26 November 2015

 

 

 

CEO’S REPORT FOR THE YEAR ENDED SEPTEMBER 2015

 

 

Introduction

 

This is my 8th CEO’s AGM report, and possibly my last.

 

I have read through all my previous seven reports, as well as those of my predecessor.

 

Of all the documents in your pack,the CEO’s report is undoubtedly the most boring.

It is a long winded summary, the contents of which members are fully familiar with from email notifications and newsletters.We pride ourselves on the fact that communication to members has always been professional, detailed and timeous.

It probably takes up more of my time than any other function.

 

I will attempt to depart from tradition and keep my summary of this report as short as possible today.

 

 

 

 

2015 The Year in Review

 

As usual the year was eventful and challenging as our Chairman,Anthony Schneiderman has already told you.

 

Final anti-dumping duties were applied to bone in chicken imports from the UK,the Netherlands and Germany.

ITAC originally missed its deadline-we kept them busy and on their toes-resulting in millions of rands worth of duty refunds from SARS.

The duties for the UK and the Netherlands were lower than anticipated by SAPA and the media, but Germany was high.

 

So the chicken wars continued and have still not abated, as also applies to the difficulties surrounding the PRRS restrictions on imported pork meat.

 

The poultry attacks came with the usual hostility and insults from both SAPA and local poultry players.This continues incessantly.

It was, of course, accompanied by a host of lies, exaggerations, innuendo, untruths and half- truths.

 

And just who was attacking imports so vociferously? – 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.

 

Their fragile plan is based on massive production and sales of Individually Quick Frozen Chicken (IQF) drowning in injected water-sometimes as much as 43% of the chicken is water.

 

Brining

 

This brings us to the matter of DAFF, the Minister of Agriculture, and brining controls:

DAFF has been investigating South Africa’s high brining levels for over 5 years.

In 2011 it determined that these levels represent “consumer abuse”.

A Parliamentary Monitoring Committee at the same time came to a similar conclusion and discussed possible health risks.

 

In 2012/13 DAFF conducted a full investigation with research performed by the Tshwane University of Technology (TUT).

The Tut research suggested brining limits of 10% on both whole birds and cuts.

 

DAFF invited comments from all interested parties, and AMIE, SAPA, The Department of Health as well as the Heart Foundation and consumer associations,amongst others, submitted comments.

The Heart Foundation expressed concerns about high sodium levels, and the Department of Health suggested 0% brining.

 

The final result was that DAFF produced a report recommending 10% limits on whole birds and 15% limits on cuts.DAFF notified the WTO of its implementation intentions in December 2013, two whole years ago.

 

The DAFF report was then presented in Parliament to the Portfolio Committee on Agriculture in April of 2015, where it was again fully debated.We were present and expressed our views.

 

We had a meeting with the Minister of Health in July of this year and he expressed his support for brining controls and his concern about high sodium levels.

 

The Minister of Agriculture convened a meeting of interested parties in August of this year and most of the views expressed at that meeting, including AMIE’s, as well as The Heart Foundation’s, and those of the National Consumer Council,were critical of current levels and supportive of the proposed limits.

 

Since then-nothing from the Minister’s office, while SAPA has been lobbying for higher levels than recommended while attempting to discredit the DAFF investigation and recommendations.It appears, at this point that collusion with, or fear of, the local poultry lobby is rampant.

 

We, in turn, have been in touch with both the WTO and WHO in this regard.

We have also,this week,requested a meeting with the Deputy Minister of Agriculture.

Over the many months we also ran a major media campaign including a very successful social media onslaught.

 

AGOA

 

Everybody knows of AGOA.

It has been big news for months.

As at today, nothing has been finalized.

 

The USA has been depicted as the bully boy, yet AGOA is not a trade agreement but a very generous gift to SA and other African countries, so the USA has the right to make counter trade demands as long as they are reasonable.

 

Nearly six months after a poultry quota of 65000 MT per annum was agreed, we are still waiting for final rules, regulations and protocols.

What should have been a simple agreement has been severely complicated.

 

The SA Government did not engage with us except for a few departmental meetings where our input was ignored.

Instead they abdicated much of their negotiating space and responsibilities to a manipulative local poultry industry, who were, despite their public utterances, dragged kicking and screaming to the negotiating table.

The result-confusion and the missing of crucial deadlines by SA!

 

We did submit our response to ITAC’s recommendations, and we all currently wait with bated breath for the final outcome.

 

That’s poultry.

 

As far as pork and beef are concerned we keep hearing that the two sides are not far apart.

 

The likely scenario is that SA will meet its obligations by end December,but due to the complications and conditions that are likely to be included in ITAC’s final product,will the quota be filled,and,if not ,will the USA impose AGOA penalties on SA after further out of cycle reviews?

 

All so entirely unnecessary!

 

DAFF

 

One of the ongoing problems that we are constantly faced with is interactions with DAFF.This area has been my personal disappointment of the year.

 

The permit office, from an efficient operation, has degenerated into a disaster, totally lacking in efficiency, communication skills and even credibility.

 

Market Access issues are virtually a joke.Other than an on-site visit to Poland there has not been a single forward step taken in the opening of markets with whom DAFF has been negotiating access for years.

 

Many of our diplomatic friends here today have experienced this inefficiency first hand.

 

There is no consistency over the provinces regarding export accreditation, and in the area of exports, DAFF’s resources are woefully inadequate, while the new import bacteriological testing is inconsistently applied across the ports, and even withdrawn in some areas.

 

There are certainly pockets of excellence within DAFF, but the bureaucracy and disarray in a number of departments offsets this.

 

We can only persist and persevere to improve a difficult situation.

