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. Mangoes and guavas were the leading food and beverage product produced in Kenya valued at USD1.6bn in 2012. Cow s milk and indigenous cattle meat were ranked second and third valued at USD1.2bn and USD1.1bn respectively. Kenya s food consumption growth rate was 3.6% in 2013. It is expected to grow at around 4.2% p.a. in the forecast period (2014 to 2019). Kenya s beer sales represented the largest sales of beverages, increasing from 430 million litres in 2010 to a forecasted 470 million litres in 2019. One of the biggest opportunities in the industry is that premiumisation will play a major part in the growth of many segments of the Kenyan food and drink industry. FDI Kenya is a net exporter of food and beverages. Kenya s exports of food and beverages were valued at ZAR19.2bn in 2013 compared to ZAR17.7bn in 2012, increasing by 9%. South Africa and the Western Cape are net exporters of food and beverages to Kenya. In 2013, South Africa exported food and beverages valued at ZAR493m to Kenya, representing an increase of 39%. The leading export product from the Western Cape to Kenya in the food and beverages sector was wine, valued at ZAR93m, followed by apples, pears and quinces (ZAR73m) and liqueur, mostly liqueur and cordials excluding whisky, rum, vodka and gin (ZAR29m). Kenya is a net recipient of FDI in the food and beverage sector, receiving ZAR1.6bn in 2013 and investing ZAR653m in the same year. Between January 2003 and September 2014 a total of 2 FDI projects were recorded from South Africa into the Kenyan food and beverage sector. These projects by Nutro Manufacturing EPZ and Coca-Cola Sabco represent a total capital investment of ZAR365.6m. There were no investments with Kenya in this sector from or into the Western Cape.
Table of Contents 1. Definitions/descriptions... 3 2. Overview of food and beverage market in Kenya... 3 2.1 SWOT analysis of Kenya s food and beverage sector... 5 2.2 Logistics... 5 2.3 Companies... 6 3. Trade... 8 3.1 Kenya s Global Trade of Food and Beverages... 8 3.2 South African Trade of Food and Beverages with Kenya... 11 3.3 Western Cape Trade of Food and Beverages with Kenya... 12 3.4 Trade Regulations Markings and Standards... 14 3.4.1. Standards... 14 3.4.2. Labelling... 14 3.5 Tariffs for South African food and beverages... 14 4. FDI... 16 4.1 Inward FDI into the Kenyan Food & Beverage Sector... 16 4.2 Outward FDI... 17 4.3 Bilateral FDI between South Africa and Kenya... 18 4.4 FDI with the Western Cape... 18 2
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 2030. 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 Mangoes and guavas were the leading food and beverage product produced in Kenya valued at USD1.6bn in 2012. Cow s milk and indigenous cattle meat were ranked second and third valued at USD1.2bn and USD1.1bn respectively. Other top products include maize (USD484m), potatoes (USD473m), tea (USD393m) and bananas (USD393m). KENYA'S GROSS PRODUCTION VALUE, 2012 Production (USD m) 3 Sugar cane 191,20 Milk, whole fresh camel Beans, dry Bananas Tea Potatoes Maize 318,34 361,19 392,71 392,85 472,66 483,82 Meat indigenous, cattle Milk, whole fresh cow 1110,40 1164,91 Mangoes, mangosteens, guavas 1666,71 Source: FAOSTAT, 2015 Food and beverages is the main sector represented on the Nairobi Stock Exchange, together with the banking sector. Foods and consumer food processing also currently dominate Kenya s manufacturing sector with approximately 75% of Kenya s labour force working in the agriculture sector. This goes a long way to ensuring food security and employment in the country (PwC, 2014). The general outlook for the retail sector in food and beverages is also notably strong with real GDP growth forecast to average 6.4% p.a. from 2015 to 2018. The outlook for Kenya's food and drink industry continues to be positive. According to BMI Research (2014) the success of premium-chain coffee shops highlights the likelihood that premiumisation will play a major part in the growth of many segments of the Kenyan food and drink industry. Going forward, the mass grocery sector is likely to be a key growth area, with foreign investment from South African retailers likely over the next two years.
