The project, which would have seen lamb on the bone exported to the European Union for the first time, was one of the "first 100 days deliverables" mooted by Western Cape Premier Ebrahim Rasool when he took office in May.
All 26 other projects on his list, including new police stations, targets for registration for child grants, school electrification and improved health services, had been completed, he said on Wednesday.
However, the avian flu had broken out just at the time EU inspectors were due to visit South Africa, and it had been decided that under those circumstances their visit would do more harm than good.
The EU has so far not accepted meat still attached to the bone for fear of foot and mouth disease, though it does take meat without bone.
After representations from the Western Cape department of agriculture the Karoo was identified as a locality from which "bone-in" lamb would be exported on trial period.
The meat would come from registered farms mainly in the Beaufort-West and Prince Albert area, and slaughtering would be done at the new Swellendam export abattoir.
Alie van Jaarsveld, spokesperson for agriculture MEC Cobus Dowry, said everything had been ready on the South African side, and the only thing remaining was for EU officials to "come here and sign the project off".
However, at that point there was an outbreak of foot and mouth in Limpopo and the national department said the officials, who were also supposed to visit other areas of the country, should not come out.
"And it just so happened that the bird flu thing was at the same time as when they would have been here," he said.
"That would have definitely influenced their decision."
"We did not want to jeopardise our prospects," he said.
He was confident the EU certificate would be issued in due course.