Kenya. Food and Beverages. Executive Summary SECTOR OVERVIEW IN KENYA

Transcription

1 Kenya Food and Beverages Executive Summary SECTOR OVERVIEW IN KENYA TRADE African countries spend more than USD60bn annually importing food for their growing populations, but the continent has the potential to become a major food exporter. Fresh cow s milk was the leading agricultural product in Kenya valued at USD1.6bn in Food sales over the forecast period will grow by 13%, from KEM1.2trn in 2016 to KEM2trn in 2020 The largest food sales in Kenya over the five year forecast period to 2020 are expected to be cooking oil and fats (KEM137bn in 2016 to KEM321bn in 2020) and edible oils (KEM129bn in 2016 to KEM307bn in 2020). Kenya s beer sales represented the largest sales of beverages, increasing from 509 million litres in 2012 to a forecasted 791 million litres in Kenya is a net exporter of food and beverages. Kenya s exports of food and beverages were valued at ZAR24.2bn in compared to ZAR19.6bn in 2013, increasing by 20%. South Africa and the Western Cape are net exporters of food and beverages to Kenya. In, South Africa exported food and beverages valued at ZAR673m compared to ZAR513m in 2013, representing an increase of 31%. The leading export product from the Western Cape to Kenya in the food and beverages sector was undenatured ethyl alcohol, valued at ZAR122m. The Western Cape also had a positive trade balance with Kenya from 2004 to. Exports were valued at around ZAR274m in compared to ZAR236m in 2013, increasing by 16%. In, the leading export product from the Western Cape to Kenya in the food and beverages sector was fresh apples, pears and quinces, valued at ZAR92m. FDI Kenya is a net recipient of FDI in the food and beverage sector. Between January 2003 and August 2015 a total of 36 FDI projects were recorded into the Kenyan food and beverage sector. Between January 2003 and August 2015 a total of 33 FDI projects were recorded into the food and beverage sector by Kenya. These projects represent a total capital investment of ZAR6.88bn. Between January 2003 and August 2015 a total of 2 FDI projects were recorded from South Africa into Kenya s food and beverage sector. These projects represent a total capital investment of ZAR365.57m. There were no investments with Kenya in this sector from or into the Western Cape.

2 Table of Contents 1. Definitions/descriptions Overview of food and beverage market in Kenya SWOT analysis of Kenya s food and beverage sector Logistics Companies Trade Kenya s Global Trade of Food and Beverages South African Trade of Food and Beverages with Kenya Western Cape Trade of Food and Beverages with Kenya Trade Regulations Markings and Standards Standards Labelling Tariffs for South African food and beverages FDI Inward FDI into the Kenyan Food & Beverage Sector Outward FDI Bilateral FDI between South Africa and Kenya

3 1. Definitions/descriptions According to FDI.net (2012), the food and beverage processing sector refers to the manufacturing, processing and preservation of meat, fish, fruit, vegetables, oils and fats; manufacture of dairy products; manufacture of grain mill products, starches and starch products and prepared animals feeds; manufacture of other food products (e.g. bread, sugar, chocolate, pasta, coffee, nuts and spices); and the manufacture of bottled and canned soft drinks, fruit juices, beer, wines, etc. This analysis includes unprocessed food and beverages such as raw fruit and vegetables, seeds and nuts. African countries spend more than USD60bn annually importing food for their growing populations, but the continent has the potential to become a major food exporter. Large areas of unused arable land, low fertiliser use and poor irrigation mean there is scope for improving yields in Africa, which are among the lowest in the world. A rising middle class continues to boost African demand for food products, especially for processed and packaged food, creating a continental food market that the World Bank estimates could be worth USD1trn in While exporters in Asia and Brazil stand to gain in the short term, BMI Research (2015) forecasts that food producers, processors and shippers in Kenya and South Africa, and retailers in Nigeria are all well placed to serve the growing African consumer market. 2. Overview of food and beverage market in Kenya Kenya's food and drink industry will experience robust growth in 2016, as the country's positive economic outlook drives consumer spending. Kenya's consumer confidence is expected to rise with the increase in household spending due to growing disposable incomes. It is expected that Kenya's emerging middle class will boost sales for non-essential goods (BMI, 2016). Fresh cow s milk was the leading agricultural product in Kenya valued at USD1.2bn in Indigenous cattle meat and maize were ranked second and third valued at USD1.2bn and USD1.15bn respectively. Other top products include tea (USD460m), bananas (USD394), potatoes (USD370m) and mangoes and guavas (USD350m) (FAO, 2016). 3 KENYA AGRICULTURAL PRODUCTION (000 USD), 2013 Eggs, hen, in shell Sweet potatoes Meat indigenous, goat Meat indigenous, sheep Vegetables, fresh nes Cassava Cabbages and other brassicas Avocados Meat indigenous, camel Tomatoes Sugar cane Beans, dry Milk, whole fresh camel Mangoes, mangosteens, guavas Potatoes Bananas Tea Maize Meat indigenous, cattle Milk, whole fresh cow Source: FAOSTAT, 2016

