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The Agroprocessing Sector

• The Trade and Investment South Africa Profile
• An Introduction to the South African Economy
• An Overview of the Agroprocessing Sector
• Preferential Trade Agreements
• South African Development Community
• South African Customs Union
• Major International Companies Operating in South Africa
• Business Opportunities
• Incentives

The Trade and Investment South Africa Profile

When Trade and Investment South Africa was formed in 2000 as a division of the Department of Trade and Industry (the dti), the original investment promotion agency, Investment South Africa (ISA), and the export functions of the dti were merged to form a single organisation. Trade and Investment South Africa is responsible for stimulating foreign direct investment and exports of South African goods and services to international markets. As part of the country's national economic strategy, Trade and Investment South Africa is tasked with identifying and targeting key high-growth sectors and enjoys direct access at the highest levels to both South African business sectors and trading partners. Thus, Trade and Investment South Africa is the essential point of contact for anyone involved in investment and export promotion in this country.

At Home in South Africa

Locally, Trade and Investment South Africa functions under the umbrella of the dti, a broader family of institutions controlling state assets in excess of R25bn and led by Minister Alec Erwin. A number of units dedicated to specific aspects of the business process operate within Trade and Investment South Africa. Sector specialists and strategic analysts work together to oversee targeted export objectives. Simultaneously, logistics specialists, who are located in the Enterprise Industries Development Division (EIDD) of the dti, identify and take steps to eliminate bottlenecks in the supply chain, for both exporters and investors alike. Thus, the dti provides a single-transaction arena for investors and exporters at a national level and Trade and Investment South Africa is also mandated to co-ordinate provincial initiatives to match investor requirements with opportunities available within each of the nine provinces.

• Agroprocessing
• Automotive and Transport Industries
• Chemicals, Pharmaceuticals and Biotechnology
• Cultural Industries
• Information Communication Technology and Electronics
• Mining and Metal-based Industries
• Textiles, Clothing, Leather and Footwear
• Tourism

Abroad

Trade and Investment South Africa identifies opportunities and provides core-market intelligence in 48 regional offices within South Africa's diplomatic centres worldwide. Key investors are targeted in priority-growth sectors and specific sectoral expertise is added to the equation. The regional managers operate according to international best practice standards, pioneered by leading trading nations such as Singapore and Ireland. Trade and Investment South Africa's single-transaction arena approach to service is ensured and promoted via their efficient use of an extensive array of communication mediums. From negotiations and exhibitions to handing over prospective leads to domestic-based facilitators and units dedicated to specific aspects of long-term business processes, Trade and Investment South Africa has a finger on the communication pulse continuously.

Trade and Investment South Africa is a flexible, customer-oriented organisation, specifically in regard to the services it delivers and financial incentives it oversees. For instance, in 2001 the export sectors prioritised by Trade and Investment South Africa realised R15.8bn in trade growth. In addition, South Africa’s manufacturing sector gained R4.7bn in fixed inward investment.

Clearly Trade and Investment South Africa plays a guiding role in the promotion of South Africa as a leading, internationally competitive business destination.

Investments Unlimited

As the central point of contact for anyone interested in investing in South Africa, Trade and Investment South Africa offers the following services:

• Information on the various investment sectors and industries within South Africa
• Facilitation of inward investment missions, including travel itineraries and movement within the country
• Introduction to potential joint-venture partners
• Consultation on the prevailing regulatory environment
• Introductions to relevant stakeholders in the private and public sectors
• Information on tax incentive packages
• Assistance with work permit applications
• Guidance with plant / site locations
• Logistical support for relocation
• Dedicated aftercare services
• Input into policy formulation on investment and trade promotion.

Exports Unlimited

The export process is sector specific, and sector strategies offer the framework within which exports are encouraged and incentivised. These strategies address competitive issues and international best practice standards regarding the product. Trade and Investment South Africa sector specialists have a clear understanding of, and access to, the various industries. Hence, they are able to provide sound advice, recommendations and assistance – information that is invaluable to the potential exporter.

Trade and Investment South Africa provides a Customer Care service for manufacturers, a facility that offers information and advice on current export processes and procedures. To ensure enquiries are channelled to the relevant specialist organisations, the dti Customer Contact Centre can be contacted on:
+27 (12) 394 9500 (International callers)
or 0861 843 384 (Local callers)

Trade and Investment South Africa is also mandated with developing small and BEE exporters and to manage the Export Marketing and Investment Assistance Scheme (EMIA) as a key enabling incentive. Through EMIA funding is provided to companies for:

• Primary export market research
• Foreign direct investment research
• Exhibition assistance
• Outward-selling trade missions
• Outward investment recruitment missions
• Inward-buying trade missions
• Inward investment missions
• Assistance to industry specific sectors.

