gauteng agro-processing strategy

78 Pages·2015·4.25 MB·English

by  Rhoda Wartington

GAUTENG
AGRO-PROCESSING STRATEGY
October 2015
GAUTENG DEPARTMENT OF AGRICULTURE AND RURAL DEVELOPMENT
11 Diagonal Street
Diamond Building
Newtown
Johannesburg,
2000
GAUTENG AGRO-PROCESSING STRATEGY: DRAFT

Table of Contents
SECTION 1: INTRODUCTION ........................................................................................................................................... 1

SECTION 2: PROBLEM STATEMENT................................................................................................................................. 1

SECTION 3: GOVERNMENT FOCUS ON AGRO-PROCESSING ............................................................................................ 3

SECTION 4: INDUSTRY OVERVIEW .................................................................................................................................. 6
4.1 MEAT INDUTSRY .................................................................................................................................................................. 8
4.2 LEATHER INDUSTRY ............................................................................................................................................................. 9
4.3 DAIRY INDUSTRY ................................................................................................................................................................ 10
4.4 GRAIN MILLING AND BAKERY INDUSTRY ........................................................................................................................... 11
4.5 OIL SEEDS AND VEGETABLE OIL INDUSTRY ........................................................................................................................ 12
4.6 NON-ALCOHOLIC BEVERAGES INDUSTRY .......................................................................................................................... 13
4.7 LIQUOR INDUSTRY ............................................................................................................................................................. 14
4.8 ESSENTIAL OILS INDUSTRY ................................................................................................................................................. 15
4.9 AGRO-PHARMACEUTICAL INDUSTRY ................................................................................................................................ 16
4.10 ANIMAL FEEDS INDUSTRY .................................................................................................................................................. 17
4.11 TOP TEN AGRO-PROCESSORS IN GAUTENG ....................................................................................................................... 18
4.11.1 SAB Miller .......................................................................................................................................................... 19
4.11.2 Tiger Brands ...................................................................................................................................................... 19
4.11.3 RCL Foods .......................................................................................................................................................... 20
4.11.4 Heineken ........................................................................................................................................................... 20
4.11.5 Pioneer Foods.................................................................................................................................................... 21
4.11.6 Premier Foods ................................................................................................................................................... 21
4.11.7 Clover Industries ............................................................................................................................................... 22
4.11.8 British American Tobacco ................................................................................................................................. 22
4.11.9 Astral Foods ...................................................................................................................................................... 23
4.11.10 Red Meat Processors......................................................................................................................................... 23
4.12 CONCLUSION ..................................................................................................................................................................... 24

SECTION 5: OPPORTUNITY IDENTIFICATION ................................................................................................................. 25
5.1 ALIGNMENT WITH STRATEGIC GOVERNMENT PRIORITIES ................................................................................................ 25
5.2 LOCAL PRODUCTION BASE................................................................................................................................................. 26
5.3 VIABILITY AND INDUSTRY GROWTH POTENTIAL ................................................................................................................ 27
5.4 BACKWARD AND FORWARD LINKAGES POTENTIAL........................................................................................................... 27
5.5 OPPORTUNITY ANALYSIS RESULTS .................................................................................................................................... 28

SECTION 6: AGRO-PROCESSING STRATEGY................................................................................................................... 29
6.1 VISION AND STRATEGIC FRAMEWORK .............................................................................................................................. 29

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GAUTENG AGRO-PROCESSING STRATEGY: DRAFT

6.2 PILLAR 1: GOVERNMENT-LED INVESTMENT ...................................................................................................................... 31
6.2.1 Cluster Development ............................................................................................................................................ 31
6.2.2 Investment in Strategic Infrastructure ................................................................................................................. 36
6.3 PILLAR 2: PARTNERSHIP DEVELOPMENT ........................................................................................................................... 38
6.3.1 Crowding-in of Private Sector Investment ............................................................................................................ 38
6.3.2 Collaboration ........................................................................................................................................................ 40
6.4 PILLAR 3: TRANSFORMATION ............................................................................................................................................ 42
6.4.1 Improved Market Access ...................................................................................................................................... 42
6.4.2 Promotion of Public Procurement ........................................................................................................................ 44
6.4.3 Technology and Knowledge Transfer ................................................................................................................... 44
6.5 PILLAR 4: CREATING A CONDUCIVE ENVIRONMENT .......................................................................................................... 46
6.5.1 Capacity Building .................................................................................................................................................. 46
6.5.2 Development of Supporting Infrastructure........................................................................................................... 47
6.5.3 Promotion of Agriculture and Agro-processing as Career Options....................................................................... 48
6.6 APPLICABILITY OF STRATEGIC INTERVENTIONS TO THE PRIORITY AGRO-PROCESSING INDUSTRIES ................................. 49

