Flaws, solutions to Zim’s poultry industry

Charles Dhewa
Zimbabwean rural communities have traditionally given chicken a social value more than an economic value. The consumption of chicken was associated with honouring special relatives or visitors. A visitor would be shown a chicken before it was slaughtered to show that this was going to be his/her relish.

The chicken would then be cooked and shared with the whole household. Chicken was not consumed everyday but was part of a special diet.

Poultry was also a powerful currency that would facilitate commodity exchange such as a cock with groundnut seed. To the extent that livestock ownership was gender-related, chicken were mostly owned by women while men preferred owning big animals like cattle.

Subtle issues like nutrition were rarely considered with consumption reserved for visitors or special occasions like Christmas or holidays.

The fact that chicken were not eaten every day increased people’s appetite for chicken meat and eggs. The longer people waited before eating chicken, the more their appetite for chicken meat increased.

With the coming of urbanisation, commercial companies noticed this appetite among people who had moved to work in cities such as Harare and Bulawayo in large numbers.

An opportunity for mass production of chicken in order to satisfy the appetite for chicken products among thousands of people who had migrated to urban centres became a compelling business case for some companies.

This coincided with the mass production of maize meal which was replacing sorghum and pearl millet in African diets. A fitting companion for sadza became chicken and vegetables in the full commercialisation of food systems.

How indigenous chickens fell by the way side

The fact that indigenous chickens had multiple social uses meant they could not be transformed fast enough to keep pace with mass consumption. Indigenous chicken production processes were found too slow for rapid urbanisation and commercialisation.

For instance, they would be grown from eggs, into chicks and then produce off-spring before being killed for meat, in the case of hens. Cocks would also take many months before they could be considered for the pot.

Noticing the limitations of indigenous chickens and the fact that raising indigenous chicken in cities was not an attractive option, chicken companies were formed to introduce commercial chicken production in the form of broilers and layers for eggs.

However, broilers and layers have come with serious knowledge gaps for small producers who can only buy the chicks but cannot breed the way chicken production has been done traditionally. The knowledge has been locked as a way of protecting the industry.

On the other hand, it is not known how much farmers and communities have lost in terms of knowledge and other favourable attributes by abandoning indigenous chickens for broilers and layers. Faster growth associated with broilers and layers have focused on productivity and mass production.

Rather than following the whole chicken production cycle associated with indigenous chickens, small-scale producers can simply buy day-old chicks and go home to produce full chickens within six weeks.

While it seems an easy business to enter for small chicken producers, these producers do not have control over the growth of the entire industry, which is the preserve of a few big commercial producers who also control chicken feed.

In fact, commercial feed is a business on its own where small producers have to buy a range of feeds such as Starter Mash, Growers Mash and Finisher until a chicken is ready for consumption in six weeks. Low entry barriers into commercial poultry production have attracted too many producers such that production has now outweighed demand in the past three years and seems to be getting worse.

While prices of commercial chickens have gone down or remained stagnant due to over-production, the price of chicks has remained the same. A decrease in the profit margin for small individual producers is threatening the viability of all poultry enterprises.

Absence of clearly defined poultry value chains

One of the main reasons why the commercial poultry sector has reached its tipping point is sustained absence of clearly defined value chains in terms of who produces what and who takes over other activities until chicken products reach the end-users.

Unlike in informal markets where the difference between farmers, retailers, transporters, wholesalers and other actors is clear, in the poultry industry small-scale producers are constrained to a few value chain nodes while a few big players run the whole economic race.

In fact the big players dominate the whole value chain. They have different business units such as hatchery, feed section, chick production section as well as research and development. All these business complement each other.

Small-scale chicken producers who buy chicks from the big players participate in the market as traders of chicken rather than empowered growers. If small-scale producers had capacity to produce chicks, eggs, feed and full chickens, they would be able to control costs.

Since they buy chicks already packaged by big players, small growers have limited capacity to create new sources of value. The biggest risk is competition with big commercial players who also make money through chicks, eggs, feed and other business units but want to compete with small guys in selling all chicken products.

Due to their size and historical advantages, big players can afford to dump some chicken products in the market and still remain viable. Since they also produce layers, big players can also offload layers into the broiler market once layers have stopped laying eggs.

It means for big players, layers are another source of income through the egg market. That is why they can afford to sell layers at $3 for a big bird. Such a price beats small-scale producers who peg their broiler prices at $6 per bird. Given the low buying power among consumers, the majority end up going for layers due to low prices.

Small-scale egg producers also buy point of lay chickens at $10 per bird from big players. The egg market has also become congested since big players can offload eggs that fail to hatch into chicks.

These eggs are found in the informal market where they compete with small players who will have bought initial raw materials from the big player. Big players also make money from breakages, offals and cutlets which are bought by vendors in large quantities. These cutlets compete with a full chicken produced by a small producer.

Why should big players compete with their out-growers in the same market?

Being the suppliers of almost all raw materials, big players in the poultry industry have the advantage of being able to track how many chicks, eggs, full chicken or cutlets they have put in the market per given period.

Based on these insights, big players are able to either decrease or increase costs in line with market dynamics. They even know the capacity of their small competitors. Small producers do not have that competitive vantage point and privileged information.

Why is the modern way of structuring businesses into manufacturers, wholesalers, retailers and end-users missing in the poultry industry? In the current situation, youths and NGOs that are getting into poultry projects are wasting resources when the market is already rigged in favour of big players.

Properly organising the poultry industry enables the sustenance of each economic actor. You can’t have a manufacturer competing with a retailer or a small grower who can only afford to produce 50 chickens.

