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

2. PRESENTATION OUTLINE  Macro economic statistics  Performance of the agro-processing sector in SA Economy  Strategic intervention pillars  Opportunity for growth and investment  Conclusion 2

3. List of abbreviations APAP -Agricultural Policy Action Plan BFAP -Bureau for Food and Agricultural Policy GDP -Gross Domestic Product IPAP -Industrial Policy Action Plan MTSF -Medium Term Strategic Framework NDP - National Development Plan SIC - Standard Industrial Classification SONA - State of the Nation Address by the President 3

4. Classification The 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 products  Textiles, footwear and apparel;  Leather products; and  Rubber products 4

5. Relative performance of the agro-processing industry Comparison year AgricultureMiningManufacturingServices % share in Gross Domestic Product (GDP) 19707.110.637.143.2 20132.29.228.260.2 Manufacturing (2014) % share of total Employment (‘000) Contribution of industry (‘000) Food, beverages and tobacco20.5251 Textiles, clothing and leather goods3.2114 Wood and paper; publishing and printing8.6155 Petroleum products, chemicals, and plastic24.4162 Other non-metal mineral products4.773 Metals, machinery and equipment19.6334 Source: Stats SA 520 (32.3%) 5

6. Significance of agro-processing sector (2013) SectorGDPEmploymentInvestment Agriculture, forestry and fisheries 2,4%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 2013 NDP sets economic growth target of at-least 5% by 2019 6

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8. Agricultural trade ratio (BFAP) 8

9. Opportunity for growth continued Growth opportunity NDP postulates a positive trade balance of primary and processed agricultural products 9

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

11. Output: Agro-processing NDP 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-processing Agro-processing identified by NDP as having potential to significantly create jobs. IPAP further depicts agro-processing as having highest employment multiplier 13

14. 14 Problem statement 14

15. High post-harvest loses translates to raw material for processing Agro-processing segment Category Range of percentage loss Food and beverage Roots and tubers10 - 40% Milk8 - 16% Fruits and vegetables15 - 44% Cereals, oil seeds and pulses15 - 30% Fish and sea food10 - 40% Meat6 - 8% Smallholder producers 15

16. Plans, policies and strategy for intervention NDPMTSFIPAPAPAPSONA (9 Point Plan)Strategy Revive rural economies through greater economic potential industries such as agro-processing Maintain positive trade balance for primary and processed agricultural products Creation of jobs and reduction of poverty Outcomes 4, 5 and 7 Developing emerging broiler producers Support to poultry/soybean/m aize integrated value chain Revitalization 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 industry Enhancement of fruit and vegetable canning industry Support to fruit and vegetable value chain Commercialis ation of the industrial cassava and moringa Support through agricultural research through ARC & DST Support and development of small and medium agro- processing enterprises 16

17. Strategic intervention pillars  Pillar 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 implementation Christy et.al, 2009 Pillar 1 Entrepreneurial Support Pillar 2&3 Enterprise development and R&D Pillar 4 Infrastructure investment Coach-Lab for entrepreneurs with EDD & Innovation HUB Supplier Development Programme with Tiger Brands and Massmart Bulk infrastructure via SIP 11 Processing infrastructure via thedti incentive schemes 18

19. Integrated decision-making approach 19

20. Opportunity for investment and growth Intervention channels Opportunities for exploitation 20

21. Recapitalisation of Valley Farms Fruit Processing Facility Valley 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 R4.7million Currently 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 jobs The dti is currently assisting the facility to expand exports Malaysia, China, Japan, Indonesia, Australia and New Zealand.  21

22. Conclusion  Agro-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 you END 24