4 Value (KEMbn) Kenya is the East African Community (EAC)'s economic hub and comfortably its most dynamic consumer market. It is expected that robust growth in Kenya's economy will drive positive growth in the food industry. Kenya's diversified economy makes it one of the region's best performing, as it is less exposed to the downturn in commodities prices and China's slowdown. Away from Kenya, there are very few countries, if any, in the region that boast such a competitive food retailing industry that is dominated almost entirely by domestic companies (BMI, 2016). Food sales over the forecast period to 2020 will grow by 13%, from KEM1.2trn in 2016 to KEM2trn in 2020, driven primarily by 4.5% private consumption growth. The key drives will be the country's rising incomes, growing middle class and favourable demographics, as well as growing financial inclusion. KENYA FOOD SALES, f % % 13.00% 12.50% 12.00% 11.50% Growth f 2017f 2018f 2019f 2020f KEMbn Growth 13.65% 13.35% 12.21% 13.28% 12.72% 13.57% 13.56% 13.54% Source: BMI Research, % 4 Kenya's market is exposed to a booming fast food sector, which will boost growth for convenience foods. Market demand for oils and packaged foods will rise with Kenya's booming fast food industry and growing need for convenience foods. The long-term opportunities on offer in Kenya, along with the fact that one can source a lot of retail space locally given the relatively well developed nature of the wider food processing industry, suggest Kenya is too good an opportunity to miss (BMI, 2016). The increasing arrival of high-end travellers to Kenya are expected to drive premiumisation in the market and the country's growing number of middle-income consumers will look to spend more on luxury goods offered by international retailers. The largest food sales in Kenya over the five year forecast period are expected to be cooking oil and fats (KEM137bn in 2016 to KEM321bn in 2020), edible oils (KEM129bn in 2016 to KEM307bn in 2020), sugar (KEM153bn in 2016 to KEM248bn in 2020) and beef (KEM145bn in 2016 to KEM233n in 2020).

5 Value (KESbn) TOP 25 KENYA FOOD SALES, f f 2017f 2018f 2019f 2020f Cooking oils and fats Edible oils and animal fats Sugar Beef Dairy Milk Rice Bread Bananas (fresh), Poultry Other cereal products Lamb Citrus fruits (fresh) Fresh vegetables Stone fruits (fresh) Fish Salt, spices, herbs Shellfish and preserved fish Sauces and condiments Other fruit Margarine and spreads Baked goods Leaf and stem vegetables Eggs Root vegetables and mushrooms Source: BMI Research, 2016

6 Litres million litres million Kenya's emerging middle-class will be the driver of beer sales, with premium beer experiencing positive growth sales as reported by East African Breweries in H116. Kenyan consumers will switch up from home brewed beer owing to rising disposable incomes to boost the low-end beer market (BMI, 2016). Kenya s beer sales represented the largest sales of beverages, increasing from 509 million litres in 2012 to a forecasted 791 million litres in This relatively modest growth in volume may cause market leaders to focus on premiumisation, even though the low-cost beer revolution is more established in East Africa than it is in West Africa. KENYA BEER SALES, f f 2017f 2018f 2019f 2020f Beer Source: BMI, 2016 Whiskey is expected to be the largest alcoholic beverage sales in Kenya over the five-year forecast period to 2020 with 12.1 million litres being sold in 2020, followed by liqueur and red wine with sales of 5.3 million litres and 3.9 million litres respectively. Overall wine consumption in Kenya grew by 5% during 2013, higher than The growth in wine consumption was largely driven by the growing middle-class population in Kenya (Euromonitor, ). There is an opportunity for Western Cape wine companies to promote their wines in this growing market. Kenya Wine Agencies Limited, however, has engaged in extensive marketing and branding to grow and protect its market share amid increased competition (Euromonitor, ). 6 KENYA ALCOHOLIC BEVERAGE SALES, f Source: BMI, f 2017f 2018f 2019f 2020f Whiskey Liqueur Red Wine Gin White Wine Vodka Other Wine Rum Vermouth Sparkling Wine Fermented drinks