When there is shortage of poultry feed, big players have the privilege to buy a lot of maize from farming communities or import from neighbouring countries. That strengthens their stranglehold on the poultry market at the expense of small players.

Just as we don’t see big players in the bread baking industry competing with tuck shops in selling individual loaves directly to consumers, the same should happen in the poultry industry.

At the moment it is like a maize seed company selling seed to farmers and competing with the same farmers in growing maize and selling to the Grain Marketing Board. It is also like Delta Beverages competing with bottle stores in selling beer.

Ideally, the big player (manufacturer of chicks) should supply chicks to out-growers and become the main market rather than the competitor.

The big guys should buy from farmers and supply up-markets such as hotels and supermarkets rather than supplying their own chickens and elbowing out small farmers. Why not emulate some companies which contract farmers to produce beans and then process those beans into cans for a different market including export markets?

Why can’t the big chicken players concentrate on the export market and leave the domestic market to small guys to whom they sell chicks?

Need for fair competition to avoid eroding the gains of infrastructure development. It is impossible to distribute wealth creation opportunities to many people when a few players are allowed to dominate such an important food industry. Given that traditionally chickens were associated with women, by dominating chicken production, big companies are encroaching on to what are supposed to be women’s businesses.

The biggest poultry companies should be owned by women if the correct traditional ownership and knowledge pathways were followed.

While decentralisation of outlets by big chicken players has positively led to infrastructure development such as rural electrification and appropriate poultry structures, market saturation is undoing all these benefits since rural players are out-competed.

The small-scale chicken industry is collapsing because efforts to fully commercialise it are being hampered by anti-competitive behaviours of big chick manufacturers.

Just as these big players need government protection from imports, small chicken players need government protection from the big guys.

There are opportunities for big players to strengthen out-grower models like what is happening in other value chains such as tea where Tanganda Tea Company contracts farmers to produce tea while it concentrates on the export market.

The chicken market has reached its ceiling. At the ruling price of $4 to $6 per bird, 70 percent of households are now regular chicken consumers, almost daily. The price has stayed the same for the past three to four years. That has become a cap and there is no growth.

Price is no longer informing demand. Chicken is now going for $2,50 per kg compared to $5/kg for beef. It means beef is now twice more expensive than chicken. Production has remained high while prices of chicken have gone down.

Doing 25-50 chicks does not make economic sense for farmers unless they are doing so for their own consumption.

For most farmers, chicken production is an on and off business where three months are spent growing the chicken, a fourth month is used in selling, and production begins in the following three months cycle. In most cases, by the time another batch is acquired the price of either chicks or feed will have gone up.

Big companies should get out of this conflict of interest where they pretend to empower their competitors when they know very well that they can out-compete them.

The fact that the price of chicks remains constant for some time suggests that big players recoup their costs from many nodes along the value chain.

In response to market failure, most small-scale producers now produce for events like weddings. Unfortunately that action has the effect of reducing market share because chickens in the market end up with less buyers.

Other small-scale producers are targeting festive seasons. When an industry functions on the basis of specific and ad hoc events, there is not business. You can’t build a serious economy based on such practices.

The cost benefit analysis route

There is need to revisit the whole poultry value chain in Zimbabwe in order to unlock new sources of value. Indigenous chickens have been demonised due to lack of evidence. It is important to examine the cost benefit analysis between a broiler chicken and an indigenous chicken.

What is the cost benefit analysis if you compare broiler production with indigenous chicken production? New demand can be stimulated through new awareness brought by such analysis.

What are the benefits of broilers compared to other classes of poultry such as turkeys, guinea fowls, indigenous chickens, ducks and others?

What opportunities could be hidden in the alternatives? While a road runner may be selling for $7, its production cost may be lower than the broiler. What if the fact that indigenous chickens are slow growers only constitute 30 percent of challenges that can be solved but lack of hatching technology is the main issue?

Indigenous chickens may guarantee smallholder producers high returns. For instance, 50 broilers @ $4 = $200 and 20 road runners @ $10 = $200. It means road runners may give you more profit because your production costs are low compared to broilers.

Our veterinary policies also need recalibration. Why should we restrict the movement of indigenous chicken merely because we are failing to deal with a primitive poultry disease like Newcastle?

At the moment broiler chicks and full chickens can get to all parts of the country without any problem yet indigenous chicks are considered bad resources that carry contagious diseases.

We can only open sustainable foreign markets for our indigenous chickens rather than exporting broilers to Europe where they are already part of staple food.

How can we use our natural feed systems to package and present the Unique Selling Proposition of indigenous chickens?

That is one way of adding value to our local resources such as small grains. Instead of worrying about technology for processing small grains, let’s feed small grains to chicken and export high value chickens.

That can open alternative markets for small grains and other local resources.

Why are restaurants and supermarkets not saving dressed indigenous chickens? Would we be wrong to suspect collusion between these markets and big commercial chicken suppliers?

Since scientific knowledge around broilers and layers has been kept secret for decades, would consumers and other people be wrong to raise concerns and speculations about GMOs finding their way into these chickens?

• Charles Dhewa is a proactive knowledge management specialist and chief executive officer of Knowledge Transfer Africa (Pvt) (www.knowledgetransafrica.com) whose flagship eMKambo (www.emkambo.co.zw) has a presence in more than 20 agricultural markets in Zimbabwe. He can be contacted on:[email protected]; Mobile: +263 774 430 309 / 772 137 717/ 712 737 430.