SECTION 7: AGRO-PROCESSING IMPLEMENTATION PLAN ............................................................................................ 50

SECTION 8: AGRO-PROCESSING COSTING PLAN ........................................................................................................... 64

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List of Figures
FIGURE 4.1: AGRO-PROCESSING GVA, SOUTH AFRICA AND GAUTENG, 2003-2013..................................................................................... 6
FIGURE 4.2: PROVINCIAL SHARE OF NATIONAL AGRO-PROCESSING GVA, 2003 & 2013 .............................................................................. 7
FIGURE 4.3: GAUTENG AGRO-PROCESSING GVA PER AGRO-PROCESSING SUB-SECTOR, 2003 & 2013 ............................................................ 7

FIGURE 6.1: GAUTENG AGRO-PROCESSING CLUSTERS ............................................................................................................................ 33
FIGURE 6.2 ALIGNMENT OF STRATEGIC INTERVENTIONS AND AGRO-PROCESSING INDUSTRIES........................................................................ 49

List of Tables
TABLE 4-1: MEAT INDUSTRY OVERVIEW ................................................................................................................................................ 8
TABLE 4-2: LEATHER INDUSTRY OVERVIEW ............................................................................................................................................ 9
TABLE 4-3: DAIRY INDUSTRY OVERVIEW .............................................................................................................................................. 10
TABLE 4-4: GRAIN MILLING AND BAKERY INDUSTRY OVERVIEW ................................................................................................................ 11
TABLE 4-5: OIL SEEDS AND VEGETABLE OIL INDUSTRY OVERVIEW .............................................................................................................. 12
TABLE 4-6: NON-ALCOHOLIC BEVERAGES INDUSTRY OVERVIEW................................................................................................................ 13
TABLE 4-7: LIQUOR INDUSTRY OVERVIEW ............................................................................................................................................ 14
TABLE 4-8: ESSENTIAL OILS INDUSTRY OVERVIEW .................................................................................................................................. 15
TABLE 4-9: AGRO-PHARMACEUTICAL INDUSTRY OVERVIEW ..................................................................................................................... 16
TABLE 4-10: ANIMAL FEED INDUSTRY OVERVIEW .................................................................................................................................. 17
TABLE 4-11: TEN LARGEST AGRO-PROCESSORS IN GAUTENG .................................................................................................................. 18
TABLE 4-12: SABMILLER GAUTENG OPERATIONS ................................................................................................................................. 19
TABLE 4-13: TIGER BRANDS GAUTENG OPERATIONS ............................................................................................................................. 19
TABLE 4-14: RCL FOODS GAUTENG OPERATIONS ................................................................................................................................. 20
TABLE 4-15: HEINEKEN GAUTENG OPERATIONS.................................................................................................................................... 20
TABLE 4-16: HEINEKEN GAUTENG OPERATIONS.................................................................................................................................... 21
TABLE 4-17: PREMIER FOODS GAUTENG OPERATIONS ........................................................................................................................... 21
TABLE 4-18: CLOVER INDUSTRIES GAUTENG OPERATIONS ...................................................................................................................... 22
TABLE 4-19: BRITISH AMERICAN TOBACCO GAUTENG OPERATIONS .......................................................................................................... 22
TABLE 4-20: ASTRAL FOODS GAUTENG OPERATIONS ............................................................................................................................. 23
TABLE 4-21: RED MEAT PROCESSORS - GAUTENG OPERATIONS............................................................................................................... 23

TABLE 5-1: STRATEGIC GOVERNMENT PRIORITIES ALIGNMENT RATING ...................................................................................................... 26
TABLE 5-2: LOCAL PRODUCTION BASE RATING ...................................................................................................................................... 26
TABLE 5-3: VIABILITY AND INDUSTRY GROWTH POTENTIAL RATING ........................................................................................................... 27
TABLE 5-4: LINKAGES RATING ........................................................................................................................................................... 27
TABLE 5-5: OPPORTUNITY ANALYSIS RESULTS ....................................................................................................................................... 28

