Agro-processing Sector Presented to the National Council of Provinces (NCOP) - PowerPoint Presentation

1. Agro-processing SectorPresented to the National Council of Provinces (NCOP)27th October 2015DDG Elaine Alexander1

2. PRESENTATION OUTLINEMacro economic statistics Performance of the agro-processing sector in SA EconomyStrategic intervention pillarsOpportunity for growth and investmentConclusion2

3. List of abbreviationsAPAP - Agricultural Policy Action PlanBFAP - Bureau for Food and Agricultural PolicyGDP - Gross Domestic ProductIPAP - Industrial Policy Action PlanMTSF - Medium Term Strategic FrameworkNDP - National Development PlanSIC - Standard Industrial ClassificationSONA - State of the Nation Address by the President3

4. ClassificationThe 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 productsTextiles, footwear and apparel;Leather products; and Rubber products4

5. Relative performance of the agro-processing industry Comparison yearAgricultureMiningManufacturingServices  % share in Gross Domestic Product (GDP)19707.110.637.143.220132.29.228.260.2 Manufacturing (2014)% share of totalEmployment (‘000)Contribution of industry (‘000)Food, beverages and tobacco20.5251Textiles, clothing and leather goods3.2 114Wood and paper; publishing and printing8.6 155Petroleum products, chemicals, and plastic24.4 162 Other non-metal mineral products4.7 73Metals, machinery and equipment19.6 334Source: Stats SA520 (32.3%)5

6. Significance of agro-processing sector (2013) SectorGDPEmploymentInvestmentAgriculture, forestry and fisheries2,4%5,8%1,9%Manufacturing sector16,9%9,2%19,1% Agro-processing4,8%3,6%3,1%GDPEmploymentInvestment Agro-processing28,7%39,3%16,2%Relative contribution of agro-processing to the total manufacturing sector in 2013NDP sets economic growth target of at-least 5% by 20196

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8. Agricultural trade ratio (BFAP)8

9. Opportunity for growth continuedGrowth opportunityNDP postulates a positive trade balance of primary and processed agricultural products9

10. Trade balance by value 2013/14 (BFAP)ExportsImportsBillions (R)10

11. Output: Agro-processingNDP states that rural economy should be revived through increase in production and subsequently processing of primary products 11

12. Population growth (BFAP) 12

13. Employment: Agro-processingAgro-processing identified by NDP as having potentialto significantly create jobs. IPAP further depicts agro-processing ashaving highest employment multiplier13

14. 14Problem statement 14

15. High post-harvest loses translates to raw material for processingAgro-processing segmentCategoryRange of percentage loss  Food and beverageRoots and tubers10 - 40%Milk8 - 16%Fruits and vegetables15 - 44%Cereals, oil seeds and pulses15 - 30%Fish and sea food10 - 40%Meat6 - 8%Smallholder producers15

16. Plans, policies and strategy for intervention NDPMTSFIPAPAPAPSONA (9 Point Plan)StrategyRevive rural economies through greater economic potential industries such as agro-processingMaintain positive trade balance for primary and processed agricultural productsCreation of jobs and reduction of povertyOutcomes 4, 5 and 7Developing emerging broiler producers Support to poultry/soybean/maize integrated value chainRevitalization 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 industryEnhancement of fruit and vegetable canning industrySupport to fruit and vegetable value chainCommercialisation of the industrial cassava and moringaSupport through agricultural research through ARC & DSTSupport and development of small and medium agro-processing enterprises16

17. Strategic intervention pillarsPillar 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.17

18. Hierarchy of implementationChristy et.al, 2009Christy et.al, 2009Pillar 1Entrepreneurial SupportPillar 2&3Enterprise development and R&DPillar 4Infrastructure investmentCoach-Lab for entrepreneurs with EDD & Innovation HUBSupplier Development Programme with Tiger Brands and MassmartBulk infrastructure via SIP 11Processing infrastructure via thedti incentive schemes 18

19. Integrated decision-making approach19

20. Opportunity for investment and growthIntervention channelsAgro-industrializationSmall & mediumagro processing-enterprisesDemand-sideSupply-sideInternational demandLocal food demandOtherValue additionImproved competitivenessImport 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 abroadOpportunities for exploitation20

21. Recapitalisation of Valley Farms Fruit Processing FacilityValley 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 R4.7millionCurrently 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 jobsThe dti is currently assisting the facility to expand exports Malaysia, China, Japan, Indonesia, Australia and New Zealand.  21

22. ConclusionAgro-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. 22

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24. Thank youEND24