BUSINESS DAY: Fairfax bullish on SA and has cash to deploy

Fairfax Financial Holdings, a Canadian-based investment holdings business with predominantly insurance and reinsurance assets, says it has $500m to deploy in Africa.

The group, listed on the Toronto Stock Exchange and led by billionaire Prem Watsa, is also bullish on SA.

“We happen to be really quite optimistic about SA. We take a long-term view and we believe SA is uniquely positioned,” said Mark Cloutier, a Fairfax representative and incoming chairman of Bryte Insurance, formerly Zurich Insurance Company SA.

Fairfax raised the $500m in equity capital (housed under Fairfax Africa) via an initial public offer for subordinate voting shares, private placements and a commitment from its parent, Fairfax Financial.

Fairfax Africa would seek investments with a view to acquiring control or significant positions of influence, the group said. Its investment objective was to achieve long-term capital growth by investing in debt and equity instruments of businesses primarily conducted in Africa, it said.

Fairfax bought Bryte Insurance, the new brand of Zurich Insurance in SA and Botswana, from the Zurich Insurance Group in 2016 for R1.8bn. Also in SA, Fairfax has bought a 7.15% stake in reinsurer Africa Re and a 50% stake in specialist liability underwriter Camargue, through another of its subsidiaries, Brit Insurance.

Fairfax made its first investment in the country in 2014, when AgriGroupe Investments, in which it is the largest investor, acquired a 60% stake in agricultural and foods group Afgri.

Cloutier, who is executive chairman of Brit, said Fairfax was in “early-stage discussions” with two private insurance businesses in SA.

There was significant growth potential for insurance in the country as the transformation agenda progressed, he said.

Short-term insurers have struggled to grow premium income in a country with economic growth below 1%.

But Cloutier said the country would resemble other emerging markets from a demand standpoint, as people increasingly acquired assets that needed to be insured.

SA had a strong culture of insuring valuable assets, which was not the case in all countries, he said.

“We continue to make investments in SA and explore opportunities in the insurance and reinsurance worlds,” Cloutier said.

Watsa founded Fairfax in 1985, earning net insurance premiums of $10m that year. In 2015, it earned net premium income of $7.5bn.

Fairfax’s net earnings amounted to $642m in 2015, a 61% decline on the previous year due to larger losses from claims. Figures from September 2016 indicate that the company has a $44bn balance sheet.

Watsa — referred to as “Canada’s Warren Buffett” by the likes of Forbes, Irish Times and Financial Post — is adept in financial markets. He sold nearly $5bn in US Treasury bonds ahead of that country’s recent election, saving a lot of money, Forbes reported, as bond prices fell sharply on the news of Donald Trump’s election.

Giving Bryte its independence and “putting Fairfax’s financial strength behind it” would give the company an advantage in SA, Cloutier said.

East Africa recognises AFGRI’s contribution to food security

AFGRI Uganda was recognised by the East African people as the largest contributor towards food security at the annual East Africa Book of Records (EABR) awards.

At the handover ceremony recently held in Uganda, attended by members of AFGRI’s management team, EABR honoured AFGRI with the award for Responsible Consumption and Production in recognition of its sustainable contribution to agriculture in the region.

Jacob de Villiers, Managing Director, Grain Management at AFGRI, says the award proves that AFGRI’s initiatives to assist small scale farmers in the region are paying off.  “AFGRI’s Grain Management business in Uganda began in 2013 with the purpose of managing grain for food security and to prevent post-harvest losses on grain commodities.”

Across the African continent, AFGRI assists farmers to develop subsistence farms into semi-commercial farms in its efforts to ensure food security. AFGRI Grain Management in Uganda incorporates Farmer assistance and mentoring services, grain handling, grain storage and grain marketing.

The EABR aims to inspire ordinary people into doing extraordinary things in line with the United Nations Sustainable Development Goals. At the annual awards ceremony, the EABR recognises ground breaking achievements in various categories and records such achievement by awarding certificates to the winners. Companies in East Africa have been enthusiastic about the possibilities in harnessing the unique appeal of being a record breaker. Previous winners of the East African Award include the President of Uganda Yoweri Museveni and other distinguished individuals and companies.

At the 2017 ceremony, the awards were handed over by the Burundi Ambassador to Uganda standing in for the Speaker of Parliament, Honourable Rebecca Kadaga.

De Villiers concluded by saying that this is a tremendous accolade for AFGRI in support of its vision of being an enabler to food security across the continent.

AFGRI is committed to the future of agriculture and how innovation can play a role in ensuring the future.

The AFGRI Innovation team spent three days with some of the greatest minds from South Africa, Africa and all over the globe at the SA Innovation Summit. The event covered broad spectrum of topics, a recurring focus of the event was on the agricultural sector and enabling food security across the globe. The world is looking to us to move forward and pioneer innovation in the Agricultural sector.

