Government failures in water and electricity starting to cost companies
|Published
Eskom and Load shedding... An early morning picture taken at Matla Power Station in Mpumalanga Province. Picture: Dumisani Sibeko
The unprecedented load shedding since January 2022 and rapidly deteriorating water infrastructure, have made it difficult for business to operate in South Africa, says Astral chairman Theuns Eloff, accusing the government of failing in its duty to provide basic services to meet the needs of its people
“It is difficult to remain positive and it is widely acknowledged that drastic political change is needed,” the CEO of South Africa’s biggest integrated poultry producer said in the latest annual report. Astral processes some 5.8 million broilers per week, has 8 feed mills, does poultry production at 178 sites and employs 12 417 people.
Eloff said the outlook for the coming financial year, “is less positive with the financial health of the consumer set to deteriorate further, and raw material costs and other variable costs such as electricity and fuel, likely to remain high given the local and global challenges as well as business sentiment towards RSA Inc. becoming increasingly negative.”
“The failure of government to provide basic needs like electricity and water places immense pressures on companies and individuals. I am under no illusion that there is an easy or quick solution to these problems, but I do know that the government will have to address these issues as a matter of urgency to ensure the commercial survival of companies,” said Eloff.
He said the group maintained a resilient balance sheet, a strong focus on cash management and this, with a strategy of being the best low cost producer of protein, would continue to ensure that Astral remained the leading poultry producer in South Africa.
Astral reported only one incident of HPAI (avian influenza) at one of its breeding farms at the start of the year. According to the Department of Agriculture, Land Reform and Rural Development 32 HPAI cases were reported in total between October 1, 2021 and September 30, 2022.
”As HPAI poses a significant threat to the South African poultry industry, SAPA (South Africa Poultry Association) continues to urge poultry farmers to be vigilant
“The outbreak of HPAI , the sustained high cost of raw materials, load shedding and water supply constraints, as well as the continued unregulated import of poultry products,had all placed severe strain on Astral’s operations, and considering these risk related risk-related matters, the results for the year ended September 30 are remarkable, said Eloff.
CEO Chris Schutte said the 103% year-on-year increase in the operating profit in the past year was driven by an increase in poultry sales volumes and higher poultry selling prices.
The group benefited from economies of scale following the expansion of its poultry processing capacity, and new production volumes assisted in reducing the fixed cost base of production, and created growth in profitable product categories.
In addition, the higher input costs were recovered through the increases in the selling price for poultry, which led to some margin improvement in the broiler operations.
“This growth must be seen in context of the low base in the comparative year, as well as the fact that the group’s net operating margin is still below its long-term average. We are however pleased with the performance during the year under trying conditions,” said Schutte.
BUSINESS REPORT