Rainbow Chicken has raised concerns about the sluggish implementation of the poultry sector master plan despite investments made by the industry to expand capacity and improve production.
The poultry giant is urging the government to expedite its support for exports, enforce necessary trade restrictions and provide clear policy direction.
“Rainbow and its growers have invested over R500m in Hammarsdale to double processing capacity. Another critical aspect of the master plan is to expand the market and support exports. However, the industry requires greater and more urgent support from the government to access export markets. Trade measures to support the local industry are a third pillar of the master plan,” Rainbow Chicken said in its annual report.
The call comes after the government reimposed anti-dumping duties on chicken imports from Brazil and four EU countries in August 2023 after a year-long delay.
The company was also concerned about the potential implementation of temporary rebates on imported chicken proposed by the International Trade Administration Commission (Itac) in January to address potential local shortages due to avian flu.
Though Itac committed to consulting the SA Poultry Association (Sapa) on the local supply situation before issuing rebates, Rainbow remained concerned that additional rebates could affect the local market.
“The industry has worked more closely with Itac to ensure that no further rebate permits will be issued without also considering information supplied by Sapa on whether a shortage does or does not exist,” it said.
Another issue concerning Rainbow is the Competition Commission’s probe into the broiler and layer industries. The group said an update was due on this matter.
“Comments were invited and Sapa provided considered input by the due date of March 15 2024. There have been no new developments on this matter. With minister Parks Tau having been appointed as minister Ebrahim Patel’s successor in the DTIC [department of trade, industry & competition], an update is expected in due course.”
Despite these challenges, Rainbow Chicken said it had made progress in securing its operational and financial base and implementing its “Future Perfect Rainbow Chicken” strategy to strengthen resilience against sectoral “shocks”.
Rainbow reported a 7.9% increase in revenue to R14.5bn for the year ended June due to higher retail and wholesale volumes, effective cost management and a reduction in load-shedding costs.
Earnings before interest, taxes, depreciation, amortisation and impairments increased from R38.6m to R637.2m year on year.
Rainbow said its turnaround strategy, including its adoption of the Indian River breed which improves feed efficiency and reduces energy density, is almost complete, with full benefits anticipated in the 2025 financial year.
“Notwithstanding the positive traction achieved to date, there remains further work to be done in this regard and Rainbow intends to continue the implementation of this strategy towards becoming a market-leading, low-cost producer in the SA environment through consistent focus on ‘brilliant basics’ and best-in-class farming practices, product quality, cost control, and investment in the group’s infrastructure and asset base, the combination of which is expected to drive strongly‑improved profitability and financial returns,” the group said.
Management expects continued momentum in revenue growth over the near-term, supported by increased pricing to recover higher input costs, and more general demand improvement in line with expected growth in demand for chicken as an affordable, quality protein source in a pressurised consumer environment.
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