A PROFILE OF THE SOUTH AFRICAN EGG MARKET VALUE CHAIN

A PROFILE OF THE SOUTH AFRICAN EGG MARKET VALUE CHAIN 2015 Directorate Marketing Tel: 012 319 8455 Private Bag X 15 Fax: 012 319 8131 Arcadia E-mail:MogalaM@daff.gov.za 0007 www.daff.gov.za 1

TABLE OF CONTENTS 1. DESCRIPTION OF THE INDUSTRY... 1 1.1. PRODUCTION AREAS... 1 1.2. PRODUCTION TRENDS... 2 1.3. CONSUMPTION VS PRODUCTION... 3 1.4. EMPLOYMENT... 4 1.5. IMPACT TO THE FEED SECTOR... 4 2. MARKET STRUCTURE... 5 2.1. DOMESTIC MARKET AND PRICES... 5 2.2. IMPORT EXPORT ANALYSIS... 5 2.2.1. EXPORTS OF EGGS... 6 2.2.2. IMPORTS OF EGGS... 13 3. SHARE ANALYSIS... 15 3.1. EXPORT SHARE ANALYSIS OF EGGS... 15 4. THE EGG VALUE CHAIN... 19 5. INDUSTRY ASSOCIATIONS... 21 6. MERGERS AND ACQUISITIONS... 21 7. QUALITY... 21 8. EGG GRADING... 21 9. DIFFERENTIATING EGGS... 22 10. EMPOWERMENT PLANS BY THE INDUSTRY... 23 11. BARRIERS TO ENTRY... 23 12. OPPORTUNITIES... 24 13. MARKET INTELLIGENCE... 24 13.1. EXPORT TARIFFS... 24 13.2. NON TARIFF BARRIERS (NTB S)... 26 13.2.1. CHAPTER I: EGGS... 26 13.2.2. CHAPTER II: EGG PRODUCTS... 26 13.2.3. CHAPTER III: SPECIAL GUARANTEES... 28 13.3. IMPORT TARIFFS... 28 14. COMPETITIVENESS OF THE EGG INDUSTRY... 31 14.1. COMPETITIVENESS OF EGG IDUSTRY EXPORTS... 31 15. ACKNOWLEDGEMENTS... 44 16. APPENDICES... 45 2

Million Rands 1. DESCRIPTION OF THE INDUSTRY The egg industry used to be controlled by the Egg Board which ceased to exist in 1993. Presently South African Poultry Association (SAPA) have organized majority of egg producers under Egg Producer, Chick Producer and Developing Poultry Producers organization. SAPA also launched Eggs are Magic marketing campaign to promote eggs. The egg industry is fragmented with a few major players and a number of small and medium-sized producers. Egg production takes place throughout the country, and rearing of good quality pullets requires an extreme cold temperature; that is why KwaZulu Natal midlands seems to be pullet rearing capital of South Africa. The laying cycle of chickens was extended by two weeks from 69 weeks to 71 weeks. On average the annual gross turnover over the 10 year period was R 6.3 billion at producer level retaining eggs as the 4 th largest animal product in agriculture in South Africa. The contribution of eggs in terms of gross value of agricultural production is illustrated in Figure 1. 10 000 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 Figure 1: Gross value of egg production Source: SAPA 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 The gross value of egg production in the country was increasing throughout the period under review. There is an increase of R5.5 billion (166%) in 2013/14 compared to 2004/05. This was mainly due to production and favorable price increases. The gross value increased substantially again in 2013/14 compared to 2012/13. Years 1.1. PRODUCTION AREAS Eggs are produced throughout the country. The South African laying flock was estimated at 23.53 million hens in 2014, that is a decrease of 3.6% compared to the flock in 2013. The total production of eggs in 2014 was 509 000 tons. This figure is based on 96% survival rate, 0.13% mortality rate per week during the laying cycle. The laying cycle was extended by two weeks which will now starts at 18 weeks of age to 71 weeks of age. 1

Eggs are produced at a feed conversion ratio of 2.2 kg per kg of egg. The contribution of various provinces to the total South African egg production is represented in Figure 2. Figure 2: Provincial distribution of layers 2014 Eastern Cape 4% Western and Northern Cape 21% Free State 15% Mpumalanga 5% North West 10% Limpopo 7% KwaZulu-Natal 13% Gauteng 25% Source: SAPA Gauteng is the largest producer of eggs in South Africa with the market share of 25% followed by Western and Northern Cape by 21%, Free State with 15%, KwaZulu-Natal provinces with shares of 13%, and North West with 10%. These five provinces account for 74% of the production while the remaining 4 provinces have a combined market share of 26%. This is because production follows consumption areas as eggs are perishable and cannot be transported for long distances. 1.2. PRODUCTION TRENDS The egg production figures usually include hatching eggs with table eggs. Non-commercial or backyard flocks are not included. Commercial egg production is dominated by three producers, Eggbert, Nulaid and Highveld Cooperative. These three commands around 51% of the market share while the remaining 49% is produced by the Small, Medium and Micro enterprises (SMME s) and developing sector. The performance of egg production has a positive relationship with average number of laying flock. The South African laying flock was estimated at 23.53 million hens in 2014, that is an increase of 23.8% compared to the flock in 2005. Production of eggs and laying hens over the past decade is illustrated in Figure 3 below. 2

Thousand tons Million layers 600 500 400 300 200 100 0 Figure 3: Annual average egg production and laying flock 30 25 20 15 10 5 0 Production Layers Source: SAPA and DAFF, Statistic and Economics Analysis The production of eggs and number of laying hens moved at an increasing trend and they followed the same trends between the periods of 2005 to 2014. Production of eggs experienced an increase of 35.7% in 2014 relative to 2005. From the figure above it is clear that from 2011 to 2014 the production efficiency has improved. 1.3. CONSUMPTION vs. PRODUCTION The two key factors impacting on the demand for eggs are population and real income growth. Other factors such as changing of life styles, egg production systems and health scares have a role to play in influencing demand but they are mainly evident in developed countries. In the developing countries, people are much less concerned about whether layers are kept in cages or not, or that eating eggs can have a negative impact on the blood cholesterol levels of a small proportion of the population but other taboos exist that impact negatively on egg consumption. Figure 4 depicts local consumption of eggs comparing it to the local production for each year to determine if the country is self-sufficient in eggs. The demand factors are influenced by many reasons such as improving standards of living amongst the consumers, which push a large number of consumers towards protein filled diets. Other reasons include increased marketing by egg producers, price competitiveness relative to other proteins on the market and a still-low per capita consumption of eggs compared with other economies in the world. Production factors are influenced more by inputs costs. 3

Thousand tons 600 Figure 4: Production vs Consumption of eggs 500 400 300 200 100 0 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Production Consumption Source: SAPA Figure 4 above indicates that the total production of eggs was more than the total egg consumption during the period under review. Both production and consumption followed the same trend; they have shown an increasing trend from 2004/05 to 2007/08, followed by a slight decrease in 2008/09 then an increase until 2011/12. From 2012/13 to 2013/14, consumption and production decreased, this may be due to increasing feed costs and increased egg prices for consumers. Despite these fluctuations, the production and consumption of eggs increased by 36% and 32% respectively for the past decade. 1.4. EMPLOYMENT The number of egg producers are estimated at about 1 856 (of which 273 are commercial and 1583 constitutes of emerging farmers) and they own nearly 23 530 482 laying hens and employed about 6 742 workers, 731 supervisors and 414 managers during 2014. 1.5. IMPACT TO THE FEED SECTOR Egg industry is one of the main customers of the Animal Feed Manufacturers Association (AFMA). According to the AFMA annual reports of April 2013 to March 2014 poultry industry commanded around 78% of AFMA feed national production. Egg industry consumes around 922 071 tons of feed during 2013/14 period. Employment in the feed industries is estimated at 2 500 workers. 4

