SA, with the latest industry indicators showing that business confidence continues to decline, weighed down by reduced export volumes, higher real financing costs and the weak rand”.

Astral, which faced soaring feed costs due to high maize prices, has been selling chicken at below cost as consumers are unable to afford price increases.

While the maize price has generally declined from highs seen at the start of the RussiaUkraine war, Eloff said the outlook for the coming financial year is “concerning, with raw material costs and other variable costs such as electricity and fuel likely to remain high”.

He urged the SA Reserve Bank to be circumspect about considering more rate hikes in 2024 as consumers struggle.

The company expects consumer finances to “continue their downward spiral, and can only hope that the Reserve Bank takes this into account in light of any further increases in the interest rate”.

He also warned against the government lowering duties on imported chicken.

At the request of trade, industry & competition minister Ebrahim Patel, the International

Trade Administration Commission (Itac) has been investigating whether to relax some import duties due to concerns that SAs ’ worst bird flu outbreak would lead to a shortage of chicken over the festive season.

A decision on duties has not been made, despite Christmas fast approaching.

RELAXATION

Importers have called for a relaxation of some import duties, citing a predicted shortage of chicken meat due to mass culling and a need for affordable protein. However, the local industry does not want a flood of cheap imports, as it plans to raise chicken prices to recoup high input costs.

Eloff repeated Astral’s call not to relax duties and said Patel is “overreacting to a possible shortage of poultry meat”. The industry has “contingency plans in place to negate shortages of poultry meat, such as importing broiler hatching eggs”.

He said that despite the prevailing economic and political environment, the group still has a resilient balance sheet and remains focused on cash management.

“This, with its proven strategy of being [the] best low-cost producer of protein, will continue to ensure that Astral remains one of the leading poultry producers in SA,” he said.