Investors Guide Poultry in Investors Guide on Poultry in Zambia

Foreword

As a strategy to contribute to Companies seeking the different asing poultry feed ingredient of improved investment and compe- investment opportunities. and . titiveness of the Zambian poultry Notwithstanding lack of data on For more information, you can industry, the Embassy of the King- Zambia’s poultry imports and visit http://zimbabwe.nlembassy. dom of the Netherlands in Harare exports, the market study esta- org/key-topics/trade-information/ in conjunction with AgriProFocus blished that the Zambia poultry doing-business-in-zambia.html . Zambia and the Poultry Associ- has been growing steadily for the ation of Zambia commissioned past five years averaging around 8 The full market study on the a market study on investment % and 20% for broilers and layers Investment Opportunities in the opportunities to inform the Dutch annual production respectively. Poultry Sector in Zambia can be businesses that have interest in The rapid poultry production accessed on the AgriProFocus investing in the Zambian poultry increase is attributed to a num- Zambia website: www.agriprofo- industry. ber of factors such as national cus.com/zambia population increase, disposable In the poultry sector lie different income rise buoyed by growing investment opportunities. This middle income class, investment guide highlights these opportu- in poultry breeding, production nities, the costs of investments, and processing as well as incre- expected returns and the Poultry

2 Investors Guide on Poultry in Zambia Overview Zambia

Zambia has had a long period of all growth rate of Sub-Saharan political stability. Independent Africa. However, in 2015 it felt the since 1964, Zambia has experi- pinch of reduced export earnings, enced five successful multiparty due to large drops in commodity elections since the return to prices and slowdown of Chine- multiparty politics in 1991. With se economy, resulting in a GDP strong growth in the last decade growth rate of 5%. This is thought the country has reached lower to go back to 6-7% growth when middle income status1. commodity prices start to stabi- lize. Investor confidence has been high and Zambia’s economy has been Even though agriculture only ac- growing rapidly due to expansion counts for 8.6% of total GDP, the of copper mining industry, gover- agricultural sector employs 60% nment investment in infrastructu- of total labour force. Of the total re, and expanding private sector agricultural sector 48% is related investment in construction and to the livestock. services and agricultural diver- sification. Zambia’s GDP grew at an average annual rate of 6.4% Government Type: Republic between 2010 and 2014, which was more than the average over- Population: 15.47 million

1 Worldbank.org Capital: Lusaka Language: English Currency: Zambian Kwacha (1US$ = ZK11.4) Average GDP growth rate: 6.4% (2010-2014) GDP per capita (PPP): $4.300 Population below poverty line: 62% Arable land: 31,7% Member of: SADC and COMESA Main industries: Mining, agriculture, tourism and manufac turing Agricultural Products: Maize, Cotton, Wheat, Soya – Livestock: catt le, pigs, goats and poultry

3 Investors Guide on Poultry in Zambia The Poultry Sub-Sector

In 2005/07 poultry, after production and processing is the most consumed meat in propelled by the introduction of Africa, at 2.9 million tonnes. By modern technology. The poultry 2050 consumption of both meats industry anchors on the small and is estimated to increase. with medium enterprises that operate the total market size for poultry 60% of poultry production farms. reaching 11.8 million tonnes. In However, these small farmers lack 2050, the egg market is estimated investments to increase and mo- at 5.9 million tonnes. Consump- dernize their production as well tion of all livestock products is as value addition. anticipated to grow rapidly in the coming decades, with annual growth rates estimated at 3.3 BROILERS percent for poultry. Out of the five African regions, the Southern Average Broiler live weight 1.8 kg Africa (SADC) market is expected Average Broiler Dressed weight 1.2 kg to remain to have the largest for poultry market share at 29.8%. Consumption per capital 4.8kg/year For eggs, SADC market share is % of live Broilers sold 80% expected to be at 19%, just after Total Broiler Production in 2015 79,000,000 Western Africa2. Large potential Market price of broilers USD 4 - 4.7/bird thus for the poultry sector, also Market price for frozen chickens USD 2.3 - 2.6/kg for Zambia. The Poultry Association of Zambia Average Cost of production USD 3.4/bird (PAZ) 2014 annual report reveals Estimated availability for export 18,500,00/kg that the poultry sector provides direct and indirect employment to 80,000 people with 50,000 in permanent jobs and 30,000 sea- EGGS sonal employees. This report fu- rther records that poultry produc- Egg consumption/capita/year 66 eggs tion in 2014 reached over 1 billion Estimated total demand 864,600,000 eggs and 73 million broilers. The poultry industry has been con- Total Annual Production 1,100,000,000 sistently growing since 2000 at Estimated availability for export 235,400,000 annual rates of 8% and 10% for Total Annual Consumption 1,000,000,000 broilers and layers respectively. This phenomenal growth is attri- buted to the demand and supply side factors. The demand factors FEED include; increasing human popu- lation, rising disposable income Total National Poultry Feed Production 320,000 MT consolidated by the expanding Consumption by Broilers 259,000 MT middle income class, and rapid urbanization with higher taste Consumption by layers 162,000 MT for chicken meat. The supply Cost of Broiler Feed USD 459/t side factors are the tremendous Cost of Layer Feed USD 405/t advances in poultry breeding, Cost of Maize USD 180/t Cost of Soybeans USD 310/t 2 Investing in African Livestock: business opportunities 2030-2050 (FAO, March 2013) 4 Investors Guide on Poultry in Zambia

