Quarterly Economic Review of the Food and Beverages Industry in South Africa

Transcription

1 Quarterly Economic Review of the Food and Beverages Industry in South Africa April June 2016 Volume 3, Number 1 DIRECTORATE: AGRO-PROCESSING SUPPORT agriculture, forestry & fisheries

2 PREFACE This publication Quarterly Economic Review of the food and beverage Industry in South Africa: April to June 2016 is the first quarterly review by the Directorate: Agro-processing Support to provide an overview of the economic performance of the food and beverage industry in South Africa. The food and beverages industry in South Africa is one of the subsectors of agro-processing that plays a dominant role in terms of output and employment in the agro-processing sector. By adding value to the primary agriculture and fisheries production, the food and beverages industry stimulates output and job creation in the primary sector and contributes directly to the food security of the country. In addition, it played a pivotal role in supplying inputs to the food and beverage service industry, wholesale and retail sectors. One of the core businesses of the Directorate: Agro-processing Support is to provide timely and updated economic information regarding the food and beverages industry to monitor its performance and provide insight into the effects of economic policies and exogenous factors on the industry. The main economic indicators reviewed are the changes in prices, production, capacity utilisation, value of sales, formal employment and trade. An outlook of the industry for the next quarter is also presented. In addition, some indicators of the food and beverages service industry, wholesale and retail sectors are reviewed to evaluate the forward linkages of the food and beverages industry. Any comments and suggestions on the content of the publication are most welcome. Victor Thindisa Director: Agro-processing Support Pretoria Disclaimer: The Department of Agriculture, Forestry and Fisheries did everything to ensure the accuracy of the information reported in this publication. The department will, however, not be liable for the results of action based on this publication. i

3 CONTENTS PREFACE... i 1. INTRODUCTION FOOD PRODUCTS PRICE PRODUCTION INCOME FROM FOOD SALES IN THE SERVICE INDUSTRY TRADE EMPLOYMENT OUTLOOK BEVERAGES PRICES PRODUCTION VALUE OF SALES INCOME FROM BAR SALES IN THE SERVICE INDUSTRY TRADE EMPLOYMENT OUTLOOK CONCLUSION NOTES: Compiled by Deborah Makola and Joshua Magomani with inputs from Phiwe Jiba and Tebogo Clement Sebopetji Department of Agriculture, Forestry and Fisheries Sefala Building 503 Belvedere Street, Arcadia, South Africa All correspondence can be addressed to: Director: Agro-processing Support Private Bag X416, Pretoria 0001, South Africa Tel.: +27 (12) Fax: +27 (12) VictorTH@daff.gov.za This publication is also available on the internet at: ii

4 1. INTRODUCTION In 2016, global growth is projected to slow down to 3,1% before recovering to 3,4% in The forecast, which is revised down by a 0,1 percentage point for 2016 and 2017 relative to April, reflects a more subdued outlook for advanced economies following, amongst other factors, the UK vote in favour of leaving the European Union (Brexit) in June and weakerthan-expected growth in the United States (IMF, 2016). However, in the second quarter of 2016, global economic growth moderated, following a slowdown in activity in both advanced and emerging-market economies. The US economy has lost momentum over the past few quarters and the expectation of a pickup in the second quarter of 2016 has not been realized, with growth estimated at 1,1% at a seasonally adjusted annual rate (IMF, 2016). Furthermore, among advanced economies, the economic performance of Japan and Europe was sluggish. Again, the outcome of the Brexit referendum and potential banking stresses in some European countries further negatively affected the outlook for the United Kingdom (UK) and the euro area. Output growth in emerging-market economies decelerated on account of slower growth in India, a contraction in economic activity in Russia and recessions in several major Latin American economies, with the outlook remaining mixed (Reserve Bank, 2015). In South Africa, the real gross domestic product (GDP) in the second quarter of 2016, increased by 3,3%, following a contraction in the first quarter. The variations in economic growth from quarter to quarter were mostly the result of fluctuations in the primary and secondary sectors. The real value added by the mining sector rebounded, while agricultural production inched lower to record a sixth consecutive quarter of contraction, mainly due to the effect of drought. Moreover, the volume of manufacturing production picked up significantly (Reserve Bank, 2015). The food, beverages and tobacco division employment contracted by 2,2% quarter-toquarter, but grew by 6,1% year-on-year. The quarter-to-quarter contraction was driven mainly by a decline in number of employment in the food component of the division which resulted in the shedding of jobs during the second quarter of This quarterly review assesses the economic performance of the food and beverages industry, given a moderate global economic growth and a contraction of domestic economic activities recorded during the second quarter of FOOD PRODUCTS According to the Standard Industrial Classification, the food industry incorporates groups of products which are categorized into the following four codes: Code 301 refers to manufacturing, processing and preservation of meat, fish, vegetables, fruits, oils, and fats. Code 302 refers to manufacturing, processing and preservation of dairy products Code 303 refers to manufacture of grain mill products, starch products and prepared animal feeds Code 304 refers to manufacture of other food products like bread, sugar, chocolate, pasta, coffee, nuts, and spices. 1