7 Value (KEMbn) Kenya's tea and coffee industry will drive non-alcoholic drinks sales, as hot drinks sales grow by 11% over the fiveyear forecast period to Soft drinks sales will experience positive growth, led by bottled water sales. It is forecasted that mineral or spring water sales will remain high owing to the country's unsafe tap water. Kenya's growing fast food industry will boost carbonated drinks sales, which are forecast to grow by 7.5% over our fiveyear forecast period to 2020 (BMI, 2016). KENYA NON-ALCOHOLIC BEVERAGE SALES, f f 2017f 2018f 2019f 2020f Tea Soft Drinks Carbonated Drinks Hot chocolate and other hot drinks Fruit and vegetable juices Mineral or spring waters Source: BMI, SWOT analysis of Kenya s food and beverage sector The table below shows the SWOT analysis of Kenya s food and beverage sector: STRENGTHS Kenya is the East African Community (EAC)'s economic hub and comfortably its most dynamic consumer market. Its food and drink industry is well developed by regional standards and has many Kenyan companies. Nakumatt, Uchumi, Tuskys and Naivas, are well established domestic companies in the food retail sector. Close trade links with Uganda and Tanzania and with large markets in Europe have seen the country develop a major food export industry. Kenyan firms' ability to manage complex supply chains and experience dealing with European import and health requirements. OPPORTUNITIES Premiumisation will play a major part in the growth of many segments of the Kenyan food and drink industry. WEAKNESSES Per capita food consumption in Kenya still has a long way to go to match some of Sub-Saharan Africa's wealthiest countries, such as Botswana, Namibia and South Africa. Kenya ranks 12 th out of 14 sub-saharan African countries in the food and drinks risk-reward rating. The distribution of products across sub-saharan Africa to retailers remains challenging hampered further by poor infrastructure and refrigeration systems. THREATS Kenya's dominant beer company East African Breweries Limited is facing some major issues in Kenya following the introduction of an excise tax

8 Opportunities for M&A with domestic food retailers Rising middle class boosts African demand for food products (especially for processed and packaged food). The well-developed dairy industry has the capacity to expand its operation. Kenya is developing a domestic packaging and processing industry based around firms such as meat producer Farmers' Choice. Source: BMI Research, 2015 levied against its key Senator Keg brand in October Logistics There are two Trans-African highways running through Kenya, which form the main international transport routes and allow for smoother cross-border road transit. The first is the Cairo-Cape Town Highway (number 4), which runs north to south and connects the country to Ethiopia and Tanzania. This route is largely paved south of Tanzania, and is mostly used from Nairobi southwards. Northern sections in Kenya and Sudan are of poorer quality. The second is the Lagos-Mombasa Highway (number 8), which runs east to west and connects Kenya to Uganda and West Africa. The usage of this route remains limited beyond Uganda, however, as it is largely unpaved through the Democratic Republic of Congo (EAC, 2015). The road network in Kenya is still below the standard of more developed countries, and supply chains face serious risks of congestion, checkpoint bribes and armed robbery. The port delays are especially worrisome for perishable food and beverage products (PwC, 2013). Kenya also has many established private companies who specialise in the transport of perishable items, these include Sonic Fresh Co. 8 Source: Northern Corridor Transit and Transport Coordination Authority, The Northern corridor, pictured above, is the transport corridor linking the land locked countries of Uganda, Rwanda and Burundi with Kenya s maritime port of Mombasa. Similarly, the Northern Corridor serves the eastern part of the Democratic Republic of Congo, southern Sudan and northern Tanzania. The Northern Corridor infrastructure connects all the five countries of the East African Community and links around 200 million people to global markets through the Mombasa port (Northern Corridor Transit and Transport Coordination Authority, ). In terms of port upgrades, Kenya is spending USD366m to construct a new container terminal in Mombassa that will more than double the capacity of the current port, from handling 900, foot equivalent unit (TEU)

