Beef Production Chain in South Africa at Commercial and Informal Levels

Studies on the developing and communal beef sector in South Africa, except for the Northern and Western Cape Provinces, show that raising beef cattle is the main livestock production enterprise in the sector. In the emerging and communal sectors, the average number of cattle herds was 19, compared to 413 in the commercial sector. In the communal sector, keeping cattle was primarily done for meat and money (47% of use). Only 10% of use was for milk production, and 4% was for draft power. The emerging sector is dominated by bland cattle, though the Nguni and Brahman breeds also play a significant role.
Research conducted by the Agricultural Research Council (ARC) in 2013 showed the following: “Eastern Cape boasts the highest concentrations of cattle, sheep, and goats (including Angoras) in the country (see the following Table). KwaZulu-Natal is second in beef cattle and Northern Cape is second in sheep. Proportionally the small-scale and communal sectors own 41% of the beef cattle, 12% of the sheep and 67% of the goats. Game species are farmed mostly in Limpopo and the Northern Cape. Pigs in the commercial sector are concentrated in North West, KwaZulu-Natal, and the Western Cape.

Estimated ruminant livestock numbers in South Africa (2013).

	Beef Cattle Commercial	Other	Dairy	Sheep Commercial	Other	Meat goats Commercial	Other	Game
Western Cape	219	232	323	2 380	336	62	152	34
Northern Cape	603	208	13	5 361	758	144	355	671
Eastern Cape	1 531	1 272	348	6 410	906	643	1 588	341
KwaZulu Natal	1 409	1 116	268	676	95	227	561	177
Free State	1 232	911	198	4 721	604	67	165	158
Mpumalanga	868	603	60	1 534	217	25	61	273
Limpopo	650	433	12	226	31	349	861	1 109
Gauteng	321	245	44	91	13	11	27	90
North West	1 035	713	102	612	86	202	498	198
Total	7 868	5 733	1 368	21 561	3 046	1 730	4 268	2 991
National Total		13 601	1 368	24 607		5 998		2 991

 

An overview of weighted herd sizes per province in both the emerging and communal sectors compared with the average for the commercial sector.

Province	Sample size (No)	1-25	26-50	51-100	101-150	> 150	Av herd size
Eastern Cape	173	75	8	11	5	1	28
Free State	33	91	3	3	3	0	14
Gauteng	13	54	8	23	15	0	40
KZN	316	93	6	1	0	0	12
Limpopo	398	92	6	2	0	0	13
Mpumalanga	113	74	16	6	2	2	24
Northern Cape	11	9	9	27	18	36	231
North West	120	74	16	5	2	1	22
Western Cape	13	69	23	8	0	0	19
Communal or  emerging	1 190
Commercial	90						413

Various reasons for keeping cattle in communal areas are given in this paragraph. The primary reason is for cash and meat, which together accounted for 47% of the total usage. Despite a lack of structured markets in many of the rural areas of South Africa, the informal beef market appears to thrive. The cultural and ceremonial aspects were also evident (13.3%).
The lack of banking facilities in the rural areas could be another reason why the communal farmers continue the tradition of keeping cattle as a form of investment (15.4%). The use of oxen for draft power was not popular, with a relative importance of only 4.1%. Dairy ranching as an option for milk production in this sector should receive attention, as the keeping of cattle for milk accounted for only 10.2% of the total use.

 

Smallholder Development Plan

About 15 000 smallholder farmers were targeted for the 2011/12 financial year. In addition to this, a Smallholder Development Plan was established to strengthen coordination with provinces regarding the support of the 15 000 smallholder farmers. Brand South Africa (2011) indicated the following: “For this CASP programme (Agriculture Support Program), a grant of over R1 billion has been allocated to the nine provinces, which will be paid out in tranches, depending on progress. By 2011 the provinces will have received the initial 10% of their allocation, which will be followed by a further 20% next month, and the remaining allocations in October and January 2012.”
According to Brand South Africa (2011), the Eastern Cape received R174.9 million, Free State R102.9 million, Gauteng R41.1 million, and KwaZulu-Natal R164.6 million funding.
Brand South Africa (2011) also indicated the following: “Limpopo received R154.3 million, Mpumalanga R102.9 million, Northern Cape R72.05 million, North West R133.8 million and the Western Cape R82.3 million. The Department of Agriculture, Forestry and Fisheries aims to establish 50 000 commercially oriented smallholder farmers focusing on homelands. The department will also establish these farmers where there is a large concentration of subsistence producers, including supporting smallholders on land acquired through land reform in partnership with the Department of Rural Development and Land Reform.

