Non-Confidential SWAZILAND COMPETITION COMMISSION BROILER CHICKENS MARKET INQUIRY Market Inquiry case number: CPR/BROILERS/14 DATE – January 2019 Status of Report: Non-Confidential Draft Report Non-Confidential CONTENTS ACRONYMS ............................................................................................................................................ 3 EXECUTIVE SUMMARY ....................................................................................................... 4 1. INTRODUCTION ........................................................................................................... 14 3. OVERVIEW OF THE BROILER PRODUCTION ..................................................... 15 Value Chain ........................................................................................................................................... 17 3. RELEVANT LEGISLATIONS FOR THE BROILER CHICKEN MARKET ............. 18 National Food Security Policy for Swaziland ............................................................................... 18 Swaziland Customs and Excise Act ............................................................................................... 18 Scheduled Products Policy .............................................................................................................. 18 Trading Licence – Ministry of Commerce, Industry and Trade ............................................... 20 4. THE MARKET FOR THE SUPPLY OF DAY OLD CHICKS .................................. 22 Market Definition ................................................................................................................................. 22 Product Description............................................................................................................................ 22 Business Process ............................................................................................................................... 22 Substitutability ..................................................................................................................................... 24 Geographic Market ............................................................................................................................. 25 Relevant Market ................................................................................................................................... 25 Market Structure .................................................................................................................................. 25 Cost Structure ...................................................................................................................................... 28 Entry and Exit Barriers ...................................................................................................................... 29 Price Determination and Transmission ......................................................................................... 30 Countervailing Buyer Power ............................................................................................................ 31 Import Competition ............................................................................................................................. 31 Exiting independent growers in the broiler growing market ................................................... 31 Conclusions, competition/general concerns and recommendations ................................... 32 5. BROILER CHICKEN GROWING MARKET ............................................................. 34 Market Definition ................................................................................................................................. 34 Product description ............................................................................................................................ 34 Business process ............................................................................................................................... 34 Substitutability ..................................................................................................................................... 37 Relevant Market ................................................................................................................................... 38 Market Structure .................................................................................................................................. 38 Entry and Exit Barriers ...................................................................................................................... 41 Price Determination and Transmission ......................................................................................... 42 Existing Contractual Arrangements ............................................................................................... 43 Countervailing Buyer Power ............................................................................................................ 48 Import Competition ............................................................................................................................. 48 Conclusions, competition/general concerns and recommendations ................................... 48 1 Non-Confidential 6. SLAUGHTERING AND PROCESSING MARKET .................................................. 52 Market Definition ................................................................................................................................. 52 Product description ............................................................................................................................ 52 Business Process ............................................................................................................................... 52 Substitutability ..................................................................................................................................... 55 Geographic Market ............................................................................................................................. 56 Relevant Market ................................................................................................................................... 56 Market Structure .................................................................................................................................. 56 Entry and Exit Barriers ...................................................................................................................... 59 Price Determination and Transmission ......................................................................................... 60 Contracts between processors, wholesalers and retailers ...................................................... 61 Countervailing Buyer Power ............................................................................................................ 62 Import Competition ............................................................................................................................. 62 Conclusion, competition/general concerns and recommendations...................................... 63 7. DISTRIBUTION MARKET ........................................................................................... 65 Market definition .................................................................................................................................. 65 Product description ............................................................................................................................ 65 Business Process ............................................................................................................................... 65 Substitutability ..................................................................................................................................... 67 Geographical Market .......................................................................................................................... 68 Relevant Market ................................................................................................................................... 68 Market structure .................................................................................................................................. 68 Price Determination and Transmission ......................................................................................... 70 Integrated Ownership and its Effects ............................................................................................ 70 Entry and exit barriers ....................................................................................................................... 72 Countervailing buyer power ............................................................................................................. 73 Import competition.............................................................................................................................. 73 Conclusions, competition/general concerns and recommendations ................................... 74 8. CONCLUSIONS, COMPETITION/GENERAL CONCERNS AND RECOMMENDATIONS ....................................................................................................... 76 9. APPENDICES ................................................................................................................ 83 Appendix 9.1: Shares within Kikilikigi ..........................................................................................