In addition, the formation of industry-based Export Councils to assist exporters in reaching their targets is promoted. The approach has been tailored to allow small businesses, as well as artists and craftspeople, to form an SMME Export Council and an Arts and Crafts Export Council, which are able to function as entry points for first-time exporters. This allows small businesses in any sector to access the dti support structures and become successful exporters.

AN INTRODUCTION TO THE SOUTH AFRICAN ECONOMY

South Africa is one of the richest countries on the continent and in the world in terms of minerals and other natural resources. It was and still is amongst the world’s largest exporters of gold and diamonds and it also exports a wide range of other industrial minerals. A Mediterranean climate in its southern region facilitates its role as a major world exporter of citrus fruits and wine.

This abundant natural wealth led European settlers here as early as the 17th century. The economy boomed and physical infrastructure was developed. Unfortunately in the middle of the 20th century, the country faced the problem of apartheid, decisively resolved in 1994 with the first democratically elected government. Since then the country has begun to rebuild its economy and achieve much of the vast potential of which it is capable.

Today South Africa has a population of 44 million people and a GDP of US$113 billion (2001). In terms of its business environment and international competitiveness, it is rated at the low end of the OECD countries and at the top end of developing countries. The Global Competitiveness Report ranks South Africa 25th out of 75 countries, fifth best amongst all developing countries in the world. In terms of general infrastructure, the country is rated 22nd, and in terms of its financial market sophistication 16th. Unlike most developing countries, South Africa has a strong technological base, which has resulted in its patenting products, such as the computer tomograph, using indigenous technology.

In addition, South Africa has concluded highly attractive preferential trade agreements with the European Union, the United States and the Southern African Development Council countries, all within the last three years. These agreements open up new market and business opportunities for businesses wanting to invest directly in South Africa or partner with it for other types of business collaboration.

An overview of the Agroprocessing sector

The agro-food complex (inputs, primary production, processing) contributes approximately R124bn to South Africa’s GDP and employs 451 000 people in the formal sector. Exports of processed agricultural products amounted to R17.2bn in 2001. The major export products and their destinations follow:

Top 5 Export Destinations

Country	Value(Rm)
United Kingdom	1971
Netherlands	1546
Belgium	908
Japan	898
Mozambique	889

South Africa has a diversity of climates, ranging from semi-arid and dry to subtropical. As a result, a diversity of crops, livestock and fish are to be found. In certain industries, South Africa is one of the top exporters in the world today.

The regional distribution of major items follows:

• Field crops - found in the northern and northwestern parts of the country. Maize is the major field crop. Others include wheat, sugar, barley, soya, canola, sunflower, groundnuts and cotton.
• Deciduous fruit - found in the Western and Eastern Cape. Citrus is found in the northern part of the country, and from the southern coastal areas up to the east coast province of Kwa-Zulu Natal.
• Wine - the Western Cape is the primary wine producing area.
• Cut flowers - found in the Western Cape and Gauteng Province. The Western Cape boasts a host of indigenous flora and fauna. South Africa’s national flower, the protea, hails from this region. The major cut flowers grown in Gauteng Province are roses, dendranthemas and carnations.
• Livestock - almost two-thirds of South Africa’s land is suitable for natural grazing, and supports cattle, sheep, goats, donkeys and wildlife. Milk is the fourth largest agricultural industry in value terms.
• Fish and other catch - the country boasts a wide range of fish, including hake, sole, monk, pilchards, mackerel, tuna and yellowtail. Amongst the crustaceans, there are rock lobsters, prawns and abalone. Squid are also found.
• Aquaculture and mariculture - these emerging sectors produce rainbow trout, tilapia, African catfish, abalone and marine finfish.

South Africa’s competitive advantages
The South African agro-food complex has a number of competitive advantages, making it both an important trading partner and a viable investment destination.

World-class infrastructure
South Africa has three deep-water ports, three international airports, a network of roads and railways, well-developed cold chain facilities, and a well-developed financial sector.