The event was supported by a partnership from the Swiss Economic Development minister Marie-Gabrielle Ineichen-Fleisch and the Swiss ambassador to South Africa Helene Budliger Artieda who have committed to working with South African corporate innovators and entrepreneurs in building the economy.

Raw and processed agricultural exports. With consumption rising in markets throughout sub-Saharan Africa and Asia, South Africa could triple its agricultural exports by 2030. This could be a key driver of rural growth, benefiting the nearly one in ten South Africans who depend on subsistence or smallholder farming. Capturing this potential will require a bold national agriculture plan to ramp up production, productivity, and agroprocessing.” Source: http://www.africa.com/mckinsey/

The event focussed on topics such as renewable energy technologies, biotechnology, consumer trends, artificial intelligence and robotics, self-driving cars and battery technologies, the ‘Internet of Everything’ and very importantly AgTech (i.e. agricultural technology).

Listening to global CEO’s, CIO’s and entrepreneurs and global futurists reminding us to broaden our minds and to not be blindsided by the global changes that are underway, we cannot do things as we always have in order to remain competitive … “Innovation is how we bring humanity forward…The future is ours to create”.

AFGRI is committed to the future of agriculture and how innovation can play a role in ensuring the future.

Innovative financing needed for growth in demand for farming equipment

AFGRI, one on the largest distributors of agricultural machinery in South Africa, predicts subdued growth in the market for agricultural machinery to 2020, provided farmers can get access to financing.

The market for agricultural machinery in South Africa is expected to grow by between 3% and 5% over the next four years.
Patrick Roux, Managing Director at AFGRI Equipment, says in South Africa the growth in the market for agricultural machinery will be supported by the rapid expansion of technology that will improve yields and make farming more cost effective.

Globally, the agricultural machinery market is expected to grow at a compound annual rate of over 7% during the period 2016-2020, according to global research company Technavio.

In its latest research report on the agricultural machinery market (released in June), Technavio says globally growth will be driven by growing urbanisation, and different initiatives from governments regarding agricultural activities. Many governments, especially in developing countries, are offering credit facilities and subsidies to farmers, which help them in purchasing advanced machinery.

Roux says the growth in the market for agricultural machinery in South Africa will largely depend on cyclical factors, especially seasonal rains, whilst the consolidation in the sector due to the drought of the past few years will also play a role.
He expects a more robust growth in Africa, where the commercial farmers are less mechanised than their counterparts in South Africa. “The high demand for mechanisation will definitely play a role in the growth in the agricultural machinery market on the African continent. The vast new developments in Africa on clearing bush for arable land will force the mechanisation route for all farmers and innovative plans for structured deal making on equipment will also play a role.”

AFGRI has taken the lead with innovative finance schemes in Zambia and Uganda.
In Zambia, AFGRI’s John Deere dealership, in partnership with Zanaco and the Zambia National Farmers Union (ZNFU), provide agriculture asset finance to help farmers mechanise their operations.

In Uganda, the Abba Mechanisation Circle, through AFGRI’s Agricultural Development Services Division, provides farmers with access to mechanisation, which is purchased by AFGRI and made available to them through rental agreements.
Much more is needed in Africa to drive the agricultural sector and increased demand for agricultural equipment. To assist farmers in Africa to increase their yields through the use of modern equipment, government involvement is crucial, and so is the availability of financing for agricultural equipment, says Roux.

According to Roux, this will require the banking sector to take some calculated risks.
He says as Africa is the lowest mechanised continent, the growing demand for mechanisation will drive the market for agricultural equipment. According to the Technavio report this will be supported by the announcement that agricultural departments across the continent will allocate more than US$ 48 million in subsidies to small farmers during 2015-2017.

Roux says in some countries, notably Zambia, there is good support to make finance available for farmers to buy mechanised equipment, but the difficulty to access finance can hamper the growth rate.
Technavio expects that Asia Pacific (APAC) will continue to generate the bulk of the revenue for the global agricultural machinery market. In APAC the market is expected to reach US$74 billion by 2020 compared to US$46 billion expected in North America. APAC has a larger share of the market mainly due to the growing population in this region, which gradually boosts the demand for food. Increased mechanisation is supported by government initiatives such as subsidies for agriculture and credit availability.

In contrast to this rapid growth, the agricultural machinery market in North America has reached maturity and is expected to witness slow growth due to a decline in the price of commodities and a weak forecasted economic cycle in North America.

AFGRI joins the GAA Alliance

Thursday, September 15, 2016 – Thirty-six leading agri-business companies have today launched the Global Agri-business Alliance (GAA) in Singapore. Their aim is to collectively tackle the major environmental and social challenges facing agricultural supply chains and rural communities across the world.

Announced at the Building Sustainable Futures Forum sponsored by Olam International, the newly-formed GAA is a CEO-led private sector initiative seeking to contribute significantly to the delivery of the UN Sustainable Development Goals (SDGs) by 2030, most notably SDG 2: End hunger, achieve food security and improved nutrition, and promote sustainable agriculture1.