TABLE 6-1: PROJECTS/ ACTIONS IN SUPPORT OF AGRO-PROCESSING CLUSTER DEVELOPMENT ......................................................................... 35
TABLE 6-2: PROJECTS/ ACTIONS IN SUPPORT OF STRATEGIC INFRASTRUCTURE INVESTMENT ........................................................................... 37
TABLE 6-3: PROJECTS/ ACTIONS IN SUPPORT OF CROWDING-IN OF PRIVATE SECTOR INVESTMENT ................................................................... 39
TABLE 6-4: PROJECTS/ ACTIONS IN SUPPORT OF COLLABORATION WITHIN THE AGRO-PROCESSING SECTOR ....................................................... 41
TABLE 6-5: PROJECTS/ ACTIONS IN SUPPORT OF IMPROVED MARKET ACCESS .............................................................................................. 43
TABLE 6-6: PROJECTS/ ACTIONS IN SUPPORT OF PUBLIC PROCUREMENT WITHIN THE AGRO-PROCESSING SECTOR ............................................... 44

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TABLE 6-7: PROJECTS/ ACTIONS IN SUPPORT OF TECHNOLOGY AND KNOWLEDGE TRANSFER .......................................................................... 45
TABLE 6-8: PROJECTS/ ACTIONS IN SUPPORT OF CAPACITY BUILDING ......................................................................................................... 47
TABLE 6-9: PROJECTS/ ACTIONS IN SUPPORT OF DEVELOPING SUPPORTING INFRASTRUCTURE ........................................................................ 48
TABLE 6-10: PROJECTS/ ACTIONS IN SUPPORT OF PROMOTING AGRICULTURE AND AGRO-PROCESSING AS CAREER OPTIONS ................................. 49

TABLE 7-1: PILLAR 1 - GOVERNMENT-LED INVESTMENT IMPLEMENTATION PLAN ........................................................................................ 50
TABLE 7-2: PILLAR 2 – PARTNERSHIP DEVELOPMENT IMPLEMENTATION PLAN ........................................................................................... 54
TABLE 7-3: PILLAR 3 - TRANSFORMATION IMPLEMENTATION PLAN .......................................................................................................... 57
TABLE 7-4: PILLAR 4 – CREATING A CONDUCIVE ENVIRONMENT IMPLEMENTATION PLAN ............................................................................ 61

TABLE 8-1: GOVERNMENT-LED INVESTMENT COSTING PLAN ................................................................................................................... 64
TABLE 8-2: PILLAR 2 – PARTNERSHIP DEVELOPMENT COSTING PLAN ........................................................................................................ 66
TABLE 8-3: PILLAR 3 - TRANSFORMATION COSTING PLAN ...................................................................................................................... 68
TABLE 8-4: PILLAR 4 – CREATING A CONDUCIVE ENVIRONMENT COSTING PLAN ........................................................................................ 70

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GAUTENG AGRO-PROCESSING STRATEGY: DRAFT

Section 1: Introduction
The agro-processing sector in Gauteng has the potential to become an industrial impetus that can create jobs and
address some of the Province’s macro-economic challenges. Agro-processing is defined as a manufacturing
subdivision that processes raw materials and intermediate products derived from primary production and cultivation
in the agricultural sector. This includes products that originate from agriculture, forestry, and fisheries1. In South Africa,
several government interventions and investments are geared towards growing this industry, thus giving a solid
foundation for the empowerment of stakeholders such as smallholder enterprises to participate in the mainstream
economy of the Province.

One of the most important features of any industry is the degree to which it is able to generate demand for the
products of other industries. Agro-processing is known for its strong up- and downstream linkages. Upstream, the
sector links to primary agriculture across a variety of farming activities and products. Downstream, agro-processing
outputs are both intermediate products to which further value is added and final goods that are marketed through
wholesale and retail chains.

The key benefits that will be realised through the implementation of the Gauteng Agro-processing Strategy includes:
 Job opportunities in the entire value chain of the agriculture sector;
 Promotion and investment in the agro-processing sector of the Gauteng Province;
 Improvement in competitiveness of the local economy by optimally using the local resource base and
locational advantages;
 Stronger integration between the different economic sectors of the Province;
 Enhancement of local businesses/enterprises and skills development for the agro-processing industries; and
 Promotion of overall growth and development of the agro-processing industries.

Section 2: Problem Statement
Traditionally the agricultural sector has played a major part
in the development of emerging economies and has
acted as a significant job creator. However, as economies
advance and per capita incomes increase, the role of
agriculture changes and the demand for value-added
and processed food products increase, shifting the focus
away from pure primary agriculture towards agro-
processing.

With the Gauteng province being the economic hub of
South Africa, the Province is highly urbanised and attracts
higher skilled and well-paid residents, resulting in the
Province having the highest per capita income level in the
country. As such, the demand for high value goods is
particularly high in Gauteng.

At the same time, the central location of the Province, its access to export markets and its well-developed
infrastructure networks see much of the country’s agro-processing activities taking place in Gauteng. Despite this,
the Province has not fully embraced and capitalised on agro-processing as a driver for economic growth, job
creation and development.