9 containers to 2,1 million containers (Financial Mail, 2013). A new terminal is also being built on land reclaimed from the sea by Japan Ports Consultants, with the third phase expected to be completed in The new terminal will enable the country to handle larger vessels. 2.3 Companies The table below gives the key companies in Kenya s food and beverage sector: East African Breweries Limited (EABL) is East Africa's leading branded alcohol beverage business with an outstanding collection of brands that range from beer, spirits and adult non-alcoholic drinks (ANADs) reaffirming our standing as a total adult beverage (TAB) company. Unga Group Limited is a Kenya-based holding company that has a majority shareholding in companies involved with the manufacture and marketing of a broad range of human nutrition, animal nutrition and animal health products. Mumias Sugar Company is primarily engaged in the manufacture and sale of sugar. The company grows some sugar cane; its own estates provide up to 7% of its annual output. Its primary source of sugarcane is over 50,000 registered "out growers" with over 400 square kilometres (99,000 acres) under cultivation. Sasini has controlling stacks in Tea and Coffee production in Kenya comprising an area of over 2,000 hectares. Kenya is one of the largest exporters of tea. With an active participation in the weekly Mombasa Tea Auctions, Sasini supplies increasingly large volumes of tea to the expanding markets of Europe, the Middle East, Egypt and Pakistan (Moneyhub, 2015). KENYA FOOD AND BEVERAGE COMPANIES, 2016 COMPANY OWNERSHIP SUBSECTOR SALES (USDm) East African Breweries Parent company: Diageo Alcohol - beer Unga Group Mumias Sugar Partnership: US-based Seaboard Corporation (35%) Shareholders: Kenyan Government (71%); Commonwealth Development Corp (17%) Food - diversified Food - sugar 60.6 Sasini - Tea and coffee 31.8 Williamson Tea - Tea 29.0 Kakuzi Parent company: UKbased Camellia PLC (50.7%) Tea and diversified agribusiness Kapchorua Tea - Tea 12.0 Eaagads - Coffee 1.1 Limuru Tea - Tea 1.0 Kenya Orchards - Food - diversified 0.7 Source: BMI,

10 Value (ZARm) 3. Trade 3.1 Kenya s Global Trade of Food and Beverages Kenya experienced a positive trade balance from 2004 to, making Kenya a net exporter of food and beverages. Kenya s exports of food and beverages were valued at ZAR24.2bn in compared to ZAR19.6bn in 2013, increasing by 20%, while imports were valued at ZAR21bn in increasing by 24% KENYA FOOD & BEVERAGE TRADE, Exports (ZARm) Imports (ZARm) Trade balance (ZARm) Source: Trade Map, Egypt was the leading export market for food and beverages from Kenya in, valued at ZAR3.4bn and growing by 12% per annum over the last five years. The United Kingdom and Pakistan were ranked second and third, valued at ZAR3bn and ZAR2.7bn respectively. Other top export markets were Uganda (ZAR953m), Germany (ZAR1.1bn) and Netherlands (ZAR1bn). The top food and beverage exports to the top three destination markets are as follows: 10 Egypt Tea, ZAR3.3bn Pipe, chewing, tobacco, ZAR113m Coconut, abaca, ramie & other vegetable fibers, ZAR17m United Kingdom: Tea, ZAR2bn Cut flowers and flower buds, ZAR987m Leguminous vegetables, ZAR889m Pakistan Tea, ZAR2.5bn Dried vegetables, ZAR208m Carbonate; peroxocarbonate, ZAR91m

11 KENYA S EXPORT MARKETS OF FOOD & BEVERAGES, RANK DESTINATION MARKETS VALUE (ZARm) % GROWTH Egypt % 2 United Kingdom % 3 Pakistan % 4 Uganda % 5 United States % 6 Germany % 7 Netherlands % 8 Russian % 9 Tanzania % 10 France % 34 South Africa % TOTAL EXPORTS % Source: Trade Map, 2016 Pakistan was the leading source market for food and beverages to Kenya valued at ZAR2.9bn, followed by Tanzania and Uganda valued at ZAR2.8bn and ZAR1.5bn respectively. Other top import markets were Russia (ZAR1.4bn), Malaysia (ZAR1.4bn) and Indonesia (ZAR1.2bn). The top food and beverage imports from the top three source markets are as follows: Pakistan: Rice, ZAR2.8bn Knotted nettg of twine, ZAR111m Woven cotton fabrics, ZAR73m 11 Tanzania Maize (corn), ZAR1bn Twine, cordge and cable, ZAR675m Frozen vegetables, ZAR573m Uganda Tea, ZAR896m Tobacco unmanufactured; tobacco refuse, ZAR513m Electrical energy, ZAR312m