Launch member companies span continents and commodities
The companies already involved are headquartered across the world with representation from Africa, Asia, Australia, USA and South America and are involved in multiple commodities including grains, dairy, edible nuts, edible oils, pulses, rubber, sugar, as well as agro-chemicals. (*Please refer to the Appendix for the list of GAA members as at launch date, as well as quotes
from company management for reporting.)

Unique and substantial role
The GAA is unique in bringing together the companies operating closest to the ‘farmgate’ and
therefore having the greatest influence on the stewardship of natural resources and surrounding
communities, many of whom may also be employed by the sector. Member profile includes
growers and producers; traders; fertiliser, agro-chemical and seed suppliers; agri-service
providers, primary processors and agri-tech suppliers for both food and non-food crops.

David Nabarro, Special Advisor to the UN Secretary-General on the 2030 Agenda for
Sustainable Development and Climate Change, said: “Achieving the Sustainable Development Goals by 2030 will change our world: eradicating poverty, tackling climate change and ensuring a prosperous, safe and healthy future for our children and grandchildren.

“The SDGs also represent investment opportunities for responsible businesses, and are essential for sustainable economic growth. Achieving the SDGs will only be possible with the full commitment of the business community, transforming their business models to deliver also social and environmental value, and working in partnership with the public sector and civil society.

“The launch of the Global Agri-business Alliance is excellent news for the SDGs”.

While many agri-companies already collaborate with non-governmental organisations, technical implementers, consumer brands and retailers, the members of the GAA will harness their collective strengths at the ‘front-line’ of agricultural production to help bring the scale and impact required to drive major change.

Members will collaborate to improve rural livelihoods and working conditions, mitigate climate
risks and manage natural capital sustainably at the landscape-level.

  1. Please  refer  to  the  Appendix  for  key  facts  pertaining  to  SDG  2

This powerful combination  will greatly improve food and nutrition security globally. In turn this will also support the delivery of SDG 1 – to end poverty in all its forms everywhere2.

Paul Polman, Chief Executive Officer of Unilever, and a member of the SDG Advocacy Group, said: “The Global Agri-business Alliance is a major step in aligning this critical sector behind the Sustainable Development Goals. We know the SDGs cannot be achieved without business and we must all go beyond our own individual supply chains towards broader sector wide and value chain approaches. The alliance can catalyse likeminded businesses and
collaborate with other business platforms to deliver the positive impact the world needs.”

Lord Mark Malloch-Brown, Chair, Business and Sustainable Development Commission commented: “Agri-business is most clearly linked to SDGs related to reducing hunger and ending poverty, but it is also critical to protecting livelihoods, achieving gender equality and fulfilling education. The companies of the Global Agri-business Alliance understand that their sector must help achieve sustainable development, but they also recognise the SDGs represent
a tremendous business opportunity. We at the Business Commission look forward to working with the GAA and its member companies to seize these opportunities and create a more inclusive,
sustainable world.”

Global Context
In providing food and raw materials, the agricultural sector employs more than 2 billion people globally, is a foundation for rural development, and underpins many economies in terms of share of GDP and employment3.

Yet, the FAO currently estimates that of the 795 million undernourished people4, about 50%5 are from smallholder farming communities, surviving off marginal lands prone to natural disasters including drought or flood. At the same time, agriculture accounts for 70% of freshwater withdrawal6 and generates 12% of all manmade greenhouse gases – or up to 25% if forestry and other land use are included7. The sector’s ability to boost productivity, minimise food losses and reduce impacts on natural resources is critical to food security and inclusive growth for a world
population projected to rise from about 7.3 billion to 8.5 billion in 20308.

+++
Notes to the Editor:

Anti-trust statement
As participants in the GAA, the companies involved are mindful of antitrust laws and will operate within clear parameters. There shall be no discussions of competitively sensitive information, and GAA participants commit not to enter into any agreements, whether formal, informal or tacit, or concerted actions, or otherwise engage in conduct that may restrain competition. This prohibition

                                                                                                                                                                                                                    

2 2016, 18 August. Goal 1: No poverty. Retrieved from http://www.undp.org/content/undp/en/home/sdgoverview/post-2015-
development-agenda/goal-1.html
3 2016, 18 August. Creating a Sustainable Food Future: Interim Findings. Retrieved from http://www.wri.org/publication/creating-
sustainable-food-future-interim-findings
4 Food and Agricultural Organization of the United States. (2015). The State of Food Insecurity in the World
5 2016, 18 August. Who are the hungry? Retrieved from https://www.wfp.org/hunger/who-are
6 2016, 18 August. Water uses. Retrieved from http://www.fao.org/nr/water/aquastat/water_use/index.stm
7 Intergovernmental Plan on Climate Change. (2014). Climate Change 2014 – Mitigation of Climate Change. 5) IPCC Working
Group III AR5 (2014) Chapter 11. Agriculture, Forestry, and Other Land Use (AFOLU), Available
online: www.ipcc.ch/pdf/assessment-report/ar5/wg3/ipcc_wg3_ar5_ chapter11.pdf (Last accessed 09/04/2015)
8 http://www.un.org/en/development/desa/news/population/2015-report.html.

includes the exchange of competitively sensitive information, including but not limited to prices, rates, coverage, market practices, claims settlement practices, customers or any other competitive aspect of an individual company’s operation. Each participant is obligated to prevent any discussion from falling outside these bounds.