Rands/Kg 2. MARKET STRUCTURE 2.1. DOMESTIC MARKET AND PRICES The domestic market consists of 5 main retailers (Pick n Pay, Shoprite-Checkers, Spar, Woolworths and MassMart) and SMME s in the retail sector. These retailers buy the largest share of domestic production. In terms of production, commercial egg industry is stable by nature, meaning that, although demand may decrease or increase, supply remains relatively stable as a result of the lengthy production cycle. A small excess supply lead to a rapid price decrease and a small supply shortfall will be reflected in a rapid price increase. In order to manage this imbalance between supply and demand, producers determine the price of their commercial eggs weekly, on a Monday, by taking into account the number of eggs sold in retail stores during the previous week. In South Africa, eggs remain one of the cheapest animal food proteins available to consumers. The producer price of eggs over the past decade is illustrated in Figure 5. 12.0 10.0 Figure 5: Annual average producer price of large eggs 8.0 6.0 4.0 2.0 0.0 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Years Source: DAFF, Economic and Statistics Analysis The price of eggs increased continuously throughout the production years and reached the peak of R10.70 per Kg in 2014. This increase might have caused by the high feed prices, there was a decrease of 11% of feed cost in 2010 which affected the producer prices to decline slightly in 2010/11. There is an increase of R5/Kg (87%) in 2014 compared to 2005. 2.2. IMPORT EXPORT ANALYSIS Imports in South Africa are largely exchange rate driven while exports are mainly affected by sanitary rules that countries like EU and USA apply. Figure 6 compares volumes of imports and exports of eggs from 2005 to 2014. 5

Tons Figure 6: Egg export and import quantities 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 Exports Imports Source: Quantec Easydata Figure 6 shows that from year 2005 to 2007 the egg imports exceeded exports but they were effectively below 1000 tons. However during the year 2008 to 2014, export volumes became higher than import volumes but with a very low margin from 2008 to 2009 and gradually increased in 2010 followed by a decrease in 2011. There was a substantial increase of exports quantity of eggs in 2014 reaching 15 514 tons. Generally, South African local production outstrips consumption which makes it self-sufficient. Most of the imports are mainly dried eggs whilst exports were eggs in shell. This shows that South Africa is not self-sufficient mainly with the dried eggs. 2.2.1. EXPORTS OF EGGS Eggs are exported in a shell and as yolks (liquid and dried). Figure 7 show the export destinations of eggs during 2014. 6

Tons Million Rand Lesotho 4% Figure 7: Egg exports destination during 2014 Nigeria 3% Botswana 1% Others 1% Swaziland 6% Namibia 7% Zimbabwe 11% Mozambique 56% Angola 11% Source: Trademap Figure 7 depicts that most of South African egg exports went to SADC countries in 2014. Mozambique was the main importers of South African eggs during 2014. It commanded 56% of South African eggs during 2014 followed at a distance by Angola and Zimbabwe accounting for 11% each. These three countries accounted for 78% and the rest of the countries shared the remaining 22% of the export market of South African eggs. South Africa exported around 64 365 tons of eggs valued at R1.4 billion during the past decade. Figure 8 show exports from 2005 to 2014. Figure 8: South African egg exports, 2005-2014 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 450 400 350 300 250 200 150 100 50 0 Quantity Value Source: Quantec Easydata 7

Figure 8 indicates that exports (quantity and value) increased for the past decade and reached the peak in 2014. Both exports quantity and value has been following the same trend throughout the period under review, they both shown a decrease of 27% and 24% respectively in 2011. Apart from similar trend, the figure also shows that it was relatively more profitable to export eggs in 2014 compared to other years as quantity has been exported with more value. The value of exported eggs in 2014 increased by 30%, whilst quantity increased by 6% from 2013. 10000000 8000000 6000000 4000000 2000000 Figure 9: Exports of egg to SADC 0 Angola DRC Malawi Mozambique Namibia Tanzania Zambia Zimbabwe Source: Quantec Easydata It is clearly indicated from Figure 9 above that within SADC, majority of South African eggs were exported to Mozambique followed at a distance by Zimbabwe, Angola and Namibia. Angola commanded the highest market shares of eggs only in 2007. Mozambique received the greatest shares during the periods 2005 to 2006, 2008, and from 2011 to 2014 while Zimbabwe was the highest during 2009 to 2010. Generally Mozambique commanded 54% shares of South African egg market, followed by Zimbabwe at 16%, Angola at 14% and Namibia at 14% during the period under review. The other countries have shared the remaining 2%. Figure 10: Egg exports to Eastern and Western Africa 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 Source: Quantec Easydata Ghana Kenya Nigeria Saint Helena Uganda 8

Thousand Rand Thousand Rand From the other parts of Africa (Western and Eastern), Nigeria was the highest importer of South African eggs in 2014, commanding almost 85%. Kenya from Eastern Africa was the highest during 2008 and 2010-2011. During 2006 and 2007 the highest shares went to Saint Helena and Nigeria took the lead during 2009 and again from 2012 to 2014. The value of egg exports from South African provinces are presented from Figure 11 to Figure 19. 160000 140000 120000 100000 80000 60000 40000 20000 0 Source: Quantec Easydata Figure 11: Values of eggs exported by provinces Western Cape 1465 1157 3072 3795 6304 19735 5119 29623 75756 140213 Eastern Cape 3 0 0 0 0 0 0 0 0 62 Free State 0 0 0 2819 13441 8748 14474 16875 20740 40477 KwaZulu-Natal 2893 481 157 118 114 22155 15122 30893 35331 87175 North West 0 0 0 0 0 5 0 0 0 0 Gauteng 4401 3903 7435 18754 34730 146085 114873 117672 106153 42295 Mpumalanga 0 0 0 0 88 1170 3216 18268 74710 96836 Limpopo 0 0 0 234 12741 5992 1258 1 0 38 Figure 12 illustrates that during the past decade Gauteng Province commanded the highest egg exports share with a total of R596 300 809, followed at a distant by Western Cape Province (R 286 238 502) and KwaZulu Natal by R194 438 830. This may be due to the fact that these provinces are exit points and they are also main production centers. The highest export value was experienced in 2010 by Gauteng Province. However the exports experienced a decreasing trend from 2011 to 2014. The year 2014 recorded high export values from the three provinces. Figure 12: Values of egg exported by Western Cape province 140000 120000 100000 80000 60000 40000 20000 0 City of Cape Town 483 939 2442 3507 6007 18011 5085 29610 75256 129062 West Coast 0 0 0 43 61 1604 34 0 0 10171 Cape Winelands 0 0 0 0 0 0 0 0 0 878 Overberg 0 0 0 0 0 0 0 0 0.10 0 Eden 981 218 630 245 235 119 0 13 3 102 Central Karoo 0.16 0 0 0 0 0 0 0 497 0 Source: Quantec Easydata 9