12 KENYA S SOURCE MARKETS OF FOOD & BEVERAGES, RANK SOURCE MARKETS VALUE (ZARm) % GROWTH Pakistan % 2 Tanzania % 3 Uganda % 4 Russian % 5 Malaysia % 6 Indonesia % 7 India % 8 Ukraine % 9 United States of America % 10 Thailand % 13 South Africa % TOTAL IMPORTS % Source: Trade Map, 2015 Tea was the leading export product from Kenya in, valued at ZAR11bn. Kenya currently exports 14% of the world s share of tea, the 3 rd largest exporter after Sri Lanka and China. Unilever is the world s leading tea manufacturer and buys on average around 12 percent of global supply, which it markets worldwide under the Lipton, PG Tips and Brooke Bond brand names. In this capacity they are partnering with a New York based company Nature Source Genetics to create more resilient, future-proof, tea crops using a natural breeding method known as genomic selection in their tea plantations in Kenya. This will likely further the growth of tea exports from Kenya into the future. Coffee (ZAR3bn) and leguminous vegetables (ZAR1.9bn) were the second and third largest export products from Kenya. The fastest growing food and beverage exports in were nuts and vegetables. 12 The leading import product into Kenya was wheat and meslin, valued at ZAR4bn. Rice (ZAR3.3bn) and palm oil (ZAR2.4bn) were the second and third largest imported products in the sector. There was strong growth in the import of frozen vegetables and tea. RANK KENYA S GLOBAL EXPORTS OF FOOD & BEVERAGES, KENYA S GLOBAL IMPORTS OF FOOD & BEVERAGES, PRODUCT VALUE (ZARm) % GROWTH RANK PRODUCT VALUE (ZARm) % GROWTH Tea % 1 Wheat and meslin % 2 Coffee % 2 Rice % 3 Leguminous vegetables % 3 Palm oil & its fraction % 4 Preserved fruits % 4 Tea % 5 Nuts nes % 5 Maize (corn) % 6 Dried vegetables, shelled % 6 Cane or beet sugar % 7 Dates, figs,pineapples, mangoes, avocadoes, guavas % 7 Frozen vegetables % 8 Sugar confectionery % 8 Food preparations, nes % 9 Vegetables nes, fresh or chilled % 9 Dried vegetables, shelled % 10 Margarine % 10 Fish, frozen, whole % TOTAL EXPORTS % TOTAL IMPORTS % Source: TradeMap, 2016

13 Value (ZARm) 3.2 South African Trade of Food and Beverages with Kenya South Africa has a positive trade balance with Kenya and is a net exporter of food and beverage products from the country. In, South Africa exported food and beverages valued at ZAR673m compared to ZAR513m in 2013, representing an increase of 31%. South Africa imported food and beverages from Kenya valued at ZAR88m in compared to ZAR118m in 2013, representing a decrease of 25%. The exports from South Africa in 2009 are so high due to a spike in the export of maize worth ZAR2.3bn. SOUTH AFRICAN EXPORTS OF FOOD &BEVERAGES WITH KENYA, Exports (ZARm) Imports (ZARm) Trade balance (ZARm) Source: Quantec, 2016 The leading export product to Kenya was undenatured ethyl alcohol, valued at ZAR122m, followed by apples, pears and quinces (ZAR117m) and wine (ZAR95m). The largest growing export to Kenya per annum from 2010 to was cane or beet sugar (197%), followed by chocolate and other food containing cocoa (162%). The leading import product into South Africa from Kenya was dried and shelled leguminous vegetables valued at ZAR19m, followed by tea (ZAR17m). Fresh or chilled leguminous vegetables (ZAR15m) were the third largest import in value terms. Cabbages, cauliflowers, kohlrabi and kale were the largest growing import into South Africa growing at 348% per annum over the last five years. SOUTH AFRICA S EXPORTS OF FOOD & BEVERAGES TO KENYA, VALUE GROWTH RANK PRODUCT (ZARm) 1 Undenatured ethyl alcohol; ethyl alcohol SOUTH AFRICA S IMPORTS OF FOOD & BEVERAGES FROM KENYA, VALUE GROWTH RANK PRODUCT (ZARm) % 1 Dried leguminous vegetables, shelled Apples, pears and quinces, fresh % 2 Tea, whether or not flavoured % 3 Wine % 3 Leguminous vegetables, shelled or unshelled, fresh or chilled % 4 Cane or beet sugar % 4 Cabbages, cauliflowers, kohlrabi, kale % 5 Chocolate % 5 Vegetables frozen Undenatured ethyl alcohol; spirits, liqueurs % 6 Coffee % 7 Food preparations nes % 7 Other vegetables, fresh or chilled % 8 Preparations of a kind used in animal feeding % 8 9 Citrus fruit, fresh or dried % 9 Jams, fruit jellies, marmalades, fruit or nut pureé Onions, shallots, garlic, leeks and other alliaceous vegetables %

