South African Business 2017 edition

OVERVIEW Agriculture

OVERVIEW Agriculture Agri-processing is a key focus of future investment. South Africa's varied climate and wide range of soils ensure that it is able to produce a very diverse range of agricultural products. The country's agricultural exports earn the country valuable foreign exchange. Fruit, sugar and wine make up about 7% of the country’s total export basket. Avocados and tomatoes are among other important export crops, while the macadamia nut industry is growing exponentially. More than 50% of agricultural export is made up of processed agricultural products, a promising development for the future of agriprocessing. National trade policy strategies are intended to enhance this trend. Several of the Special Economic Zones around South Africa either have or will in the future have agri-processing facilities. Examples include existing tomato paste and dairy facilities at Coega IDZ, as well as plans to develop the Harrismith SEZ into a hub for agri-processing. The National Empowerment Fund (NEF) currently spends six percent of its allocation on agri-processing but intends to increase that. The focus for the spending of R288-million to date has been on small, medium and micro enterprises (SMMEs) and the NEF is just one state entity that has this focus. Several others are similarly engaged, for example, the Free State provincial government is rolling out a plan to create agri-parks to provide trading facilities, access to markets and training. The Free State Department of Agriculture and Rural Development (DARD) has highlighted the fact that only 11% of the province’s SECTOR INSIGHT The NEF intends to increase the proportion of its budget spend on agri-processing projects. primary agricultural production is processed within the province. A severe long-term drought had a big impact on South African agriculture. Good rains only came in July 2016, by which time the country had to import yellow and white maize (8.3-million tons in total) for the first time in more than a decade. The potato price doubled in 2016. The average 10kg pocket cost R28.45 in 2015, R63.30 in March 2016. The Industrial Development Corporation (IDC) put up R400- million to allow the Land Bank to SOUTH AFRICAN BUSINESS 2017 50

OVERVIEW advance loans to farmers in five provinces in areas that were declared disaster areas. About 850 000 people are employed in the agricultural sector (StatsSA) but many sub-sectors have been laying off workers in recent, dry, times. The exceptions were forestry and aquaculture, both of which increased their labour force. Primary agriculture provides 5% of formal employment in South Africa. A number of former farmers' co-operatives are now substantial agri-businesses. Most have a specific geographic and farming sector focus (BKB is strong in the eastern Free State and Eastern Cape and concentrates on wool and mohair, for example) while some, like the giant grain concern Afgri, have a national presence. Afgri, which is headquartered in Centurion, Gauteng, recently signed a joint venture (GeoAgro Africa) to give its farmers access to satellite technology. Senwes is another company that focusses on grain, and it controls 68 silos. Its operations are run from Klerksdorp in North West Province. Other companies include NTKLA (Limpopo), GWK (Northern Cape), Klein Karoo Agri, VKB (eastern Free State and Limpopo), Kaap Agri (from the Boland to the Eastern Cape and up to Namibia), SSK (Overberg) and TWK (KZN and Mpumalanga). Crops Global demand for macadamia nuts continues to outstrip production, but South African farmers in KwaZulu-Natal, Mpumalanga and Limpopo are doing their best to keep up. About one thousand new hectares are being planted every year, according to the Southern African Macadamia Growers' Association (SAMAC), adding to the existing 19 000 hectares already under macadamias. South Africa is currently the number one supplier in the world, with 27% of the market, followed by Australia. Production of nut-in-shell improved by almost 5% in 2015, to 46 950 tons. About 45% of the previous year's crop was exported, mostly to the USA and Europe. About 3 000 new jobs have been created in the last decade, plus another 1 000 in cracking facilities. A total of 70% of South Africa’s grain production is maize, which covers 60% of the cropping area of the country. The North West Province produces one-third of South Africa’s maize and about 15% of its wheat. The Free State is the country’s largest supplier of wheat (37%) and maize (34%). The Western Cape has 350 000 hectares of wheat-producing land. The South African feed industry has an annual turnover of about R50-billion with most of the raw material being soya and maize. Two of the country's big three sugar producers (Illovo Sugar and Tongaat Hulett) each shut down one of their mills temporarily because of the drought but South Africa still crushed 17.7-million tons of sugar cane in the 2014/15 season. Saleable sugar production figures have returned to two-million tons plus since 2013/14, after dropping to 1.8-million tons in 2011/12. The other big sugar company, TSB Sugar, has been acquired by RCL Foods. TSB milled a record 702 000 tons of raw sugar in 2014/15. The Free State Province supplies significant proportions of the nation’s sorghum, sunflower, potatoes, groundnuts, dry beans, and almost all of its cherries. Barley and canola are produced in the Western Cape. Products distinctive to South Africa, such as rooibos tea (Western Cape) and marula berries (Limpopo) hold great potential to capture niche markets internationally. Fruit South Africa is famous for its fruit. Export volumes, particularly in tropical fruits such as mangoes and avocados, have been growing rapidly in recent years. The sector is highly sophisticated and is skilled at the refrigeration and packing required for European Union standards. Large volumes of exports are achieved in deciduous fruits such as apples, table grapes, pears, peaches, plums and apricots. Avocados thrive in Mpumalanga and Limpopo and production volumes above 110 000 tons per year have been achieved. About 45% of production is exported. Most of South Africa’s citrus and subtropical fruit comes from the eastern part of Limpopo. Some of the world’s biggest farming enterprises operate in Limpopo Province. Westfalia (which is part of the Hans Merensky Group) is an avocado grower of note, while ZZ2 is a 51 SOUTH AFRICAN BUSINESS 2017