Entrepreneur steps into unchartered territory

Friday, March 10, 2023

By Nosihle Shelembe

The failure of a previous business venture did not deter Alleen Magumbi to chicken out on his dream of running his own business - instead the experience only egged him on.

Starting a business is one of the hardest things one can do and if you don’t have discipline, hard work, dedication, and outright tenacity, let alone funding - then it simply won't work.

With several hurdles in his way, including the COVID-19 pandemic, the 2021 July unrest, funding challenges and load shedding, Magumbi was determined to still run his own race.

Having started Ulusoy Africa Poultry (UAP) during the pandemic, uncertainty, economic and financial disruption were the order of the day.

UAP produces free-range chicken, a simple healthy wholesome bird fit for whole family meals. The birds are fed on clean grain, fresh water with no hormones or any artificial additives.

Prior to the establishment of the agro-processing business, the entrepreneur had started a business supplying sanitisers, personal protective equipment (PPE) and face masks that were needed when the COVID-19 pandemic hit South African shores in 2020.

At the time, the wearing of face masks was mandatory and workers wore PPE clothing to reduce exposure to a variety of hazards in various situations, including in the health care and community settings.

 “I was on the verge of giving up because I felt that my business was not working [out],” he recalls. The businessman who had worked in various roles in the construction sector, had walked this path before having tried his hand at establishing a construction company in 2015. Unfortunately, the venture failed to take off.

“After doing some research I realised that there was an opportunity in the [agriculture sector] since [it plays a significant role in ensuring] food security,” says Magumbi.

In 2021, the 36-year-old used the nest egg that he had accumulated from the PPE business to establish UAP.

The 2021 annual report of the South African Poultry Association (Sapa) noted that demand for poultry was high with chicken and eggs being the most affordable animal protein sources.

In the same year, the poultry industry was recorded as the largest sector of the South African agriculture sector at 16.6%, contributing 2.5% to gross domestic product (GDP) under difficult circumstances.

Resolute to achieve his goals, Magumbi approached companies, proposing that his business grow chickens for them.

Although he did not have a farm, he found a company that he could lease land from and he managed to secure a contract to supply a big cold storage supplier in the North West province.

Based in the North West, the 100% black youth-owned business has operations in Hartebeespoort and Randfontein. Magumbi says the company is producing broiler chickens on a five-year grower contract to the cold storage supplier.

“We have a good relationship with them as they also provide us with veterinary expertise as well as business advice in terms of the birds’ nutrition and health so that we can produce   quality bird meat that fetches good prices in the market,” says Magumbi.

Government funding

In 2022, the company was funded to the tune of R14 979 million under the Small Enterprise Finance Agency (sefa) Youth Challenge Fund programme. Sefa, which is an agency of the Department of Small Business Development, provides financial products and services to qualifying small, medium and micro enterprises and cooperatives.

UAP currently employs 114 people.

“We are getting all sorts of support from all sectors of the economy involved with agro-processing, particularly sefa who provided us with funding to grow our business.”

The YCF is a youth start-up support programme intended to stimulate the establishment and growth of youth-owned businesses, promote digital skills, grow the economy and foster job creation.

The company produces 560 000 broilers per cycle and has 19 poultry houses.

“We have just opened an abattoir at our plant to lessen the burden on costs and transportation of live birds to slaughterhouses. We slaughter 2 000 birds daily,” he says.

The company has now embarked on a large scale broiler production and processing project that will yield birds weighting up to 2 kilograms (kg), which is a good weight for healthy chickens.

The birds would then be packaged into 20 kg packs and traded to wholesalers, hotels and other bulk buyers in the market.

Addressing challenges

While the business has managed to secure a five-year grower contract, the journey has not been without any difficulties. The unrest and load shedding threatened the sustainability of the business.

Just as Magumbi was beginning to breathe a sigh of relief due to government easing the COVID-19 restrictions, the hatchery at Ulusoy Africa Poultry was burnt down during the civil unrests, negatively affecting trade.

In addition, the business had to buy a generator at a cost of almost a million rand as power utility Eskom continues to struggle to keep the lights on. It has also incurred the costly expense of purchasing diesel to run the generator due to the business operating 24/7.

Government has indicated that it is determined to accelerate the work already underway to increase energy supply to the national grid and remove any impediments to that progress.

Furthermore, the commitments announced in the State of National Address and the National Budget allocations are expected to strengthen the capability of the state to fast track interventions outlined in the Energy Action Plan.

The plan was developed through extensive consultation and endorsed by energy experts as providing the best and fastest path towards energy security.

The recently published National State of Disaster regulations by the Minister of Cooperative Governance and Traditional Affairs allows government to respond more effectively and with the necessary pace to deal with the severe electricity supply constraints.

While the poultry farming industry is a growing one with many opportunities, prior to 2019 the industry reported significant loss of market share and economic hardship; and sought tariff protection for the domestic market.

Government working together with the private sector put their heads together to consider the underlying causes of the challenges faced by the industry and developed the Poultry Master Plan with the intention to address the identified challenges.

The plan identified five pillars in Phase 1, with commitments from stakeholders to achieve necessary reforms on expanding and improving local production; driving domestic demand; increasing the focus on exports; enhancing regulatory framework and ensuring compliance and trade measures to support the local industry.

The plan has thus far achieved to increase tariffs, providing a level of additional protection for local industry. The Industry reported investments of about R1.8 billion, creating 1 888 additional jobs.

Twenty-one contract growers have also been supported and the industry has pledged an additional R570 million investment by 2024.

The Department of Agriculture, Land Reform and Rural Development and the Department of Trade, Industry and Competition (the dtic) have established a R1billion Agri-Industrial Fund to support emerging agricultural producers, including poultry farmers.

As of September 2022, the fund had supported eight poultry projects valued at R479 million creating 215 jobs. The Animal Feed Manufacturers Association (AFMA) reported an additional 2 000 jobs being created in the extended value chain.

To date, the slaughtering capacity increased from 19.7 million birds per week to 22.5 million birds per week.

Through the Poultry Master Plan and the interventions to address load shedding, government has demonstrated its commitment to protecting and growing the industry.

Meanwhile, UAP hopes to be the protein authority of the nation, delivering premium white bird meat with a formidable brand reputation both domestically and globally. –SAnews.gov.za