14 Value (ZARm) SOUTH AFRICA S EXPORTS OF FOOD & BEVERAGES TO KENYA, VALUE GROWTH RANK PRODUCT (ZARm) 10 Maize (corn) % 10 SOUTH AFRICA S IMPORTS OF FOOD & BEVERAGES FROM KENYA, VALUE GROWTH RANK PRODUCT (ZARm) Prepared foods obtained by the swelling or roasting of cereals TOTAL EXPORTS % TOTAL IMPORTS % Source: Quantec, Western Cape Trade of Food and Beverages with Kenya The Western Cape also had a positive trade balance with Kenya from 2004 to. Exports were valued at around ZAR274m in compared to ZAR236m in 2013, increasing by 16%, while imports were valued at ZAR8.9m in compared to ZAR5.6m in 2013, increasing by 54%. WESTERN CAPE TRADE OF FOOD & BEVERAGES WITH KENYA, Exports (ZARm) EImports (ZARm) Trade balance (ZARm) Source: Quantec, 2016 The leading export product from the Western Cape to Kenya in the food and beverages sector was fresh apples, pears and quinces, valued at ZAR92m. The second largest export to Kenya was undenatured ethyl alcohol (ZAR89m) followed by citrus fruit (ZAR26m). Of all exports from South Africa to Kenya, the Western Cape exports, 97.8% of the grape wines 87% of fruit juices and 81% prepared foods obtained by the swelling or roasting of cereals. Prepared foods was the leading import product into the Western Cape from Kenya valued at ZAR2.2m, 41% of South Africa s imports. The second largest import from Kenya to the Western Cape were Leguminous vegetables, (ZAR1.6m), followed by Cabbages, cauliflowers, kohlrabi, kale (ZAR1.3m). The Western Cape imports 10% of food and beverages imported by South Africa.

15 WESTERN CAPE S EXPORTS OF FOOD & BEVERAGES TO KENYA, VALUE GROWTH RANK PRODUCT (ZARm) 1 Apples, pears and quinces, fresh % 1 2 Undenatured ethyl alcohol; spirits, liqueurs % 2 WESTERN CAPE S IMPORTS OF FOOD & BEVERAGES FROM KENYA, VALUE GROWTH RANK PRODUCT (ZARm) Prepared foods obtained by the swelling or roasting of cereals 2.2 #DIV/0! Other vegetables, fresh or chilled % 3 Citrus fruit, fresh or dried % 3 Leguminous vegetables % 4 Fruit juices % 4 Cabbages, cauliflowers, kohlrabi, kale % 5 Grapes, fresh or dried % 5 Coffee % 6 Food preparations nes % 6 7 Preparations of a kind used in animal feeding Jams, fruit jellies, marmalades, fruit or nut pureé 0.7 #DIV/0! % 7 Vegetables frozen 0.14 #DIV/0! 8 Sugar confectionery % 8 Tea, whether or not flavoured % 9 Prepared foods obtained by the swelling or roasting of cereals o % 9-10 Sauces and preparations % TOTAL EXPORTS % TOTAL IMPORTS % Source: Quantec, 2016 Other fresh fruit was the fastest growing export products in the short term (2013 to ), growing at 332% followed by food preparations and malt preparations, food preparations of flour growing at 130% and 75% respectively. In the medium term (2010-), the fastest growing export product category was also other fresh fruit at 489% growth. - - GROWTH OF WESTERN CAPE EXPORTS OF FOOD & BEVERAGES TO KENYA, Other fruit, fresh Food preparations nes Malt extract; food preparations of flour, groats, meal, starch Other fermented beverages Sugar confectionery Sauces and preparations Apples, pears and quinces, fresh Ginger, saffron, turmeric (curcuma), thyme, bay leaves, curry Preparations of a kind used in animal feeding Citrus fruit, fresh or dried Fruit juices Grapes, fresh or dried Undenatured ethyl alcohol; spirits, liqueurs 39.95% 39.86% 51.63% 26.16% 48.47% 28.66% 38.29% 50.38% 36.83% 52.11% 30.25% 25.12% 29.31% 7.33% 28.06% 39.79% 11.89% 5.35% -9.75% 74.91% 51.27% % % % % % Prepared foods obtained by the swelling or roasting of 14.68% cereals % -100% 0% 100% 200% 300% 400% 500% 600% 15 Source: Quantec, 2016

