From the Desk
In this December issue, we’d like to give our greetings to you all and hope that you have a blessed Christmas with your families. May the season bring cheer to all, for as difficult as the life of the industry might be, our family lives stay relevant and deserving of support and belief.
Some economists are predicting that South Africa will be in a recession next year. While I hope their predictions are wrong, it’s clear the economy is wallowing in a shallow sea. It’s hard to think of a reason for real hope, but hope we must believe in. As at the date of writing this letter, a true picture of the drought risks we face still isn’t available. In practical terms, we’ll struggle to import more than about two million tonnes of maize, so as long as the local harvest is at least eight million tonnes, we’ll have enough to eat and use as feed. Of course, a shortage of white maize will make for some disgruntled maize meal consumers. High prices are here to stay. We’ll make a point of keeping members updated on the status of the drought, and have already made submissions to DAFF to assist them in their planning. It’s an arithmetic fact that it is the users of maize who are already suffering, having to pay R 8,4 billion for their maize versus last season, yet the maize industry as a whole has lost only around R1 billion year on year.
The first meeting of the new Egg Organisation Committee took place on 12 November. The new executive has
been confirmed as Robin Barnsley as Chairman, Nic Elliot as Vice-chairman, and Dr Naude Rossouw as third executive member. The board representatives are Robin Barnsley, Achmat Brinkhuis, Koos Pretorius and Willie Bosoga. The two alternate Board members are Dr Naude Rossouw and Colin Steenhuisen. Roelof Viljoen has been redeployed to another position within the Quantum group of companies, so the new representative from Quantum will be Adel van der Merwe.
The Egg Organisation reviewed and approved their own budget and developed a position on the shared services budget. Some important discussions centred on our ability to sell statistics to commercial bodies. This is an idea that we’re exploring with our competition lawyers to protect you, as data suppliers, and SAPA as your representative body. I’m not sure how much money we’ll make from selling statistics, but the principle is sound in my view, and worth exploring. A similar argument exists for the website, which is currently simply a cost for members. Ways of generating at least some income from the website will be explored in due course.
A long discussion was held on the PDMA budget. So far, we haven’t utilised the annual budget in any of the years following the PDMA’S formation. We think it opportune to reconsider the PDMA budget after the appointment of the new PDMA Director and then together with he or she, reconsider the strategic rationale of the agency and the most effective way of achieving these goals. It’s my personal view that we’ll be able to have an effective PDMA on a lower operational budget than at present.
The Egg Organisation considered that the proposed PR campaign was unaffordable for them at this stage of their organisational development. They were of the view that the idea is good and is worth considering at a later stage. The communication budget will stay in its current form until we have all new staff in place and a better idea of likely incomes for SAPA and its→
It’s clear that with the current level of membership, the reduced 2016 budget is still in excess of likely income. The funding formula remains 1c/dozen eggs sold. A model to fairly invoice other parts of the value chain is to be developed and approved, with chick producer contributions to remain as before. To get the new Egg Organisation on its way, we’re going to need quite a few new members. This will be a key project for 2016.
As expected, the Galliova budget for 2016 was approved with a few variations from the ‘standard’ model. It’s intended to host the Galliova awards outside of the Western Cape and there’ll be some changes to the prize categories. The prizes will be Food Writer Magazines; Food Writer Weeklies and Newspapers; Health Writer; Up and Coming Writer (Food or Health); Egg Champion (Food or Health); and Online Writer (Food or Health).
The 2015 version of Galliova gave us media exposure worth R 3,2 million for a budgeted cost of much less than that amount. A good investment indeed.
The Egg Organisation considered how best to use the levy surplus. We considered it unwise to make an application to the NAMC prior to clarity on our future purpose being reached. Now the new constitution is in place, it’s time to make such plans. The Broiler Organisation will have the same discussion and the Board will then rule on the application. In terms of the NAMC guidelines, surplus levy funds should be spent on transformation activities. The Egg Organisation considers that establishing a ring-fenced fund out of which growth in the funds can be used for training and related purposes is the preferred option. This’ll make it an evergreen fund. The Egg Organisation would like to use some of the surplus levy money to satisfy our obligations towards the University of Pretoria to fund the Chair in Poultry Health and Production. Whatever the Board’s decision, it’s unlikely this fund will be in place much before the end of next year. It’ll be a good step forward to close off the levy chapter in this way.
The Egg Organisation considered there might be some legal uncertainty as to eth microbiological standards required for unpasteurised egg pulp. Standards for pasteurised pulp exist, so we’ll be trawling through all applicable legislation to see what regulations and Acts might apply in this case. If any reader has a view on this matter, we’d be grateful if you’d contact us to discuss these in some detail.