5 Hence, food products refer to those primary agricultural and fisheries products that have undergone some form of change through manufacturing and processing or performed some value addition activities such as preservation. 2.1 PRICE Consumer price index (CPI) 1 The quarter-to-quarter and year-on-year consumer price index of food products grew by 0, 2% and 0,1%, respectively in the second quarter of The quarter-to-quarter marginal growth is driven mainly by the slight growth of food stuffs such as bread and cereals (0,4%), meat (0,6%), fish (1,7%), and oils and fats (0,6%). However, fruit and vegetables remained in the negative of 1,8% and 0,6% in the current year (see Table 2.1). Similarly, (fruit, fish, meat) and sugar sweets and desserts remained positive at 10,8%, 1,7%, 3,4% and 0,2%, respectively. Table 2:1 Consumer price index of food products Producer price index (PPI) 2 Food products Indices Weight 2015: Q2 2015: Q2 and % change between All items (CPI ,0 110,9 111,1 0,1 0,2 Headline) Food and nonalcoholic 15,4 111,1 111,6 112,0 0,8 0,4 beverages Food 14,2 111,2 111,8 112,1 0,8 0,3 Processed 6,8 112,4 113,2 113,6 1,1 0,4 Unprocessed 7,4 110,1 110,7 110,9 0,7 0,2 Bread and cereals 3,5 110,3 109,0 109,4-0,8 0,4 Meat 4,6 108,6 111,6 112,3 3,4 0,6 Fish 0,4 113,1 114,2 115,0 1,7 0,7 and 1 Stats SA defines CPI as a current social and economic indicator that is constructed to measure changes on the general level of prices of consumer goods and services which households acquire, use or pay for over time. 2 OECD defines the producer price index (PPI) as a measure of the change in the prices of goods, either as they leave their place of production or as they enter the production process. The PPI can be used as an economic indicator of inflation, as an escalator in contracts and as a deflator in the calculation of the national accounts. 2

6 Milk, eggs and 1,7 119,8 120,9 121,2 1,2 0,2 cheese Oils and fats 0,5 100,8 100,3 100,9 0,1 0,6 Fruit 0,2 98,5 111,1 109,1 10,8-1,8 Vegetables 1,6 114,1 111,9 111,2-2,5-0,6 Sugar, sweets and 0,6 115,0 114,9 115,2 0,2 0,3 deserts Other food 0,9 84,1 85,5 85,7 1,9 0,2 Source: (Stats SA, 2016a) The producer price index for final manufactured goods registered an improved contraction of 0,3%, following a 0,4% negative growth in the last quarter. The following items moderated in the period: meat and meat products (0,3%), fruit and vegetables (0,1%), oils and fats (1,3%). However, sugar rebounded by 1,0%, while beverages and bakery products grew by 0,7% and 0,5%, respectively and food products stagnated at 0,2%, (see Table 2.2). On the other hand, the year-on-year producer price index for final manufactured decelerated by 0,6%, following a 0,2% contraction in the last quarter. Sugar, (oils and fats) recorded a 1,3% and 3,1%, growth, respectively, while (meat and meat products) and fruit and vegetables moderated by 7,5% and 1,5%, respectively. In addition, bakery products stagnated at 1,0%, with fish remaining unchanged as compared to the preceding quarter of a 2,0% negative growth. Table 2.2: Producer price index of food products Food products Indices Weight 2015: Q2 2016: Q1 2016: Q2 % change between 2015: Q2 and and Final manufactured ,1 114,7 114,4-0,6-0,3 goods (Headline PPI) Food products 26,3 116,9 118,8 119,2 2,0 0,3 Meat and meat 4,5 117,7 126,2 126,5 7,5 0,3 products Fish and fish product 1,6 127,5 127,7 127,5 0,0-0,2 Fruit and vegetables 2,4 112,5 114,0 114,2 1,5 0,1 Oils and fats 0,5 105,8 107,7 109,0 3,0 1,3 Dairy products 3,3 122,4 122,7 122,7 0,2 0,0 Grain mill products 1,8 109,3 108,2 109,5 0,2 1,2 Starch and starch products and animal feeds 1,6 117,6 117,4 117,5-0,1 0,1 3

7 Other food products 0,9 116,3 116,7 117,4 0,9 0,6 Bakery products 6,9 121,9 122,4 123,1 1,0 0,5 Sugar 1,9 103,5 103,7 104,8 1,3 1,0 Source: Stats SA (2016b) Import unit value index 3 Import unit values of selected food products are given in Table 2.3. During the current period, the import unit value index for food products and oils and fats, grew by 0,2%, however, contracted by 3,4% year-on-year. In addition, quarter-to-quarter and year-on-year for fats and oils contracted by 3,6% and 0,1%, respectively. Grain mill products grew year-on-year by 0,5%. Table 2.3: Import unit value index of food products Food products Indices 2015: Q2 2015: Q2 and % change between and Food (total) 110,0 106,1 106,3-3,4 0,2 Fats and oils 101,3 97,8 97,7-3,6-0,1 Grain mill products 120,9 116,6 117,2-3,1 0,5 Source: Stats SA (2016c) 3 IMF defines export and import unit value index as a measure of the overall change in the prices of transactions in goods and services between the residents of an economic territory and residents of the rest of the world. The average unit value is obtained by dividing the value of exported/imported goods in monetary terms with the respective volume/weight of the goods. 4