Trade and other transactional issues
Trade and other transactional issues that fall under the purview of existing trade bodies in the sector will not be addressed by the GAA.

About the Building Sustainable Futures Forum
The Building Sustainable Futures Forum is sponsored by Olam with the aim of convening the agri sector to help support the delivery of the UN Sustainable Development Goals (SDGs), particularly in improving global agricultural systems as referred under SDG2: “End hunger, achieve food security and improved nutrition, and promote sustainable agriculture”. Speakers and moderators include: Ms Hoonae Kim, Director, Asia and the Pacific Region, International Fund for Agricultural Development (IFAD); Dr Pavan Sukhdev, natural capital economist; Jeremy Oppenheim, Founder & Managing Partner of SYSTEMIQ and Programme Director, Business & Sustainable Development Commission; Dr Andrew Steer, Chief Executive Officer at the World Resources Institute; Peter Bakker, President of the World Business Council for Sustainable Development (WBCSD); Dr Peter White, CFO, WBCSD; David Shukman, Science Editor BBC, and Alejandro Litovsky, Founder and CEO of the Earth Security Group.

APPENDIX

I) List of GAA members at launch date (alphabetical order)

No. Company  Name Headquartered
1 AFGRI South  Africa
2 Agrocorp  International  Pte  Ltd Singapore
3 Agropalma  Group Brazil
4 Balsu  Gida Turkey
5 Besana  Group UK
6 Bidco  Africa  Ltd Kenya
7 Chellam  Plantations  Group Malaysia
8 Export  Trading  Group  (ETG) Tanzania
9 Flour  Mills  of  Nigeria  PLC Nigeria
10 Golden-Agri  Resources  Ltd Singapore
11 Greenyield  Berhad Malaysia
12 Groupe  Mimran Senegal
13 Groupe  SIFCA The  Ivory  Coast
14 GURSOY  Tarimsal  Ürünler  Gida  Sanayi  ve  Ticaret  A.S. Turkey
15 Hakan  Agro  DMCC UAE
16 Halcyon  Agri  Corporation Singapore
17 IFFCO UAE
18 Indian  Oilseeds  and  Produce  Export  Promotion  Council  (IOPEPC) India
19 Lewis  M.  Carter  Manufacturing  Inc. US
20 Markham  Agro  Pte  Ltd Singapore
21 Minanga  Group Indonesia
22 Mitsubishi  Corporation Japan
23 Musim  Mas  Group Singapore
24 MWT  Foods Australia
25 Olam  International Singapore
26 PureCircle  Ltd Malaysia
27 Reliable  Cashew  Company  Pvt.  Ltd. India
28 SABIC Saudi  Arabia
29 Sime  Darby  Group Malaysia
30 The  Richard  Franco  Agency US
31 Triputra  Agro  Persada Indonesia
32 Univanich  Palm  Oil  PCL Thailand
33 Vijayalaxmi  Cashew  Company India
34 Von  Bundit  Co.  Ltd. Thailand
35 Willowton  Group South  Africa
36 Wilmar  International  Limited Singapore

II) Quotes from select GAA members (alphabetical order)

AFGRI:

“At AFGRI we are passionate about being an enabler to food security across the African continent, as such our support of the GAA puts us another step closer to fulfilling our chosen mandate.” ~ Chris Venter, Chief Executive Officer of AFGRI
Agrocorp International Pte Ltd:
“The agriculture and food production sector is one of the largest emitters of greenhouse gases across industries. While we serve a vital need in producing and transporting food around the world, it is important to ensure that we do so in a sustainable manner. This means employing efficient production practices and supply chain control and to work together with one another to promote wider adoption of these practices. This is why groups coming together, like the GAA, are so important and we aim to take an active role.” ~ Vijay Iyengar, Chairman and Managing Director of Agrocorp International

Agropalma Group:
“Networking, interaction, commitments, sustainable investments and policies: the Global Agri-business Alliance is the new platform for frontrunners interested in gathering to build momentum for an inclusive and responsible economy in the food and non-food value chain.” ~ Marcello Brito, Chief Executive Officer of Agropalma

Balsu Gida:
“The GAA initiative brings together different parties from the agri-business sector and provides a wide platform of opportunity to discuss, address and execute on a plan for a sustainable future for the food industry. The GAA will fill a crucial gap in coordination between all the stakeholders to bring sustainable solutions.” ~ H Cuneyd Zapsu, Chairman of Balsu Gida

