THE SOUTH AFRICAN AGRO PROCESSING SECTOR OVERVIEW

Presented by: Tshifhiwa Madima Director: Agro processing 2 Customised Sector Programme Kwazulu Natal Trade and Investment Faire and Conference Durban Exhibition Centre Durban 30 March 2006 Overview of the South Africa Agro processing Sector

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Presentation outline
Definition - Agro-processing Local and International trends SWOT Analysis Industry life cycle Contribution to the economy Imports and exports Job opportunities and productivity Food companies Potential sub sectors

Support from the dti

ursday, 18 May 2006

Overview of the South Africa Agro processing Sector

What is agro-processing?
The process or action taken by manufacturers of converting (raw) agricultural products into consumable commodities primary

It is in essence, turning primary agricultural products into consumable commodities The process involves; Cutting Milling Molding Fermenting Blending, etc
Overview of the South Africa Agro processing Sector

ursday, 18 May 2006

South African agro processing value matrix

Stages 1&2 Farm gate

Stage 3 Government support

Stage 5

Field crops R&D Technology Marketing Input supplies

Multinationals Cereals & Pastas

Fresh, dried, canned & frozen fruit

Horticultural crops

Fermenting Slaughtering

Blending Stage 4
Sheet Strip Cans Foil Bars Tubes Rods Wire Profiles Rough Stones

Processed, dried, frozen & canned veg. Bakery & confectionery

Transport

Field crops
METAL PRODUCTS AGRO PROCESSING
(rolling, shaping, extruding, casting & welding)

PACKAGING

Beverages Sugar Processed, value added meat & meat products Inputs for bio fuels Inputs for chemical Chemicalproducts products

Livestock

Stage 3

Forestry

Cutting Molding Milling

Logistics

Nuts Logistics

Training and skills dev. Skills

Training &

Machinery Machinery

Quality Assurance and Standards

Furniture

Investors

Aquaculture products
Overview of the South Africa Agro processing Sector

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Local and international trends Fundamental Changes in the Sector

Government policy
Reduce health care costs Non Trade Barriers Food control

Consumer preferences
Preventative health care Consumer rights movements Food safety

= Transparency requirements , retailer power price pressure , need for producer flexibility

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Overview of the South Africa Agro processing Sector

SWOT Analysis
Strengths
Alternate season production Low power costs Labour availability Technology institutions / R&D facilities Potential for diverse production Presence of multi-nationals Sector-specific incentives

Weaknesses
Lack of export infrastructure for perishables Transport inland / port charges / long distances Small domestic market Production volumes small Distances to global markets Skills (management)

Opportunities
Changing demands / exports AGOA NEPAD Free Trade Agreements Empowerment Charters

Threats
Subsidised production / exports in developed nations Environmental Issues Trade barriers / non-tariff barriers Market entry barriers for BEE / WE Increasing demand for transparency in supply chains Strong ZAR

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Overview of the South Africa Agro processing Sector

ndustry life cycle

6

Fresh Fruit

Wine
4

New Fruits
3

Floriculture Aquaculture

Vegetables Indigenous Tea

Furniture

Sugar

Fruit Canning

Dairy

Proc. Food

Meats

Black Tea

New Fuels Natural Fibres

0 Concept

New Industries

Growing Industries Stages of Development

Mature Industries

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Overview of the South Africa Agro processing Sector

Contribution to the SA Economy

Agro-processing currently contributes 10% to South Africas Gross Domestic Product

Contributes 16.4% (R131.3bn) to total manufacturing sales, making it the third largest manufacturing sector in South Africa

Employs 5% of South Africas economically active population, with strong connections to primary agriculture ( second most labour intensive sector-13 jobs for R1m invested) The total value of export in 2004/5 was R23.1 billion

Top export destinations in 2004/5 were: European Union, Zimbabwe and Japan Fruit and wine are the largest export products by volume and value

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Overview of the South Africa Agro processing Sector

Food manufacturing companies

Over 4000 food production companies Only top 10 responsible for 70% of industrys turnover Major players forming part of top 10 are: Unifoods/Best foods, Nestle, National Brands, Tiger Brands, Premier Foods Nabisco Five (5) companies listed at the JSE and their market concentration: Tiger Brands (50%) AVI Ltd (25%) Tongaat-Hullet Group (17%) Illovo Sugar Ltd (8%) All Joy Foods Ltd (1%)
Overview of the South Africa Agro processing Sector

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Trade balance - positive

Source: Quantec

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Overview of the South Africa Agro processing Sector

Jobs shed but wage bill and labour productivity on the increase

Source: Quantec

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Overview of the South Africa Agro processing Sector

Sub-sectors with investment potential

Indigenous teas Health beverages e.g. Iced tea, bottled mineral water High value vegetables e.g. asparagus, baby carrots Organic foods Bio fuels New fruits e.g. Berries, cherries New area and markets for wine Traditional and exotic meats Aquaculture (fresh and marine) Dried fruit products Vegetable & berry juice development Nuts e.g. Macadamia
Overview of the South Africa Agro processing Sector

ursday, 18 May 2006

Support from the dti

NVESTMENT INCENTIVES
Small and Medium Enterprise Development Programme (SMEDP)

For new or expansion projects Tax free grant up to 10% on qualifying assets Skills Support Programme (part of SMEDP) Cash grant of up to 50% for training due to start-up or expansion Critical Infrastructure Programme Provides support for installation of needed infrastructure Grant of 10 to 30% of qualifying costs for projects Foreign Investment Grant Partially compensates (15%) foreign investors for moving new machinery & equipment from abroad
Overview of the South Africa Agro processing Sector

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Support from the dti conti.

EXPORT INCENTIVES
Export Marketing and Investment Assistance Scheme(EMIA) Primary Export Market Research Foreign Direct Investment Research Exhibition Assistance Outward Selling Trade Missions Outward Investment Recruitment Missions Inward Buying Trade Missions Small and Medium Enterprise Development Programme (SMEDP) Matching grant up to R500 000 Pays Export Council representattives expences on Outward Selling Trade Missions

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Overview of the South Africa Agro processing Sector

Support from the dti conti.

Customised Sector programme Sector Development Strategy

More info on incentives - www.thedti.gov.za under Offerings

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Overview of the South Africa Agro processing Sector

Thank you for your attention

Presented by: Tshifhiwa Madima Director: Agro processing 2 the dti Division: TISA Tel: 012 394 1149 Fax: 012 394 2149 Mobile: 082 338 0233 e-mail: tshifhiwam@thedti.gov.za Website: www.thedti.gov.za

ursday, 18 May 2006

Overview of the South Africa Agro processing Sector