8 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 Index (2010 = 100) 2.2 PRODUCTION Figure 2.1: Seasonally adjusted physical volume of production: food products Meat, fish, fruit etc Grain mill products Dairy products Other food products Source: Statistics SA (2016d) A physical volume of production by the food products division is presented in Figure 2.1. The quarter-to-quarter physical volume of production of meat and meat products stagnated at 1,3%, dairy contracted by 1,2%, grain mill and bakery products rebounded by 0,2%, while other food products decelerated by 0,2% in the second quarter of However, the year-on-year volume of production for meat and meat products increased modestly by 3,0%, following a 1,1% growth in the first quarter of Dairy products moderated by 4,9%, while grain mill and bakery and other food products decelerated by 1,7% and 0,1%, respectively. Production capacity Table 2.4: Utilisation and reasons for underutilisation of production capacity by large enterprises: Food products (percentage) Period Utilisation Reasons for underutilisation Total underutilisation Shortage of Raw materials Labour Skilled Semi and unskilled Insufficient demand Other 2015: Q2 82,7 17,3 1,9 1,4 0,2 10,9 3,0 81,7 18,3 2,2 1,3 0,3 10,7 3,8 5

9 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 R million 81,5 18,5 2,1 1,4 0,2 10,1 4,8 Source: Statistics SA (2016e) The utilisation of production capacity by large enterprises of food products showed a marginal decrease year-on-year and quarter-to-quarter (see Table 2.4). Insufficient demand and other reasons such as low productivity and shortage of raw materials are the main reasons of underutilisation during the period. 2.3 VALUE OF SALES Figure 2.2: Seasonally adjusted value of sales (current prices): food products Source: Statistics SA (2016d) In the second quarter of 2016, the quarter-to-quarter seasonally adjusted value of sales of food products moderated by 0,3%, following a 0,6% growth recorded in the previous quarter. However, the seasonally adjusted value of sales grew marginally by 1,3% as compared to 1,2% year-on-year of the same period (see Figure 2.2). 6

10 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 Index (2010 = 100) Figure 2.3: Seasonally adjusted value of sales (current prices): food products Meat, fish, fruit etc Grain mill products Dairy products Other food products Source: Statistics SA (2016d) Wholesale and retail sales 4 The current value of wholesale and retail sales of food, beverages and tobacco are given in Figure 2.4. The wholesale and retail sales of food, beverages and tobacco increased significantly by 9,6% and 17,1%, following growth of 1,0% and 2,6% respectively as recorded in the previous quarter. Similarly, it grew significantly by 17,4% and 26,1% year-on-year, following growth of 8,7% and 10,0%, respectively as recorded in the last quarter. As a result of the positive growths, the current value of income from wholesale and retail sales of food, beverages and tobacco increased from R69,5 billion and R15,6 billion in the previous quarter to R76,2 billion and R18,3 billion, respectively in the second quarter of Statistics South Africa (Stats SA) conducts a monthly survey covering enterprises in the wholesale and retail trade industry. The results of the monthly wholesale and retail trade sales survey are used to compile estimates of the gross domestic product (GDP) and its components, which are used in monitoring the state of the economy and formulation of economic policy. These statistics are also used in the analysis of comparative business and industry performance. 7

11 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 R million Figure 2.4: Wholesale and retail trade sales of food, beverages and tobacco (current prices) Wholesale Retail Source: Statistics SA (2016f, 2016g) 2.4 INCOME FROM FOOD SALES IN THE SERVICE INDUSTRY 6 Table 2,5 below shows the income from food sales 5 in the service industry, which includes food sales in restaurants and coffee shops 6, take-away and fast food outlets 7 and catering services 8. The quarter-to-quarter and year-on-year current income from food sales in the service industry increased significantly by 9,4% and 15,4%, following growth of 2,2% and 6,5%, respectively in the preceding quarter. Owing to the increase in growths, the current value of income from food sales in the service industry increased modestly from R9,9 billion in the previous quarter to R10,8 billion in the second quarter of Income from food sales in the service industry refers to income from the sale of meals and nonalcoholic drinks. 6 Restaurants and coffee shops refers to enterprises involved in the sale and provision of meals and drinks, ordered from a menu, prepared on the premises for immediate consumption and with provided seating. 7 Take-away and fast food outlets refer to enterprises involved in the sale and provision of meals and drinks, ordered from a menu, prepared on the premises for takeaway purposes in a packaged format, at a stand or in a location, with or without provided seating. 8 Catering services refers to enterprises involved in the sale and supply of meals and drinks prepared on the premises on a contract basis and brought to other premises chosen by the person ordering them, to be served for immediate consumption to guests or customers. Catering services also include bars, taverns, other drinking places, ice-cream parlours, etc. 8

12 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 R million 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 R million Figure 2.5: Income from food sales in the service industry Source: Statistics SA (20156) The current income from food sales in the service industry increased significantly by 9,4%, following a growth of 2,2% in the preceding quarter. The quarter-to-quarter increase can be attributed to the growth in restaurants and coffee shops by 10,9% and 12,1% from a 2,9% and a 1,3% growth in the last quarter. However, catering services contracted by 1,3% as compared to a 2,9% growth in the preceding quarter. Similarly, the income from food sales grew significantly by 10,5% from a 2,5% increase registered in the last quarter, driven by growth in restaurant and coffee shops, take-away/fast food outlets and catering services by 11,5%, 11,6% and 7,8%, respectively (see Figure 2.6). During the quarter under review, the total income from the restaurants and coffee shops, take-away/fast food outlets and catering services stands at R5,7 billion, R4,8 billion and R2,1 billion, respectively, which represents a growth in total income of 9,4% in the current quarter Figure 2.6: Income from food sales in the service industry Restaurants and coffee shops Catering services Take-away/fast food outlets Source: Statistics SA (2016h) 9