1 Food and Agriculture Organization of the United Nations. 1997. The State of Food and Agriculture 1997
http://www.fao.org/docrep/w5800e/w5800e00.htm

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GAUTENG AGRO-PROCESSING STRATEGY: DRAFT

Gauteng is also faced by the current reality of:
 Decline in the economic contribution of the agriculture sector: The contribution of agricultural activities in the
Province has declined by 0.8% between 2003 and 2013, contributing less than 0.5% to the GVA and only 1.4%
to the employment of the Province in 20132. This is in line with a general decline in the contribution of
agriculture to economic growth in the country as a whole. There is thus a need for further economic
diversification and value-addition to take place to counter the declines in the agricultural sector. A strong
agro-processing sector could in turn again stimulate primary agricultural activities.
 Imports: South Africa is a net importer of processed agriculture, forestry and fisheries products. This presents
an opportunity for the country to explore possibilities to develop the local processing industry to play a more
significant role, both in terms of its economic contribution as well as equity and inclusivity of the previously
marginalised. The Gauteng Province is well-positioned to take up these opportunities, given its central
location and existing infrastructure and export networks.
 Urbanisation and availability of land: The Gauteng province is the smallest province in South Africa, making
up only 1.4% of the total surface area of the country. The Province also faces rapid in-migration and
increasing urbanisation, with more than 96% of the Province being urban in nature. Not only does this
urbanisation lead to increased consumer demand for food and higher-value products, but it also places
significant barriers on the availability of land for the expansion of agricultural development. This situation
requires a shift in focus towards value-addition and processing.
 Food security issues: Food security remains a significant challenge for the African continent and for South
Africa. In Gauteng almost 20% of households go to bed hungry due to lack of food security and sustainable
incomes. The agro-processing industry has significant to increase demand and therefore stimulate
agricultural production, while creating jobs and stimulating economic growth, which allows for improved
living standards and reduced hunger.
 Strong industry dominance by large-scale players, limited transformation and lacking participation of small
and medium-scale agro-processors: Although much of the country’s agro-processing activities are
concentrated in the Gauteng province, and Gauteng making the largest agro-processing GVA (28.5% in
2013) and significant job creation (23% or 124 000 jobs in 2013) contributions to the country, imbalances in
the agro-processing industry exist. The agro-processing industry is dominated by a few large players that own
large proportions of the market share. New role-players in both the agricultural and agro-processing sectors
are few and the skewed participation of farmers and agro-entrepreneurs in the value chain is evident.
Smaller enterprises face challenges of poor access to markets, technologies and skills. Many smallholder
farmers fail to progress to value-adding activities. Inadequate infrastructure and limited incentives further
hinder entry and growth of smaller processors into the market.

The challenges identified above highlight that interventions are required to redress the imbalances of the past and
the skewed nature of the sector. But it also identifies a significant opportunity for agro-processing to become a driving
force for economic growth in Gauteng. While the intent and commitment by the Province in this regard is well
documented, a planned and coordinated approach to the development of the industry is required. Through the
development of a targeted Agro-processing Strategy, the Gauteng province can strengthen its competitiveness and
support localisation.

2 Urban-Econ Calculations based on Quantec Research Data, 2015

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GAUTENG AGRO-PROCESSING STRATEGY: DRAFT

Section 3: Government Focus on Agro-processing
In line with national developmental goals, the Gauteng Provincial Government is turning its attention to agro-
processing with the aim of reviving areas in need of economic stimulation.

From a national development perspective, the agro-processing industry is among the sectors identified by the
Industrial Policy Action Plan (IPAP), and the National Development Plan (NDP) for its potential to spur growth and
create jobs, due to its strong backward linkages with the primary agricultural sector. It is imperative that any agro-
processing interventions are aligned to the objectives as set out in these overarching national policies.