 

 

 

SARS and Statistics

 

We have upgraded the quality of the import statistics that we distribute and have introduced AMIE produced export stat summaries, both of which have been well received by members.

 

We have been working closer to SARS and are receiving more detailed information than previously.

 

As pointed out by Anthony, this information has highlighted the dangerous and dishonest practice of under invoicing which we are dealing with together with SARS through a new committee that was formed with the express purpose of monitoring what SARS describes as a “key industry”.

As you were advised, we are also in the process of an application for fixed as opposed to ad valorem import duties on chicken products.This will be discussed shortly,as per the agenda.

 

As members will have seen from the stats, import volumes for the past year are substantially up on the year before—total imports up by 20%, mdm up by 22%, and total chicken excluding mdm and gizzards up by 23%

 

 

Meetings

 

In terms of meetings we were kept very busy over the year with much time spent at DAFF, SARS, foreign embassies, consulates and trade offices.

 

We met with Minister Davies.as well as his colleagues in separate meetings, Minister Motshoaledi, Deputy Minister Masuku, and attended and addressed a number of Parliamentary Portfolio Committee meetings over the year

 

PRRS

 

Then there has been the ongoing PRRS saga, and the effects this has had on pork issues.

 

My colleague Mr. Mike Burger will handle this issue in a short while as per the agenda.

 

Avian Influenza

 

As you are aware, and already mentioned by Anthony, the Avian influenza outbreaks and consequent import bans played havoc with our industry over the year and kept us constantly busy.

 

 

 

Membership

 

At the end of the financial year we had the following paid up members:

 

 

Ordinary members                                           33

Associate members (Offshore)                       27

Honorary Life member                                       1

 

Total                                                                     61

 

 

This is a far cry from the total membership of 35 a mere seven years ago.

 

We have had one new member join the Association since the financial year end.

 

 

Executive Committee

 

The year ended with six executives serving on the committee.Mr Mike Burger resigned during the year resulting from a change in his business situation, but he still very ably represents AMIE on the industry PRRS technical committee.

 

 

Communication and Website

 

From an average of two or three incoming emails and calls per day, the AMIE office, has, in tandem with our growing membership, become extremely busy, with many issues and queries reaching us on a continuous basis.

 

The general level of communication between us and members all over the world remains extremely high.

 

Our aim in this area is to be constantly available and we have an average response time of less than 24 hours.

 

 

 

We have distributed 6 newsletters over the last 12 months, and also posted them on our website.

 

We have also developed and grown excellent relationships with a number of overseas associations as well as their local embassy and agricultural officials.

 

We upgraded our website a couple of months ago and have received numerous compliments about our new site

 

Finances

 

Budgets for the coming financial year are in your packs, and I will take you through these documents, and be happy to answer any questions that you may have.

 

 

Monthly income and expenditure accounts are prepared and variances to budgets monitored closely.These are discussed at every Executive Meeting.

AMIE’s accounting is well controlled, as confirmed by our auditors.

 

 

We currently have approximately R6m, in the bank (Mostly in a money market account, with a small balance in a market link account). (We have no debtors, while our only liabilities are our audit fees for the year and a small vat amount).

 

 

Our accumulated funds as reflected on our balance sheet seem large, but we will have to pay out a lot of money on consultant and legal fees and costs, and we always need to consider our financial model carefully.

 

All our bank accounts are audited in detail.

 

 

We will always ensure, with the loyal and willing support of our industry, that we have sufficient funds to meet all challenges and attacks.

 

 

Poultry Levy

 

Our application for a statutory poultry levy, as discussed at last year’s meeting, was met with an obstacle in that according to WTO regulations no levy may be imposed on imported poultry unless such a levy exists on local poultry.

 

As SAPA abandoned its statutory levy a few years ago, we will need to wait until they re-impose such a levy before we proceed.

 

 

Meat Levy

 

We have collected a total of R1100,000 in red meat levy funds over the 12 month period from October 2014 to September 2015 which was very close to our budget.

 

 

 

Outsourced Expertise

 

In our constant quest to achieve a high level of professionalism in all that we do, while meeting challenges with vigour and expertise, we have appointed the top consultants in various fields, as well as the best legal brains in the country.

 

 

 

The Future

 

We are going to be vilified and attacked, with perhaps even greater energy than before, by a very frustrated local poultry industry.

 

We are a threat to them because we have become powerful and efficient, but we seem quite able to always rise to the occasion.

 

We would much prefer to live in harmony and cooperation with our local counterparts, but if they refuse to do so, we will always be ready for them.

 

We can see that animal health issues, droughts and economic constraints will be very serious trading impediments for some time to come.

 

But a resilient industry will deal with them.

 

 

Thanks

 

I would like to thank all members and our distinguished guests for the way you communicate with me and the respect you always show me.I have made some good friends amongst members and foreign representatives.

 

A special word about Anthony Schneiderman.

 

We are fortunate to have him as our Chairman.

His standing and profile in the industry are a testament to his character.

As far as his relationship with me is concerned, he has been a revelation.

 

I have spent most of my adult life in senior executive positions.

One would think that the AMIE post is easy—I assure you it is the most difficult I have occupied,because you deal with so many diverse and even opposing management styles.

 

Anthony has a simple philosophy.

He does not instruct me-ever-he asks me nicely and shows and expresses appreciation.He has not once undermined me.

His philosophy is that I am the CEO, I must make judgement calls-some will be bad ones and that is normal and we move on.

A true gentleman.

 

Thank you to the Executive team, our Deputy Chairman, Seymour Talpert, another true and very talented gentleman, as well as all members, colleagues and guests.

 

With best wishes for a peaceful festive season,

 

 

David