As the name suggests, the agri-processing industry transforms and adds value to products that originate from agriculture, forestry and fisheries and its Standard Industrial Classification categorises 11 divisions that make up the sector: food, beverages, paper and paper products, wood and wood products, textiles, wearing apparel, furniture, tobacco, rubber products, footwear and leather and leather products.
Facts about agri-processing in South Africa
Trade and Industry minister Dr Rob Davies said in 2013, the agro-processing sector is worth R49-billion and has created as many as 207 893 jobs in the third quarter of that year. It is also significant in sustaining the environment and growing the economy. He added that since 2008, food processing grew by over 2% more than the manufacturing sector as a whole. (Latest figures)
The government’s New Growth Path (NGP) and National Development Plan (NDP) had both identified agri-processing as a sector with high growth potential, despite the challenges of imports competition, loss of market and the unstable currency and exchange rate.
Agriculture as a percentage of GDP has decreased over past four decades which doesn’t imply an industry in decline, just that the economy has gradually become more advanced. In 1960, agriculture constituted 9,1% of the total economy; this has decreased to only 2,2% in 2013. Though this decrease would seem to be a negative trend from a farmer’s perspective, it signals that the South African economy is reaching maturity as the secondary and tertiary sectors become more important.
A key characteristic of the agri-processing sector is its strong up- and downstream linkages. Upstream, the sector links to primary agriculture across a variety of farming models and products. Downstream, agro-processing outputs are both intermediate products to which further value is added and final goods, which are marketed through wholesale and retail chains as well as a diverse array of restaurants, pubs, shebeens and fast-food franchises. This link with agriculture makes it critical for employment creation and poverty eradication.
For the purposes of data continuity, the agri-processing sector is defined in statistical terms by the food-processing and beverage manufacturing sub-sectors.
Some challenges facing the agri-processing industry
Market concentration
- Though large enterprises in the agri-processing industry contributed a significant share of income and employment, the relative share of SMEs to the total employment is higher, compared to their share of the total income in the industry. Therefore, SMEs have greater potential of generating jobs in the agri-processing industry. However, agri-processing industry is highly concentrated and dominated by few role players.
SME enterprises
- Though few of the challenges facing the SMEs are unique for each division, it can be asserted that lack of access to finance, inadequate skills and inaccessible government support are the foremost challenges facing most SMEs across the divisions. Since the potential for generating more employment is higher for SMEs, a policy intervention to alleviate some of these challenges is critical to realise their full potential and lessen the market concentration.
