Post on 18-Nov-2014
description
transcript
Meeting the Needs of South Africa’s Ag-Chem Market
AgChem Asia Summit 2011
20-21 October 2011
Dr John Purchase
Outline of Presentation
• Overview of South Africa’s agriculture landscape
• Overview of its pesticide demand
• Identifying opportunities for trade and future business development
• Market analysis: Understanding what works and what doesn’t
• Concluding remarks
Overview of South Africa’s agriculture landscape
Overview of SA’s agriculture landscape
• Well developed commercial sector and subsistence oriented sector – dual economy
• Only ~12% of land area arable, of which 22% high potential
• ~1.3 million hectares under irrigation • Water major limiting factor – SA mostly semi-arid • Deregulation & market economy • Number of competitive advantages - ‘World-class’ infrastructure - Counter-seasonality to Europe/Asia - Biodiversity - Trade agreements - Competitive input costs - Access to latest technology & innovation
Role of Agriculture in
SA Economy • Strategic sector – provides food, fiber, wine & beer,
satisfying two basic needs of man (+ others!)
• Has provided national food security since the start
of the 20th century (Pop: ~4,0 million), right
through to the 21st century (Pop: ~50,0 million,
~60% in urban areas)
Status and Trends
South Africa
Contribution of Primary Agriculture to GDP (Source: Statssa)
2
3
4
5
94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 06 07 08 09
%
Graph: ABC
SA economic growth: Tradable goods sectors lag the non-tradable goods sectors
Source: StatsSA
Graph: ABC
0
50
100
150
200
250
300
20002001200220032004200520062007200820092010
IND
EX
GDP % per Sector of Economy
GDP
Agric
Mining
Manufacturing
Construction
Trade
Transport
Finance
Inflation
Source: AMT, 2011
Exchange rate
Source: AMT, 2010
SAARF LSM Segments: Proportion of SA adult population and average monthly household
income in 2009
Source: SAARF (2010a) & BFAP, 2010
LSM class mobility: All adults during the period 2004 to 2010
Source: SAARF AMPS data for the period 2004 to 2010, as quoted by BFAP
SA Resource Situation • Land issue: sensitive now, Green Paper released.
• Energy crisis and energy security situation
- Electricity price hikes (31% + 25% pa over 3 years)
• Scarce high potential agricultural land to mining, esp. Mpumalanga, and urban development.
• Water management and water quality crisis
• Climate Change effects create uncertainty
• Soil degradation/erosion
• Biosecurity threats (FMD, Avian Flu, etc.)
• Question: Resources for sustainable expansion?!
• Greater competition for resources – price effect?
Performance of Sector Gross Value of Production in Rand million
0
10000
20000
30000
40000
50000
60000
70000
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Field Crops Horticulture Animal Production
R'm
illio
n
Source: DAFF, 2010. 1 Chinese Yuan = 1.2 South African Rand
Field crops
• Maize – major importance, net exports, GM
• Wheat – also staple food, net imports
• Sugar – net exports, move into Africa
• Soya – growing importance, cake imports, GM
• Sunflower – growing importance, S/D balance
• Groundnuts – net exports, but declining
• Dry beans – net imports, also from China
Horticulture
• Totally deregulated market
• Viticulture & Wine – major export industry
• Citrus – 2nd biggest global exports, growing
• Deciduous fruit – major net exports
• Table grapes – major net exports
• Sub-tropical fruit – net exports
• Vegetables – S/D balance, some imports/exports
Animal Production
• Value of production in 2009:
- Broilers R22.5 billion
- Beef R13.3 billion
- Fresh milk R9.1 billion
- Eggs R6.6 billion
- Mutton R3.1 billion
- Pork R3.1 billion
- Wool R1.1 billion
SA Agribusiness • Strong input sector: Seed, fertilizer, crop
protection and veterinary chemicals, animal feed, packaging, agricultural machinery, fuel, etc.
• Financial sector: Major banks, DFI’s, insurance companies, auditors, agribusinesses, etc.,
• Storage, trade and agro-logistics
• Agro-processing and packaging
• Retail Sector
Agricultural trade trends
19
Source: DAFF/NAMC, 2009.
