Building up agro-processing seen as essential to South Africa’s development
13 May 2012
In late March 2012, Rob Davies, South Africa’s Minister of Trade and Industry, expressed concern ‘about the increased penetration of imported processed foods’ which is slowing down job creation in the domestic food processing sector. In 2010, the food processing sector in South Africa accounted for 177,000 jobs, making it ‘the largest manufacturing subsector by employment’. According to figures from the South African Department of Trade and Industry, ‘import penetration ratio rose from 9% in 2005 to 13% in 2010 ... accompanied by a decline in the export-output ratio from about 12% in 2000 to 9.7% in 2010’. According to Minister Davies, ‘agro-processing is of strategic importance to promote industrial development in South Africa.’
Dr Davies further highlighted how ‘exports to the traditional markets of the European Union and US have been flat in recent years’, indeed lower than ‘before the onset of the global financial crisis’. In addition, ‘changes in global standards, regulations and quasi-environmental considerations’ were seen as developments that have ‘the potential to negatively affect the growth of the food-processing sector’. The minister maintained that the South African authorities needed to ‘remain vigilant against regulations that are unfair and have the potential to constrain industrial development in the country’.
While ‘South African companies were recognised as significant producers of highly competitive agro-processed products like rooibos tea, wine, fresh and canned fruits, and spices’, new markets in faster-growing economies such as India and China were ‘relatively difficult markets to enter’. In this context, a major focus is also on ‘new export market opportunities in Africa’ and the Middle East region. Particular importance is attached to developing ‘market access to more dynamic economies’.
It was also argued that more needed to be done to develop local supply chains (e.g. soya bean to animal feed supply chains).
Overall, Dr Davies expressed optimism describing the South African food processing industry as ‘relatively resilient’.
Food sector stakeholders are however critical of a lack of government incentives ‘to encourage investors to buy into the sector’. A new incentive scheme, the Manufacturing Competitiveness Enhancement Programme (MCEP) worth some US$764 million, was launched in April 2012. This is aimed at helping companies adversely affected by the post-2007 economic downturn. It aims to assist companies to ‘upgrade their production facilities’, with the food processing sector seen as a likely major beneficiary of this programme.
Editorial comment
The EU’s focus on increasingly deploying rural development programme and food and agricultural product promotion programme support to develop value-added food product exports is very similar to recent efforts made by South Africa to promote the development of its agro-food processing sector.
At an EU conference in 2007 on agro-food product export interests in FTA negotiations, analysis was presented that highlighted the strong growth in EU exports to South Africa since 1996 in the following product categories:
- beverages: +72.1% (1996–2005)
- chocolate: +38.0% (1996–2005)
- biscuits: +38.6% (1996–2005)
- food preparations: +106.5% (1995–2005)
- olive oil: +105.9% (1995–2005)
- fruits and vegetables: +107.7% (1995–2005)
- animal feed: +159.5% (1995–2005)
Overall EU exports of food and drink increased by 20.2% over the period 1995–2005. Recent data contained in the EC statistical review of EU agriculture in 2011 showed an overall increase of 51% in EU exports of agricultural products between 2007 and 2010 (see Agritrade article ‘ EU 2011 review shows growing importance of ACP markets’, May 2012).
This suggests that governments such as that in South Africa will need to maintain a close watch on the evolution of EU policies explicitly targeted at promoting EU value-added food product exports. These range from rural development programme-financed initiatives to promote the competitiveness of EU food and agricultural sector enterprises, through support to food and agricultural product promotion on third-country markets (see Agritrade article, ‘ EU promotional measures for agri-food products to have greater external...’, 13 May 2012), to the external effects of the EU’s expanding safety-net policy.