13 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 % 2.5 TRADE Main food export destinations and products Figure 2.7 shows food export destination share of the continents. Africa was the main food export destination during the second quarter of 2016; it accounted almost half of exports (49%), followed by the Americas and Asia, which accounted 22% and 21%, respectively, of the total food export destination. Europe and Oceania, altogether accounted for 8% of the total food export. The trend during the past five years shows that Africa is by far the biggest share of food export of more than 50% (see Figure 2.8). Figure 2.7: The Food export destinations'share of continents in 2016:Q2 Americas 22% Oceania 2% Africa 49% Asia 21% Europe 6% Figure 2.8: The food export destination's share of the continents ( ) Africa Europe Asia Americas 10

14 Figure 2.9 shows the food export destinations share of the main regions 9 in the second quarter of Among the main regions, SADC (Excluding SACU) accounted the highest share of food export (26%), followed by SACU, (Excluding RSA) (25,0%), the EU (24%), Eastern Asia (13,0%), Western Asia and NAFTA with 6,0% each. Western Asia 6% Figure 2.9: The Food export destinations'share of main regions in 2016:Q2 NAFTA 6% Eastern Asia 13% SACU (ExcludinG RSA 25% European Union 24% SADC (Excluding SACU) 26% 9 The main regions which are included in the analysis are the top eight regions: SADC, Western Africa, EU; NAFTA (North Atlantic Free Trade Area consists consisting of US, (Canada and Mexico); Eastern Asia (which includes China, Japan, North Korea and South Korea); Western Asia (mostly Middle Eastern countries); South Central Asia (which includes India, Pakistan and Bangladesh) and Australia and New Zealand. 11

15 Zimbabwe Namibia Botswana China Germany Mozambique Slovakia Venezuela Lesotho Netherlands % Figure 2.10: The share of top ten food export destination countries in Figure 2.10 shows that the five countries that accounted for food export share destinations during the second quarter of 2016 were from Africa (Zimbabwe (8,6%), Namibia (8,3%), Botswana (6,9%), Mozambique (5,9%) and Lesotho (4,2%). The European countries that accounted for huge share of export destinations during the quarter were: Germany (6,0%), Slovakia (5,5%), and the Netherlands (4,1%). Among the Asian countries, China was the only country with a huge share of export designation accounting 6,4%. Table 2.5 presents the major exported food products during the second quarter of 2016 and Table 2.6 show the year-on-year high and low export performers of food products during the quarter under review by comparing the export values of the present quarter to the same quarter of the previous year (year-on-year). Table 2.5: Major exported food products in HS Code Food product Total amount (R million) HST Flours, meals and pellets of fish or of crustaceans, molluscs or other aquatic invertebrates 589,0 HST Sweet biscuits 135,3 HST Chewing gum, whether or not sugar-coated 94,7 HST HST Fats and oils and their fractions, of fish, other than liver oils Prepared foods obtained by the swelling or roasting of cereals or cereal products 87,9 86,4 HST Prepared foods obtained from unroasted cereal 78,9 12

16 HST flakes or from mixtures of unroasted cereal flakes and roasted cereal flakes or swelled cereals Prepared foods obtained from unroasted cereal flakes or from mixtures of unroasted cereal flakes and roasted cereal flakes or swelled cereals 78,9 HST Other cheese 78,6 HST Tomato ketchup and other tomato sauces 62,3 HST Prepared baking powders 30,7 HST Processed cheese, not grated or powdered 28,0 HST HST HST Roasted chicory and other roasted coffee substitutes and extracts, essences and concentrates thereof Cocoa powder containing added sugar or other sweetening matter Flours, meals and pellets of meat or meat offal; greaves 25,9 22,6 14,4 HST Crisp bread 11,6 HST Fresh (unripened or uncured) cheese, including whey cheese and curd 10,9 HST Rusks, toasted bread and similar toasted products 9,8 HST Dairy spreads 4,8 HST Grated or powdered cheese, of all kinds 4,4 HST HST Stuffed pasta, whether or not cooked or otherwise prepared Blue-veined cheese and other cheese containing veins produced by Penicillium roqueforti 2,9 2,6 HST Soya sauce 2,5 HST Inactive yeasts; other single-cell microorganisms, dead 2,4 HST Active yeasts 2,4 HST Gingerbread and the like 2,4 HST Waffles and wafers 2,1 13

17 Table 2.6: Export performance of food products HS Code Food product % Changes compared to a year ago High performers HST Fish liver oils and their fractions 4594,3 HST Cane molasses 555,2 HST Other fructose and fructose syrup, containing in the dry state more than 50% by weight of fructose, excluding invert sugar 374,1 HST Maize (corn) flour 211,9 HST Potato starch 207,5 HST Oilcake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of soya bean oil 168,0 HST Other cereals 160,2 HST Fats and oils and their fractions of fish, other than liver oils 149,2 HST Manioc (cassava) starch 142,9 HST HST Fresh (unripened or uncured) cheese, including whey cheese, and curd 140,3 Blue-veined cheese and other cheese containing veins produced by Penicillium Roqueforti 126,7 HST Maple sugar and maple syrup 116,9 HST Chewing gum, whether or not sugar-coated 113,6 HST Prepared baking powders 102,0 HST Processed cheese, not grated or powdered 79,1 HST HST HST Black tea (fermented) and partly fermented tea, in immediate packings of a content not exceeding 3 kg 74,7 Flours, meals and pellets, of fish or of crustaceans, molluscs or other aquatic invertebrates 63,1 Tapioca and substitutes, therefore prepared from starch in the form of flakes, grains, pearls, siftings or in similar forms. 54,0 HST Grated or powdered cheese, of all kinds 51,3 HST Rusks, toasted bread and similar toasted products 45,3 HST Glucose and glucose syrup, not containing fructose or containing in the dry state less than 20% by weight of fructose 42,6 14

