From the Desk
Imports, exports, old, new, and all things avian
The brief period of better conditions for broiler producers has passed, with high levels of imports - the highest ever on a January to May basis - and a flat economy leading to price falls, stock build ups and much gnashing of teeth. For egg producers, there seems to be a bit of a shortage in some areas, which will hopefully assist those not affected by disease and the like as the egg industry hasn’t had the luxury of the better times broiler producers have had.
The maize price rise seems guaranteed for the rest of this year, and the latest predictions on El Nino aren’t favourable for the coming season. It’s a little early to panic, but the possibility of another poor harvest shouldn’t be discounted.
As at the time of writing this letter, SARS still hasn’t approved the new SAPA constitution, meaning the ‘old’ SAPA continues. In the meantime, we’ve met with our auditors to make sure we’re all agreed as to how to make the transition from an accounting perspective - whenever that should happen.
We’ll meet with the two new Committees in August to try to establish budgets, working groups, etc. so that when we do get the SARS approval, it’ll be possible to bring the new model into effect simply by electronic resolution if need be. Should we be lucky enough to receive the SARS approval before 18 August, then this’ll be the date of the first meetings of the new Committees.
The normal Management Committee meeting will take place on 19 August. This may also become a new SAPA Board meeting if SARS approves the constitution beforehand. In essence, we’re doing all we can to speed up the process of change and start with the new SAPA.
I don’t think we should underestimate the task ahead of us to reconfigure the organisation to be ‘product’ focussed rather than ‘type of producer’ focussed. Exciting times in my view.
The Management Committee deliberated on the interviews it held at the end of June and decided to appoint Louisa Nel to the revised Administration Services Officer position. Christopher Mason was also appointed to the position of Manager: Sustainability and Development. The position of Senior Executive was not filled from the pool of internal candidates and the post has been advertised externally, with the intention that interviews for this post and that of the Director of the PDMA can be held on 19 August after the Management Committee meeting.
SAPA now has a structure with eight direct employees - down from 16 at the peak. Some of the work previously done by employees is now outsourced but there is also a real refining of our purpose and cost base.
The outcome of the Management Committee deliberations has led to Moses Modise, Aubrey Morudu and Sol Motsepe leaving SAPA’S employ. Sol might still do some work for SAPA as a consultant, although there’s no certainty of this at the time of writing this letter. I’d like to thank all three of them for the work they did at SAPA and hope their careers will go from success to success. In particular, I’d like to highlight the work that Moses and Aubrey did to make the DPFO a much more functional organisation, and the bridges that Sol built for us with government and Parliament. Their time with us may be over but their work will leave a lasting legacy.
For the rest of the staff, a period of great uncertainty is almost at an end. Now if we can find a sustainable funding model, we can expect full focus on delivering the programmes and projects that you want.
The promised ‘out-of-cycle review’ of South Africa by the US Congress to consider our membership of AGOA has been initiated. Hearings in Congress will have taken place by the time you read this, and we might well know what further work awaits us. As at the date of writing, our US counterparts were still getting→
input from their government before responding to the draft agreement we’ve sent them. We believe they’re not discussing the basic framework of the agreement (since they have accepted that), but rather the effects of some of the clauses as they relate to their government.
That said, it seems unlikely that we’ll have a signed agreement much before the end of August. We can only begin the public participation process after the agreement is signed. Our government also can’t start the process of inviting bids from HDI importers for the quota before the agreement is signed. In practical terms, it looks as though we might still have an effective quota by the end of this year, but any further delays will push the initiation of the quota out to sometime next year.
Apart from these details, the US is persisting with its request for changing the avian influenza protocol that South Africa applies. This is an interesting matter, and while the US ‘Ja Dokter’ approach is not to be commended, there’s a real need to consider what practical methods for safe trade of both live birds (breeders) and finished products can be found to cover the disruptions that occur during outbreaks.
As mentioned last month, I’ve been asked by the International Egg Commission (IEC), on behalf of the egg producers of the world, to join a small global expert group on avian influenza which will consider precisely these sorts of issues. Our first meeting is set for September as part of the IEC conference in Berlin. Now, while I don’t see myself as a global expert in this field, I know that among the small group of about 10 people, I can bring a business perspective mixed with a scientific understanding and can hopefully help in the process of finding solutions.
Last month, I mentioned that we had to deal with an application to contest the granting of a rebate for an importer. A facility like this this would allow that importer to import without paying duties, supposedly for export purposes, and thereby bypass the protective measures that are in place. As mentioned last month, they withdrew the application but have now resubmitted it using new advisors. Round two it is - and more trees will be sacrificed.
We have a date for the next phase in our Namibian action set by the Namibian Courts, and a date for the main hearing itself in December. I’d like to be able to say that we’ll have this matter resolved in 2015, but the omens aren’t good.
The importer and exporter action to challenge the imposition of the EU antidumping tariffs has been quiet for a while, but all parties have now done the work required for the next round of preparations for a court battle. In essence, the applicants are claiming that Minister Davies does not have the rights we believe that he has. It’s an important battle to win as cutting off the Minister’s knees (politically I mean) is not good for our trade defensive
actions. It’s so clear from all the work we’re doing and the work that the developed world does on supporting the dumping of their waste, that they know well the extent of the problems they’d face if they were no longer able to export the consequences of their own market’s diets to us members of the developing world. It’s a bizarre concept to think that their business model relies on there always being poor people elsewhere in the world who’ll always want to take their leftovers. I thought the developed world wanted to help us to be no longer poor? Clearly, I’m a very naïve chap!
Fhe outbreaks in the USA have stopped with the last confirmed one declared on 17 June. Disinfection of affected sites is progressing well, and should be completed by early August. This means that imports will probably be permitted around the end of October. The US veterinary services do think that further outbreaks are possible in their autumn.