Thousand Rand Rands Exports of eggs originating from the Western Cape are mainly from the City of Cape Town and to a lesser extent Eden. City of Cape Town recorded the highest values throughout the period under review except only in 2005 where Eden recorded the highest. This is because City of Cape Town is the main exit point within the province. Intermittent exports were recorded from West Coast district municipality. Central Karoo district municipality recorded exports in 2005 and 2013. Cape Winelands and Overberg recorded exports only in 2014 and 2013 respectively. Source: Quantec Easydata 35000 30000 25000 20000 15000 10000 5000 0 Figure 13: Values of egg exported by Eastern Cape Cacadu 2987 0 0 0 0 0 0 150 0 20472 Joe Gqabi 0 0 0 0 0 0 0 0 0 5735 Alfred Nzo 0 0 0 0 0 0 0 0 0 30521 Nelson Mandela Bay 0 0 0 0 0 0 0 0 0 4949 In the Eastern Cape Province, intermittent exports of eggs were recorded during the period under review. Cacadu district municipality has recorded exports of eggs in 2005, 2012 and 2014. Nelson Mandela metropolitan municipality, Joe Gqabi and Alfred Nzo district municipalities recorded exports only in 2014. There were no records of exports from 2006 to 2011 and again 2012 in Eastern Cape Province. 30000 25000 20000 Figure 14: Values of egg exported by Free State province 15000 10000 5000 0 Xhariep 0 0 0 0 0 0 0 1234 821 561 Lejweleputswa 0 0 0 0 0 0 0 0 0 3375 Thabo Mofutsanyane 0 0 0 0 0 0 0 0 0 12352 Fezile Dabi 0 0 0 0 0 0 0 0 43 0 Mangaung 0 0 0 2819 13441 8748 14474 15640 19875 24189 Source: Quantec Easydata 10

Rands Thousand Rand Exports from the Free State Province were originating mainly from Mangaung district municipality. However between the years 2005 and 2007, there were no exports recorded from Free State Province. Exports from Mangaung district municipality reached a peak of R 24 189 236 in 2014. Xhariep recorded eggs exports in 2012 to 2014, Lejweleputswa and Thabo Mofutsanyane district municipalities recorded exports only in 2014. Fezile Dabi was the smallest exporter within the Free State Province districts. 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 Figure 15: Values of eggs exported by KwaZulu Natal province UMgungundlovu 2540 0 0 0 1 16937 12844 30788 35327 86933 Zululand 0 0 0 0 0 0 0 0 0 0.208 Uthungulu 4 0 0 0 0 0 0 0 0.03 0 ilembe 0 0 0 0 0 16 2264 60 0 0 ethekwini 349 481 157 118 113 5202 15 45 4 242 Source: Quantec Easydata Exports of eggs from KwaZulu Natal were mainly originating from ethekwini, Umgungundlovu and ilembe district municipalities. Umgugundlovu recorded intermitted egg exports during the period under analysis but it recorded the highest export value of R185 368 918 during the past decade followed by ethekwini district municipality by R6 725 133 and ilembe by R2 340 194. KwaZulu-Natal Province recorded regularly but all municipalities within the Province exported fractionally except ethekwini. Figure 16: Values of eggs exported by North West province 5000 4000 3000 2000 1000 0 Dr Kenneth Kaunda 0 0 0 0 0 4663 0 0 0 0 Source: Quantec Easydata 11

Thousand Rands Thousand Rand Figure 16 indicates that in North West Province, the exports of eggs were from Dr. Kenneth Kaunda district municipality. The district reported exports of eggs only in 2010, and there were no exports recorded during the rest of the years under review. Source: Quantec Easydata 140000 120000 100000 80000 60000 40000 20000 0 Figure 17: Values of egg exported by Gauteng province Sedibeng 0 0 2380 2275 1151 607 726 0 0 0 West Rand 4 0 0 0 285 522 0 0 0 0 Ekurhuleni 1243 168 55 20 2668 1615 36 636 1462 748 City of Johannesburg 2985 3733 4988 16213 30385 127403 92377 102580 95449 32386 City of Tshwane 168 2 13 245 241 15937 21734 14456 9242 9162 Exports from Gauteng PROVINCEProvince were originating mainly from City of Johannesburg as illustrated in Figure 17 above. City of Johannesburg recorded the highest egg exports values during the entire period under review. City of Johannesburg reached the highest record of R 127 403 161 during 2010. Regular egg exports were also recorded from City of Tshwane and Ekurhuleni district municipalities and irregular values were recorded from Sedibeng and West Rand district municipalities. 120000 Figure 18: Values of eggs exported by Mpumalanga Province 100000 80000 60000 40000 20000 Source: Quantec Easydata 0 Gert Sibande 0 0 0 0 87 0 0 0 0 0 Nkangala 0 0 0 0 0 0 0 1672 5316 0 Ehlanzeni 0 0.23 0 0 1 1170 3216 16597 69394 96836 Figure 18 show that Mpumalanga Province recorded irregular exports throughout the period under review from Gert Sibande, Nkangala and Ehlanzeni district municipalities. The highest exports value of R 96 836 002 was 12

Tons Thousand Rands Thousand Rands recorded from Ehlanzeni municipality in 2014. There were no exports recorded in 2007 and 2008 in Mpumalanga province. 12000 Figure 19: Values of exported by Limpopo Province 10000 8000 6000 4000 2000 Source: Quantec Easydata 0 Vhembe 0 0 0 10 10632 5001 1010 1.06 0 5 Capricorn 0 0 0 224 1914 991 248 0 0 13 Waterberg 0 0 0 0 195 0 0 0 0 19 Figure 19 shows that Limpopo province made irregular exports from 2005 to 2014 from three districts (Vhembe, Capricorn and Waterberg). There was a sharp increase from Vhembe district municipality in 2009 reaching the peak of R 10 631 850. Generally, there were improved records of egg exports from Limpopo Province in 2009 and exports shown a decrease until they reach zero exports in 2013. Limpopo also showed zero exports from 2005 to 2007. 2.2.2. IMPORTS OF EGGS Eggs are imported in a shell and as yolks (liquid or dried). Figure 20 below shows the import of eggs from 2005 to 2014. Figure 20: Egg imports 1000 900 800 700 600 500 400 300 200 100 0 Quantity 902 869 836 495 55 45 105 171 201 275 Value 6138 5017 6102 2158 2743 2510 4902 7611 9373 12678 14000 12000 10000 8000 6000 4000 2000 0 Source: Quantec Easydata 13

Kilograms Kilograms Figure 20 shows that egg imports (quantity and value) by South Africa moved in a fluctuating trend with a declining movement from 2005 to 2010. From the figure above the deduction may be made that the imports of eggs was generally less expensive for South Africa during from 2005 to 2008 but extremely expensive to import eggs during 2009 to 2014 where very less quantity were imported with a high value. 70000 Figure 21: Egg imports from EU 60000 50000 40000 30000 20000 10000 0 Source: Quantec Easydata Belgium Germany Denmark France United Kingdom Italy Netherlands It is clearly indicated from figure 21 that the highest egg imports from the European Union countries to South Africa were from France, Denmark and Italy. Denmark commanded the highest import shares from 2006 to 2010. In 2012 Italy took the lead and France recorded highest commander of South African import market 2011, 2013 and 2014. France exported a total of 239 201 kilograms of eggs to South Africa during the period under analysis followed by Denmark with 180 419 kg then Italy by 142 424 Kg. Figure 22: Egg imports from Asia 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 Source: Quantec Easydata China Hong Kong, China Thailand Taiwan, China 14