Besana Group:
“The nut and dried fruit sector is today global and becoming more and more important. High-level scientific research has confirmed the healthiness of nuts and dried fruit in the daily diet, and certified quality that starts in the field is a “must” in our international agriculture business over five continents. This means respect for the environment, sustainability for farmers and high food safety for consumers, with an eye towards the impact of climate change. We therefore welcome the initiative and the mission of the Global Agri-Business Alliance (GAA) as a very important step towards global development.” ~Giuseppe Calcagni, President of Besana
Bidco Africa Ltd:
“The Global Agri-business Alliance is an active movement by companies that recognise the potential of using demand-driven smallholder farming to end poverty and hunger by building inclusive value chains. This is the kind of commitment we need and must have from the private sector to achieve the SDGs.” ~ Vimal Shah, Chief Executive Officer of Bidco Africa
Chellam Plantations Group:
“Ignoring engagement on the issue of sustainability is a myopia that could damage the perceived
integrity of palm oil and its derivatives. The battle to sustainability is a long and difficult one, involving
cooperation of many parties throughout the entire palm oil value chain. But it is also unavoidable as
with education, technology and media, people have become global citizens. The key to surviving this
battle will be to embrace it.” ~ Venkata Chellam, Managing Director of Chellam Plantations Group

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Back row, second from left: Jacob de Villiers the AFGRI representative from AFGRI Grain Management

 

AFGRI extends financial services offering to Northern Cape

AFGRI, the leading agricultural services, food processing and grain commodities company, is expanding its financial services offering through a working relationship between UNIGRO Financial Services and KLK Landbou.

UNIGRO Financial Services, one of the businesses in AFGRI’s financial portfolio, is spreading its wings to the Northern Cape in line with its strategy to expand beyond the areas where it is currently doing business.

Early in 2016 a working relationship with Northern Cape-based KLK Landbou Limited was established. This relationship was put into place to enhance KLK’s offering to their clients and to enable KLK to supplement their services through UNIGRO’s relationships with various insurers. This co-operation is now being expanded to include UNIGRO’s lending products.

UNIGRO not only provides crop insurance, covering hail, extended hail, wind, transit, fire, frost and multi-peril, but also asset insurance, health, wealth management and planning, medical aid as well as credit life insurance which provides farmers with security against production loans.

Traditional lending products such as term loans, hire purchases and production loans are augmented by innovative financial solutions such as UNIGRO’s revolving credit facility.

Theo Potgieter, Insurance Director at UNIGRO, says the agreement offers new opportunities to both entities. “UNIGRO together with KLK will be able to expand its crop insurance and asset insurance offering to established as well as emerging farmers in the region, whilst KLK will have the opportunity to target large corporate clients with the assistance of UNIGRO. The working relationship will place emphasis on the KLK clients especially those not insured via KLK”.

The agreement with KLK was followed in February by the establishment of a working relationship between UNIGRO and Indwe Risk Services, a leading personal, business and specialist risk and insurance advisory business.

This agreement allows Indwe access to UNIGRO’s expertise in agricultural insurance and financial products, while UNIGRO will gain by utilising Indwe’s full range of risk advisory services.

Potgieter says the collaboration with Indwe creates an opportunity for UNIGRO to expand into Africa through Indwe’s Allied Africa Broker Network, an integrated network of independently African-owned and operated short-term insurance brokers.

As a parting comment, Potgieter indicated that in hard times, such as those currently being experienced in the agricultural sector, purchases such as insurance and cover, are often the first areas to be cut back, unfortunately to the detriment of the farmer, should anything unforeseen happen. “In times like this, it is much better to approach your broker or relationship manager, and discuss possible options, rather than cancel policies and cover outright,” said Potgieter.

The Sunday Mail/Financial Mail – The great chicken rip-off…A third of frozen chickens are just water

SHOPPERS are having the feathers pulled over their eyes when it comes to the R39 billion (US$2,7 billion) per year poultry industry. Chickens are big business in South Africa. Every day, more than 2,7 million chickens are eaten in South Africa — more than one billion a year — making it the most popular and lowest-cost animal protein money can buy.

The vast majority of these chickens, 90 percent, are sold in the form of individually quick-frozen portions, such as drumsticks, thighs and wings, in retailers like Shoprite, Pick ‘n’ Pay and Spar.

But in many cases, 30 percent of what consumers pay for when they buy frozen chickens is simply water, thanks to the controversial practice of “brining”.

If “brining” sounds like a complicated procedure, it’s not: it is simply injecting a salt-water solution with flavourants into the chickens before they are frozen, ostensibly to make them look plumper.

Injected salt solution makes it look better. Walk along the frozen-food aisles of Shoprite, for example, and you will see Rainbow frozen chicken or Astral’s Tender n Tasty Goldi chicken — both with only 70 percent chicken and 30 percent brine, going for around R30/kg.