16 3.4 Trade Regulations Markings and Standards Currently there is no FTA between South Africa and Kenya. In October 2008, SADC joined with the Common Market for Eastern and Southern Africa and the East African Community to form the African Free Trade Zone, including all members of each of the organizations including South Africa and Kenya. The African Free Trade Zone, consists of 26 countries with a GDP of an estimated USD624bn. It is expected to become operational in Standards The Kenya Bureau of Standards (KEBS) is the government regulatory body under Kenya's Ministry of Trade mandated to develop and ensure compliance with the International Standards Organization (ISO) product standards. The National Environment Management Authority, under the Ministry of Environment and Natural Resources, the Department of Public Health, and the Ministry of Health are all government organisations that develop environmental and public health standards in partnership with KEBS. The Kenya Plant Health Inspectorate Service (KEPHIS) deals with the certification of all imported plant materials as well as implementing sanitary & phytosanitary requirements Labelling Special labelling is required for certain goods including condensed milk, vegetables, and butter. Weights and measure indicators must be in metric form or display both metric and imperial units. Manufacturers are required to indicate the date of manufacture and expiry on the labels of consumable products. 3.5 Tariffs for South African food and beverages Kenya imposes the highest tariffs on the import of sugars and sugar confectionary from South Africa at 71.9%. This is followed by dairy products, eggs, honey and other edible animal product with an imposed tariff of 53.1%. 16 TARIFFS IMPOSED BY KENYA TO SOUTH AFRICAN FOOD AND BEVERAGE IMPORTS HS CODE PRODUCT EQUIVALENT AD VALOREM TARIFF 02 Meat and edible meat offal Fish, crustaceans, molluscs, aquatic invertebrates nes Dairy products, eggs, honey, edible animal product nes Edible vegetables and certain roots and tubers Edible fruit, nuts, peel of citrus fruit, melons Coffee, tea, mate and spices Cereals Milling products, malt, starches, inulin, wheat gluten Animal,vegetable fats and oils, cleavage products, etc Meat, fish and seafood food preparations nes Sugars and sugar confectionery Cocoa and cocoa preparations Cereal, flour, starch, milk preparations and products Vegetable, fruit, nut, etc food preparations Miscellaneous edible preparations Beverages, spirits and vinegar 25 Source: TradeMap, 2016

17 The excise duty for alcoholic beverages in Kenya according to the Kenyan treasury (2015) are as follows: Whiskies, rum, gin and geneva, vodka cordials and distilled spirits like Konyagi and Uganda Waragi will attract the highest tax rates, that is, Ksh120 per litre or 35 percent whichever is higher. Beer will attract a tax of Ksh70 per litre or 50 percent per litre, whichever is higher. Stout and porter beer made from malt and cider will be charged Ksh70 per litre or 50 percent whichever is higher. Wine and vermouth will be charges Ksh80 per litre or 50%. 17

18 Value (ZARm) 4. FDI 4.1 Inward FDI into the Kenyan Food & Beverage Sector Between January 2003 and August 2015 a total of 36 FDI projects were recorded into the Kenyan food and beverage sector. These projects represent a total capital investment of ZAR8bn which is an average investment of ZAR223m per project. During the period, a total of 6,839 jobs were created. Kenya is a net recipient of investment in this sector. INWARD FDI INTO KENYA'S FOOD & BEVERAGE SECTOR, 2003-AUGUST Capex (ZARm) Projects Projects Source: FDI Intelligence, 2016 The United States was the leading source market for Kenya s food and beverage sector investments with 9 investment projects representing a capital investment of ZAR2.2bn from 2003 to August 2015, followed by Egypt and Switzerland with 4 investment projects each. South Africa was the 6 th largest global source market for inward FDI into the Kenya s food and beverage sector. 18 GLOBAL FDI INTO KENYA S FOOD, BEVERAGE & TOBACCO SECTORS, AUGUST 2015 RANK SOURCE COUNTRY PROJECTS % PROJECTS CAPEX (ZARm) % CAPEX COMPANIES 1 United States % % 6 2 Egypt % % 1 3 Switzerland % % 2 4 France % % 2 5 Netherlands % % 2 6 South Africa % % 2 7 UAE % % 1 8 UK % % 2 9 Bermuda % % 1 10 China % % 1 TOTAL Source: FDI Intelligence, 2016 Coca-Cola was the largest investor into Kenya s beverage, food and tobacco sector, with 5 projects worth ZAR1.7bn. In November it was announced that Switzerland-based food company Nestlé's (3 rd ) Kenyan unit had partnered with Coffee Management Services (CMS) to boost coffee yields and crop production in the country. Nestlé and CMS will implement the programme in the rural counties of Kiambu, Murang'a, Kirinyaga, Nyeri, Embu and Meru (BMI Research, 2015).