Litres (million) Value (USDbn) Kenya s food consumption increased from USD11.6bn in 2008 to USD13.9bn in 2013 and is expected to increase over the forecast period from USD14.2bn in 2014 to USD17.5bn in 2019. Kenya s food consumption growth rate was 3.6% in 2013. It is expected to grow at around 4.2% p.a. in the forecast period (2014 to 2019). Per capita food consumption is also forecast to increase by 3.0% in 2015 and mass grocery retail sales are forecast to increase by 32.4% in 2015 (BMI Research, 2015). FOOD CONSUMPTION IN KENYA, 2008-2019 20 18 16 14 12 10 8 6 4 2 0 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f 2019f Food consumption, USDbn 11,6 12,6 12,8 12,1 13,4 13,9 14,2 14,3 14,8 15,4 16,4 17,5 Food consumption, USD, % y-o-y 11,8 8,4 1,2-4,8 10,6 3,6 2,4 0,5 3,3 4,4 6,4 6,2 14 12 10 8 6 4 2 0-2 -4-6 Growth (% per annum) Source: BMI Research, 2015 Kenya s beer sales represented the largest sales of beverages, increasing from 430 million litres in 2010 to a forecasted 470 million litres in 2019. 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. Carbonated soft drink production is forecast to remain at 341.6 million litres from 2010 to 2019, with no extra capacity, however sales are expected to rise. There is a clear upward trend in the sale of beer and the production of fruit or vegetable juice in Kenya which is expected to grow by 4.5% p.a. from 2013 to 2019 (BMI Research, 2015). 4 KENYAN BEVERAGE SALES & PRODUCTION, 2010-2019 500 450 400 350 300 250 200 150 100 50 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Beer Sales 430,1 430,1 430,1 445,2 447,4 451,9 456,4 461,0 465,6 470,3 Carbonated soft drink production 341,6 341,6 341,6 341,6 341,6 341,6 341,6 341,6 341,6 341,6 Fruit/vegetable juice production 111,8 117,4 123,3 129,4 135,9 142,0 148,4 155,1 162,0 169,3 Wine Sales 5,7 7,3 8,5 8,6 7,6 6,8 7,0 7,1 7,1 7,4 Source: BMI, 2015 Note: the figures for beer and wine are for sales and those for carbonated soft drinks and fruit/vegetable juice is for production
Overall wine consumption in Kenya grew by 5% during 2013, higher than 2012. The growth in wine consumption was largely driven by the growing middle-class population in Kenya. Other factors such as increased product availability in the market, advertising of various brands and popularity of wines at corporate functions and restaurants are major factors that promoted growth of wine consumption during 2013 (Euromonitor, 2014). 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, 2014). 2.1 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. Agriculture is Kenya's largest industry, making up 22% of GDP in 2013. 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. 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 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 levied against its key Senator Keg brand in October 2013. 5 2.2 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.
Source: Northern Corridor Transit and Transport Coordination Authority, 2014 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, 2014). 6 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 900,000 20-foot equivalent unit (TEU) 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 2020. The new terminal will enable the country to handle larger vessels. 2.3 Companies The table below gives the top 5 companies on the Nairobi Securities Exchange in the food and beverage sector. Other companies that are not listed below include Kenya Orchards, Limuru Tea Company, Kapchorua Tea Company and coffee company Eaagads. 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. It has also piloted the production of a hybrid high-yielding palm oil variety in areas previously thought too cool for commercial cultivation, in collaboration with the UN Food and Agriculture Organization (FAO). 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. The company is actively looking to extend its operations into tea blending and packaging within the East African region (Moneyhub, 2015).
