Market Study Reveals Competition Concerns in Botswana's Poultry Industry

The findings of three regional market studies were recently presented by the African Competition Forum (ACF) at the annual meeting of the International Competition Network (ICN) in Marrakesh, Morocco. The market studies were in the Cement, Sugar and Poultry Sectors, and were conducted under the auspices of the ACF (an association of African competition authorities) as part of a research programme on competition dynamics and regional trade flows.

The study on the commercial poultry meat industry, commonly referred to as chicken, was undertaken in Botswana, Namibia, South Africa and Zambia. It is the major finding of the study that the poultry industry in the region is oligopolistic, that is, ownership in this sector is concentrated in a few players. The study further established that some of the dominant players operated at the different stages of production across all the four countries involved.
With regard to Botswana, the study revealed that ownership in the poultry sector is unique and complex.

The largest poultry producers in Botswana have ties to South African producers, and domestic producers are no match to these huge firms at the breeder and processing levels; and the tight trade restrictions protect these dominant players from competition. The market study further revealed that Botswana is a high cost producer and its poultry meat price is higher than the other three countries that participated in the study.

According to the poultry research report, the relationships between the poultry abattoir and processing plant with contract growers places smaller farmers in Botswana in a challenging position as they appear to be set up to fail. The cost of poultry feed in the country is also a cause for concern. The report reveals that there is a high likelihood that feed costs could be driven high by government restrictions on feed importation as broiler producers have to source at least 70 percent of their feed locally, and in instances where there is shortage of domestic supply; a producer needs to obtain an import permit.

The report also highlights the requirement of Halaal certificates as a potential barrier to trade in processed poultry products. Regarding excessive pricing, Botswana and Zambia have been identified as the two countries where dominant countries could engage in unilateral conduct bordering on over-pricing of poultry products at both feed and broiler breeding levels.

As one of its recommendations, the poultry sector research report calls on national governments to consider relaxing in stages the protectionist policies that are currently being implemented. It points out to a danger that if there is lack of competition within a country or region, the benefits installed to incentivise the required investment into the poultry meat industry will be captured by the large firms and their shareholders, while the small poultry farmers will continue to be marginalised.

“Some of the benefits that could be realised from relaxing protectionist policies include cheaper feed costs in countries like Botswana as well as greater price competition for end products which would benefit end consumers” the report says.

With regard to the cement study that was conducted in Botswana, Namibia, Kenya, South Africa, Tanzania and Zambia, it was revealed that the market structure of cement is oligopolistic, just like in the poultry sector. Many of the firms that trade in these countries are multinationals, eg Lafarge, PPC and Afrisam.
Many of the firms involved in the cement trade view it as regional, rather than country to country trade, and as such complex transportation and distribution systems are integrated in the cement trade.

Limestone is the chief raw material in cement production and there are low deposits of limestone in Botswana and as a result, the three cement production companies in Botswana (PPC, MPC and Botsino) are unable to meet the national capacity.
As a consequence, Botswana imports cement and even other crucial cement inputs such as clinker and fly ash mainly from South Africa and other African countries and even as far away as Asia. According to the report, it is the unavailability of these raw materials that impedes access and expansion of the cement industry in Botswana.

With regard to price, the report observed that Botswana had been witnessing an increase in price of cement until 2009 when this flattened, possibly due to government intervention or the bursting of a cement cartel in South Africa.  The sugar study was conducted for the South African, Zambian, Kenyan and Tanzanian markets.