Stock Theft

Stock Theft (2013) indicated the following: “Stock theft stripped the economy of R430 million during the 2011/2012 period with goats to the value of R42 million, sheep to the value of R92 million and cattle to the value of R295 million stolen. This scourge threatens both the commercial farming sector as well as the emergent farming sector in most of the country. The increase in stock theft could be attributed to non-compliance by industry role-players, who do not ensure that livestock is properly identified. Livestock buyers, such as farmers, speculators, stock-auctions, feedlots and abattoirs, can be, or are unwitting, recipients of stolen livestock and are thereby transgressing the law and liable for a fine or prosecution.
The Animal Identification Act, (Act 6 of 2002), makes provision for the compulsory marking of livestock and the Stock Theft Act, (Act 57 of 1959) that controls the movement of livestock. Both these Acts have been put in place to support the industry and SAPS to combat stock theft and make it easier to recover stolen livestock. Research indicates that a large part of the livestock trade does not comply with the provisions of these Acts and does not comply with the basic requirements to prevent stock theft. The Red Meat Industry Forum encourages its member organizations to comply with the following Acts:

1. ANIMAL IDENTIFICATION ACT (Act No. 6 of 2002) – replaced the old Livestock Brands Act, 1962 (Act No. 87 of 1962).
2. APPLICATION OF THE ACT (Section 2).

 

Business Interactions in the Red Meat Industry in South Africa

The Red Meat Industry Forum (RMIF) has various initiatives that are aimed at promoting the transformation and development of the red meat industry; thus, these initiatives involve the whole red meat value chain. To achieve this, RMIF makes use of role-player organisations that are best suited to start and facilitate developmental projects in their respective areas of expertise; hence embracing food security, economic growth, and job creation (RMIF, 2016). Indeed, the RMIF has allocated about R7 million per annum to transformation initiatives across different industry subsectors.

Initiatives spearheaded by the RMIF.

Programme	Objectives
NERPO Linking  Livestock Syndicates  to the Red Meat Value  Chain	To build the capacity of 200 cattle farmers, organised into 20  syndicates (small groups), to attain sustainable production (100  breeding cows at 85% calving rate), to regularly supply high volumes  of quality livestock to the market, and to enable them to become  part owners in the red meat value chain.
RPO Emerging  Producers’ Skills  Development  Programme	Training and developing approximately 440 emerging or communal  farmers per year. The training courses will be limited to the most  important requirements, which include animal husbandry  and animal health practices, as well as basic farm business and  management practices.
RMAA Technology  Transfer in HAS and  HACCP	To provide 40 learners with the necessary knowledge and skills to  implement a Hygiene Management System in an abattoir, and at least  90% of the learners and beneficiaries are previously disadvantaged  individuals.  To provide 5 learners with the accreditation and certification to  conduct audits for compliance and legislation and regulatory  requirements, and at least 90% of the learners and beneficiaries are  previously disadvantaged individuals.
RMAA Black-owned  Abattoir Enterprise  and Skills  Development	To provide hygiene- and slaughter-related training as well as  technical skills support to black-owned abattoirs in South Africa,  and at the same time contribute to the maintenance of standards in  abattoirs.
NFMT Meat Cutting  Technician Training	The NFMT has implemented effective basic training of meat cutting  technicians at the distributive level of the Meat Trade and can report  that a training facility has been established and has trained students  to a level of Grade II, Meat Cutting Technician. Seven groups of 5  students would participate in the skills development programme over  3 weeks; thus, 35 Grade II Cutting Technicians will be trained.
SAFA Transformation  Initiative in  Partnership with the  SA Chefs Association	The South African Feedlot Association embarked on a transformation  initiative in partnership with the SA Chefs Association to train and  empower 2 groups of 14 young unemployed students to become  skilled in the Centre of Culinary Excellence over 18 weeks.