After our most recent meeting with DAFF on the proposed changes to the Agricultural Products Standards Act (APS) that are needed if we’re to have valid free range regulations in the country, it became clear that the process is still going to be a drawn out one. DAFF are willing to consider issuing the draft regulations for comment when the APS Act goes to Parliament to try speed things up, but this is still a couple of years from now. Since the definition of free range in the current egg packaging regulations is far too limited to have any connection with what consumers believe free range to be, we’ve agreed to draw up a free range protocol that can be monitored by a third party agency and carry a SAPA mark. We hope this’ll assist producers and consumers to know what free range means. A team will start working on the draft proposal early next year, and all free range producers, including broiler producers, will be invited to comment when it’s ready. The cost of drawing up the system will be carried by SAPA, but the cost of the auditing by the independent third party will be for producer’s account.
The first meeting of the new Broiler Organisation Committee and the Board will take place after this letter is written. We’ll report on their deliberations in the next letter. The Board of the Poultry Bulletin and the Transformation Committee will meet at the same time. I look especially forward to the Transformation Committee meeting, as we need to give impetus to change in our industry. We still await the designation of poultry (meat and eggs I hope) by the dti as this will give a real boost to the market opportunities available to smaller and new participants in the poultry value chain. The Poultry Health and Welfare group met last month and the most important matter discussed was to reconsider using the proposed SABS standard as an adjunct to our revised Code of Practice. The idea is that we should work
on the Code of Practice at the same time as we are engaging with the SABS on their proposed standard and see which mechanism will serve the needs of the industry best.
Great news is that Dr Charlotte Nkuna has accepted the position of Senior Executive and will join SAPA on 1 December. She will be looking after the interests of the Egg Organisation, transformation, and most of the government relations portfolio.
We’ll be interviewing candidates for the PDMA position on 1 December, and I hope my next letter will carry an announcement of the new incumbent. Then we’ll have our new and smaller team in place and in operation.
As mentioned last month, all three staff members retrenched in the last round of our restructuring have taken their retrenchments to the CCMA for resolution. As at the date of writing this letter, one of the ex- staff members has settled the matter with us, a second ex- staff member has referred his case for arbitration with a date still to be determined, and the third ex-staff member has gone through the conciliation phase of the CCMA process with further steps perhaps to follow. This means that it’s unlikely these matters will be resolved before the first quarter of next year.
I mentioned last month that we discovered an ex-staff member has misappropriated the DPFO name, and apparently used this to canvas for members, and perhaps funds, for an alternate organisation to SAPA. The legal process to recover our asset is ongoing, and as with all such processes, we can’t predict how long it’ll take for the matter to be resolved.
Last month I wrote about the draft AGOA guidelines having been published, prematurely in our view. We’ve participated in the ITAC process, laid our concerns, and made various inputs as well. We do still hold the power to resist if the guidelines are not to our reasonable satisfaction. There are numerous difficulties that ITAC faces if it acts outside of the agreed process that we participated in over the last year or so.
It’s important to note that although we’re party to discussions on the antidumping duty free quota, we’re not party to discussions on SPS issues. These issues shouldn’t be part of AGOA, as they’re the normal work of veterinary health experts in all countries. Since scientific knowledge changes with time, there’s no reason for SPS protocols not to be reviewed as and when knowledge changes, but it shouldn’t ever happen that these rules change because trade negotiators want them to. Apart from the HPAI and Salmonella concerns that the US raised, we hope they’re alive to the fact that arsenic containing coccidiostats are not allowed in South Africa. We hope therefore that additional care will be taken in selecting from the US stockpile of surplus dark meat to make sure that it is not rejected for containing unregistered substances when it lands on our shores.
You’ll all hear whether the US threat to our other agricultural exports is carried out after you’ve read this letter and before the next one is in your letterbox. My sense is that a compromise of sorts will be cobbled together and we’ll limp along to the next round of strong arm pressure that the US will exert on us. As this is their gift, they hold the strings. We simply have the power to determine what we’re prepared to give and what we aren’t. At an AGOA beneficiaries meeting held last month, the citrus industry acknowledged that they’ll continue exporting to the US even if tariff benefits are withdrawn. This’ll affect their profitability but not their ability to export. Will the same apply to other agricultural exports? We’ll have to wait and see.
There’s been a lot of media exposure of late on AGOA. As I’m intimately involved in the process, I understand the nuances of the discussions. It fascinates me how little understanding of the process is reflected in our media. At the risk of boring you with repetition, the fact that AGOA was renewed is testimony to the good work that the dti and Minister Davies have done over the last while. The fact the US keeps moving the goalposts to try to wrong foot us isn’t a reflection of the ability of dti to manage the process but rather a statement of the nature of the process - the US sets the rules as and when it wants to. It’s surprising to see how much ‘reciprocal’ type language is in the current version of AGOA when no other African country who benefits from AGOA had
any input into the actual drafting of the renewal Bill.