Total
-
5
10
15
20
25
2004 2005 2006 2007 2008
R b
illi
on
Year
Primary exports Primary imports Primary trade balance
Primary
-10
-5
-
5
10
15
20
25
30
35
2004 2005 2006 2007 2008
R b
illi
on
Year
Processed exports Processed imports Processed trade balance
Processed
Agricultural trade
1 Chinese Yuan = 1.2 South African Rand
South African Agricultural Trade
(Source WTA & GTA, USDA-FAS)
(US$ billions) 2007 2008 2009
Agricultural exports $4.0 $5.2 $5.2
% of total SA exports 5.7% 6.5% 8.3%
Agricultural imports $4.2 $4.7 $4.2
% of total SA imports 5.3% 5.2% 6.4%
Major agricultural products exported:
(US$ millions) 2007 2008 2009
Wine $673.6 $753.9 $727.5
Citrus $613.1 $711.4 $667.1
Corn $32.1 $510.3 $444.6
Table grapes $364.5 $387.6 $379.7
Apples $329.5 $367.3 $364.7
Sugar $276.1 $217.9 $386.7
Major export destinations (2009)
United
Kingdom
Netherlands
Zimbabwe
Kenya
Mozambique
Germany
United States
China
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
Major agricultural products imported:
(US$ millions) 2007 2008 2009
Rice $302.1 $463.9 $458.8
Wheat $261.6 $444.6 $282.0
Soybean cake $209.8 $311.9 $297.1
Palm oil $195.7 $299.3 $232.1
Soybean oil $212.0 $288.5 $106.9
Whisky $212.5 $202.9 $201.6
Major countries imported from (2009)
Argentina
Brazil
Thailand
Germany
Malaysia
China
Netherlands
Indonesia
United States
0% 2% 4% 6% 8% 10% 12% 14% 16%
Challenges • Government: - Food security, both household and national: Access to safe, nutritious and affordable food for all - New Growth Path: Job creation, Shared Growth & Opportunities - Empowerment of PDI’s, e.g. AgriBEE, EE, etc. - Land Reform & Rural Development - Industrial Policy Action Plan II: Agro-processing - Competitive environment (Competition Act) - Sustainable resource management, e.g. CC - African development, etc.
Challenges • Private Sector: - Profitability and competitiveness - Transparent and reliable markets (Integrity!) - Engage Govt ito enabling policy environment: Create confidence for long term investment - Need for inclusive Strategic Framework/Plan - Sustainable transformation - Institutional and value chain support (R&D, SPS matters, resource base management, trade facilitation, training & skills development, agro-logistics, Act 36 of 1947, etc.) - African opportunities
Overall Prospects • Much greater food security awareness, both globally and
locally – very positive. Priority for G20, Paris.
• Awareness by government to work closer with Private Sector
• Greater awareness by all of the need to support both commer- cial and developing agriculture. Better implementation NB!
• Substantial markets: locally, regionally, globally, and especially to the East. Need market development, though!
• General commodity and agribusiness infrastructure is good basis – build on this & other institutional capacity.
• New technology/expertise through especially multinationals.
• New global investors looking to Africa for food production
- major development.
Conclusion • Healthy and robust agro-food industry
• Technologically advanced, globally competitive
• Challenges: ‘Nationalisation talk’, Agro-logistics, climate change, water availability and quality, environmental sustainability, food safety regulations, R&D, etc.
• Opportunities: Growing population, consumer spending trends, new markets (esp. to East), etc.
• Major contributor to Food Security, growth and employment in RSA.
Conclusion • We live in uncertain times – many risks and
variables, some controllable, others not or less so.
• Must fully understand both macro- and micro-environment, and the risks and opportunities posed.
• Develop strategic plan and develop business plan accordingly.
• Must clearly articulate and live the value proposition you bring to the value chain.
• BUT, maintain flexibility and adaptability.
Overview of its crop protection chemicals demand
South African sales for crop protection
products: (At grower level, in millions)
Year 2000 2001 2002 2003 2004 2009 est*
SALES (Rand) (x1 000 000)
R 1 712 R 2 092 R 1 850 R 1 500 R 2 100 R 3 104
EX RATE (R/$) 6.92 8.58 10.54 7.55 6.50 7.34
US$
(x1 000 000) $ 247.4 $ 243.8 $ 175.5 $ 198.7 $ 323.1 $ 422.9
VOLUME (kg) (x1 000 000)
50.0 46.6 42.0 35.0 49 53.7
R PRICE/kg R 34.24 R 44.89 R 44.05 R 42.86 R 42.86 R 57.80
$ PRICE/kg $ 4.95 $ 5.23 $ 4.18 $ 5.68 $6.59 $ 7.88
Source: AVCASA, 2011 • *Industry Estimate, as no official figures available since 2004. ~95% accurate. • AVCASA no longer collects data as it could be in breach of Competition Act
1 Chinese Yuan = 1.2 South African Rand
Identifying opportunities for trade and future business development
Market and market features • Highly competitive market – requires innovation
and new product lines continuously. • Crop protection market comprises 4 major segments: - Insecticides - Herbicides - Fungicides - Other chemicals (Adjuvants, PGR’s, etc.) • South Africa is ± 1.5% of the world market • Rest of Africa is ± 1.5% of the world market • Total Africa is ± 3.0% of the world market • SA has growing market (~2% consumption growth in real terms)
Market and market features (Cont.)