Figure 22 displays fluctuations of egg imports from Asian countries with the highest egg imports from China in 2008, 2010, 2013 and 2014, Taiwan in 2007, 2011 and 2012 while Hong Kong, China commanded the highest in 2009. The sharp increase of 16,897 Kg of eggs imported was experienced during 2008 from China, 98% of this egg imports were dried eggs. Figure 23 below shows countries of origin for eggs imported by South Africa during 2014. Italy 6% Figure 23 : Origin of egg imports during 2014 Netherlands 1% Denmark 1% France 18% Lesotho 21% India 53% Source: Quantec Easydata European Union countries were the main supplier of eggs to South Africa during 2014. India accounted for 53% and 21% was from Lesotho, 18% France, 6% Italy and lastly Denmark and Netherlands accounted for 1% each of South African egg imports market. 3. SHARE ANALYSIS 3.1. Export share analysis of eggs The shares of the various provinces to the total South African exports of eggs during the past ten years are presented in Table 1. Table 1: Export share analysis of eggs from provinces Years Province Western Cape 17 21 29 15 9 10 3 14 24 34 Eastern Cape 0 0 0 0 0 0 0 0 0 0 Free State 0 0 0 11 20 4 9 8 7 10 KwaZulu-Natal 33 9 1.47 0 0 11 10 14 11 21 North West 0 0 0 0 0 0 0 0 0 0 Gauteng 50 70 70 73 52 72 75 55 34 10 15

Years Province Mpumalanga 0 0 0 0 0 0.6 2.1 9 24 24 Limpopo 0 0 0 0.91 19 2.9 0.8 0 0 0 Total 100 100 100 100 100 100 100 100 100 100 Source: Quantec Easydata Table 1 indicates that Gauteng province commanded the greatest share of egg exports during the past decade followed by Kwa-Zulu Natal and Western Cape provinces. This is because they are the main production centers and are also exit points for exports. However fractional exports of eggs occurred in Eastern Cape, Free State, North West, Mpumalanga and Limpopo provinces. There are no records for egg exports from Northern Cape Province. Table 2: Export share analysis of eggs from Western Cape province Years Province City of Cape Town 33 81 79 92 95 91 99 99.96 99 92 West Coast 0 0 0 1.14 0.97 8 0.66 0 0 7 Cape Winelands 0 0 0 0 0 0 0 0 0 0.63 Overberg 0 0 0 0 0 0 0 0 0 0 Eden 66.99 19 21 6 4 0.6 0 0.04 0 0.07 Central Karoo 0.01 0 0 0 0 0 0 0 0.66 0 Total 100 100 100 100 100 100 100 100 100 100 Source: Quantec Easydata City of Cape Town metropolitan municipality commanded the greatest shares of eggs exports from Western Cape Province. This is because it is the main exit point in the Western Cape province. Cape Winelands, Overberg, Eden and West Coast district municipalities recorded irregular exports throughout the decade. Table 3: Export share analysis of eggs from Eastern Cape Province Years Province Cacadu 100 0 0 0 0 0 0 100 0 33 Joe Gqabi 0 0 0 0 0 0 0 0 0 9 Alfred Nzo 0 0 0 0 0 0 0 0 0 49 Nelson Mandela Bay 0 0 0 0 0 0 0 0 0 8 Total 100 0 0 0 0 0 0 100 0 100 Source: Quantec Easydata In the Eastern Cape Province, Nelson Mandela metropolitan municipality, Alfred Nzo and Joe Gqabi commanded the egg exports only in 2014 while Cacadu district municipality commanded the shares in 2005, 2012 and 2013. All municipalities recorded fractional exports and there were no exports records from 2006 to 2011. Table 4: Export share analysis of eggs from Free State Province Years Province 16

Years Province Xhariep 0 0 0 0 0 0 0 7 4.0 1.4 Lejweleputswa 0 0 0 0.005 0 0 0 0 0.0 8.3 Thabo Mofutsanyane 0 0 0 0 0 0 0 0 0.0 30.5 Fezile Dabi 0 0 0 0 0 0 0 0 0.2 0 Mangaung 0 0 0 99.995 100 100 100 93 95.8 59.8 Total 0 0 0 100 100 100 100 100 100 100 Source: Quantec Easydata In the Free State Province, exports of eggs occurred mostly from the Mangaung district municipality, the district recorded highest egg exports from 2008 to 2014. Other districts recorded fractional exports. There were no exports of eggs recorded from 2005 to 2007. Table 5: Export share analysis of eggs from KwaZulu Natal Province Years Province UMgungundlovu 87.79 0 0 0 1 76.45 84.93 99.66 99.99 99.72 Zululand 0 0 0 0 0 0 0 0 0 0 Uthungulu 0.15 0 0 0 0 0 0 0 0 0 ilembe 0 0 0 0 0 0.07 14.97 0.20 0 0 ethekwini 12.06 100 100 100 99 23.48 0.10 0.15 0.01 0.28 Total 100 100 100 100 100 100 100 100 100 100 Source: Quantec Easydata In the KwaZulu Natal Province, egg exports shares dominated by Umgungundlovu, ethekwini and ilembe district municipalities although they recorded exports of eggs irregularly. The least exporting district municipalities were Zululand and Uthungulu. Table 6: Export share analysis of eggs from North West Province Years Province Dr. Kenneth Kaunda 0 0 0 0 0 100 0 0 0 0 Total 0 0 0 0 0 100 0 0 0 0 Source: Quantec Easydata In North West province, the exports of eggs were from Dr. Kenneth Kaunda district municipality. The district reported 100% exports of eggs only in 2010, and no exports during the rest of the years under review. Table 7: Export share analysis of eggs from Gauteng Province Years Province Sedibeng 0 0 32 12 3 0 1 0 0 0 West Rand 0.1 0.0 0.0 0.0 0.8 0.4 0.0 0.0 0.0 0.0 Ekurhuleni 28.3 4.3 0.7 0.1 7.7 1.1 0.0 0.5 1.4 1.8 City of Johannesburg 67.8 95.6 67.1 86.5 87.5 87.2 80.4 87.2 89.9 76.6 City of Tshwane 3.8 0.1 0.2 1.3 0.7 10.9 18.9 12.3 8.7 21.7 17

Years Province Total 100 100 100 100 100 100 100 100 100 100 Source: Quantec Easydata In Gauteng Province, City of Johannesburg, Ekurhuleni and City of Tshwane district municipalities commanded the greatest shares of exports of eggs during the period under review. However, irregular exports occurred from Sedibeng and West Rand district municipalities. Table 8: Export share analysis of eggs from Mpumalanga Province Years Province Gert Sibande 0 0 0 0 99 0 0 0 0 0 Nkangala 0 0 0 0 0 0 0 9 7 0 Ehlanzeni 0 100 0 0 1 100 100 91 93 100 Total 0 100 0 0 100 100 100 100 100 100 Source: Quantec Easydata From Mpumalanga Province, fractional exports of eggs occurred from Gert Sibande Nkangala and Ehlanzeni district municipalities. Ehlanzeni district municipality became the greatest exporter followed at a distance by Nkangala district municipality. There were no records of exports during the periods 2005, 2007 to 2008 in Mpumalanga province. Table 9: Export share analysis of eggs from Limpopo Province Years Province Vhembe 0 0 0 4 83 83 80 100 0 14 Capricorn 0 0 0 96 15 17 20 0 0 34 Waterberg 0 0 0 0 2 0 0 0 0 52 Total 0 0 0 100 100 100 100 100 0 100 Source: Quantec Easydata In Limpopo Province, irregular exports of eggs were recorded from the four districts, (Vhembe, Capricorn and Waterberg). Vhembe district municipality commanded the highest share of 83% in 2009 and 2010, 84% in 2011 and 100% in 2012. There were no records of egg exports in Limpopo Province during the periods 2005 to 2007 and in 2013. 18