Most shoppers don’t know they are not getting all they are paying for — a situation made worse by cynical marketers, who have tried to muddy the waters by slapping the label “moisture-enhanced” on the brined chickens.

But is there any need for brining in the first place? Or is it simply a device used by chicken producers, who are under siege from a flood of imports, to protect their margins?

The answer depends largely on who you speak to.

Critics say it is a cynical device used by producers, like the JSE-listed Sovereign Foods and Astral, to plump up their profits and protect themselves from a flood of overseas imports.

On the other side, the producers claim that brine is both a “tenderiser” and “flavour enhancer” that provides a distinct taste and tenderness to chicken pieces. Brining, they say, replaces the moisture lost through the freezing process.

The evidence doesn’t support this.

Maphuti Kutu of Tshwane University of Technology, conducted research that found that injecting small quantities of brine — between only five percent and 10 percent — improved the succulence and flavour of chicken.

There is no scientific justification for the much higher levels of brining we see in South African chicken. This is why some countries, like Brazil, have banned brining entirely. Others limit brining to eight percent of the chicken’s weight nearly a quarter of the standard for South Africa’s chicken.

South Africa has had no such rules until now. From October, new regulations will come into force, imposing a cap of 15 percent brine on individually quick-frozen portions of chicken and 10 percent on whole chickens.

Intuitively, it may seem good for consumers, but the industry is up in arms and has gone to court to stop it happening.

The SA Poultry Association — a 112-year-old organisation populated by the industry establishment, including Astral and Quantum Foods says the new rules will make chicken “unaffordable” for the poor.

Kevin Lovell, the CEO of the association, says the new rules on brining will be a body blow for the sector, causing unemployment to spike in an industry already battling to compete with imports. Lovell says the government simply ignored the industry’s views on the beneficial effects of brining.

“Besides the potentially devastating results on local poultry production and the jobs that depend on it‚ this constitutes an assault on the poor of SA who will now find the price of individually quick frozen chicken unaffordable,” he says. That’s self-serving bunkum, says David Wolpert, the CEO of the Association of Meat Importers & Exporters of SA.

“Brining has resulted in the local poultry industry plumping up their profits by exploiting consumers with up to 40 percent salt water,” Wolpert says.

If anything, he argues, the government (through the department of agriculture, forestry & fisheries) has followed international best practice, taking a stand for “fairness, integrity and common sense” in curbing brining.

And while the poultry producers are frantically spinning the story that consumers will be hurt by these new rules, the opposite is true.

“The new regulations protect consumers’ pockets and, according to many experts, their health. The poultry association’s claim that this would render chicken unaffordable for the poor and shrink the local poultry sector is breathtaking in its utter gall,” Wolpert says. He doesn’t beat around the bush, adding: “People want chicken for their chicken. Salt-water and spin doesn’t feed a family.”

There is an important context to the brining debate, however.

South Africa’s poultry industry has sold the story to the public that it’s teetering on the brink of collapse, and that without being allowed to brine chickens to bulk up their per kilogram weight, its sustainability is at risk. To some extent, they’re right.

Chicken imports are growing rapidly, as countries with dismal economies have sought to dump loads of chickens into receptive markets like South Africa.

Chris Schutte, CEO of South Africa’s biggest chicken producer, Astral Foods, says the problem of dumping arose because customers in some countries only want the breast meat.

This means poultry producers in those countries seek to dump the other parts, like drumsticks and feet, in countries where there is a market at knockdown prices.

Schutte says more than 7,7 million birds were imported into South Africa each week over the past six months. That is about 40 percent of South Africa’s total production of 19 million birds a week. But it comes after a particularly bruising 2015, when poultry imports shot up 21,6 percent to 478 447 tonnes. Imports rose 13 percent this May from April and by an astounding 44 percent year-on-year.

The main source is Brazil, which accounts for 43 percent of all poultry brought into South Africa, followed by the Netherlands (17 percent), and the UK (10 percent). The other 30 percent comes from the US, Argentina, Spain, Ireland and other European Union countries. Schutte says the steep rise in imports means Astral has to introduce “more severe” production cutbacks to manage oversupply.

“The impact of the planned production cutbacks will unfortunately negatively affect the labour force due to the reduction in hours to be worked,” he says.

The impact is devastating: some SA poultry producers are already shutting their doors, or going into business rescue. Add to the mix the severe drought that ripped through the country over the past year and it paints a desolate picture.

The drought meant the price of yellow maize, which is about half the cost of feeding a chicken, has doubled within the past year. Considering that chicken feed is about 65 percent of the cost of rearing a chicken, it was a severe body blow.

Faced with these headwinds, it is no surprise Astral’s share price shed 25 percent in the past year, RCL Foods lost 16 percent and Quantum Foods nine percent. Sovereign, facing internal corporate governance upheavals, gained nine percent.