Value Chain Actors Input suppliers The major supplier of inputs is Africa. Many corporate compa- producers, small scale farms must Livestock Services, which runs nies are interested in further ver- optimize their production in a one-stop-shop for inputs and tical integration of their poultry terms of feed efficiency to lower feed. It also offers training. Most businesses. Next to expanding production costs. They can form suppliers source their imports their production capacities (e.g. production clusters to reap bene- from South Africa. Zambia main- Feed production, broiler and egg fits accruing from scale. Small and tains a ban on imports of parent production), they are interested medium scale farms offer most stock. This has created a captive in investing in other activities like scope for improvement. They use market for the 8 locally establis- production of day old chicks, and simple manual equipment, small hed largest breeding companies. slaughtering and further proces- amounts of feed additives, drugs Zambia allows importation of sing of broilers. and vaccines and do purchase feed ingredients and premixes. small amounts day-old chicks. Medium/Small poultry far- These inputs are purchased from Corporate firms mers local suppliers. This group is dominated by a There are about 1.1 million small handful of integrated companies and medium poultry farmers in Feed millers namely; Zambeef (Novatek), Zambia and medium and 0.1 com- There are seven major feed Zamchick, Eureka chicken, Olym- mercial farmers. Small and medi- millers in Zambia who produce pic Stock Feeds, Nam Feeds, um poultry farmers produce the about 320,000 MT poultry feed Hybrid Poultry, Ross Breeders, bulk of the poultry meat and eggs per year. These feed millers are: Tiger Chicks, Copper Belt chickens in Zambia. Poultry is kept in sim- NamFeeds, Choma Milling, Pem- and Golden Lay. They import ple, open houses. Manual feeding be Milling, Tiger Animal Feeds, their inputs from South Africa. In is employed. Simple water bowls Novatek (Zambeef), Nutrifeeds, recent years, there has been mini- are used while heating is under- Olympic Stock Feed. Most of mal entry into this segment save taken through wood or charcoal. these compound feed suppliers notable developments like the Some small farms produce maize have their own poultry producti- newly created venture between and soy for stock feed. To re- on facilities (like day-old chicks) as Zambeef and Rainbow of South ach the pace set by large scale well, except for Choma milling. 5 Investors Guide on Poultry in Zambia

The millers use maize and soy- system include retailers, hotels Competition: beans produced by local farmers and lodges. • Threat of cheap illegally (or their own farms) and pre- Table eggs in Zambia are sold imported poultry products mixes imported largely from through formal and informal entering the domestic market South Africa. Maize is produced markets. Formal markets com- • Chain stores mounting pres- by small scale and commerci- prise chain retail outlets such as sure on government to allow al farmers and but small scale Shoprite, Spar, Pick n Pay, as well import of frozen chickens IQF farmers produce about 80% of as supermarkets like Melisa in • Competition from rival firms the country’s total yield. For Lusaka. Informal markets include from South Africa the 2013/2014 farming season, open markets, roadside selling • Competition from increased around 3,350,600 MT of maize points, cross border selling points poultry imports to South was produced. is pro- such as Kasumbalesa border (DRC Africa e.g from US duced predominantly by com- border). Generally, table eggs mercial farmers who churn out are not graded accordingly egg about 139,000 metric tonnes per weight and sold per kind (mostly Government regulations and year. Zambia produces GMO-free per egg tray of 30 eggs). control maize and GMO-free soybeans. • Disease control and testing In 2015, droughts have affected Challenges in the Zambian charges, uncontrolled local the harvest volumes. In response, Poultry Sector government poultry levies the millers compete for maize and To keep up with the growing de- • Inadequate legislation to soy. mand for table eggs and poultry guide the growing industry’s meat the Zambian poultry sector conduct and development Wholesalers and importers players are continuously investing • High taxation for companies of poultry house equip- in up-grading their production that do not have investment ment/drugs and vaccines technologies/systems to invest licenses. An investment licen- Importers and wholesalers are in new production capacity. To se can be obtained and this Zambeef Products Ltd, Copper secure the further development would lower tax liabilities and belt Chickens Ltd, Country Choice of the Zambian poultry industry provide import incentives. Chicken, Crest Chicken, Eure- attention should be paid to the • Ban by local district councils ka Chickens, Zamchick. These following challenges. on backyard poultry rearing wholesalers do sell fresh slaugh- tered poultry carcasses, further High cost of production and processed poultry meat (like financing: drumsticks, chicken wings and • Zambia faces a power crisis chicken breast). Being member of that is not likely to improve fully integrated companies they or even worsen on the short do import most of the inputs, term. Therefore, there is a like slaughtering and processing strong dependency on alter- equipment, poultry housing native energy sources equipment, feed additives, poul- • High cost of labour (set mini- try drugs and vaccines) mum wage) • High interest rates >15% Traders and retailers The informal market is largely for small scale producers and invol- Knowledge: ves sale of live chickens, unpack- • Low level of extension servi- aged and ungraded eggs. This ces especially by government market system is predominantly extension staff found in local markets and by • Marketing of poultry pro- the roadside stalls in both urban ducts is a big challenge espe- and rural areas. The sale of live cially for small scale farmers birds is still a significant channel for broilers in Zambia taking up about 30 % of broiler meat (MAL, Input supply: 2013). The second type of market • Lack of inputs especially in ru- system is well developed, modern ral districts (feeds and poultry and dominated by a few but large drugs) producers that have the capacity • Low grade input materials to process their products. The • Inconsistent raw material main channels for this market supplies 6 Investors Guide on Poultry in Zambia