4. THE EGG VALUE CHAIN Figure 24: Structure of the poultry egg industry value chain for 2011 51.7 million Consumers (Estimate for 2014) Consumption 471 000 tons Per Capita Consumption = 139 eggs per person/ year Informal traders 23.53 million spent hens Shoprite/Checkers. Pick n Pay Spar Woolworths Massmart Boxer SMME s Informal traders Retailers Packers and Processors Export Import Import: 274 680 Kilograms Export: 2 499 781 782 Kilograms Commercial Production: Eggbert (7%) Nulaid. (32%) Highveld (12%) Supply 51% or 9.45 million cases per year Hatcheries Domestic Production 509 000 tons Avichick Nulaid Boskop Rossouw Hyline SMMEs: 49% or 9 million cases sold per year. Breeders Feed companies Employment 2500 workers Feed companies: 2 Breeders: Hyline and Lohnmann Farms 267 commercial and 1554 emerging producers Employment 5841 workers 75% of industry Independent millers: 25% of industry - SAPA Stats (Commercial only) 3 producers handle 51% of total egg supply to RSA Source: Adapted from NAMC and SAPA. 19

The value chain depicted in Figure 24 consists of 5 stages: grandparents, parent stock, laying flock and commercial egg production and the market. The various operations are linked by a series of arrows. a. Egg production starts with the import of genetic stock (known as grandparents) into South Africa as day old chicks. In South Africa there are two genetic breeds of chickens that lay eggs for the commercial market, Lohmann and Hyline. Both breeds are imported. The Lohmann breed emanates from Europe and is imported by Lohmann SA, a joint venture between Pioneer Foods and Golden Lay Farms. Lohmann SA imports the Lohmann genetic stock (known as Lohmann Brown and Silver grandparents) into South Africa as day old chicks. The grandparents are reared to lay eggs, which are incubated to produce day old chicks called parents. It then sells its production of parent stock to its joint venture owners, Pioneer Foods through its Nulaid division, and Golden Lay through Avichick. The company also produces day-old parents to all African states south of the equator. Hyline is an American breed and is imported, solely, by Hyline SA. Hyline SA only imports grandparents, rears them to breed parent stock which in turn produce hatching eggs for day old commercial layers. It sells all its day-old pullets to independent rearing farms and is not involved in rearing point of lay hens. b. During the second stage, the parents are reared to maturity and produce fertile hatching eggs. The eggs produced by these parents are incubated and the day old chicks that hatch are called pullets. c. During the third stage, the pullets are then reared on rearing farms until they are mature at 21 weeks and are ready to lay commercial eggs, at which stage they are called Point of Lay hens. Some egg producers in South Africa rear their own Point of Lay hens as it is a very crucial phase in the life of the hen and the quality of the rearing process has direct bearing on the efficiency with which the hen will eventually produce eggs during her laying phase. d. The fourth stage involves production of final product, eggs. This stage is dominated by 3 companies (Nulaid, Eggbert and Highveld Co-op) Eggs are produced in various sizes and they are graded. Commercial layers have a production lifespan of approximately one year after which they are culled and sold as spent hens mainly in the rural areas where the demand is high through informal traders. e. The fifth stage is the market. Output of the industry is basically eggs and spent hens. There are 6 main retailers, SMME s and informal traders in South Africa that buys eggs from these farms and sell to approximately 48 million consumers countrywide. Informal traders play a big role in distributing spent hens to consumers. The distribution chain in the egg industry tends to be short with approximately 75% of the total production being delivered to the formal trade sector. The greater the distance between producer and consumer, the more complex is the marketing channel. The whole production process, from grandparent stage to the culling of the hen, runs close to three years. In addition to these production processes there are packing and value addition (liquid egg) functions that are important in the egg value chain. Large companies have integrated or formed subsidiaries to perform these functions while small farms are still struggling and they even sell their eggs as cracked and ungraded. 20

5. INDUSTRY ASSOCIATIONS The South African Poultry Association (SAPA) SAPA is a fully-fledged commercial representative body whose mission is to advance all matters tending towards the improvement of the poultry and allied industries in South Africa by embracing and co-coordinating the objects of subsidiary organisations. Developing Poultry Farmers Organization (DPFO) A division of SAPA, was established in 2003 to cater for the specific needs and requirements of emerging and small-scale poultry producers. Egg Organization This organization s main mission is improving the egg industry and promoting it on a national level. Chick Producers Organization This organisations gives specialized attention to matters concerning their members to enable them to supply quality breeding stock for South Africa. 6. MERGERS AND ACQUISITIONS In 2004, Nulaid acquired Golden Lay s commercial egg production facilities thereby increasing the market share to 32%. Golden Lay exit the commercial egg market but retain its day-old pullet business, as well as its Point of Lay hen rearing facility in KwaZulu-Natal, to become a specialized rearing firm producing pullets and Point of Lay hens. 7. QUALITY The quality of the eggs and their stability during storage is largely dependent by their physical structure and chemical composition. Maintaining fresh egg quality from the producer to the consumer is one of the major problems facing those engaged in the marketing of eggs. Proper attention to production, distribution and point of sale phases are of vital importance in maintaining egg quality. 8. EGG GRADING Agriculture and Agri-Food regulations define three quality grades that apply to eggs for sale to customers. These are: Grade A - sold at retail markets for household use Grade B - used mostly in bakeries 21

Grade C - sent to egg breakers for processing Only Grade A eggs are sized according to the weight of each egg. Jumbo - at least 70 g Extra Large - at least 63 g Large - at least 56 g Medium - at least 49 g Small - at least 42 g Pee Wee - less than 42 g 9. DIFFERENTIATING EGGS Eggs are differentiated according to the production systems as follows: Organic Free Range These eggs are produced by free-range hens that are fed on grains and pulses that are grown without pesticides, chemical fertilisers or any other genetically engineered products. Omega 3-enriched Omega 3 fats, which are excellent for brain functioning, the immune and nervous systems and healthy hearts, are found in oily fish. The hens that lay these eggs are fed salmon oil as part of their diet. Omega 3-enriched eggs are not necessarily free range. Free range The chickens that lay these eggs are exposed to sunlight and grass pastures. They have room to scratch, flap and bath in the dust. Their diet is not necessarily vegetarian, it could include insects or fishmeal. Barn These eggs are produced by chickens that live inside, but are not kept in cages. Barn eggs are laid by chickens that are fed a vegetarian diet of grains and pulses. Grain fed Grain-fed chickens don't eat commercial feed, which can include fish and chicken meal. These eggs are not free range, and not necessarily barn. The chickens may be kept in cages. Commercial These are the cheapest eggs to buy, and so make up the bulk of the eggs consumed in the country. The chickens are kept inside, in cages. They are fed with meal, which includes 22