Scott Pitman, MD of RCL’s consumer division, says imports of frozen poultry continue to grow exponentially, despite the rand having weakened by more than 50 percent over the past seven years, tariffs being imposed on non-EU imports and anti-dumping measures on some EU countries.

Pitman warns, alarmingly, that the SA chicken industry may not be able to survive in its current form for more than eight to 12 months.

“Certainly, the 100 000-plus people employed in the chicken industry — and the dependent maize growing industry — have a lot to lose if a swift and firm solution is not reached very soon,” he says.

It’s a tricky debate, considering government is loath to intervene with international trade agreements; but it can hardly afford to have an already large number of retrenched workers swell further.

On the other side of the coin, imported chickens would help reduce grocery costs — a boon for the man-in-the-street. Amid this industry meltdown, the poultry industry understandably appears to be pulling out every trick in the book to protect itself. This includes spinning the story that imported chicken is “inferior”.

Says Wolpert: “The SA Poultry Association continuously and hysterically attempts to discredit imported chickens as waste, knowing full well that imported chicken quality is far superior to the local equivalent that is literally swimming in water.”

What is clear is that South Africa can expect even more chicken imports. This includes a likely 65 000 tonnes of frozen chicken from the US.

A stand-off between South Africa and America over these chicken imports in the past few months threatened SA’s preferential access to US markets through the African Growth & Opportunity Act.

President Barack Obama’s administration wanted South Africa to remove “anti-dumping duties” on US chicken parts, which had been in place since 2000. South Africa’s trade & industry minister Rob Davies eventually relented, clearing the way for the resumption of US chicken imports into SA, in what he described as a “patriotic sacrifice”.

Besides American chicken, South Africa could also now face a flood from Poland, one of the largest EU producers.

In June, Poland’s deputy minister of agriculture & rural development, Jacek Bogucki, visited South Africa and flew back with a veterinary health certificate giving the green light for chicken to be imported within months.

“The agreement entails the unlocking of the SA market for import of Polish poultry meat — bone-in and mechanically deboned meat, as well as offal,” says Andrzej Krezel, head of the Polish trade & investment promotion section in Johannesburg.

However, Poland, significantly, doesn’t allow any brining of chicken, Krezel says.

Magdalena Rowinska, senior specialist in the foreign affairs office of Poland’s agricultural market agency, says Polish chicken is 30 percent cheaper than the EU average.

But even if the industry is indeed on its knees, duping consumers about brining is not justified. Intriguingly, not all the producers are speaking with one voice on this issue.

RCL, the second-largest chicken producer, which owns Rainbow and Farmer Brown, supports the new regulations. “We support brining as it does maintain the succulence and flavour of the chicken once frozen. However, we believe in brining at levels below what the rest of the industry deems acceptable (and by which) consumers ultimately get more water and less chicken for what they pay,” says Pitman.

With a frankness many of his rivals would do well to match, Pitman says consumers “have a right not to be misled by the excessive addition of brine”.

“We believe taking this stance is in the best interests of SA consumers, as many raise families with chicken as their main protein,” he adds.

Pitman says the cheaper imported frozen chicken products have less brine than many domestic equivalents, are more competitively priced and are perceived by consumers to be of better value. “This means that local producers are not always able to compete,” Pitman says.

Afgri, the agricultural services and foods group, also supports the curbs on brining as “ethical, fair, reasonable and scientifically justifiable”.

However, Afgri’s food business MD Izaak Breitenbach warns that while the new regulations are necessary, the “massive distress” among producers as a result of the dual economic crunch of drought and imported chicken means it’s not the right time to implement them. “It is the wrong time for this to be implemented companies have massive losses. I would think 80 percent of the industry is in a material loss situation,” he says.

Still, it’s hard to see how lower levels of brining which would mean consumers getting more chicken for their rand can be bad for the man in the street.

But Breitenbach says the new brining rules will lead to a 15 percent rise in the cost of frozen chicken pieces. Wolpert agrees that this will be so ultimately, but says producers won’t necessarily have to take a hit as a result.B“All that is required is smaller packs with current chicken levels and less water.”

The SA National Consumer Union says the only purpose of brining is to make consumers believe they are buying a cheaper product. It’s an effect you can replicate by simply marinating chicken, they point out.BIt all comes down to one issue: is South Africa’s chicken market sufficiently competitive to survive without gimmicks like brining?

To many, the answer is no: high food costs, escalating electricity costs and a crowded market mean the cost of producing a chicken is too high.

Wolpert last year characterised the chicken sector as an “increasingly desperate industry aiming to punish SA consumers for its own business woes caused predominantly by its own failings, created by adhering rigidly to a faulty business plan”.

Thabi Nkosi, the chief economist for Agri SA, said on radio recently the country can’t be trying to protect local industry against imports. Instead: “The discussion should be about making them competitive, creating economies of scale and seeing how we can bring down feed costs.”