 

Value Chain Description and Maps

The livestock value chain map as indicated below illustrates the product flows, from raw materials to end markets, and specifies how the industry functions. This is illustrated in the following Figure.

Beef value chain map
We should be aware that the livestock value chain is only one of a few value chains in the beef industry. To gain perspective on the latter, an overview of the main beef industry is provided in the following Figure.

Illustration of the South African beef industry

To understand the livestock beef value chain thoroughly, it is important to have an overview of the number of households involved in livestock production and the number of cattle available, as well as the amount of beef slaughtered and consumed.
The following Table provides a synopsis of the above-mentioned factors.

Overview of the South African beef industry.

Indicator	Numbers
Households involved in livestock production	1 096 854 (*1.2 million)
Households owning cattle	613 662
Cattle numbers	13 896 million (*13.6 million)
Annual Turnover	*R60 billion
Emerging and Communal sector	Owning 42% of cattle numbers
Nett exports meat and hides (2016)	*R3.3 billion
Livestock agents (levy)	51

 

Beef Standards

Carcass quality, meat safety, and all the below-mentioned characteristics prove to be a challenge for communal production systems. However, production innovations could counter many of these and should be implemented. Huge price differentiations do exist between grades and economically viable traits.
Carcasses from livestock are classified according to certain age and fatness characteristics and are marked with roller marks. Age indicates tenderness of meat (the younger, the more tender, while fatness indicates ‘no fat’ (0) through to ‘excessively overfat’ (6) (SAMIC, 2016).
The South African Carcass Classification System is first applied to determine the price at the abattoir level. Suppliers or farmers of live animals are remunerated according to this system.
According to the South African Meat Industry Company, or SAMIC (2016): “Meat classification is also a mark of quality that indicates the value differences (money value) between different qualities of meat. To ensure that the different meat qualities are handled according to predetermined norms in legislation, SAMIC (South African Meat Industry Company) has been appointed by the Government to monitor uniform standards. SAMIC also liaises with producers, abattoirs, retailers, and consumers to ensure that uniform standards are applied.

Characteristics of the meat classification system entail:

1. Age:

AAA	=	This code means that the colour of the roller mark on the carcass is PURPLE and is  an indication that the meat is from a young animal (no permanent incisors) and thus  the most tender.
ABAB	=	This code means that the colour on the roller mark on the carcass is GREEN and is an  indication that the meat is from a young animal in transition to an adult animal  (1 – 2 permanent incisors) and thus tender meat.
BBB	=	This code means that the colour of the roller mark on the carcass is BROWN and is an  indication that the meat is from an adult animal (1 – 6 permanent incisors) and thus  less tender but with a lot of flavours.
CCC	=	This code means that the colour of the roller mark on the carcass is RED and is an  indication that the meat is from an adult animal (> 6 permanent incisors) and thus  the least tender but perfect for stews.

2. Fatness – fat classes are indicated in the following manner:

000	=	Means no visible fat on carcasses.
111	=	Means a very lean carcass.
222	=	Means a lean carcass.
333	=	Means a medium-fat carcass.
444	=	Means a fat carcass.
555	=	Means an over-fat carcass.
666	=	Means an excessively fat carcass.

3. Conformation:

Since some consumers purchase in bulk (hindquarter or forequarter), most purchases are done on visual selection. This means that the consumer will buy what is seen by way of the conformation of the carcass.

Conformation comprises five classes defined in the following manner:

1	=	A very flat carcass.
2	=	A flat carcass.
3	=	A medium carcass.
4	=	A round carcass.
5	=	A very round carcass.

4. Damage:

This category is only used where possible sections of the carcass are cut off after slaughtering as a result of possible bruises or any other aesthetic reasons. Damage comprises three classes, defined as the following:

1	=		Slight damage where very little meat was removed.
2	=		Moderate damage where fat and some meat of certain muscles were removed to get rid of meat that would not be fit for human consumption.
3	=		Serious damage where the muscles must have been cut deep to get rid of meat and fat not fit for human consumption.

Usually, the damage characteristic is used by traders to purchase meat to re-sell since damages influence the price of meat if the trader is not aware of what is being bought. This means that the trader will purchase these carcasses at a lower price, depending on the level of damage and on which part of the carcass the damages occur.