18 HST Cocoa powder, containing added sugar or other sweetening matter 40,2 HST Tomato ketchup and other tomato sauces 36,5 HST Cocoa powder, not containing added sugar or other sweetening matter 33,5 HST Flour, meal and powder 28,2 HST Flours, meals and pellets of meat or meat offal; greaves 23,9 HST Margarine, excluding liquid margarine 22,3 HST Wheat or meslin flour 21,1 HST Butter 15,8 HST Waffles and wafers 14,8 Low performers HST Fats and oils and their fractions, of marine mammals -99,7 HST HST HST Oil cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of ground-nut oil -99,0 Lard stearin, lard oil, oleostearin, oleo oil and tallow oil, not emulsified or mixed or otherwise prepared -95,3 Glucose and glucose syrup, containing in the dry state at least 20% but less than 50% by weight of fructose, excluding invert sugar -74,7 HST151530: Castor oil and its fractions -58,6 HST190240: Couscous -52,2 HST Other starches -51,3 HST Dairy spreads -37,8 HST Stuffed pasta, whether or not cooked or otherwise prepared -33,1 HST Cocoa butter, fat and oil -31,8 Main source of food imports and imported food products South Africa s main source of food import during the second quarter of 2016 is presented in Figure South Africa imported 62% of its food from Asia and Europe combine. The share of the Americas (27%) was also significant, while that of Africa and Oceania were marginal at 9,0% and 2,0%, respectively. Figure 2.12 indicates that during the past five years, Europe, the Americas and Asia have been the largest sources of import, while Africa has been the least and is still below 15%. 15

19 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 % Figure 2.11: The share of continents as a source of food import in 2016:Q2 Europe 34% Oceania 2% Africa 9% Americas 27% Asia 28% Figure 2.12: The share of continents as a source of food import ( ) Asia Europe Americas Africa As the main trading region, the EU accounts for 38% of the total food imports, followed by South America (26%), South Eastern Asia (23%), Eastern Asia (9,0%) and NAFTA (4,0%) during the second quarter of 2016 (see Figure 2.13). 16

20 Argentina Indonesia Malaysia Netherlands Spain China Gabon Brazil Belarus United Kingdom % Figure 2.11: The share of regions as a source of food import in 2016:Q2 South America 26% European Union 38% South-Eastern Asia 23% Eastern Asia 9% NAFTA 4% Figure 2.14: The share of top ten countries as a source of food import in Among the top ten countries as sources of import for South Africa, Argentina was the highest (15,7%), followed by Indonesia (8,5%), Malaysia (8,4%), the Netherlands (8,3%), Spain (7,4%), China (7,2%), Gabon (7,2%), Brazil (6,8%), Belarus (3,7%) and the United Kingdom (3,6%)(see Figure 2.14). Table 2.6 presents the major imported food products during the second quarter of

21 Table 2.7: Top 30 imported food products in HS Code Food product Total amount (R million) HST Oil cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of soya bean oil. 695,8 HST Other cheese 123,3 HST Chewing gum, whether or not sugar-coated 81,0 HST Processed cheese, not grated or powdered 80,2 HST Flours, meals and pellets of meat or meat offal; greaves 72,6 HST Butter 69,0 HST Wheat or meslin flour 62,6 HST Cocoa butter, fat and oil 61,1 HST Cocoa powder, not containing added sugar or other sweetening matte. 58,9 HST Vegetable fats and oils and their fractions 56,4 HST Other pasta 54,8 HST Sweet biscuits 53,5 HST Cane molasses 43,8 HST Active yeasts 34,9 HST Manioc (cassava) starch 28,9 HST HST HST Glucose and glucose syrup, not containing fructose or containing in the dry state less than 20% by weight of fructose 23,6 Glucose and glucose syrup, containing in the dry state at least 20% but less than 50% by weight of fructose, excluding invert sugar 17,1 Flours, meals and pellets, of fish or of crustaceans, molluscs or other aquatic invertebrates 16,4 HST Tomato ketchup and other tomato sauces 16,2 HST Ice cream and other edible ice, whether or not containing cocoa 15,2 HST Maize (corn) starch 13,7 HST Soups and broths and preparations thereof 12,9 HST Castor oil and its fractions 10,5 HST Animal or vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 15.16; inedible mixtures or pre 8,0 18

22 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 R million HST Soya sauce 7,9 HST Blue-veined cheese and other cheese containing veins produced by Penicillium roqueforti 6,3 HST Waffles and wafers 6,2 HST Grated or powdered cheese, of all kinds 5,9 HST Yogurt 5,8 HST Potato starch 5,7 Figure 2.15: Quarterly trade balance of food products Export Import Figure 2.15 shows the quarterly trade balance of food products. The quarter-to-quarter food export and import of food products rebounded by 13,3% and 4,2%, following a 7,1% and 11,6% respective growth in the previous quarter. However, the year-on-year food exports and imports increased marginally by 19,7% and 11,9%, in the current quarter as compared to the 19,2% and 9,9% respective growth registered in the preceding quarter. As a result, the trade surplus widened from R11,2 billion in the previous quarter to R12,7 billion during the second quarter of