Investment Opportunities

Poultry Housing Equipment Feed Manufacturing Equip- It is generally recognized by ment use of high quality vaccines and poultry farmers that improving More small and medium sized drugs is essential. Currently most the poultry house climate is one poultry farmers are going to of the poultry drugs and vaccines of the most critical issues, in produce their own compound are imported order to improve the production feed by using their own feed efficiency. Installments of new ingredients, like maize, soya, sun- Poultry expertise technology to improve the living flower, wheat etc. To produce op- To meet the national demand of conditions of birds is therefore a timal balanced compound feeds, poultry products and to increase necessity they need high quality premixes the export to the neighboring This will require investments in and feed additives. Currently countries, the poultry sector has small/medium scale feed manu- most of the premixes and other to improve its efficiency. To achie- facturing equipment (Approx. 1 feed additives are imported. ve this, the Zambian poultry value – 3 tons/hr.), ventilation systems chain will need more professional, and climate control equipment, Hatching Equipment well trained poultry professionals. Non gas heating/brooding sys- With the poultry industry growing At this moment there is not a tems (solar heating), water supply and with the trend being obser- good professional poultry edu- systems, including water treat- ved that farmers start to organize cation infrastructure in Zambia. ment systems) themselves more (e.g clusters, Currently 65% of the 1.1m poultry cooperatives) interest has incre- farmers have limited access to Incentives schemes ased in own hatching equipment. specific knowledge on poultry. Dutch companies selling equip- As mentioned poultry farms are ment can use Atradius, the export generally small, therefor the Incentive schemes credit insurance agency to incre- capacity that is being asked for is Dutch training service providers ase the attractiveness of their about 10 – 20.000 day-old-chicks/ can use the Tailor Made Training offer. Atradius facilitates sales to wk. facility in conjunction with Zam- parties that might not have all the bian partners to offer customized money required to pay upfront Poultry Drugs and Vaccines training to Zambian poultry sector for required capital equipment To optimize the poultry produc- members. TMT is a Dutch govern- tion efficiency and to guarantee ment funded instrument. a healthy poultry production, the 7 Investors Guide on Poultry in Zambia Investment incentives and regulations to consider

Zambia being a member of both government such as to promote, the Southern African Develop- facilitate and enhance the par- ment Community (SADC) and ticipation of the private sector Common Markets for Eastern and in production, processing and Southern Africa (COMESA) trades marketing of quality livestock under these regional bodies of products. However, the Minister free trade area and promotion of of Agriculture and Livestock has economic integration. In addition, the power to impose import or an agreement was reached with export bans whenever deemed the East Africa Community (EAC) necessary forth benefit of domes- to collaborate with both COMESA tic producers and consumers. The and SADC to enhance economic poultry industry has been cited integration across these three re- as an infant industry in Zambia, gional economic groupings. Being hence, protectionist tendencies a member of the two regional have been advanced by major economic bodies, Zambia does stakeholders that have seen the not imposed tariff on poultry government impose a ban on products either imported into the importation of poultry products country or sold to other coun- such as broiler meat and table tries. egg.