We met with the US Embassy to discuss our exports to the US and one can see that this will be a difficult process. The red meat industry has been trying for about ten years to get market access. In our case, the US claims that we have HPAI in South Africa. Now you all know that to be false, but how do you prove something to people who choose not to follow the rational and proper manner to discuss such matters? As a further example, the US has recently declared itself free of HPAI and yet, by its own admission, it hasn’t cleared up all infections in backyard flocks. All of a sudden, backyard flocks are no longer chicken! Now that we’re in la-la land, what’ll they say if other countries stop reporting HPAI by claiming it’s only in backyard flocks and so they don’t have it? A chicken is a chicken is a chicken.
At last we seem to have a date for the Namibia matter to go to trial, expected to be heard in June next year. I think past experience has tempered my enthusiasm that the Namibian government and the Namibian poultry company involved won’t try further delay the matter, but we’ll present our case as soon as we can. Delaying the matter might frustrate us, but it doesn’t make the case of the other side any stronger. Clearly consumers have been the losers in this matter, with a few employees and even fewer owners getting some benefit from the ban on IQF imports and the restrictions on total imports.
Wiesenhof, the big German producer who had taken the government and us to court about what they claimed was the inappropriate use of the Anti-dumping legislation by ITAC and the State have withdrawn the matter and agreed to pay our taxed legal costs. They’ve yet to agree to pay taxed legal costs in their first failed application to stop the provisional measures that were in place last year. We’ll be dealing with this matter in the next while and hopefully we can tick off one more legal challenge to our trade regulatory regime early in the new year.
We had our long promised meeting with DAFF officials
last month. The meeting was very successful in that both parties acknowledged that the manner in which they’d been interacting with each other wasn’t to the normal standard experienced in our many other interactions. Now we can’t undo the past but we can atone for it, and I believe both parties want to do this. DAFF share our view that the country needs a solid, enforceable regulation. They’re prepared to listen to why we think the current draft isn’t a solid, enforceable regulation. We’ll be submitting our analysis and proposals in early December. We’ll also resubmit, in a different format, the rationale for percentages we believe are appropriate and why we believe them to be so. So we’re separating the plain technical submissions we’re making from the technical/ economic/social ones. We hope to be able to discuss our submissions with DAFF sometime in December so the Minister could apply his mind to the matter later this year or early in 2016. It’ll be a great day if we can bring this matter to resolution.
Our consumer research report is still not finalised. This report is based on both qualitative and quantitative research, which had been mixed up in the work presented so far. A revised report should be available by the end of this year, and we’ll then decide how best to share this information with our various stakeholders.
Our efforts to get access to the raw data which we believe DAFF has used to determine the levels in the current draft regulation continue to be stymied by the three institutions that were involved in the work, namely the ARC, the University of the Free State and the Tshwane University of Technology. I am still puzzled why they’re so scared to give us the data behind the public reports that they’ve issued. Bizarre. Anyway we believe in our legal system and their attempts to hide should come to nought.
Ithink I’ve advised readers that I’ve recently been tasked by the International Egg Commission to represent their interests on the Animal Welfare Working Group of the OIE. This group deals with all species, not only poultry, and we’re working towards the next OIE global conference on welfare which will be held in December 2016. Separately, I was asked directly by the OIE to try deal with some difficulties in the current proposed standards for broiler slaughter welfare. I spent some time in Paris last month, and am happy to report that a compromise position that satisfies the needs of the EU and of the rest of the world was reached after some hard bargaining. This compromise will allow us to continue with our Halaal compliant slaughter practices, but there will be some further outcomes-based measures that’ll have to be implemented once the proposal is adopted. It’s possible this new section of the OIE Code could be adopted next year in May, but it’s more likely to be adopted in May 2017. Once there’s a public text available it’ll be shared with all broiler members.
We’re working on our submission for the proposed abattoir sectoral determination, which should be made in early December. I expect the process might have a few iterations before it’s complete, and it’s also possible that the Department of Labour might decide not to impose such a determination.
Iattended the latest Astral results presentations and found it an interesting way to interact with the investment community. If any producer would like SAPA to attend their public meetings, we’re more than willing to attend and if required, answer any specific questions.
A new initiative by Citizens in Partnership with Government is to develop a South Africa Day, modelled partly on Australia Day. This is an opportunity for all South African business, of all sizes, to celebrate our 'South Africaness'. The idea was launched last month and the first such day will take place at a date to be confirmed next year. When I have more information I’ll share this with you as an opportunity for all to get involved in our present and our future.¡
Regards until next month. Kevin Lovell CEO