Chicken cornered

| Friday October 28, 2011 00:00

 

Every day, hundreds of thousands of chickens give their lives for the enjoyment of hundreds of thousands of people in Botswana. Every day, hundreds of thousand of mother chickens give away their eggs for the nutriment of thousands of people. However, in this country, not many chickens will be boiled, fried or barbecued nor will many eggs be boiled, fried or scrambled unless prominent businessmen Abdul Satar Dada and Derek Brink have something to do with it.

Through their groups of companies, the two men have Botswana's P900m poultry industry 'on lock'. But like the chicken and egg question, trying to understand the maze in the poultry industry chain is like trying to solve the ultimate philosophical question. There are certain things one needs to understand.

It begins with grasping the simple fact that the industry thrives on four major products - eggs, day-old chickens, feed and broilers (chickens raised for meat production).It is a simple concept. If you want to raise chickens, you have to buy chicks, and sooner or later you must come knocking at the door of major chick supplier, Ross Breeders Botswana, which is Dada affiliated; or Irvine's, into which Derek Brink recently bought. If you want to procure eggs, the major egg producers are Bokomo Eggs or Notwane Eggs (Brink). But if you want to keep the chickens to produce the eggs, sooner or later the chickens need feeding, and if you are going to feed your chickens, then you have to contact either Nutrifeed/Master Feeds (Dada owned) or Tholo Holdings.

The industry, sources say, is shared by three main groups, namely, the so-called Dada group of companies, the Brink group of companies, and most recently a new group made up of former employees and associates of the former two groups. Through the three of them, the companies own nearly the total of the P900m industry. This is how:

Dada's business in the poultry business

Politician and prominent businessman, Abdul Satar Dada, has a stake in a major company, the Associated Investment & Development Corporation. AIDC has a stake in three areas of the value chain. It has a 40 percent stake in Ross Breeders, which dominates the day-old chicken industry with the market share of about 75 percent, according to Professor Roman Grynberg and Masedi Motswapong in their latest report on the industry titled Competition and Trade Policy - The Case of Botswana Poultry Industry.

Economic scholars Roman Grynberg and Masedi Motswapong of Botswana Institute for Development Policy Analysis (BIDPA) put the market control at 75 percent. Nutrifeed/Master Feeds, which is said to control between 90 percent and 95 percent of the feed market, is part owned by AIDC.On the broiler market, Dada has a stake in Tswana Pride, a producer of broilers, and Dikoko Tsa Botswana, both of which own shares in Coldline that in turn dominates the importing market as well as being the dominant cold storage company.

AIDC tends to have a stake in the earlier stages of production such as feed production and the broiler market, although it does have interests at the cold storage level as well, but it is the Brink group that seems to have more control in the latter stages.

'Both groups were integrated along the value chain to a greater or lesser degree with AIDC having more backward integration into inputs and Brink's being forward integrated into processing and supermarkets,' Grynberg and Motswapong point out.

The Brink behemoth

Derek Brink's engagement with the poultry industry is through a holding company, Brink Holdings. Richmark, which is in broiler production, is partly owned by Brink Holdings. Brink Holdings, in partnership with Pioneer Foods of South Africa, owns Bokomo Botswana that produces eggs.

'Brink Holdings held 50 percent of Goodwill Chickens and part ownership of Richmark Chickens (since 2009) as well as Bobbsie's and all three of these are major suppliers of broiler meat in the poultry industry,' Grynberg and Motswapong state.

But Brink also has another advantage: he has a stake in a number of Spar supermarkets in the country. Dada and Brink's influence branches into the rest of the industry in other ways as well - some of the new entrants have affiliations to them.

The Third Group - Gerald Sanders and Dave GilbertA year ago, Gerald Sanders and Dave Gilbert bought a stake in Moleps (one of the last remaining broiler producers), Bobbsie's and Goodwill Chickens (broiler producers). Sanders, however, is a former partner of Brink Holdings, having shared Bobbsie's, while Gilbert is a former employee of Tswana Pride. The Third Group is said to have captured a substantial broiler market, although their limitation is that they do not have any substantial integration backwards in the feeds market nor forwards. This is said to be a major challenge to the group.

Choppies wants in

In recent times, Choppies, one of Botswana's major supermarket operators, made a decision to move into agricultural production. Industry insiders say the chain was frustrated by the prices offered by the market. The chain is going into both broiler production and egg production.

Ministry of Agriculture

The power of the major players in the industry is said to be buttressed by the Ministry of Agriculture that often has acted to protect their interests. Various aspects of the agricultural policy seem to be skewed on the side of the major players. For example, there is a restriction on the importation of feed and even day-old chickens. While this policy was meant to protect the local industry, it has only served to protect the monopolies, argue Grynberg and Motswapong.

The 70/30 rule is another example. The rule states that any factory which seeks to import feed should maintain a 70 percent local procurement and only at the most 30 percent of imports, protects and sustains the monopoly in this area as well as compromising the competitiveness of other players.

For example, Nutrifeed/Master Feeds owns about 90 percent of the feed manufacturing market. A broiler producer is forced to procure feed from Nutrifeed/MasterFeeds, which in turn is related to Tswana Pride, another broiler producer. The importation of one-day chicks is also restricted in that only Cold Line, an AIDC company, has been granted the licence to import DOCs on behalf of the industry.  In other words, whether the chicken came before the egg or the other way round is irrelevant. What is true is that in this country, both have a lot to do with either Brink or Dada.