Overview on South African Agriculture and Agribusiness

1. Overview on South African Agriculture and Agribusiness USA NAMPO Exhibitors 15 May 2011 John Purchase

2. Content • Introduction • SA Agriculture • SA Agribusiness • Prospects & Challenges

3. Introduction • Well developed commercial sector and subsistence oriented sector – dual economy • Only ~12% of land area arable, of which 22% high potential • ~1.3 million hectares under irrigation • Water major limiting factor – SA semi-arid • Deregulation & market freedom • Number of competitive advantages - Nearworld-class infrastructure - Counter-seasonality to Europe - Biodiversity - Trade agreements - Competitive input costs - Access to latest technology & innovation

4. Role of Agriculture in SA Economy Strategic sector – provides food, fiber, wine & beer, satisfying two basic needs of man (+ others!) Has provided national food security since the start of the 20th century (Pop: ~4,0 million), right through to the 21st century (Pop: ~49,0 million, ~60% in urban areas)

5. Contribution of Primary Agriculture to GDP (Source: Statssa) % Graph: ABC

6. SA economic growth: Tradable goods sectors lag the non-tradable goods sectors Source: StatsSA Graph: ABC

7. Source: AMT, 2011

8. FAO Food Price Index Source: FAO

9. Inflation Source: AMT, 2011

10. Exchange rate Source: AMT, 2010

11. SAARF LSM Segments: Proportion of SA adult population and average monthly householdincome in 2009 Source: SAARF (2010a) & BFAP, 2010

12. LSM class mobility: All adults during the period 2004 to 2008 Source: SAARF AMPS data for the period 2004 to 2009, as quoted by BFAP

13. SA Resource Situation • Land issue: sensitive now, awaiting Green Paper • Energy crisis and energy security situation • Electricity price hikes (31% + 25% pa next 3 years) • Scarce high potential agricultural land to mining, esp. Mpumalanga, and urban development • Water and water quality crisis • Climate Change effects create uncertainty • Soil degradation/erosion • Resources for sustainable expansion?! • Greater competition for resources

14. Global warming: Effect?!

16. Content • Introduction • SA Agriculture • SA Agribusiness • Prospects & Challenges

17. Commercial Agric Census 2007 Source: StatsSA

18. Performance of SectorGross Value of Production in R million R'million Source: DAFF, 2010.

19. Performance of Sector Source: DAFF, 2009.

20. Net farm income Source: AMT, 2011

21. Cost price squeeze Source: AMT, 2011

22. SA Agricultural Sectors • Field crops - Maize (Corn), wheat, sugar, sunflower, soybean, groundnuts, dry beans, etc. • Horticulture - Wine/Viticulture, Citrus, Deciduous fruit, sub-tropical fruit, table grapes, vegetables • Animal production - Poultry, beef, dairy, mutton, wool, mohair, ostrich, game/venison

23. Field crops • Maize – major importance, net exports, GM • Wheat – also staple food, net imports • Sugar – net exports, move into Africa • Soya – growing importance, cake imports, GM • Sunflower – growing importance, S/D balance • Groundnuts – net exports, but declining • Dry beans – net imports, also from China

28. Horticulture • Totally deregulated market • Viticulture & Wine – major export industry • Citrus – 2nd biggest global exports, growing • Deciduous fruit – major net exports • Table grapes – major net exports • Sub-tropical fruit – net exports • Vegetables – S/D balance, some imports/exports

29. Marketing • Fresh Produce Markets (FPM’s) play major role as basic price discovery mechanism and wholesale market • However, reduction in trade from 64% to 53% of total production from 1994 to 2004 • Marketing following global trend of retailers (supermarkets), processors and wholesalers procuring directly from producers – shortening/integration of supply chain