23 2015: Q2 2015: Q3 2015: Q4 2015: Q2 2015: Q3 2015: Q4 2.6 Employment Figure 2.16: Total number of formal employment: food products Source: Statistics SA (2016i) Figure 2.16 shows the total number of formal employment in the food products division. The quarter-to-quarter food products division contracted by 1,6% as compared to a 2,4% growth registered in the preceding quarter. As a result of the decline in growth, the employment in the division decreased from in the last quarter to 187,415 in the second quarter of Figure 2.17: Number of formal employment: food products Production, processing and preservation of meat, fish, fruit, vegetables, oils and fats Dairy products Grain mill products, starches and starch products and prepared animal fat Other food products Source: Statistics SA (2016i) Figure 2.17 shows the number of formal employment of food products division items. The quarter-to-quarter formal employment of (meat, fish, fruit, vegetables, oils and fats) and grain mill products contracted by 4,9% and 1,1% as compared to the respective growth of 0,3% and 2,2% recorded in the last quarter. However, dairy products showed an improved 20

24 contraction of 1,0%, following a 4,3% decline recorded in the preceding quarter. Furthermore, other food products moderated by 0,5% from a 6,2% growth in the first quarter of As a result, the other food products is the only division that created jobs in the quarter under review, of from jobs in the preceding quarter. 2.7 OUTLOOK Table 2.8: Net balance 10 of BER manufacturing survey: food products 2015: Q4 2016: Q3* Domestic sales volumes Export sales volumes Production volumes Domestic order volumes received Export order volumes received General business conditions Number of factory workers Fixed investment Business confidence Expected volume of goods imported in 12 months time Expected volume of goods exported in 12 months time Expected real investment in machinery and equipment in 12 months time BER calculates the net balance statistics by subtracting the percentage of the respondents replying down from the percentage replying up to a particular question. Respondents are asked to compare the current quarter s experience to that of a year ago. A positive net balance implies an improvement (i.e., positive year-on-year growth) and vice versa. Therefore, the net balance varies from -100 to 100 where -100 is the most negative response; 0 is a situation of no change and 100 is the most positive response. 11 BER calculates the business confidence index by asking respondents to rate current business conditions as satisfactory or unsatisfactory. Then the index is derived as a gross percentage of the respondents replying satisfactory. A value of 50 is indicative of neutrality, 100 indicative of extreme confidence and 0 of extreme lack of confidence. An index greater than 50 shows the majority of respondents are satisfied with the prevailing economic conditions. 21

25 2015: Q4 2016: Q3* Expected business conditions in 12 months time * Expected Source: BER (2016) A survey of food manufacturing by the Bureau for Economic Research (BER) is presented in Table 2.7 The survey shows that the year-on-year outlook for the third quarter of 2016 is positive for all the variables except for fixed investments and employment. 3. BEVERAGES Beverages according to SIC classification is code 305 and it comprises of the following beverage products: Distilling, rectifying and blending of spirits; ethyl alcohol production from fermented materials; manufacture of wine Manufacture of beer and other malt liquors and malt Breweries, except sorghum beer breweries Sorghum beer breweries Manufacture of malt Manufacture of soft drinks; production of mineral waters 3.1 PRICE Table 3.1 below shows the consumer price indices and export unit value of beverages. The year-on-year and quarter-to-quarter consumer price inflation for alcoholic beverages moderated by 0,1% and 0,2%, respectively, as compared to the previous quarter. The quarter-to-quarter consumer price moderation is as a result of moderate growth in wine (0,9%), hot beverages (0,4%), cold beverages (0,4%) and spirits (0,1%). However, beer remained unchanged as compared to the previous quarter growth which was 0,1%. On the other hand, the producer price for beverages remained unchanged for the current quarter, while the export unit value moderated by 2,6%. The year-on-year moderated growth was driven by the moderate growth of wine (3,8%), hot beverages (0,9%), non-alcoholic beverages (0,4%), spirits (0,3%) and cold beverages (0,2%. Table 3.1: Price indices of beverages Beverages products Indices Weight 2015: Q2 2016: Q2 Consumer price indices % change between 2015: Q2 2016: and Q1 and 2016: Q2 All items (CPI ,0 110,9 111,1 0,1 0,2 Headline) Alcoholic 3,9 113,6 115,5 116,0 2,1 0,4 beverages Spirits 0,8 109,7 110,0 110,0 0,3 0,1 Wine 0,7 113,4 116,7 117,7 3,8 0,9 22

26 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 Index (2010 = 100) Beer 2,5 114,4 114,8 114,8 0,3 0,0 Non-alcoholic 1,2 109,6 109,7 110,0 0,4 0,3 beverages Hot beverages 0,3 115,9 116,5 117,0 0,9 0,4 Cold beverages 0,9 107,3 107,1 107,5 0,2 0,4 Producer price index Beverages 8,5 111,3 111,4 111,4 0,1 0,0 Export Unit value Beverages 135,2 126,4 140,5 144,2 14,1 2,6 Source: Stats SA (2016a, 2016b, PRODUCTION Figure 3.1: Seasonally adjusted physical volume of production: beverages Source: Statistics SA (2016d) Figure 3.1 presents the seasonally adjusted physical volume of production for beverages division. During the second quarter of 2016, the volume of production for beverages increased marginally by 1,8% as compared to the 1,2% growth registered in the previous quarter, however, it rebounded by 1,2% year-on-year following a 0,1% contraction in the last quarter. 23