commercially farmed grains and pulses and processed fish and/or chicken meal. Electric lights are kept on much of the time to encourage the chickens to lay. 10. EMPOWERMENT PLANS BY THE INDUSTRY The Agricultural Development Corporation in the Limpopo province assisted emerging farmers to grow eggs for the Mashashane hatchery on a contract basis. Workers of Nulaid bought shares in the Nulaid egg-producing farm near Kaalfontein. Ukhahlamba Poultry Farm (Pty) Ltd trading as Nulaid Eggs KZN is a black farmer who is a contract grower for Nulaid. The eggs produced are sold to Nulaid customers in the KwaZulu-Natal areas. The Developing Poultry Farmers Organization (DPFO) and the South African Poultry Association (SAPA) jointly work on strategies to empower the emerging poultry farmers. Heidel Eggs in White River a town in the Mpumalanga province, is a 100% black-owned enterprise under the Nkosana 145 Trust. It was in 2001 when the then managers and workers of Heidel Eggs started negotiating the possible purchase of the farm from the then owner, Jan Wilkens. The number of beneficiaries in the trust initially amounted to 241 and the trustees were made up of persons elected by the employees of Heidel Eggs. The new directors are also the trustees of the trust. The new broad based black economic empowerment project is under the general management of Mark Gouws. The funds for the purchase price were raised through a combination of Department of Land Affairs (DLA s) Land Redistribution for Agricultural Development (LRAD) grant and a loan from Land Bank that was later taken over by Standard Bank. It also has operations in Mozambique and Swaziland. (Makou, undated) In 2005 Afgri financed one of the biggest BEE transactions in the egg industry by buying the second biggest egg distributor, Eggbert eggs farm near Boksburg for R 22 million for staff and management. El-Azaar poultry farm in Kroonstad (Free State) mentors two projects in Brandfort namely: a. Brandfort Poultry in the Free State province received R 700 000 in 2008 from Masilonyana Municipality through its Local Economic Development Programme. These funds were enough to construct the necessary infrastructure. Started off with 5 200 layers. b. Waya Waya Poultry in Brandfort, Free State province; was allocated a grant to the amount of R 566 500 from the Provincial Department of agriculture in Free State (PDA: FS CPS-SP funding programme) in collaboration with the European Union. They furthermore received an amount of R 318 000 from the Department's CASP funding programme. Started off with 5 200 layers. Their marketing agreement is that the buyer (El-Azaar poultry farm) will buy all the eggs produced at a predetermined price for 5 years (until 2013). The projects have the option to renew the contract after four years. The buyer supplies all packaging material and feed. 11. BARRIERS TO ENTRY New entrants are free to enter, the only limitation being the availability of laying flock, capital and expertise. Grading, packaging, transportation and bar coding of the eggs hinders formal market access of emerging egg producers to the commercial sector. Accessing finance or working capital to procure stock and cover overhead costs is a barrier. 23

The major supermarket chains require formalized distribution channels with the ability to supply regionally and nationally. Majority of the emerging farmers sell their eggs to hawkers and directly to the consumers. Direct marketing includes the following methods of selling: Sales from farm gate (farm gate) Door-to-door sales Sales to local retail shops 12. OPPORTUNITIES The huge demand for live-birds in South Africa is a lucrative business. Majority of egg producers sell their spent hens. This adds to the income generated by egg producers/farmers. Currently the rooster chicks are useless in the commercial egg industry. An opportunity exists to raise these chicks and sell them as live chickens together with spent hens. This will alleviate the current shortage of chicks in the broiler business. 13. MARKET INTELLIGENCE This chapter concerns tariffs and non tariff barriers. 13.1. Export tariffs Tariffs protect the domestic industries by increasing the price of imported eggs compared to domestic eggs, thereby giving domestic producers a relative price advantage. Tariffs that different importing countries apply to eggs originating from South Africa are shown in Tables 10 and 11. Table 10: Export tariffs of shelled eggs Country Angola Mozambique Zimbabwe Namibia Swaziland Product Code 04070010 and 04070090 Trade Regime Description MFN duties Applied 04070010 MFN duties Applied Preferential tariff for SA 04070090 MFN duties Applied Preferential tariff for SA 04070000 MFN duties Applied 04071110; Intra SACU 04071190; rate 2013 2014 Applied Total Ad Valorem Applied Total Ad Tariffs Equivalent Tariff Tariffs Valorem Equivalent Tariff 15.00% 15.00% 15.00% 15.00% 2.50% 2.50% 2.50% 2.50% 0.00% 0.00% 0.00% 0.00% 20.00% 20.00% 20.00% 20.00% 15.00% 15.00% 15.00% 15.00% 40.00% 40.00% 40.00% 40.00% 0% 0% 0% 0% 24

Country Product Code Lesotho 04071910; 04071990; 04072110; 04072190; 04072910; 04072990; 04079010 and 04079020 Trade Regime Description 2013 2014 Applied Total Ad Valorem Applied Tariffs Equivalent Tariff Tariffs Total Ad Valorem Equivalent Tariff Source: MacMap Table 10 shows that South African exports of shelled eggs received a preferential tariff from Mozambique of 0.00% on HS 04070010 and 15% on HS code 04070090 during 2013 and remained the same in 2014. Zimbabwe applied the highest MFN duties of 40%, this means that Zimbabwean egg market is highly protected compared to other importing countries. Angola applied a MFN tariff of 15% on HS code 04070010 and 04070090. Namibia, Swaziland and Lesotho applied 0% of Intra SACU rate for the product code above mentioned. Table 11: Export tariffs of dried eggs Country Angola Mozambique Namibia and Lesotho Product Code 04081100; 04081900; 04089100 and 04089900 04081100; 04081900; 04089100 and 04089900 04081100; 04081900; 04089100 and 04089900 04081100; 04081900; 04089100 and 04089900 Trade Regime Description MFN duties Applied MFN duties Applied Preferential tariff for SA Intra rate SACU 2013 2014 Applied Total Ad Applied Total Ad Tariffs Valorem Tariffs Valorem Equivalent Tariff Equivalent Tariff 15.00% 15.00% 10.00% 10.00% 20.00% 20.00% 20.00% 20.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Uganda 04081100; MFN duties 25.00% 25.00% 25.00% 25.00% 25

Country Source: MacMap Product Code 04081900; 04089100 and 04089900 Trade Regime Description Applied 2013 2014 Applied Tariffs Total Ad Valorem Equivalent Tariff Applied Tariffs Total Ad Valorem Equivalent Tariff Table 11 shows that South Africa received a preferential tariff 0.00% on HS codes 04081100; 04081900; 04089100 and 0408990 during 2013 and 2014 from Mozambique. Namibia and Lesotho also applied 0% of Intra SACU rate. Uganda applied the highest MFN duties of 25.00% in 2013 and 2014 for the HS codes 04081100; 04081900, 04089100 and 04089900 and Angola applied MFN duties of 15% on the same HS codes during the same period. 13.2. NON TARIFF BARRIERS (NTB s) Non-tariff barriers (NTB) take the form of strict sanitary and phytosanitary measures or adherence to stringent, certification measures such as 1SO 9000 certification. These measures span a product s lifecycle: the raw material a product is made from, the manner the product is fabricated, the management of production process, labeling standards and packaging requirements. Developed countries argue that NTBs are applied to eggs to ensure that imported products satisfy environmental, consumer health, consumer safety and social concerns. The following discussion about NTBs deals with the EU s standards. The reason for this approach is that the EU is the largest importer of eggs and it is considered to apply stringent NTB s to imported eggs. Therefore by implication if an exporter can satisfy the EU s regulation; his/her product is of the mandated standard to potentially satisfy other countries NTBs. NTBs on eggs and egg products with special guarantees are listed under Section X of Regulation (EC) No 853/2004 from chapter I to III. 13.2.1. CHAPTER I: EGGS At the producer s premises, and until sale to the consumer, eggs must be kept clean, dry, free of extraneous odour, effectively protected from shocks and out of direct sunshine. Eggs must be stored and transported at a temperature, preferably constant, that is best suited to assure optimal conservation of their hygiene properties. Eggs must be delivered to the consumer within a maximum time limit of 21 days of laying. 13.2.2. CHAPTER II: EGG PRODUCTS A. REQUIREMENTS FOR ESTABLISHMENTS Food business operators must ensure that establishments for the manufacture of egg products are constructed, laid out and equipped so as to ensure separation of the following operations: Washing, drying and disinfecting dirty eggs were carried out; 26