30. SA Wine Production, Consumption & Exports Source: BFAP, 2010

31. VegetablesValue of total production in 2009:US$1.2 billion

32. Source: DAFF Graph: ABC

33. FruitValue of production (2009): Deciduous fruit: US$0.9 billionCitrus: US$0.7 billionViticulture: US$0.4 billionExports (2009):Wine: US$728 millionCitrus: US$667 millionTable grapes: US$380 millionApples: US$365 million

35. Source: BFAP, 2010

36. Animal Production • Value of production in 2009: - Broilers R22.5 billion - Beef R13.3 billion - Fresh milk R9.1 billion - Eggs R6.6 billion - Mutton R3.1 billion - Pork R3.1 billion - Wool R1.1 billion

37. SA Meat consumption Source: BFAP, 2010

38. Content • Introduction • SA Agriculture • SA Agribusiness • Prospects & Challenges

39. SA Agribusiness • Strong input sector: Seed, fertilizer, crop protection and veterinary chemicals, animal feed, packaging, agricultural machinery, fuel, etc. • Financial sector: Major banks, DFI’s, insurance companies, auditors, agribusinesses, etc., • Storage, trade and agro-logistics • Agro-processing and packaging • Retail Sector

40. South African Agricultural Trade (Source WTA & GTA, USDA-FAS) (US$ billions) 200720082009 Agricultural exports $4.0 $5.2 $5.2 % of total SA exports 5.7% 6.5% 8.3% Agricultural imports $4.2 $4.7 $4.2 % of total SA imports 5.3% 5.2% 6.4%

41. Major agricultural products exported: (US$ millions) 200720082009 Wine $673.6 $753.9 $727.5 Citrus $613.1 $711.4 $667.1 Corn $32.1 $510.3 $444.6 Table grapes $364.5 $387.6 $379.7 Apples $329.5 $367.3 $364.7 Sugar $276.1 $217.9 $386.7

42. Major export destinations (2009)

43. Major agricultural products imported: (US$ millions) 200720082009 Rice $302.1 $463.9 $458.8 Wheat $261.6 $444.6 $282.0 Soybean cake $209.8 $311.9 $297.1 Palm oil $195.7 $299.3 $232.1 Soybean oil $212.0 $288.5 $106.9 Whisky $212.5 $202.9$201.6

44. Major countries imported from (2009)

45. Content • Introduction • SA Agriculture • SA Agribusiness • Prospects & Challenges

46. South African Agriculture: Prospects and Challenges

47. Challenges • Government: - Food security, both household and national - Access to safe, nutritious and affordable food for all - New Growth Path: Job creation, Shared Growth & Opportunities - Empowerment of PDI’s, e.g. AgriBEE, EE, etc. - Land Reform & Rural Development - Industrial Policy Action Plan II: Agro-processing - Competitive environment (Competition Act) - Sustainable resource management, e.g. CC - African development, JADAFA, etc.

48. Challenges • Private Sector: - Profitability and competitiveness - Transparent and reliable markets (Integrity!) - Engage Govt ito enabling policy environment: Create confidence for long term investment - Need for inclusive Strategic Framework/Plan - Sustainable transformation - Institutional and value chain support (R&D, SPS matters, resource base management, trade facilitation, training & skills development, crop estimates, agro-logistics, Act 36 of 1947, etc.) - African opportunities

49. Overall Prospects • Much greater food security awareness, both globally and locally – very positive. Priority for G20, Paris. • Awareness by government to work closer with Private Sector • Greater awareness by all of the need to support both commer- cial and developing agriculture. Better implementation NB! • Substantial markets: locally, regionally, globally, and especially to the East. Need market development, though! • General commodity and agribusiness infrastructure is good basis – build on this & other institutional capacity. • New technology/expertise through especially multinationals. • New global investors looking to Africa for food production – major development.

50. Conclusion • Healthy and robust agro-food industry • Technologically advanced, globally competitive • Challenges: Agro-logistics, climate change, water availability and quality, environmental sustainability, food safety regulations, R&D, etc. • Opportunities: Growing population, consumer spending trends, new markets (esp to East), etc. • Major contributor to Food Security, growth and employment in RSA.