Of course it isn’t that simple. But cutting out brining is one way to bring a new level of honesty into these discussions.

Zambia Daily Mail Article: NatSave invests K16m in bunjimi loans

KABANDA CHULU, Lusaka

NATIONAL Savings and Credit Bank (NatSave) managing director Cephas Chabu says the bank has so far invested K16 million into the Bunjimi asset plus loan product that is undertaken to mechanise smallholder farmers.

In an interview at the ongoing 90th Zambia the Show, Mr Chabu said over 300 farmers countrywide have benefitted from the product that was launched last year in conjunction with the Zambia National Farmers Union (ZNFU).

“This is a loan for every farmer. It is getting bigger and better, and the response is overwhelming. NatSave is financing the buying of agriculture equipment at affordable rates so that we contribute to the mechanisation of our smallholder farmers who have land but cannot increase production.”

“We have partnered with AFGRI, Saro, Camco, Hazida and others to supply tractors, planters, weeders, rippers, ploughs and related equipment. The farmers are also assured of after-sales services on this equipment,” he said.

He said the theme of the show. Managing environment for growth, is in line with some of the bank’s objectives.

“It helps us focus on a number of solutions tailored to our customers. For example, we are working with Muhanya Solar to finance and supply environmentally friendly equipment to enable people light their homes, irrigate their farms and other renewable energy strategies. We have also gone paperless, as a bank. We are able to send sms alert on mobile phones or emails on every transaction, so there is no need to write on paper and this way we are contributing to energy efficiency and sustainable way of managing the environment,” Mr Chabu said.

AFGRI attends NAMPO to showcase active involvement in the agricultural sector. Find us in the NAMPO Hall, stand number 119 and 120!

AFGRI, the agricultural services and foods’ company, is proud to be once again be supporting NAMPO. This is our seventh consecutive year at NAMPO, which is by far the preeminent agricultural trade show on the continent. As a company that has supported agriculture for the past nine decades, AFGRI participates annually, not only to showcase the company and its service and support solutions to customers, but also to participate in the debate, which takes place through the Nation in Conversation platform.

AFGRI is also proud to be a partner to the Nation in Conversation at the NAMPO Harvest Day and will use this platform to enhance discussions on topical agricultural issues affecting our country currently, profile technology and financing, and share knowledge to the benefit of farming operations across the country. The debate will cover pertinent topics such as agriculture and its impact on the economy, and there will be discussion on Africa as well as policy. The discussions will also focus on changing the image of agriculture and the many success stories out there.

AFGRI’s stand, conveniently located in NAMPO Hall, stand number 119 and 120, will provide information on our products and services and will be manned by experienced staff able to assist with any queries NAMPO visitors may have. It will also showcase a selection of our new initiatives.

Readers are encouraged to visit our stand to enquire about our technology offerings, ease of access to account information through eAccounts, as well as the many other agricultural service offerings that AFGRI has.

Be sure to visit us – we look forward to seeing you there!

AFGRI extends service offering in the Western Cape through acquisition of Agrico mechanisation business

Agrico (Pty) Ltd has announced its intention to divest its mechanisation division, including its John Deere dealerships and other import agencies. It has agreed to sell the bulk of the division to AFGRI Equipment (Pty) Ltd as a going concern, pending regulatory approval. It intends to sell the balance of the division to other existing mechanisation dealers. The acquisition includes Agrico’s John Deere dealerships in Belville, Caledon, Ceres, Malmesbury, Moorreesburg, Piketberg, Rawsonville and Vredendal.

The purchase will be made by the AFGRI Equipment (Pty) Ltd division of AFGRI, which is the preeminent agricultural, golf and turf equipment retailer in Africa and Western Australia. It offers the world’s leading equipment brands and backs these brands with a support network of 25 strategically placed branches.

The acquisition will allow AFGRI to better service farmers in the Western Cape region and beyond, says AFGRI CEO, Chris Venter. “We are pleased with this new addition to the AFGRI group of companies, and are confident that this business is a good fit with AFGRI. It will bolster our existing product range in this market segment.”

Venter went on to welcome Agrico employees and clients into the AFGRI family and indicated that AFGRI is looking forward to a long-term, mutually beneficial relationship. There will be no retrenchments as a result of the acquisition.  “The acquisition confirms AFGRI’s commitment and role in the development and success of the John Deere brand in South Africa and Sub-Saharan Africa,” he went on to say.

The acquisition of the various mechanisation agencies further extends AFGRI’s national footprint to ultimately benefit its clients.

With roots extending back to 1904, Agrico has 28 branches across South Africa. “Agrico will increase its focus on its water-related business and own-manufactured products. It will strengthen its presence in all areas currently served while expanding into sub-Saharan Africa. It retains over 800 of its 990 employees and will be further investing in its South African manufacturing- and retail operations,” said Walter Andrag, CEO of Agrico.