South Africa agriculture: Opportunities, challenges and legislation

KPMG’s study of the agricultural sector in South Africa for the Small Enterprise Development Agency (Seda), Research on the Performance of the Agricultural Sector, includes a SWOT analysis of three main products:

Field crops
Horticultural products
Animals/animal products
The results contained in the report are helpful for developing a strong business strategy, as they point out the most prominent strengths and weaknesses, as well as the opportunities and threats in the marketplace, when it comes to each agricultural subsector.

1. The field crop sub-sector


Maize is the primary food of 80% of the country’s population and will maintain strong growth.
South Africa is one of a few countries that produces white maize with significant potential for export.
Significant maize-yield improvements have resulted from stable production on irrigated land.
Demand for maize is linked to rising demand in livestock as yellow maize is the main feed-stock.
Tobacco continues to be in demand in international countries.

There is a steady decline in the area planted under maize.
Farmers are financially constrained in the period between planting and harvesting.
Input costs for farmers are rising.
Maize prices are volatile.
Farmers are not cost competitive when compared to other sugar producing countries.
Preferential trade agreements and high export tariffs apply to sugar farmers.
Cotton prices are declining and the perception exists that the industry is not profitable.
Increased smoking laws, high tax rates and high input costs are slowing the demand for tobacco.

The creation of biodiesels will improve demand for oilseeds.
Biodiesels have the potential to lower farmer’s input costs by using it to meet their energy requirements.
Sugarcane-based renewable energy could assist Eskom with the cogeneration of power.
Cotton farming can create numerous jobs as it is labour intensive.
South African cotton is one of the world’s finest, giving the country a distinct advantage..
The tobacco sector and government partnership is helping emerging farmers to enter the commercial space.

Rising prices of yellow maize are putting added pressure on the animal feed sector.
Maize exports need to be monitored to ensure that domestic demand is met.
Reducing profit margins for farmers may result in a reduction in production to remain profitable.
Competition from cheaper imports may hurt the domestic production market.
Major sugar producing nations subsidise the production of sugar with the overproduction eroding the global price of sugar.
Crop diseases can severely affect farmers’ production levels and profitability.
2. The horticulture sub-sector


The climatic diversity of the country is suitable for the cultivation of a wide variety of fruits and vegetables.
The citrus industry is export-orientated and South Africa is firmly established as one of the leading citrus producers in the world. Infrastructure and climate is suited to maintaining this position.
Off-season production suits the European market and ensures demand for South African fruit.

Small-scale fruit and vegetable farmers do not have sufficient access to credit, transport and storage infrastructure and markets and experience difficulty participating in commercial agriculture.
Small-scale farmers lack access to advanced farming technologies thus reducing their global competitiveness.
The subtropical fruit industry is cost-intensive and requires high levels of investment required during non-bearing seasons.

Asia and the Middle East are forecast to become major markets for South African table grapes.
Niche markets for rooibos and honeybush tea as well as for essential oils set to increase especially as people get more health conscious.
Increasing demand for organically grown fruits and vegetables.
The market for ornamental and cut flowers is growing.
Training of emerging and communal farmers to combat crop-related diseases.

Rising input costs.
Fruit and vegetable farmers are particularly prone to crops being affected by pests and diseases.
The citrus industry does face serious international competition and farmers will need to become increasingly cost-competitive.
3. The livestock and animal product sub-sector


Livestock farming comprises 40% of the country’s agricultural output and is a major component of the sector.
Approximately 80% of agricultural farm land can be used for the farming of livestock and as such, farmers combine livestock and crop farming.
Poultry is a fast growing convenience food and promises healthy future demand.
Help is available for small-scale farmers with financing issues.

Weak demand due to the effects of the global financial crisis.
South Africa is an importer of red meat and with potential rise in demand.
Small-scale farmers do not have the research and market information needed to commercialise their products.
There are many financing backlogs.
Financing options for small-scale farmers have high interest rates and repayments.

Communal farming has the potential to help local producers meet domestic demand.
Access to viable and affordable financing options.
Providing small-scale farmers with the technical skills and information to tap into commercial markets

Influx of cheap poultry will reduce production levels for local producers.
Rising feed prices are likely to affect local producer costs.
Avian flu’ could deter growth in the industry and would affect both poultry and ostriches.
Foot and mouth disease is a major concern.
Thinking about an agricultural business in terms of these unique “SWOTs” will help to put business owners on the right track from the start, and prevent many headaches later on. – Standard Bank


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