Poultry sector inquiry is ‘ an attack ’— Astral
• CEO stunned by competition watchdog’s action
Astral CEO Chris Schutte has lambasted the newly announced Competition Commission inquiry into the poultry sector as “an attack” on an industry that is struggling under the weight of load-shedding, erratic water supply, bird flu and imports.
“It comes as a helluva surprise, even as the plight of the industry is so well documented. It seems like every effort is taken to attack this industry.”
The commission on Thursday gazetted a notice and asked interested parties to make comments within 30 days on what the terms of reference should be. The commission said on Friday it has reason to believe there are factors that distort, impede or restrict competition in the poultry sector.
Schutte said he is flabbergasted. “SA’s poultry industry is the biggest player in the agricultural sector and provides affordable protein. Why not support this industry? Why fight it? That part is very difficult for me very to understand.”
According to Webber Wentzel ’ s webpage, “inquiries may take years to complete and entail extensive co-operation with the regulator”.
A competition lawyer confirmed that these inquiries cost participants a fortune as they must provide copious amounts of evidence, attend public hearings and retain legal teams.
Schutte said “huge effort and costs go into trying to explain to people how the poultry industry works. I’mgatvol of this attack.”
Astral posted a more than R600m loss in its 2023 year as it contended with load-shedding, which left it unable to slaughter birds timeously, meaning the chickens had to be fed for much longer. It also has unreliable water at its Olifantsfontein factory and is spending R100m to build a pipeline from the Vaal River to provide water to its Standerton farm.
The sector slaughtered more than 7.5-million birds in 2023 as a mandatory response to SA’s worst recorded bird flu outbreak, without receiving government support. In other countries, governments reimburse farmers for the losses caused by forced culling.
Quantum, the owner of Nulaid eggs, also suffered a loss in its 2023 financial year.
Since changes to the Competition Act in 2018, the commission has the power to make wide-ranging enforceable recommendations in all industries it investigates. This will be the fourth inquiry in which it has these powers.
After its online intermediation platforms inquiry, it made recommendations forcing Booking.com, Takealot, AutoTrader Property24, and Cars.co.za to provide programmes to support historically disadvantaged firms. It forced Takealot to split a division. At the time, lawyers from Norton Rose Fulbright wrote on their webpage, “the commission’s remedies increase the cost of doing business. This may have a negative effect by deterring further investment and innovation”.
In the three ongoing inquiries, the commission is examining the fresh produce sector; the
media and digital platforms; and the ailing steel sector. It focuses on sectors with only a few players, but in SA’s weak economy, concentration is common, a lawyer told Business Day on condition of anonymity.
Schutte added: “The commission should really launch the investigation when companies make 15%-20% profit margins and there is too much fat. There is only one test for the commission. We are a listed company. We get audited. Check my annual integrated report. We are making paper-thin margins. Our margins are 1% or 2%. The government should come and say, let ’ s help this industry thrive, grow and employ people.”
The industry feels particularly betrayed as it signed the poultry sector master plan with trade, industry & competition minister Ebrahim Patel in 2019 and agreed to invest in local production and increase jobs in feed businesses and at chicken farms and abattoirs.
Schutte said: “We as the industry were committed to this plan. We did everything that was required, including investing massive capital into infrastructure development.”
Last month, the department of trade, industry & competition announced it was offering rebates on some duties on frozen chicken that were in place to prevent dumping and protect the local industry. This was because bird flu led to fears of chicken shortages, which did not materialise.
The SA Poultry Association said at the time that removing the duties placed further investment and jobs at risk and threatened SA’s food security.
Analyst Anthony Clark, who covers food sector stocks extensively, said he is in a state of “total disbelief” that the struggling poultry sector now has to face a market inquiry.
“For the past two years, the department and the government have systematically done everything in their power to chip away at the industry,” Clark said.
The Competition Commission did not respond to questions on if it is targeting a struggling sector.