27 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 R million Production capacity Table 3.2: Utilisation and reasons for underutilisation of production capacity by large enterprises: Beverages division (percentage) Period Utilisation Reasons for underutilisation Total underutilisation Shortage of Raw materials Labour Skilled Semi and unskilled Insufficient demand Other 2015: Q2 82,8 17,2 2,0 1,5 0,2 8,7 4,9 85,6 14,4 1,9 0,8 0,2 7,7 3,8 85,5 14,5 2,0 1,0 0,3 7,7 3,6 Source: Statistics SA (2016e) Table 3.2 shows that the year-on-year utilisation capacity showed an increase during the second quarter of 2016 for the beverages division, however, it moderated as compared to the previous quarter. Insufficient demand remains the main reason for underutilisation during the period followed by other reasons such as seasonal factors. 3.3 VALUE OF SALES Figure 3.2: Seasonally adjusted value of sales (current prices): beverages Source: Statistics SA (2016d) 24

28 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 R million The seasonally adjusted value of sales for beverages division stagnated by 1,8% year-onyear, however, moderated by 0,5% quarter-to-quarter following a1,0% growth recorded in the preceding quarter (see Figure 4.6). 3.4 INCOME FROM BAR SALES IN THE SERVICE INDUSTRY 12 During the second quarter of 2016, income from bar sales in the food and beverages services industry accelerated by 10,5%, following a 2,5% growth recorded in the preceding quarter; representing a growth from R1,5 billion previously to R1,6 billion in the current quarter. The increases are as a result of increase in growth of restaurants and coffee shops, takeaway/fast food and catering services by 11,5%, 11,6% and 7,8%, following growth of 2,9%, 3,0% and 1,1%, respectively in the previous quarter. Similarly, the year-on-year total income from bar sales in the industry grew by 22,0% for restaurants and coffee shops, take-away/fast food outlets (10,8%) and catering services (14,8%). Figure 3.3: Total income from bar sales in the service industry Source: Statistics SA (2016h) 12 Income from bar sales refers to income from liquor sales. 25

29 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 R million Figure 3.4: Income from bar sales in the service industry Restaurants and coffee shops Take-away/fast food outlets Catering services Source: Statistics SA (2016h) 3.5 TRADE Main export destinations and food products Figure 3.5 shows that, during quarter two of 2016, Europe was by far the largest export destination for South African beverages. It accounted for 43% of the total export, followed by Africa (35%), then Asia and the Americas at 11% and 10%, respectively. Oceania played a marginal role as export destination for South African beverages division export. The trend of the export destination s share during the past five years indicates that Europe and Africa have been the two continents that have been playing the most significant roles in beverages export share destination (see Figure 3.6). Figure 3.5: The beverage export destination's share of continents in 2016:Q2 Oceania 1% Africa 35% Europe 43% Asia 11% Americas 10% 26

30 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 % Figure 3.6: The beverages export destination's share of the continents ( ) Europe Africa Americas Asia Among the main trading region, the EU accounts for most of the total export, followed by SADC (Excluding SACU) 17,0%) and SACU (Excluding RSA), which accounted for 16,0%. NAFTA, Eastern Asia and South Eastern Asia accounted for 10,0%, 6,0% and 4,0%, respectively during the period (see Figure 3.7). SADC (Excluding SACU) 17% Figure 3.7: The share of top beverage export destination regions in SACU (Excluding RSA) 16% European Union 47% Eastern Asia 6% South Eastern Asia 4% NAFTA 10% 27

31 Saint Vincent and the Grenadines Germany Namibia Netherlands Mozambique United States Central African Republic Denmark Sweden Canada % Figure 3.8: The share of top ten beverages export destination countries in Figure 3.8 above shows the share of the top ten beverages export destinations during the second quarter of The following are the main countries that beverages were exported to during the quarter: Saint Vincent and the Grenadines (9,9%), Germany (7,9%), Namibia (7,4%), the Netherlands (5,6%), Mozambique (4,5%), United States (4,4%), Central African Republic (4,1%), Denmark (4,0%), Sweden (4,0%) and Canada (3,8%). Table 3.3 presents major exported beverages during the quarter under review, while Table 3.4 shows high and low export performers of beverages during the second quarter of 2016 by comparing the export values of the present quarter to the same quarter of the previous year (year-on-year). Table 3.3: Major exported beverages products in HS Code Beverages products Total amount (R million) HST HST HST Undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol. or higher Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured Other fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included 387,4 305,0 221,9 HST Liqueurs and cordials 167,9 HST Spirits obtained by distilling grape wine or grape marc 89,5 HST Spirits obtained by distilling grape wine or grape marc 89,5 HST Whiskies 67,0 HST Vodka 39,9 28