Counter-seasonality to Europe
Counter-seasonality to Europe, the primary SA export market for horticultural and floricultural products, is in itself a competitive advantage. South Africa is the closest major Southern Hemisphere producer of horticultural and floricultural products to Europe – and has significantly shorter shipping times.

Biodiversity
The diversity of climates to be found within South Africa allows for a vast and varied array of agricultural products available. Tropical, subtropical and desert climates are all present.

Marine resources
South Africa has a 3000km coastline which is commercially used both for conventional harvesting as well as mariculture and aquaculture.

Competitive input costs
While South Africa boasts infrastructure which is comparable to first world countries, its cost structure is decidedly third world. At US 1.7cents/kwh it has one of the cheapest electricity costs in the world. Labour rates are also competitive, as can be seen in the chart below.

Approximate monthly wage rates:

Subsector Farm	Primary Production	Processing/Packhouse
Meat	R2000-00
Dairy		R2650-00
Wines	R1100-00	R1400-00
Flowers	R800-00	R1200-00
Fisheries	R5000-00(crewman)	R1892-00

(Sources: SAMIC, Dairy Industry JAG, WOSA, SAFEC, SA Pelagic Fish Industry Association)

Preferential Trade Arrangements
South Africa has entered into preferential agreements with the US, EU and sub-Saharan countries. These agreements confer generous trade benefits as given below.

Africa Growth and Opportunity Act (for the US market)
Under the Africa Growth and Opportunity Act (AGOA), the US extends to South Africa and other sub-Saharan countries GSP benefits for more than 1800 additional items beyond the standard GSP list of 4600 items. Special provisions apply to the apparel sector. For South Africa, this benefit took effect in March 2001 for apparel items and Oct 2000 for other items. It will remain in force until 30 September 2008. More detailed information is available from the US government website www.agoa.gov. Items of special interest to the Agroprocessing sector are given in the chart below.

European Union – South Africa Free Trade Agreement
A Trade, Development, and Co-operation Agreement containing a Free Trade Agreement (FTA) went into effect between South Africa and the European Union on 01 January 2000. Under the FTA, the EU is committed to the full liberalisation of 95 per cent of South African imports over a 10-year transitional period, while SA is to liberalise 86 per cent of EU imports over a 12-year transitional period. Items of special interest to the Agroprocessing sector follow:

HS Description	FTA Duty	Pre-FTA Duty
Beer made from malt	0%	6%
Wine of fresh grapes, including fortified wines; grape must be other than that of heading No 2009	0%	Between 9.9&32 Euro/hl
Other fermented beverages (for example, cider, Euro/%vol/hl+Between perry, mead) 5.6&19.2 Euro/hl	between 3&10	1.3 EUR/hl
Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes	between 5.2&30.2%	Between 10&57.6%
Meat of swine, fresh, chilled or frozen	0%	Between 46.7&86.9 Euro/100kg
Cut flowers and flower buds of a kind suitable for bouquets or for ornamental purposes, fresh, dried, dyed, bleached, impregnated or otherwise prepared	between 0&7%	10%
Vegetables (uncooked or cooked by steaming or boiling in water), frozen	between 3.3&11.5%	14.40%
Citrus fruit, fresh or dried	0%	13%
Fruit and nuts, uncooked or cooked by steaming or boiling in water, frozen, whether or not containing added sugar or other sweetening matter	between 0&10.8	between 8.4&14.4%

Southern African Development Community
The SADC trade protocol which came into effect in September 2000 provides for the phasing down of tariffs of 11 of the 14 SADC member countries. The participating member countries are from the sub-Saharan region, excluding SADC members Angola, the Democratic Republic of Congo and Seychelles. This trade bloc has a combined population of 135 million. The participating member countries hope to establish a free trade zone by the year 2004.

South Africa Customs Union
Under the present SACU agreement, participating member countries South Africa, Botswana, Lesotho, Namibia and Swaziland have totally abolished internal tariff barriers. A new agreement, which was finalised on 25 October 2002, is presently being ratified by their respective governments. The main change introduced in the new agreement pertains to revenue sharing.

Major international companies operating in South Africa
Many international companies have taken advantage of the attractive business environment in South Africa to use it as a base, not only for the domestic market, but also for exports to the rest of Africa and the world.

Business opportunities

Various investment and procurement opportunities exist across the agricultural sector in processing and the exporting of fresh produce. A wide range of opportunities are to be found in the various areas listed below.

Incentives
A range of incentives is available to qualifying investments. The more commonly used incentives are given below: