Farmer lays a solid foundation in poultry operation – African Farming

Phuti Mphelo left Joburg after a seven-year stint as a chartered accountant for Transnet and then for Ernst & Young. Phuti and her husband, Dr Sello Mphelo, left the City of Gold to follow their dream of opening a business in the mining town of Lephalale in Limpopo. Here they built successful businesses in health and medical services before they diversified into agriculture in 2018 with the launch of their family-owned egg business, Mae Eggs. Peter Mashala chatted to Phuti.

In 2010, when Phuti Mphelo and her husband, Dr Sello Mphelo, moved to Lephalale, the rapidly growing town was alive with opportunities. The once-quiet small farming town, formerly Ellisras, in Limpopo’s Waterberg municipality was surrounded by new megaprojects in the electricity and coal-mining sectors. These projects had attracted people from all over South Africa and from other countries, and Lephalale was a boom town.

The timing was right for the young couple, who planned to establish themselves in the health and medical services industry. “The Limpopo government supported my husband through his medical studies,” says
Phuti.

“So when the time came for him to do his community service, we chose to settle in Lephalale, where there was major growth and development driven by the construction of the Medupi and Matimba power stations, and the establishment of coal mines in the area to supply the power plants.”

ADAPTING AND DIVERSIFYING

Phuti and Sello, who both hail from Limpopo, had worked in Johannesburg, in finance and medicine respectively. Phuti, a chartered accountant, worked for Transnet and Ernst & Young in the city for about seven years. When Sello told her of his idea of settling in Lephalale to establish a health and medical services business, it made a lot of sense to her.

Phuti left her job to run their new business, where Sello worked as a doctor while he also put in time after hours at the local state hospital. The Mphelos set up two medical centres with the idea of opening more as the town grew. Then construction at the Medupi power station came to an end, and with this Lephalale’s growth was arrested.

“I knew we had to diversify our business, and this is how we started Mae Eggs,” explains Phuti. Going into farming was ideal, she says, because there was a market on their doorstep. Eskom’s multi-billion-rand projects had increased the town’s population by an estimated 60%, which meant a guaranteed demand for food.

“Many people in the rural areas and in the townships eat eggs for protein when they don’t have meat, and they prefer farm-fresh eggs,” says Phuti. “My husband and I had no farming background; we both did poultry courses to learn about running a poultry business. But we are surely getting the hang of it now,” she says with a smile.

She saw that setting up a farming business was also a way to build a legacy for their children. Since 2018, when they started the business, Mae Eggs has grown from a 1 000 layers to a 3 000-layer operation. Their clients are mainly local retail grocery stores, guest houses, hotels and hawkers.

“We currently employ two fulltime staff members, but we are working hard towards becoming a more significant employer,” Phuti says. The Mphelos lease land from a developer, who bought it for housing but did not build on it because of the stagnation in the town’s growth. The husband-and-wife team cleared the 2ha area of bush, put up facilities with the capacity to house 6 700 birds, and started operating in August 2018.

Phuti says they chose layers for a start, based on the resources they had and their non-existent agricultural experience. “Also, we don’t have the land or the water to plant crops, so a laying operation seemed like the best choice.” According to her, they deliberately avoided broilers because they felt that sector was oversupplied with operators.

A PROFITABLE BREED

Mae Eggs buys Hy-Line Brown pullets at point of lay (aged 18 weeks) from a supplier in Witbank. “By the time they get here, they are ready to start laying,” says Phuti. The daily egg collection rate is just above 80% – and she feels it could be improved upon. They had a collection rate of more than 90% in their first cycle, which she attributes to the quality of the first layers they got from their supplier.

“We bought the second batch in the middle of the Covid-19 hard lockdown, when there was a real shortage of good stock. I think, because of this, we got a lower grade of layers, hence the drop in production,” she explains.

Quality is very important in a laying bird and Hy-Line Browns have a reputation of being excellent birds. Phuti chose this breed because the hens can produce eggs up to the age of 100 weeks. “This is a prolific layer with excellent feed-conversion ability, which makes it more profitable for the farmer,” says Phuti.

BRINGING DOWN FEED COSTS

The couple feed their chickens BarnLay mash from BarnLab Layer range from the day they arrive. At first they bought feed from local suppliers, but this became very expensive. “Then we started our own feed shop, Lephalale Feed Depot, with a friend who is a broiler farmer in Vaalwater. We bought feed in bulk for resale and to use in our own operations in Lephalale,” explains Phuti.

This helped reduce the costs and had a positive impact on their profit. Phuti has since pulled out of that business, but is still buying in feed from her former partner. “I get it at a reasonable rate and he gives me credit when I need it, which is really helpful,” she says.

The poultry population at Mae Eggs has a very low mortality rate of below 0.01%. The pullets are fully vaccinated when they come in and do not need many more inputs for the rest of the cycle. “We put aloe extract in their water; it works like a natural antibiotic,” Phuti says. “We haven’t lost any chickens to major diseases, and we’ve had only one scare with fowlpox, which we got on top of immediately. We cull the chickens at about 18 months.”

SPREADING RISK

About 55% of the eggs are supplied to the informal market, including spaza shops, hawkers and individual clients, whereas the rest goes to the formal market – hotels, guest houses and supermarkets. Phuti says their initial plan was to sell all the eggs on the informal market, but that got off to a rocky start.

“Because we were unknown in the market, we found ourselves with lots of unbought stock, some of which we had to give away while the rest rotted.” This forced the Mphelos to change their strategy and sell stock on the formal market.

The disadvantage of the formal market, on the other hand, according to Phuti, is in the pricing. The formal market buys eggs at a fixed price while the price of feed fluctuates all the time. “On the informal market you can change the egg prices with changing feed prices. But the formal market does offer a steady demand, which keeps the cash flowing,” she points out.

They have since worked hard to establish a good reputation and have grown their informal market share to 55% of their product, with 45% going to the formal market. Phuti says they would like to maintain these percentages or perhaps to push sales in the informal market to 60% while they continue to grow the business.

“Lephalale is a migrant town, and in December and during other major holidays people go home. So we do need the backup of the formal market,” she adds. Excess stock is no longer a problem – in fact, the business now battles to meet demand.

“The hard lockdown restrictions and thevirtual standstill of the hospitality industry had a negative impact on the poultry sector. When deliveries to the town were stopped or came in late, I jumped in to fill that small gap and I’ve managed to keep my spot,” she says.

BUSINESS TRAINING AND FUTURE VISION

Phuti values opportunities to upskill and to participate in various development programmes. “I’m a member of Fetola, which is an enterprise development initiative aimed at helping small black-owned businesses, run in partnership with the SAB Foundation,” explains Phuti.

She says the initiative trains small business owners using practical methods to help them understand various aspects of business, including pricing. “As someone new to business, you need to understand how production costs affect your pricing.” There are times when big orders coming in from the formal market can look very exciting.

“But if, for example, their offer works out at R1 per egg and you don’t understand how much one egg costs you, you can fall into a trap where you will lose money.” Phuti says they would like to scale up to 10 000 birds per cycle in the next five years. “Our idea is to start rearing our own day-old chicks to point of lay or even to go as far as hatching our own birds. We just need to do it gradually and patiently,” she says.