Zambia maintains the following Zambia has signed bilateral trade agriculture incentives to spur sec- agreements with Angola and DR tor investment and growth: Congo. These agreements facili- • Zero rating agriculture tate market access for Zambian products and supplies when products. exported • Income Tax rate of 10% • Reduced Customs Duty at 5% on pre- mixes, being vitamin additives for • Farm improvement allowance at 100% on fencing, brick or stone wall and an allowance of K10,000.00 for farm occu- pied by farm workers • Property transfer tax rate on land sales of 5% • Customs duty is not levied on green houses and rose seedlings

The National Agricultural Policy (2004-2015) sets specific roles of

8 Investors Guide on Poultry in Zambia

Sources of further information

Extension Services Provi- Training Providers ders • MAL Agricultural Colleges Ministry of Agriculture and (NRDC, ZCA- Monze and Mpi- Livestock: The ministry has ka, Cooperative College departments for livestock (inclu- • University of Zambia ding poultry) and for veterinary • Mulungushi University services which are responsible • Faith-Based Training Institu- for providing extension servi- tions ( e.g. Chipembi Farm ces to farmers. The ministry is College) understaffed and operates on a tight budget which constrains its Training and extension activities provision of extension services for are offered by several institutes, the vast and spread out farming organizations and corporate areas. farms. They do offer very short (1-2 days) training programs. Livestock Services Co-operative Society (LSCS): Livestock Services Poultry industry - related is primarily an input supplier. In institutions addition, Livestock Services also Zambia National Farmers Union conducts outside and on-farm (ZNFU): A farmer organization training in poultry management. which existed already before Zambia’s independence in 1964. Chicks and Stock Feed producers: Its aim is to safeguard the interest Hybrid Poultry, Tiger Feeds, Na- of farmers. It provides farming tional Milling, Pembe Milling and information to farmers and advo- Novatek provide extension to the cates for better farming policies. clients of their products. It has commodity associations 9 Investors Guide on Poultry in Zambia

such as poultry (PAZ), dairy and ble taxes on products and servi- that they do not collude or charge cotton which focus on specific ces, imports and exports. It also high prices to exploit consumers. sub- sectors. advises potential tax payers on Big companies may form cartel to applicable taxes they should pay. charge uniform prices and there- Poultry Association of Zambia Foreign investors are also advised by exploit consumers. (PAZ): It was established in 2000 on what tax they are eligible to and advocates for conducive pay Financiers policies for poultry farmers. It Zanaco: Zambia National Com- also gathers critical poultry in- Ministry of Commerce, Trade and mercial Bank is a local bank formation e.g. prices and policies Industry: This ministry is respon- owned by the Zambian govern- which are disseminated to poultry sible for promotion of investment ment in partnership with Rabo- farmers and co corporate compa- and trade in Zambia. It also issues bank of Netherlands nies. export and import permits after relevant national standards or Stanbic: An international bank Transporters (road and rail line): sanitary and phytosanitary re- which is a subsidiary of Standard Transportation of poultry inputs quirements for goods have been Chartered Bank Ltd and products require efficient fulfilled by the applicants. The and reliable transport. Delivery of ministry has Zambia Development National Savings and Credit Bank: poultry feed due to its bulkiness Agency as its wing for conducting A local bank wholly owned by the requires appropriate transport. investment promotions with and Zambian government Eggs, day- old chicks, vaccines outside the country and drugs as well as dressed First national bank: A South Afri- broiler meat require refrigerated Zambia Bureau of Standards. This can international bank trucks to provide the right tempe- is a government institution under rature during transportation. the Ministry of Commerce Trade Madison Finance: A financial and Industry which is responsible institution belonging to Madison Import and Export Facilita- for checking commodities being group of companies. The holding tors/Regulators manufactured and imported into company is owned by a Zambian Zambia Development Agen- Zambia meet the set national entrepreneur. cy (ZDA): It is the government standards. Poultry feeds manu- agency which is responsible for factured in Zambia are checked Poultry Health Care investment promotion in Zambia. for quality and standards compli- • Ministry of Agriculture and It provides information on invest- ance Livestock ment opportunities available, • Livestock Services incentives offered and scrutinizes Competition and Consumer • VET 24 – A private company foreign investment offers Protection Commission: It is a supply livestock drugs and government institution which is vaccines Zambia Revenue Authority (ZRA): responsible for checking and pro- This government agency which is moting competition among pro- responsible for collecting applica- ducers and service providers so

10 Investors Guide on Poultry in Zambia

Useful websites Ministry of Agriculture http://www.agriculture.gov.zm Poultry Association of Zambia www.paoz.org Zambia National Farmers Union http://znfu.org.zm Livestock Services http://www.livestock.co.zm The Poultry Site www.thepoultrysite.com AgriProFocus Zambia http://agriprofocus.com/poultry-in-zambia

11 Contactdetails:

AgriProFocus Zambia P.O. Box 31771, Lusaka, Zambia

Telephone: + 260-211-255174/5/ E-mail: [email protected] www.agriprofocus.com/zambia