Breaking eggs, collecting their contents and removing parts of shells and membranes; and Operations other than those referred to in the above two points. B. RAW MATERIALS FOR THE MANUFACTURE OF EGG PRODUCTS Food business operators must ensure that raw materials used to manufacture egg products comply with the following requirements: The shells of eggs used in the manufacture of egg products must be fully developed and contain no breaks. However, cracked eggs may be used for the manufacture of egg products if the establishment of production or a packing centre delivers them directly to a processing establishment, where they must be broken as soon as possible. Liquid egg obtained in an establishment approved for that purpose may be used as raw material. Liquid egg must be obtained in accordance with the requirements of points 1, 2, 3, 4 and 7 of Part III below. C. SPECIAL HYGIENE REQUIREMENTS FOR THE MANUFACTURE OF EGG PRODUCTS Food business operators must ensure that all operations are carried out in such a way as to avoid any contamination during production, handling and storage of egg products, in particular by ensuring compliance with the following requirements: Eggs must not be broken unless they are clean and dry. Eggs must be broken in a manner that minimizes contamination, in particular by ensuring adequate separation from other operations. Cracked eggs must be processed as soon as possible. Eggs other than those of hens, turkeys or guinea fowl must be handled and processed separately. All equipment must be cleaned and disinfected before processing of hens, turkeys and guinea fowls eggs is resumed. Egg contents may not be obtained by the centrifuging or crushing of eggs, nor may centrifuge be used to obtain the remains of egg whites from empty shells for human consumption. After breaking, each particle of the egg product must undergo processing as quickly as possible to eliminate microbiological hazards or to reduce them to an acceptable level. A batch that has been insufficiently processed may immediately undergo processing again in the same establishment, if this processing renders it fit for human consumption. When a batch is found to be unfit for human consumption, it must be denatured so as to ensure that it is not used for human consumption. Processing is not required for egg white intended for the manufacture of dried or crystallized albumin destined subsequently to undergo heat treatment. If processing is not carried out immediately after breaking, liquid egg must be stored either frozen or at a temperature of not more than 4 C. The storage period before processing at 4 C must not exceed 48 hours. However, these requirements do not apply to products to be de-sugared, if desugaring process is performed as soon as possible. Products that have not been stabilized so as to be kept at room temperature must be cooled to not more than 4 C. Products for freezing must be frozen immediately after processing. D. ANALYTICAL SPECIFICATIONS 27

The concentration of 3-OH-butyric acid must not exceed 10 mg/kg in the dry matter of the unmodified egg product. The lactic acid content of raw material used to manufacture egg products must not exceed 1g/kg of dry matter. However, for fermented products, this value must be the one recorded before the fermentation process. The quantity of egg shell remains, egg membranes and any other particles in the processed egg product must not exceed 100 mg/kg of egg product. E. LABELLING AND IDENTIFICATION MARKING In addition to the general requirements for identification marking, consignments of egg products, destined not for retail but for use as an ingredient in the manufacture of another product must have a label giving the temperature at which the egg products must be maintained and the period during which conservation may thus be assured. In the case of liquid eggs, the label referred to above must also bear the words: non-pasteurized egg products, to be treated at place of destination and indicate the date and hour of breaking. 13.2.3. CHAPTER III: SPECIAL GUARANTEES a. In the case of eggs, packing centers shall provide a guarantee that consignments originate from flocks that have been subjected to a microbiological test with negative results in accordance with legislation. b. The test provided for in subparagraph (a), need not be carried out for consignments intended for the manufacture of processed products by a process that guarantees the elimination of salmonella. c. A certificate stating that the tests referred to in subparagraph (a) have been carried out with negative results, or that the eggs are destined to be used in the manner referred to in subparagraph (b), must accompany consignments. 13.3. Import tariffs Tariffs that different South Africa applies to eggs originating from possible countries are shown in Table 1 and 13. Table 12: Import tariffs of eggs in a shell Country Product Code Trade Regime Description Germany and Lesotho 04071110; 04071190; 04071910; 04071990; 04072110; 04072910; 04072990; 04079010; MFN duties Applied Intra SACU 2013 2014 Applied Total Ad Tariffs 0.00% 0.00% Valorem Equivalent Tariff 0.00% 0.00% Applied Tariffs 0.00% 0.00% Total Ad Valorem Equivalent Tariff 0.00% 0.00% 28

Country Product Code Trade Regime Description Source: MacMap 04079020 and 04079090 rate 2013 2014 Applied Total Ad Tariffs Valorem Equivalent Tariff Applied Tariffs Total Ad Valorem Equivalent Tariff Table 12 shows that imports of shelled eggs in South Africa are duty free from all possible countries during 2013 and 2014. From Germany and Lesotho, MFN duties Applied and Intra SACU rate were applied by South Africa. Table 13: Import tariffs of dried eggs Country Netherlands, Denmark, France and Italy Source: MacMap Product HS Code 0408112000; 0408192000; 0408912000 and 0408992000 0408118000; 0408198100; 0408198900; 0408918000 and 0408998000 Trade Regime Descriptio n MFN duties Applied Preferential tariff for European Union countries 2013 2014 Applied Total Ad Tariffs OQTR: 19.00% IQTR : 3.80% Valorem Equivalent Tariff OQTR: 19.00% IQTR : 3.80% Applied Tariffs OQTR: 19.00% IQTR : 3.80% 0.00% 0.00% 0.00% 0.00% Total Ad Valorem Equivalent Tariff OQTR: 19.00% IQTR : 3.80% Table 13 shows that South Africa has applied the preferential tariff for European Union countries of 0.00% for HS codes 0408118000; 0408198100; 0408198900; 0408918000 and 0408998000 in 2011. For the HS codes 0408112000, 0408192000, 0408912000 and 0408992000, South Africa applied MFN duties of OQTR: 19.00% IQTR: 3.80% for the year 2013 and 2014. Table 14: Imports of eggs under Marrakesh Agreement TARIFF DESCRIPTION HEADING EXTENT OF REBATE ANNUAL QUOTA TONNAGE CONDITIONS FOR THE ISSUING OF PERMITS 29

TARIFF HEADING DESCRIPTION 04.08 Birds Eggs, Not in Shell, and Egg Yolks, Dried, Cooked by Steaming or by Boiling in Water, Moulded, Frozen or Otherwise Preserved, Whether or Not Containing Added Sugar or Other Sweetening Matter EXTENT OF REBATE Full duty less 3.8% ANNUAL QUOTA TONNAGE CONDITIONS FOR THE ISSUING OF PERMITS 9 000 In addition to the conditions stipulated in Item 2 of the Schedule, the following conditions must be complied with: (a) Permits will be issued on a quarterly basis and will be valid for four months. (b) The quota will be allocated on a ratio basis of 50% for shelled eggs and 50% for liquid eggs and powdered eggs. (c) Bona fide egg producers will be eligible for shelled eggs, while historical importers, wholesalers, processors and distributors will be eligible for liquid/frozen and powdered egg products. (d) Applicants must compare the extent of rebate with the applied rate of duty to determine the most beneficial rate of duty. Source: Government Gazette Notice 1125 of 2008 30