5. Gender:

Only a bull or an ox showing signs of late castration in the AB-, B- and C-age classes are marked with a BLACK “MD” stamp to inform prospective buyers that these carcasses are from male animals since the taste and colour of the meat might differ from other carcasses.

Carcasses that are roller marked according to Red Meat Classification System are not necessarily inspected by health and safety inspectors. It is therefore possible that contaminated meat can enter the supply chain. Apparent health risks for consumers may come out and also damage consumer trust in the red meat industry.

 

Flow of Product and End-Markets

The carcass value chain starts at the abattoir. Abattoirs are classified as:

1. High-throughput red meat abattoirs.
2. Low-throughput red meat abattoirs.
3. Rural-throughput red meat abattoirs.

The above classification constitutes only an indication of the size (throughput) of the specific abattoir.

Keep in mind that an abattoir is also known as a product “changer”, transforming live animals into carcasses.), abattoirs are not carcass-driven, but volume-driven, and preference is given to large beef cattle. Larger carcasses are more easily processed than smaller and lean, underweight carcasses. Small, underweight carcasses are more labour-intensive and take much longer to process into primal. Therefore, abattoir owners prefer the larger carcasses that are produced from British breeds such as Angus, Hereford, and Sussex.

At the abattoir, carcasses are processed into halves, and the split halves are known as front or hind quarters. Hind and front quarters are sold to meat processing plants, wholesalers, and retailers. Meat processing plants debone split halves (hind and front quarters) into primal and sub-primal. Trimmings are processed into sausages and patties. All products are packed and then distributed to supermarkets, retailers, restaurants, or their small retail outlets.

The following Figures illustrate the different processes.

Flow diagram of high throughput red meat abattoir operations

 

Flow chart of beef processing processes

 

For the rural or emerging farmers to enter the carcass value chain, these farmers need to produce beef cattle from beef breeds and beef breed crosses that have the potential to economically produce a final carcass of between 450 and 470 kg (preferably A grade), after at least a 120-day feeding period.

This challenge can be overcome by fostering longstanding relationships between rural or emerging farmers and buyers from abattoirs.

Mentorships could be implemented where advice is given to change and improve the current breeding plan and production systems.

 

Hides Value Chain Analysis

The value chain map is illustrated in the following Figure and gives an overview of the product flow associated with hides.

Production flow of hides through SA processing units

 

Only a small percentage of skins and hides get exported in this stage (exporters state that they export low-grade hides that have little use in South Africa), as the majority go on to the next stage of processing. Feedlots and abattoirs are linked with hide traders and primary tanneries. Despite these linkages, some abattoirs export good-quality hides rather than channelling them through domestic processing channels.
Between 60 and 70% of hides produced locally are suitable for the automotive industry. The demand for hides in the automotive sector exceeds the number of hides produced in South Africa. The shortfall in high-quality wet blues is imported from around the world, as depicted in the following Figure.

Import volumes of raw hides and skins from the world

The price of raw hides in South Africa is based on export parity prices. The cost of raw hides makes up about 45% of a tannery’s variable costs.
The following Table displays the average estimated gross profit per hide for a vegetable tannery.

Gross profit calculation per hide (vegetable tannery).

Item	Value
Average selling price per hide	R915.00
Variable costs per hide	R701.00
Gross profit	R214.00

 

Offal Value Chain Analysis

The value of offal (also known as the fifth quarter) has increased significantly over the past few years, which has rendered the overall competition between various meat processors more intense. A growing interest in, and demand for, the fifth quarter offers opportunities to increase total carcass value. The dressed carcass comprises four quarters. However, the dressed carcass constitutes only up to 60% of the live weight of cattle. The remaining part (40%) is known as the fifth quarter. As the demand for convenient cheaper processed meat products increases in developed countries, it makes sense to conduct an in-depth analysis regarding the South African offal industry. The offal value chain starts at the abattoir, where offal and other by-products are separated from the carcass and ends up in different parts of retailing.

Value chain description and map:

The offal value chain map illustrates how the product flows from raw material to end markets and indicates how the industry functions. This diagram is displayed in the following Figure.

