IPAP 2’s aim is to expand production in value-added sectors, compete in export markets, and create import replacements in the domestic market. Agro-processing is one of IPAP 2’s core investment clusters, alongside metals fabrication, the automotive sector, and energy-saving industries.
IPAP 2 focuses on developing a range of industries, from small-scale milling operations in the former homelands, to value-adding to rooibos and honey bush tea, which are currently exported in bulk. The canning industry will also be made more productive and innovative. The section also covers the competitive import replacement of soya oil and organic production like vegetables and cotton.
“The time is right to start thinking about agro-processing,” said Rian Coetzee, head of the Industrial Development Corporation’s (IDC) food, beverage and agro-industries unit. “I’m seeing a match between the private sector and government’s desire to develop agro-processing.
The move must be market-driven and market-led, not production-pushed, because resource-poor farmers will get nowhere if they don’t have market access.”The IDC’s core mandate is to facilitate industrialisation and Coetzee said their focus was increasingly moving towards agro-processing. “It’s a priority sector and the IDC is helping roll out some of the IPAP 2 strategies,” he noted.
Coetzee said that with South Africa’s maize surplus, many agri-businesses were looking at value adding. “They’re taking it very seriously and we’re working with a number of them to pursue opportunities, be it in terms of milling or going into the animal-feed or poultry value chains.”
Agriculture minister Tina Joemat-Pettersson said agricultural policies must pay particular attention to value-adding and agro-processing as a means of expanding wealth creation, creating jobs and building the revenue base. The Land Bank recently unveiled plans to introduce a value-chain financing model that would see financing businesses involved in producing, manufacturing and marketing food.
The IDC has invested in agro-processing across the continent. “For example, in Ethiopia, African Juice is rehabilitating mango and tropical fruit orchards that produce juice for EU markets,” said Coetzee.
He added they’ve also invested in cross-border value chains, like a cassava starch processing plant in Swaziland. “The processed material is now imported into South Africa for use in the paper and food additive industries. It replaces imports from Thailand. We also want to focus on intra-SADC value chains.
“In the past two months, major international companies have started looking at South Africa as a raw-material supplier into global value chains, especially on the beverage side. It’s important that the IDC steps forward and puts down finance to leverage private investors.”At the Africa Investor Agribusiness Investment Summit recently held in Durban, Africa Project Access MD Paul Runge said value-adding was on the increase in sub-Saharan Africa and the flow of investments into agricultural projects was at “unprecedented” levels.
“We must be clever and keep control of our products,” Runge said. “The test will be if countries are exporting raw materials or using them locally. We want to get maximum local beneficiation and value-adding.” London-based Silk Invest’s investment director Patrick Landi said they were investing in agro-processing businesses in seven African countries and predicted a continued upsurge in investment in agriculture.
Rohatyn Group fund manager Ugo Ikemba said there was a shift in capital funds to Africa. He revealed his fund had invested in a South African chicken producer who would start producing and processing chicken and meat products in West African countries next year.
However, Grain SA farmer development manager Jane McPherson stressed the need for urgent investment in agro-processing facilities in South Africa. “We have a 4 million ton grain surplus and we’ll soon have an oversupply of sunflower and soya because we don’t have processing facilities,” she said. “Grain farmers are experiencing one of their worst years because prices are too low. We need investment in agro-processing urgently.”
Agricultural Business Chamber economic intelligence manager Lindie Stroebel echoed McPherson’s
call for urgent investment from government and the private sector in local value-adding and manufacture of agricultural products.She said the agricultural sector was losing jobs because processed products were being imported, instead of produced and manufactured locally. “Almost 100 000 jobs in primary agriculture have already been lost over the past year,” Stroebel noted.Citing Stats SA, Stroebel said primary agriculture had shed 13% of its jobs, compared to the total economy’s loss of 5%.