32 HST Gin and Geneva 28,7 HST HST Rum and other spirits obtained by distilling fermented sugar-cane products Vinegar and substitutes for vinegar obtained from acetic acid 16,7 7,7 HST Other grape must 4,2 3.4: Export performance of beverages in HS Code Beverages % Change compared to a year ago High performers HST Rum and other spirits obtained by distilling fermented sugar cane products 127,8 HST Gin and Geneva 64,4 HST Spirits obtained by distilling grape wine or grape marc 48,1 HST Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured 34,6 HST Beer made from malt 25,4 HST Tomato juice 23,4 HST Wine lees 20,0 HST Mineral waters and aerated waters 13,6 HST Undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol. or higher 12,3 HST Mixtures of juices 11,9 HST Ethyl alcohol and other spirits, denatured, of any strength 9,5 Low performers HST Liqueurs and cordials -32,2 HST Other black tea (fermented) and other partly fermented tea -23,3 HST Sparkling wine -21,7 HST Vinegar and substitutes for vinegar obtained from acetic acid -15,1 29

33 HST Whiskies -13,1 HST HST Other fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included -12,2 Cranberry (Vaccinium macrocarpon, Vaccinium oxycoccos, Vaccinium vitis-idaea) juice -8,2 HST Vodka -4,7 Main imported beverage products and the source Figure 3.9 illustrates the share of continents as a source of beverage import in the second quarter of Europe, which accounted 80% import share, was the largest source of beverages import during the second quarter of Africa accounted 7% of the import, while the Americas, Asia and Oceania altogether accounted for 13% of the total beverages import during the period. Figure 3.10 shows that during the past five years, Europe, followed by Africa, accounted for a huge share of beverages import, followed by the Americas and Asia with 8% and 4%, respectively. Oceania s contribution is very small at 1%. Figure 3.9: The share of continent's as a source of beverages import in Oceania 1% Africa 7% Americas 8% Asia 4% Europe 80% 30

34 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 % Figure 3.10: The share of continents as a source of beverages import ( ) Europe Americas Africa Asia Among the top trading regions, the EU (80%) still accounts the largest share followed by (SACU (Excluding RSA)) (7%), and NAFTA (7%). Western Asia and the Western Europe rest played a minor role of as a source of import for beverages; they accounted for 3% each (see Figure 3.10). Figure 3.11: The share of top regions as a source of beverages import in SACU (Excluding RSA) 7% NAFTA 7% Western Asia 3% Western Europe Rest 3% European Union 80% 31

35 United Kingdom France Puerto Rico Cameron Colombia Austria Zimbabwe Vietnam Angola Peru % Figure 3.12: The share of top ten countries as a source of beverages import in Figure 3.12 above shows the share of the top ten counties as a source of beverages import. During the period under review, the United Kingdom contributed a huge share of beverage import (37,3%), followed by France (13,7%), Puerto Rico (8,6%), Cameroon (6,9%), Colombia (6,3%), Austria (6,0%), Zimbabwe (5,9%), Vietnam (5,5%), Angola (4,7%) and Peru (3,6%). Table 3.5: Main imported beverages in HS Code Beverages Total amount (R million) HST Whiskies 634,4 HST Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured 283,2 HST Other black tea (fermented) and other partly fermented tea 209,4 HST Beer made from malt 137,8 HST Spirits obtained by distilling grape wine or grape marc 121,6 HST Sparkling wine 63,6 HST Liqueurs and cordials 32,1 HST Vodka 29,5 HST Rum and other spirits obtained by distilling fermented sugar cane products 26,9 HST Gin and Geneva 21,6 HST Other fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not 9,8 32

36 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1 2014: Q2 2014: Q3 2014: Q4 2015: Q1 2015: Q2 2015: Q3 2015: Q4 R million elsewhere specified or included HST HST Vinegar and substitutes for vinegar obtained from acetic acid 7,5 Black tea (fermented) and partly fermented tea, in immediate packings of a content not exceeding 3 kg 7,5 HST Mineral waters and aerated waters 6,2 HST HST Cranberry (Vaccinium macrocarpon, Vaccinium oxycoccos, Vaccinium vitis-idaea) juice 5,1 Undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol. or higher 4,8 HST Ethyl alcohol and other spirits, denatured, of any strength 0, Figure 3.13: Quarterly trade balance of beverages Export Import During the second quarter of 2016, the export of beverages rebounded by 19,0%, following a 18,5% contraction in the previous quarter, however, it increased modestly year-on-year by 15,5%, following a 10,5% growth registered in the preceding quarter. On the other hand, the quarter-to-quarter and the year-on-year import rebounded by 22,7% and 9,6%, following a contraction of 29,8% and 0,4%, repsectively in the last quarter. As a result, the trade surplus of beverages industry widened from R2 216,7 million in the previous quarter to R2 591,1 million during the second quarter of 2016 (see Figure 3.13). 33

37 2015: Q2 2015: Q3 2015: Q4 3.6 Employment Figure 3.14: Number of formal employment: beverage and tobacco products Source: Quantec EasyData (2016i) Figure 3.14 shows the number of formal employment in the beverages and tobacco products industry. The quarter-to-quarter formal employment of the beverages and tobacco products divisions contracted by 5,2%, following a growth of 2,4% recorded in the previous quarter. As a result of the decline in employment growth, the total number of formal employment of the beverages and tobacco products division decreased from in the previous quarter to during the second quarter of OUTLOOK Table 3.6: Net balance of BER manufacturing survey: Beverages 2015: Q4 2016: Q3* Domestic sales volumes Export sales volumes Production volumes Domestic order volumes received Export order volumes received General business conditions Number of factory workers