Agro-processing Sector

Presented to the National Council of Provinces (NCOP)

27th October 2015

DDG Elaine Alexander

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PRESENTATION OUTLINE

Macro economic statistics

Performance of the agro-processing sector in SA Economy

Strategic intervention pillars

Opportunity for growth and investment

Conclusion

2

List of abbreviations

• APAP - Agricultural Policy Action Plan

• BFAP -Bureau for Food and Agricultural Policy

• GDP -Gross Domestic Product

• IPAP -Industrial Policy Action Plan

• MTSF -Medium Term Strategic Framework

• NDP - National Development Plan

• SIC - Standard Industrial Classification

• SONA - State of the Nation Address by the President

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Classification

The wide-ranging nature of agro-processing sector implies a

wide range and heterogeneity of activities. United Nations

International Standard Industrial Classification (ISIC, 2013)

categorises agro-processing as follows: Food and beverages – focal area; Tobacco products; Paper and wood products Textiles, footwear and apparel; Leather products; and Rubber products

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Relative performance of the agro-processing industry

 Comparison year Agriculture Mining Manufacturing Services   % share in Gross Domestic Product (GDP)

1970 7.1 10.6 37.1 43.22013 2.2 9.2 28.2 60.2

 Manufacturing (2014) % share of total Employment (‘000)

Contribution of  industry (‘000)

Food, beverages and tobacco 20.5 251Textiles, clothing and leather goods 3.2  114Wood and paper; publishing and printing 8.6  155Petroleum products, chemicals, and  plastic 24.4  162

 Other non-metal mineral products 4.7  73Metals, machinery and equipment 19.6  334

Source: Stats SA

520 (32.3%)

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Significance of agro-processing sector (2013) Sector GDP Employment Investment

Agriculture, forestry and fisheries

2,4% 5,8% 1,9%

Manufacturing sector 16,9% 9,2% 19,1%

 Agro-processing 4,8% 3,6% 3,1%

GDP Employment Investment

Agro-processing 28,7% 39,3% 16,2%

Relative contribution of agro-processing to the total manufacturing sector in 2013

NDP sets economic growth target of at-least 5% by 2019

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7

Agricultural trade ratio (BFAP)

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

0

0.5

1

1.5

2

2.5

3

3.5

4Ratio Exports:Imports

8

Opportunity for growth continued

Growth opportunity

NDP postulates a positive trade balance of primary and processed agricultural products

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Trade balance by value 2013/14 (BFAP)

Citrus fruit

Wine

Grapes

Maize

Apples and pears

Fruit &

 vegetable juices

Wool

Nuts

Tobacco

Spirits, liqueurs etc

Soya-bean oil-cake

Poultry meat

Palm oil

Rice

Wheat

0

2

4

6

8

10

12

Exports Imports

Billions (R)

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Output: Agro-processing

NDP states that rural economy should be revived through increase in production and subsequently processing of primary products

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000R million (200

5 prices)

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Population growth (BFAP)

200520062007200820092010201120122013201420152016201720182019202020212022202345

46

47

48

49

50

51

52

53

54

55

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

SA population % Growth

Millions

% growth

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Employment: Agro-processing

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Informal Formal Total

Agro-processing identified by NDP as having potentialto significantly create jobs. IPAP further depicts agro-processing as

having highest employment multiplier13

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Problem statement

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Market concentration

Limited participation of SMEs in agro-processing

Access to finance

Lack of appropriate technology

Lack of technical and

entrepreneurial skills

Raw material supply

challenges

Non-compliance of

market standards

National economic development, employment and food security potential under-realised

Limited market access

Inadequate infrastructur

e

High post-harvest loss

High post-harvest loses translates to raw material for processing

Agro-processing

segmentCategory

Range of percentage

loss

 

 

Food and

beverage

Roots and tubers 10 - 40%

Milk 8 - 16%

Fruits and vegetables 15 - 44%

Cereals, oil seeds and pulses 15 - 30%

Fish and sea food 10 - 40%

Meat 6 - 8%

Smallholder producers

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Plans, policies and strategy for intervention NDP MTSF IPAP APAP SONA (9 Point Plan) Strategy

Revive rural economies 

through greater economic potential 

industries such as agro-processing

Maintain positive trade balance for primary and processed agricultural products

Creation of jobs and reduction of 

poverty

Outcomes 4, 5 and 7

Developing emerging broiler 

producers Support to 

poultry/soybean/maize integrated value chain

Revitalization of agriculture and agro-processing  value 

chains prioritised as a result of their  huge potential to promote economic growth, create jobs; attract 

investment as well as promotion reduction of import bill on 

processed products.

Developing small scale dry and wet 

milling industry

Enhancement of fruit and vegetable canning industry

Support to fruit and vegetable value 

chain

Commercialisation of the industrial cassava and moringa

Support through agricultural 

research through ARC & DST

Support and development of small and medium agro-

processing enterprises

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Strategic intervention pillars

Pillar 1 Entrepreneurial support.

Pillar 2− Enterprise development through provision of access to finance,

access to markets and incubation.

Pillar 3 Industry research and technology transfer.

Pillar 4 Agro-processing infrastructure investment.

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Hierarchy of implementation

Christy et.al, 2009

Christy et.al, 2009

Pillar 1Entrepreneurial 

Support

Pillar 2&3Enterprise 

development and R&D

Pillar 4Infrastructure investment

Coach-Lab for entrepreneurs with EDD & 

Innovation HUB

Supplier Development 

Programme with Tiger Brands and 

Massmart

Bulk infrastructure via 

SIP 11Processing 

infrastructure via thedti incentive 

schemes 

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Integrated decision-making approach

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Opportunity for investment and growth

Intervention channels

Agro-industrialization

Small & mediumagro processing-

enterprises

Demand-side

Supply-side

International demand

Local food demand

Other

Value addition

Improved competitiveness

Import replacement

• BRIC• Rest of Africa• Global supply chains• International brands

• Support demographic food demand trends

• Niche products• New products

• Focus on surplus production • Low value products

• Upgrading of technology & skills

• Replace imported raw materials• Replace imported final product• Source products from Africa instead

of further abroad

Opportunities for exploitation

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Recapitalisation of Valley Farms Fruit Processing Facility

• Valley Farms Processing Company is the only black owned agro-processor of fruit purees and concentrated an dried fruit in South Africa. The fruit processing facility is situated under a 4000 sq.m. roof company in Levubu, Limpopo Province. Recapitalised by R4.7million

• Currently Valley Farms is owned by 7 Community Property Association (CPA’s) whose shares are held in a trust.

• Valley Farms processes Litchi, Mango, Guava, Pawpaw, Peach and Tomato. • The company currently employs 10 permanent employee and 60 seasonal employees

depending on the production season.

• The company exports 90% of its production (Europe, Israel, UAE, USA) and 10% locally.

• The recapitalising of the facility ensured that the efficiency and competitiveness of the facility is significantly improved resulting in sustenance of jobs

• The dti is currently assisting the facility to expand exports Malaysia, China, Japan, Indonesia, Australia and New Zealand.

 

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Conclusion Agro-processing plays a leading and marked role in terms of output,

investment and export contribution by the manufacturing sector.

The trend of most economic variables is declining especially since 2008 (due to the recession). However, there is an opportunity for growth due to high demand of processed AFF products.

To reverse the trends & exploit processing opportunities, promoting investment in agro-processing and improving competitiveness of the industry is critical.

Promoting participation of start-up enterprises in agro processing activities is crucial to realise the policy imperatives of employment generation, rural development and food security and address the issue of concentration.

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Thank you

END

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