Foot-and-Mouth Crisis: Immediate Vaccine Reform Needed as State-Owned Producer Falls Short

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JEREMY MAGGS: South Africa’s red meat industry is encountering new obstacles as a recent outbreak of foot-and-mouth disease (FMD) spreads across five provinces. Export bans are becoming more stringent, market access is dwindling, and local prices are fluctuating due to pressure in supply chains.

For an industry already grappling with thin margins and rising input costs, the economic implications are significant. I aim to explore this issue to gauge the severity of the crisis. Joining me is Wandile Sihlobo, chief economist at Agbiz (Agricultural Business Chamber of South Africa). Let’s investigate the commercial ramifications and how businesses can prepare.

This situation also impacts consumers and our grocery bills. So, Wandile, let’s begin with the immediate effects. Welcome! What are the economic repercussions of this outbreak for livestock producers? How serious is it?

WANDILE SIHLOBO: First, it’s essential to understand the importance of the livestock sector in the South African agricultural landscape; livestock accounts for nearly half of that sector. Consequently, any challenges faced by the cattle industry will ultimately affect the overall sector’s performance.

At present, the effect is confined to a limited number of farms rather than widespread, but the crux of the issue lies in the limitations on cattle movement and export activities. Over time, we certainly anticipate financial repercussions. While the precise costs are yet to be assessed, farmers are incurring high expenses. The disease does not directly kill the cattle but hinders slaughtering for a defined period while farmers continue to feed them, potentially for over two months, without meaningful income, placing immense financial pressure on production.

JEREMY MAGGS: It’s alarming that China, Zimbabwe, and Namibia are halting imports.

WANDILE SIHLOBO: Temporary export restrictions are typical during disease outbreaks. This situation is particularly unfortunate, as we have previously discussed South Africa’s aim to expand its export markets.

The red meat sector has been part of this strategy, and looking back at last year, we saw our exports recover after a significant decline in 2023 due to similar challenges.

Last year, our exports fell by 19% in red meat and 16% in wool.

We believed we were on a path to recovery, but I suspect that the economic effects will continue to impact us well into the second quarter, especially concerning exports.

JEREMY MAGGS: What does this imply for the local market? Could there be an excess of beef? Might this lead to lower consumer prices in the short term, or are input cost pressures undermining that benefit?

WANDILE SIHLOBO: It’s crucial to emphasize that the red meat and protein products available in South Africa are safe for consumption. The export restrictions are primarily due to the endemic nature of the disease in certain areas, prompting nations to take precautions against potential transmission rather than concerns regarding consumer safety.

Domestically, slaughtering activities will carry on in unaffected regions, especially with vaccination efforts currently underway. Therefore, we expect a surge in domestic red meat supplies in the months ahead, potentially exerting downward pressure on prices.

This will occur in a climate where South African consumers are already experiencing financial strain, resulting in decreased demand for red meat, which poses concerns for producers amid this year’s challenges.

JEREMY MAGGS: In addition, there is also the risk of supply chain effects on other sectors, such as feed, logistics, and insurance.

WANDILE SIHLOBO: We need to monitor the financial viability of these farms closely, as that could have wider implications for businesses. Nevertheless, I am optimistic that vaccination efforts and extensive awareness campaigns by the Department of Agriculture will help mitigate these risks and prevent a more serious crisis.

That being said, Jeremy, the significance of vaccination cannot be overstated. We must prioritize the development of domestic vaccine production capabilities alongside widespread vaccination.

This is essential.

JEREMY MAGGS: What exactly is driving the issue? Vaccine supply has been cited as a recurring problem.

WANDILE SIHLOBO: In essence, I believe we have not fully progressed from the complications brought on by the state capture era and the ensuing mismanagement of institutional resources. One key institution affected is OBP (Onderstepoort Biological Products), which produces vaccines but has been underperforming.

We take pride in being the leading agricultural producer and exporter in Africa; however, we lack enough vaccines and must depend on Botswana. Restoring our capacity for domestic vaccine production is crucial, and Minister [John] Steenhuisen and Director-General [Mooketsa] Ramasodi are prioritizing this; they addressed it earlier this week.

JEREMY MAGGS: In light of the potential risks, is it time for the private sector to play a more significant role in vaccine production?

WANDILE SIHLOBO: Previously, specific entities were designated to produce certain vaccines. Now, we need to adapt. We should consider engaging one, two, or three private companies to secure the necessary licenses for producing vaccines like the FMD vaccine.

This diversification would reduce risk and ensure adequate production capacity.

We’ve seen a notable increase in disease outbreaks in recent years.

This trend may be linked to climate change, which facilitates quicker virus transmission, emphasizing the need to include the private sector in FMD vaccine production. I hope the Department of Agriculture’s willingness to collaborate with the private sector signifies progress in this domain.

JEREMY MAGGS: There’s also the discussion around a permanent regional disease zoning strategy to manage future economic impacts. What’s your perspective on this?

Read: R72m foot-and-mouth vaccine delivery expected by mid-June

WANDILE SIHLOBO: This is a critical point, and naturally, we should heed scientists’ advice here. It may also be time to consider a nationwide vaccination policy against FMD, moving beyond just vaccinating during outbreaks, following the lead of South America.

I recognize this is a contentious issue; scientific assessments should be considered, and some trade agreements may require renegotiation. However, given that we encountered the disease across six out of nine provinces in 2022/23 and faced additional issues last year in the Eastern Cape, we should pursue a proactive vaccination strategy alongside ongoing regional efforts.

JEREMY MAGGS: To conclude, can you assure us that our weekend braai’s rump steak and boerewors are safe for now?

WANDILE SIHLOBO: They are safe for the time being and might even become more affordable soon. However, we must acknowledge that farmers are facing rising input costs, and purchasing high-quality meat is vital for their support.

JEREMY MAGGS: Thank you, Wandile Sihlobo, chief economist at Agbiz.

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