Value chain map of offal

The definition of offal is the internal organs and entrails of a slaughtered animal, excluding muscle and bone. They further explained that the term ‘offal’ is derived from the process when the animal is butchered and the offal ‘falls off’ the carcass when being dressed and trimmed. The word ‘offal’ does not refer to a specific group of edible organs but comprises most internal organs other than muscle and bone.
Some literature defines offal as those parts of meat from a carcass which are used as food, but which are not skeletal muscle. The term ‘offal’ includes the liver and lungs (collectively known as the ‘pluck’), the heart, all abdominal organs, and extremities: tails, feet, head, and tongue. In the United States of America, the terms ‘organ meats’ or ‘variety meats’ are used instead of offal. Since the 5th quarter includes both offal and hides, the emphasis of this chapter will be on offal only.

Offal is categorised into three different categories, including:

1. Dirty or dark offal; Dirty or dark offal includes both the trotters (or feet) and the head (if the head is left with the skin on).
2. Green or rough offal; Green or rough offal refers to the digestive tract, which includes the large tripe, small tripe, and intestines.
3. Red offal. Category: Red Offal comprises the lungs, heart, liver, kidney, spleen, tongue, tail, and head (if the skin is removed).

The Figure of a Flow diagram of high-throughput red meat abattoir operations indicates the various stages in the slaughter line where evisceration takes place.

Dirty or dark offal, comprising the head (if the skin is left on) and trotters, is
collected just after the Stunning, hoisting, and bleeding phase. Evisceration of both

Green or rough offal and red offal take place just after the removal of hides, and this offal needs to pass the primary meat inspection first. Red offal, such as kidneys and oxtails, follows the same route as the carcass cold chain, as it is sold to the formal market and needs to be processed according to the formal market standards. The reader should take note that each abattoir handles its offal division differently. An overview of the various offal business strategies currently used will be discussed later.

Each offal component comprises a specific percentage range in weight, relative to the total live animal weight. This is illustrated in the following Table.

Percentage of weight regarding the total live animal weight of main offal.

Product	Beef %	Pig %	Lamb %	Duck %	Turkey %	Chicken %
Blood	2.4 – 6	4.9	3.3 – 4.8	3.3 – 4.8	3.3 – 4.8	3.3 – 4.8
Brain	0.08 – 0.12	0.08 – 0.1	0.26	–	–	0.2 – 0.3
Ears	0.02	0.04	0.03	–	–	–
Feet	1.9 – 2.1	1.5 – 2.2	2	1.75	2.85	3 – 4
Genitals	–	–	2	3.5	–	–
Gizzard	–	–	–	0.7	1.21	1.9 – 2.3
Head	2.5 – 3	5.2	6.7	–	2.85	3 – 4
Heart	0.3 – 0.5	0.15 – 0.35	0.3 – 1.1	–	0.35	0.3 – 0.8
Intestines	2 – 3	1.8	1.3	2.9 – 3.1	–	–
Kidney	0.07	0.2 – 0.4	0.3 – 0.6	–	–	–
Liver	1.0 – 4.5	1.1 – 2.4	0.9 – 2.2	–	1.1	1.6 – 2.6
Lung	0.4 – 0.8	0.4 – 0.85	0.7 – 2.2	–	–	0.7
Omasum	0.6	–	1 – 1.2	–	—	–
Pancreas	0.06	0.4	0.2	–	–	–
Spleen	0.1 – 0.27	0.1 – 0.16	0.1 – 0.4	–	–	0.15
Tail	0.1 – 0.25	0.1	1	–	–	–
Tongue	0.25 – 0.5	0.3 – 0.4	0.5	–	–	–
Tripe	0.75	0.6 – 0.7	2.9 – 4.6	–	–	–
Total (%)	18.9	17.6	26.3	13.6	13.2	15.6

The payment received for the slaughtering of animals by producers, feedlots, and wholesalers take by-products into account in various ways:

1. The abattoir retains the offal and the hide.
2. They only retain the offal.
3. A slaughter fee is negotiated.

Hides and skins are normally sold to local tanneries. Offal enters the so-called ‘black market’ or informal market, which peaks during the winter, and slows down during the summer months.