Overview on South African Agriculture and Agribusiness

USA NAMPO Exhibitors

15 May 2011

John Purchase

Content

• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges

Introduction• 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 semi-arid• Deregulation & market freedom • Number of competitive advantages - Near world-class infrastructure - Counter-seasonality to Europe - 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: ~49,0 million, ~60% in urban areas)

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: StatsSAGraph: ABC

Source: AMT, 2011

FAO Food Price Index

Source: FAO

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 2008

Source: SAARF AMPS data for the period 2004 to 2009, as quoted by BFAP

SA Resource Situation• Land issue: sensitive now, awaiting Green Paper• Energy crisis and energy security situation• Electricity price hikes (31% + 25% pa next 3 years)• Scarce high potential agricultural land to mining, esp.

Mpumalanga, and urban development• Water and water quality crisis• Climate Change effects create uncertainty• Soil degradation/erosion• Resources for sustainable expansion?!• Greater competition for resources

Global warming: Effect?!

Content• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges

Commercial Agric Census 2007Indicator 1993 2002 2007

Farming units 57 980 45 818 39 982

Gross Farm income (R x1 000 000) 19 620 53 329 79 544

Employees Remuneration (R X1 000 000) 3 637 6 216 8 611

Paid employees 1 093 265 940 820 796 806

Expenditure (R X1 000 000) (Current & Cap) 16 377 45 038 54 072

Market value of assets (R X1 000 000) 66 905 98 428 178 647

Farming debt (R X1 000 000) 15 295 30 857 37 090

Ratio between Farming Debt and GFI (%) 78,0 57,9 46,6

Source: StatsSA

Performance of SectorGross Value of Production in R 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.

Performance of Sector

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

Ra

nd

X1

00

0 0

00

Seasons

Gross and Nett Farming Income

Gross Farm Income Nett Farm Income

Source: DAFF, 2009.

Net farm income

Source: AMT, 2011

Cost price squeeze

Source: AMT, 2011

SA Agricultural Sectors1. Field crops - Maize (Corn), wheat, sugar, sunflower, soybean, groundnuts, dry beans, etc.2. Horticulture - Wine/Viticulture, Citrus, Deciduous fruit, sub-tropical fruit, table grapes, vegetables3. Animal production - Poultry, beef, dairy, mutton, wool, mohair, ostrich, game/venison

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

Marketing• Fresh Produce Markets (FPM’s) play major

role as basic price discovery mechanism and wholesale market

• However, reduction in trade from 64% to 53% of total production from 1994 to 2004

• Marketing following global trend of retailers (supermarkets), processors and wholesalers procuring directly from producers – shortening/integration of supply chain

SA Wine Production, Consumption & Exports

Source: BFAP, 2010

Vegetables

Value of total production in 2009:US$1.2 billion

Source: DAFFGraph: ABC

FruitValue of production (2009):

Deciduous fruit: US$0.9 billionCitrus: US$0.7 billion

Viticulture: US$0.4 billion

Exports (2009):Wine: US$728 millionCitrus: US$667 million

Table grapes: US$380 millionApples: US$365 million

Source: BFAP, 2010

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 Meat consumption

Source: BFAP, 2010

Content• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges

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

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%

Content

• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges

South African Agriculture:

Prospects and Challenges

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, JADAFA, 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, crop estimates, 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: 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.

THANK YOU

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