Avian influenza doesn’t lend itself to control; far better to prevent its arrival in a flock and, if you get it, a stamping out policy remains preferred practice. The US now has a vaccine which is supposedly nearly 100% effective. Such an approach is a poor second cousin to good biosecurity and a rapid response to outbreaks, which is the Dutch model. Of our main EU trading partners, both Germany and the UK have reported new highly pathogenic avian influenza outbreaks, so trade is limited once again.
It’s clear that alternate ways to deal with the effects of these outbreaks are needed, or else global trade is going to be very interrupted for the next few years. The trick is to find a way in which animal health risks can be minimised. At least the current EU and US outbreaks have not led to consumption declines, and neither have there been any human health concerns.
I attended a risk seminar last month, for the simple reason that I think at some point we are going to have to develop a self-insurance scheme for diseases that affect us. Once the government funded Chair in Risk Management is appointed and able to provide inputs, we will be able to give both insurers and reinsurers decent risk costing models. We can then be in a position to consider whether self-insurance is feasible. This is, in other words, a project that will take a few years to provide any useful output.
There’ll be a meeting held by DAFF to discuss the status of the draft brining regulations in early August. As at the date of writing, I’ve received no agenda - only a time and date for the meeting, which invitation has been extended to a wide range of ‘stakeholders’. With such a large audience, it’s unlikely that much can be accomplished in the time available. No amount of meetings can deal with the primary problem, which is that these products satisfy consumer needs without causing any harm.
It is however necessary to get this matter finalised as soon as possible, so we can focus on more significant matters that need joint effort from the State and industry to be resolved principal amongst them being the better management of disease.
We get the sense that DAFF has acknowledged that the proper point of measurement of the practice is at the plant during processing. With all the variables at play, both biological and processing in nature, to ever measure reliably at the point of sale is but a pipe dream. If we can resolve this part of the dispute with DAFF, we can tick one more thing off the list. A proper re-writing of the regulation should be next on the list, and the level of brining is perhaps the least important element of the current regulatory framework that needs updating. Not that I expect DAFF to agree with this opinion.
As you know, we’re no longer members of the commodity chamber of Agrisa; or to be accurate, we’re no longer members of the only real agricultural commodity chamber in South Africa. The Chairman of the Commodity Chamber has met with us to discuss their desire for us to participate in the chamber. I was also invited to speak on trade issues at the most recent Commodity Chamber meeting.
There are many issues when it isn’t possible for SAPA to speak directly - where we simply lack the skill to comment, or possess the
resources to do so. On the other hand, the political nature of agriculture, best exemplified by the recent International Labour Organisation (ILO) report on farm labour, means that for us make a decision to join is firstly a political decision, and secondly a practical one.
In the ILO report which looked at the root causes of farm labour discontent and losses of formal employment, the summarised answer they found is brutally simple. Government hasn’t supported agriculture, and farmers have responded by disconnecting themselves from their labourers much as possible. If we want to fix labour relations on farms, we need viable farms - and government policies have made it harder for farming to be viable. Similarly the land question, where it’s hard to see how the current ideological approach will help to maintain food production at reasonable rates and prices.
These are the sorts of things that need a bigger voice than SAPA to carry their message. It’s for the Management Committee or the new Board to decide on the way forward, and I hope that they debate the issue well.
The DAFF plan for agriculture, approved by the Cabinet, is known as APAP (Agricultural Production Action Plan). The poultry value chain, meaning us, the feed industry and the maize and soya industry, is one of the sectors included in APAP. This means that government funding will be focussed on those sectors that are included in the plan. Good for us - and we’ve decided that I should chair the poultry value chain round table that will be the mechanism used to coordinate efforts between DAFF and ourselves. We’ll involve AFMA and Grainsa in the planning for the first meeting (still to be scheduled). We met with the Red Meat Industry Forum to discuss APAP, as they seem undecided as to whether to participate. I think the answer to that question is self-evident. DAFF is already trying to seek additional funds from Treasury towards poultry growth projects. The bones have fallen in a good way I believe.
Mike Kingston came up to Gauteng to help us in our project with the Gauteng Department of Agriculture and Rural Development (GDARD). After visiting three different sites, it’s clear that the interests of the project will be best served by working with a greenfield site, preferably located in an industrial area. Visiting mothballed abattoirs gives meaning to the dictum that second hand bricks have little value. This approach means that we need to approach GDARD for an increase in the money we’ll need to deliver on their need to create a medium sized, black owned, poultry value chain in the province.
The Transformation Committee is one of the key committees in both the ‘old’ and the ‘new’ SAPA, and we’ve been having an email debate on the nature of the work that this Committee should do, as well as the role of the secretariat in that work. Clearly, the idea of transformation is to give people who’ve been excluded from the mainstream economy an opportunity to successfully participate. Without giving such people a “leg-up”, the obstacles to success are numerous. So where are the boundaries and how do we deal with the fact that it’s our members we want to help? One of the basic principles under which SAPA operates is to ensure that our work only benefits collective interest, not individual interest. Is this an appropriate restriction in the case of transformation?
You’re all invited to give us your views, so the Transformation Committee can develop a model that can deliver change for South Africa.
We met with a delegation from the US Department of Agriculture last month who were trying to improve their understanding of the local poultry industry. Although all poultry production, whether meat or eggs, follows a US concept, they’ve each been adapted to suit local conditions and requirements. We’re no different - and the differences in things like bird size, slaughter mass, no moulting of layers, etc. all need to be taken into account when reporting on our industry. I believe the USDA now has a better understanding of how our industry works.
Regards until next month, Kevin Lovell, CEO.