14. COMPETITIVENESS OF THE EGG INDUSTRY 14.1. COMPETITIVENESS OF EGG IDUSTRY EXPORTS Table 15: List of importing markets for shelled eggs (HS 0407) exported by South Africa in 2015 Importers Trade Indicators Exported value 2015 (USD thousand) Trade balance 2015 (USD thousand) Share in South Africa's exports (%) Exported quantity 2015 Quantity unit Unit value (USD/unit) Exported growth in value between 2011-2015 (%, p.a.) Exported growth in quantity between 2011-2015 (%, p.a.) Exported growth in value between 2014-2015 (%, p.a.) Ranking of partner countries in world imports Share of partner countries in world imports (%) Total import growth in value of partner countries between 2011-2015 (%, p.a.) Tariff (estimated) faced by South Africa (%) World 35723 35702 100 17979 Tons 1987 20 34 12 100 5 Mozambique 14331 14331 40.1 9792 Tons 1464 30 54 7 58 0.2 1 7.5 Zimbabwe 8710 8710 24.4 2355 Tons 3699 109 89 30 51 0.2 62 Swaziland 5094 5094 14.3 1665 Tons 3059-2 12 45 68 0.1-2 0 Angola 3198 3198 9 1811 Tons 1766 42 47 15 43 0.4-28 18.8 Namibia 951 951 2.7 760 Tons 1251-14 -7-34 123 0-14 0 Lesotho 877 865 2.5 747 Tons 1174-6 9-30 125 0-6 0 Botswana 627 627 1.8 303 Tons 2069-38 -29 118 124 0-37 0 Côte d'ivoire 354 354 1 68 Tons 5206 108 0 62 23 Philippines 311 311 0.9 207 Tons 1502 7 Nigeria 231 231 0.6 43 Tons 5372 57 90-87 72 0.1 6 23 Area Nes 172 171 0.5 112 Tons 1536 Cameroon 162 162 0.5 25 Tons 6480 1700 119 0 14 20 Tanzania 149 149 0.4 30 Tons 4967 65 64-63 149 0-43 0 Source: ITC calculations based on COMTRADE statistics. 31

South Africa s exports represent 0.92% of world exports for shelled eggs; its ranking in world exports is 20. Table 15 shows that during 2015 South Africa exported a total of 17 979 tons of shelled eggs at an average value of US$ 1987/unit. South Africa exported greater quantities of shelled eggs to Mozambique, Angola, Swaziland and Zimbabwe. The greatest shares of South African shelled eggs exports were destined to Mozambique which commanded 40.1% share during the year 2015 followed at a distance by Zimbabwe with 24.4% share and Swaziland by 14.3% share. South African shelled eggs export to the world increased by 20% in value and 34% in quantity per annum between the periods 2011 and 2015. During the same period, exports value and quantity of shelled eggs to Mozambique increased by 30% and 54% respectively. Exports of shelled eggs from South Africa increased by 12% in value between 2014 and 2015. At the same period the value of shelled eggs exports to Mozambique increased by 7%. 32

Figure 25: Growth in demand for eggs in shell exported by South Africa in 2015 Source: Trademap, ITC 33

Figure 25 illustrates that between 2011 and 2015 South Africa s shelled eggs exports to Kenya, Swaziland and Namibia were growing at a rate that is less than their imports from the rest of the world. During the same period, South Africa s shelled eggs exports to Angola, Mozambique, Zimbabwe, Tanzania, Nigeria and Congo were growing at a rate that is greater than their imports from the rest of the world. Further analysis indicate that of Zimbabwe is a small market with a world share of 0.2% but it has the most growing demand with an annual import growth of 62% and South African exports to Zimbabwe increased by 109% per annum during the periods 2011 and 2015. 34

Figure 26: Prospects for market diversification for eggs in shell exported by South Africa in 2015 Source: Trademap, ITC 35

Figure 26 shows the prospects for market diversification for shelled egg exports by South Africa during 2015. The figure indicates that Mozambique commanded 40.12% of South Africa s shelled egg exports in 2015. Mozambique s imports growth has also increased by 12% during the period under review. If South Africa wishes to diversify its shelled eggs export, the fastest growing markets exist in Cote d Ivoire and Zambia. Their annual imports growth is 62% each during 2015. South Africa can concentrate in increasing Zimbabwe market because SA has the market access already and also Cote d Ivoire because it s imports from the world is more than its imports from South Africa. 36

Table 16: List of importing markets for dried eggs (0408) exported by South Africa in 2015 Importers Trade Indicators Exported value 2015 (USD thousand) Trade balance 2015 (USD thousand) Share in South Africa's exports (%) Exported quantity 2015 Quantity unit Unit value (USD/unit) Exported growth in value between 2011-2015 (%, p.a.) Exported growth in quantity between 2011-2015 (%, p.a.) Exported growth in value between 2014-2015 (%, p.a.) Ranking of partner countries in world imports Share of partner countries in world imports (%) Total import growth in value of partner countries between 2011-2015 (%, p.a.) Tariff (estimated) faced by South Africa (%) World 2321 1713 100 1227 Tons 1892-7 -10-58 100 1 Mozambique 2033 2033 87.6 1066 Tons 1907 0 0 27 104 0 96 0 Lesotho 133 133 5.7 100 Tons 1330 2 13-4 101 0 2 0 Namibia 50 50 2.2 24 Tons 2083-48 -47-92 118 0-48 0 Philippines 47 47 2 30 Tons 1567 34 0.4-4 3 Angola 46 46 2 3 Tons 15333-26 -53-99 94 0 0 16.9 Nigeria 10 10 0.4 2 Tons 5000 61 0.1 74 20 Botswana 1 1 0 0 Tons -80 164 0-77 0 DRC 1 1 0 0 Tons 158 0-47 10 Zambia 1 1 0 0 Tons 159 0 0 Belgium 5 5.3-2 0 Germany 2 13.1-6 0 Source: ITC calculations based on COMTRADE statistics. 37

South Africa s exports represent 0.26% of world exports for dried eggs; its ranking in world exports is 30. Table 16 shows that during 2015 South Africa exported a total of 1 227 tons of dried eggs at an average value of US$1 892/unit. The greatest share was exported to Mozambique which commanded 87.6% followed by Lesotho and Namibia at 5.7 and 2.2% respectively. South African dried eggs export to the world decreased by 7% and 10% in value and quantity respectively between the periods 2011 and 2015. Exports of dried eggs from South Africa decreased by 58% in value between 2014 and 2015. During the same period exports of dried eggs to Mozambique increased by 27% and exports to Lesotho and Namibia decreased by 4% and 92% respectively. 38

Figure 27: Growth in demand for dried eggs exported by South Africa in 2015 Source: Trademap, ITC 39

Figure 27 above shows the growth in demand for dried eggs exports by South Africa in 2015. This figure illustrates that between 2011 and 2015 South Africa s dried eggs exports to Botswana, Namibia, Angola and Lesotho were growing at a rate that is less than their imports from the rest of the world. Botswana, Namibia and Angola are showing to be declining markets for this period. Further analysis indicate that of Mozambique is a largest market with a world share of 0% but it has the most growing demand with an annual import growth of 96% during the periods 2011 and 2015. The second growing demands exist in Lesotho with its annual import growth of 2% 40

Figure 28: Prospects for market diversification for dried egg exported by South Africa in 2015 41

Source: Trademap, ITC 42