• Use changing with huge adoption of GM-crops, e.g. glyphosate versus atrazine use
• Revenue growth very uncertain, depending on exchange rate movements, move to generics, etc.
• Generic products from the Far East (mostly PRC)
already have major market share in South Africa.
• Current market share of generic products is
around 75% and growing as increasingly major
products come off patent.
Regulatory features
• Agricultural chemicals are controlled by the Fertilizers, Farm Feeds, Agricultural Remedies and Stock Remedies Act, No. 36 of 1947.
• GM-crops controlled by the Genetically Modified Organisms Act, No 15 of 1997.
• Current registration process problematic due to capacity problems (toxicologists) at the Department of Health.
• Database of Agricultural Remedies on:
www.croplife.co.za
Registration requirements • The registration holder must be a South African registered
company • Requirements are of a high standard and in line with EU
and USA requirements • The formulated product is registered, not the active only. • Efficacy, phytotoxicity and residue data must be generated
in field and laboratory trials • For generic products 3 successful trials for an identical
registration are required • Registration process takes between 6 to 18 months • All products must be re-registered every year
• The South African importer/agent is responsible for all the above functions.
Registration requirements (Cont.)
Chemical equivalence of the technical to be provided by the manufacturer:
• Must be proven by an accredited GLP laboratory (University of Beijing?).
• All impurities must be identified and quantified.
• Full analysis of 5 commercial batches required.
General features • South Africa is a good market to do business in
because:
- It is a reverse season sales opportunity
- It has a well developed and stable agricultural
sector = predictable use and sales
- Legislative and financial infrastructures are very
secure = transparent procedures and
guaranteed payments
- It is the gateway to Sub-Sahara Africa = growth
opportunity
Major role players in SA Crop Protection Chemicals Market
• Syngenta • Arysta LifeSciences • Villa Crop Protection • Bayer Crop Science Ag • Monsanto • BASF • Du Pont • Others (~7 more) • Distributors also play a major role in the
supply chain and are organized in ACDASA – See www.acdasa.co.za
How do foreign manufacturers sell to the SA market?
OVERSEAS MANUFACTURER / EXPORTER
SOUTH AFRICAN IMPORTER / AGENT
CO-OPERATIVES/ AGRIBUSINESS
FORMULATORS
DISTRIBUTORS / DEALERS
SALES AGENTS
END USERS / FARMERS
Determining factor in entering market
• Commercial farmers require the most effective crop protection solution at the most affordable cost, i.e. productivity consideration is of paramount importance.
• Suppliers therefore have to ensure that a range of good quality products are provided for a range of crops by reputable distributors to ensure maximum customer satisfaction.
Market analysis: Understanding what works and what doesn’t
How can manufacturers/exporters from the PRC enter the South African market
• Not necessary to have own local office in South Africa.
• Appoint a reputable South African importing company as your agent.
• Provide samples for formulation and local registration tests and field trials.
• Provide chemical equivalence of the technical and 5-batch analysis by a recognized GLP laboratory.
• Agent then obtains registration.
• Chinese manufacturer / exporter then sells technical material or formulated product (in US$) to agent.
• Agent then sells to distributors / dealers.
Important points • Many PRC origin products already registered and sold in
South Africa – limited opportunities however available.
• Product must be out of patent in South Africa before generic product can be sold.
• After registration the technical or finished product must always come from the same factory.
• Quality of the technical or finished product must always be the same as that of the original sample.
• Chemical equivalence data, quality and competitive prices are the most important factors determining the market share of products from the PRC.
• Severe price competition exists now because of an over supply of Chinese products .
• To obtain a significant market share, it is better to work with one local agent only.
What doesn’t work
• CropLife very active in Africa with Africa Stockpiles Programme (FAO Bilateral Programme) and CropLife Clean Farms Project – major challenge!
• Unfortunately significant volumes of counterfeit or fake product emerging from Far East – please don’t bring to Africa – see www.agropages.com .
• Counterfeit and fake product having a dreadful effect on man and the environment, whilst the social implications are enormous.
• Food safety at serious risk.
Concluding remarks
• Growth opportunities especially in Africa.
• South Africa an excellent gateway to especially Sub-Sahara Africa.
• Commercial farmers require the most effective crop protection solution at the most affordable cost.
• Focus on chemical equivalence, formulation, labelling, price and especially quality.
• Approach industry with responsibility,
and the environment with stewardship.
THANK YOU
www.agbiz.co.za