INDUSTRIAL POLICY ACTION PLAN (IPAP)-2013/14 –
NATIONAL DEVELOPMENT PLAN-2030 (2010)3
2015/164
The NDP focus on The IPAP sets out an industrial policy framework with
eliminating poverty and overriding interventions that will prevent industrial
reducing inequality, the two decline and support growth as well as diversifications of
single biggest problems in South Africa’s manufacturing sectors. The IPAP will
South Africa. These aspects ultimately lead to a restructured economy with more
affect every other aspect of value-adding, labour intensive and environmentally
development and all sustainable industrial activities.
aspects of life for the citizens
of this country. IPAP identifies the
agro-processing
The NDP lends support to the industry as a sector
National Growth Path, and with potential to
by implication the Gauteng spur growth and
Agro-processing Strategy. The NDP indicates that in create jobs
areas with greater economic potential, industries such because of its
as agro-processing, tourism, fisheries and small strong backward
enterprise development should be developed with linkage with the
market support. It further states that in South Africa a primary agricultural sector. The agriculture and agro-
highly centralised, vertically integrated agro-processing processing value chain represents an important source
sector already exists for staple foods such as maize, of labour intensive growth. In addition, this value chain
wheat, sugar, sunflower oil, tea, flour, peanut butter, is central to the rural development and smallholder
cigarettes, beer, fruit juices and canned goods. Key farmer development objectives of government.
proposals identified for the agriculture and agro-
processing sectors include the following: The key-programmes identified for agro-processing
within the IPAP is the following:
 Greater investment in providing innovative market
linkages for small-scale farmers in communal and  Development of a Food-processing Strategy and
land-reform areas. Action Plan with the objective of accelerated growth
 As part of a comprehensive support packages for in the food-processing sector.
farmers, preferential procurement mechanisms  Development of a small-scale milling industry to
should be put in place to ensure that new enable small-scale maize milling enterprises to
agricultural entrants can also access these produce for local markets at competitive prices.
markets.  Enhancement of competition in the fruit and
vegetable canning industry - The creation of a

3 National Planning Commission. 2010. National Development Plan.
http://www.gov.za/sites/www.gov.za/files/Executive%20Summary-NDP%202030%20-%20Our%20future%20-
%20make%20it%20work.pdf
4 DTI. 2014. Industrial Policy
Action Plan: ECONOMIC SECTORS AND EMPLOYMENT CLUSTER: IPAP 2014/15 - 2016/17
http://www.gov.za/sites/www.gov.za/files/IPAP2014.pdf

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GAUTENG AGRO-PROCESSING STRATEGY: DRAFT

 Growth in agricultural production has always been sustainable platform for the long-term growth and
fuelled by technology, and the returns to competitiveness of the industry.
investment in agricultural research and  Development of a Soybean Action Plan promoting
development are high. Technology development market linkages between primary agricultural
should therefore be prioritised. producers and processors.
 Policy measures to increase intake of fruits and  Development of the organic food sector – The
vegetables, and reduce intake of saturated fats, development of a competitive organic sub-sector
sugar and salt, as recommended in the South producing high-quality food products for both local
African food dietary guidelines, to accompany and export markets.
strategies to increase vegetable and fruit  Supporting the Public-Private Partnership (PPP) for
production. Food Security – Entails smallholder farmer access to
 Exploration of innovative measures, such as formal retail chains, Government procurement and
procurement from small-scale farmers to create small scale processing opportunities.
local buffer stocks and community-owned
emergency services.

In support of the NDP and IPAP the Agricultural Policy Action Plan (APAP) (2015-2019) was developed.

AGRICULTURAL POLICY ACTION PLAN (APAP) (2015-2019)
The APAP sets an action plan for a five-year period (2015-2019), and seek to translate the high-level responses
offered in the Integrated Growth and Development Plan (IGDP) into tangible, concrete steps. The APAP informs
the Gauteng Agro-processing Strategy through the identification of the following specific sub-sectors for key action
programmes:
 Poultry/Soybeans/Maize Integrated Value Chain
 Red meat value chain
 Wheat value chain
 Fruits and vegetables
 Wine industry
 Forestry
 Small scale fisheries
In support of the national development trajectory, the Gauteng Provincial Government has recently delivered the
Gauteng State of the Province Address, and held the Gauteng Agro-processing Industry Summit, in support of the
provincial agro-processing sector.

GAUTENG STATE OF THE PROVINCE ADDRESS5 GAUTENG AGRO-PROCESSING INDUSTRY SUMMIT6
In the 2015 State of the Province The Agro-processing Industry Summit held in 2015 was
Address, Gauteng Premier hosted by the Gauteng Department of Agriculture and
David Makhura unveiled Rural Development (GDARD). The aim of the summit was
ambitious plans to grow the to develop an agro-processing strategy that focuses on
economy in the Province, reforming, developing and increasing the number of
which he says will create investors and participants in the sector.
thousands of jobs for the
unemployed in the Province. The strategic priority was to create a platform for multi-
Agro-processing will be key in stakeholder engagement, targeted towards increasing
the development of the income, creating more jobs and enhancing
competitiveness within the agro-processing sector. This is

5 Makhura, D. 2015. Gauteng State of the Province Address
http://www.gautengonline.gov.za/Documents/SOPA%202015%20Speech%20booklet.pdf Gauteng Department of
6 Agriculture and Rural Development. 2015. Gauteng Agro-processing Industry Summit Report.

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