19 Value (ZARm) COMPANIES INVESTING INTO KENYA S FOOD & BEVERAGE SECTOR, 2003-AUGUST 2015 INVESTING COMPANY ACTIVITY PROJECTS CAPEX (ZARbn) Coca-Cola United States Wadi Egypt Nestle Switzerland Majid Al Futtaim Group (MAF Group) UAE Asia Plantation Capital Singapore Bacardi Bermuda British American Tobacco (BAT) United Kingdom 1 73 Carrefour France Clarion Merchandise Italy 1 37 Coca-Cola Sabco South Africa TOTAL FROM TOP 10 INVESTORS Source: FDI Intelligence, Outward FDI Between January 2003 and August 2015 a total of 33 FDI projects were recorded into the food and beverage sector by Kenya. These projects represent a total capital investment of ZAR6.88bn which is an average investment of ZAR209m per project. During the period, a total of 6,329 jobs were created. KENYA'S OUTWARD FDI INTO FOOD & BEVERAGE SECTOR, 2003-AUGUST Capex (ZARm) Projects Source: FDI Intelligence, Projects

20 Uganda was the largest destination FDI market for food and beverages from Kenya from 2003 to August 2015, followed by Tanzania and Rwanda with 8 investment projects and 3 investment projects each. Approximately 91% of all investments outward of Kenya were to fellow East African markets. OUTWARD FDI FROM KENYA INTO THE FOOD, BEVERAGE & TOBACCO SECTOR, AUGUST 2015 RANK DESTINATION COUNTRY PROJECTS % PROJECTS CAPEX (ZARm) % CAPEX COMPANIES 1 Uganda % % 8 2 Tanzania % % 3 3 Rwanda % % 2 4 South Sudan % % 2 5 Ethiopia % % 1 6 Germany % % 1 7 India % % 1 8 Nigeria % % 1 TOTAL Source: FDI Intelligence, 2016 The food and beverages stores subsector received the largest investments from Kenya both in terms of projects (76% share) and capex (63% share) from 2003 to August This was followed by fruit and vegetables and dairy products. KENYA OUTWARD FDI INTO THE FOOD & BEVERAGE SECTOR BY SUBSECTORS, 2003-AUGUST 2015 Breweries & distilleries 3.24% 3.03% 20 Grains & oilseed 5.83% 6.06% Dairy products 6.06% 13.61% Fruits & vegetables & specialist foods 9.09% 14.63% Food & Beverage Stores 62.69% 75.76% 0% 10% 20% 30% 40% 50% 60% 70% 80% % Capex % Projects Source: FDI Intelligence, 2016

21 Uchumi Supermarkets was the largest investor from Kenya accounting for 36% of all projects from 2003 to August 2015, followed by Nakumatt Holdings with 27% share. COMPANIES INVESTING FROM KENYA INTO THE FOOD & BEVERAGE SECTOR, 2003-AUGUST 2015 INVESTING COMPANY PROJECTS CAPEX (ZARbn) Uchumi Supermarkets Nakumatt Holdings Naivas Supermarket Bidco Oil Refineries (BIDCO) BIDCO Uganda Brookside Dairy Kenn Foods Kenya Maltings SAMEER Agriculture and Livestock Limited (SALL) Sameer Group TOTAL FROM TOP 10 INVESTORS Source: FDI Intelligence, Bilateral FDI between South Africa and Kenya Between January 2003 and August 2015 a total of 2 FDI projects were recorded from South Africa into Kenya s food and beverage sector. These projects represent a total capital investment of ZAR365.57m which is an average investment of ZAR182.79m per project. During the period, a total of 360 jobs were created. 21 DATE FDI FROM SOUTH AFRICA INTO THE KENYAN FOOD & BEVERAGES SECTOR, AUG 2015 INVESTING COMPANY SOURCE PROVINCE INDUSTRY SECTOR SUB-SECTOR INDUSTRY ACTIVITY VALUE (ZARm) Aug 2004 Nutro Manufacturing EPZ Gauteng Food & Tobacco Grains & oilseed Manufacturing May 2004 Coca-Cola Sabco Eastern Cape Beverages Soft drinks & ice Manufacturing Source: FDI Intelligence, 2016 There was no FDI from Kenya into the South African food and beverages sector. There was no inward investment into the food and beverage sector from Kenya into the Western Cape, nor was there outward investment from the Western Cape to Kenya. For more information on this publication and other Wesgro publications please contact research@wesgro.co.za or for more publications visit the Wesgro publications portal on our website at