RANK TOP 5 FOOD AND BEVERAGE COMPANIES IN THE NSE, 2013 COMPANY MARKET CAPITAL (M KES) 2014 1 East African Breweries Ltd Kenya Beverages 64,844 2 Mumias Sugar Co. 4,054 3 Sasini Tea 3,398 4 Williamson Tea Kenya 2,486 5 Rea Vapingo 1,650 TOTAL 212,274 Source: The Nairobi Securities Exchange, 2014 7
Value (ZARm) 3. Trade 3.1 Kenya s Global Trade of Food and Beverages Kenya experienced a positive trade balance from 2004 to 2013, making Kenya a net exporter of food and beverages. Kenya s exports of food and beverages were valued at ZAR19.2bn in 2013 compared to ZAR17.7bn in 2012, increasing by 9%, while imports were valued at ZAR17.2bn in 2013 increasing by 19%. 25 000 KENYA'S GLOBAL FOOD AND BEVERAGE TRADE, 2004-2013 20 000 15 000 10 000 5 000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Export (ZARm) 6 600 7 752 9 330 11 438 15 985 15 255 16 791 17 208 17 640 19 193 Import (ZARm) 2 885 3 355 4 369 6 711 10 125 12 796 10 146 13 302 14 472 17 218 Trade Balance (ZARm) 3 716 4 397 4 962 4 728 5 860 2 459 6 645 3 905 3 168 1 975 8 Source: Trade Map, 2015 The United Kingdom was the leading export market for food and beverages from Kenya in 2013, valued at ZAR3.03bn and growing by 3.4%. Egypt and Pakistan were ranked second and third, valued at ZAR2.49bn and ZAR2.36bn respectively. Other top export markets were Uganda (ZAR953m), France (ZAR914m) and the United States (ZAR835m). Kenya exports food and beverages to two other African countries in its top 10 exports, namely Egypt (2 nd ) and Uganda (4 th ). The top food and beverage exports to the top three destination markets are as follows: United Kingdom: Tea, ZAR1.4bn Leguminous vegetables, shelled or unshelled, fresh or chilled, ZAR788m Vegetables nes, fresh or chilled, ZAR255m Egypt Tea, ZAR2.5bn Dates, figs, pineapples. Mangoes, avocadoes, guavas, ZAR3.8m Butter and other fats and oils derived from milk, ZAR1.7m Pakistan Tea, ZAR2.1bn Shelled dried vegetables, ZAR217m Cloves, ZAR451 000
KENYA S EXPORT MARKETS OF FOOD & BEVERAGES, 2013 RANK DESTINATION MARKETS VALUE 2013 (ZARm) % GROWTH 2012-2013 1 United Kingdom 3 034 3.4% 2 Egypt 2 493 9.3% 3 Pakistan 2 361 28.4% 4 Uganda 953-1.7% 5 France 914 29.0% 6 United States 835-2.4% 7 Germany 786 13.5% 8 Netherlands 708-5.0% 9 Russian 701 19.9% 10 Kazakhstan 651 43.7% 27 South Africa 0.12 8.3% TOTAL EXPORTS 19 232 8.9% Source: Trade Map, 2015 Pakistan was the leading source market for food and beverages to Kenya valued at ZAR1.9bn, followed by Uganda and Indonesia valued at ZAR1.6bn and ZAR1.3bn respectively. Other top import markets were Russia (ZAR1.2bn), the Ukraine (ZAR1.1bn) and India (ZAR888m). The top food and beverage imports from the top three source markets are as follows: Pakistan: Rice, ZAR1.9bn Starches; inulin, ZAR24m Sugar confectionery (incl white choc), not containing cocoa, ZAR5.2m 9 Uganda Tea, ZAR804.6m Maize, ZAR102.6m Milk and cream, concentrated or sweetened, ZAR101m Indonesia Palm oil and its fractions, ZAR1.3bn Hydrogenated animal or vegetable fats, oils& fractions, ZAR22.6m Coconut (copra),palm kernel/babassu oil & their fractions, ZAR5.5m
KENYA S SOURCE MARKETS OF FOOD & BEVERAGES, 2013 RANK SOURCE MARKETS VALUE 2013 (ZARm) % GROWTH 2012-2013 1 Pakistan 1 951 46.2% 2 Uganda 1 562 13.7% 3 Indonesia 1 331 0.2% 4 Russia 1 156 132.0% 5 Ukraine 1 110 104.3% 6 India 888 1.8% 7 Malaysia 787 75.7% 8 Thailand 784 101.1% 9 United States 751 17.7% 10 United Republic of Tanzania 720-48.8% 13 South Africa 557.371 41.7% TOTAL IMPORTS 17 278 17.7% Source: Trade Map, 2015 Tea was the leading export product from Kenya in 2013, valued at ZAR8.8bn. Kenya currently exports 13% of the world s share of tea, the third 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 (ZAR2bn) and leguminous vegetables (ZAR1.6bn) were the second and third largest export products from Kenya. The fastest growing food and beverage exports in 2013 were shelled dried vegetables with 452% growth and other prepared or preserved vegetables with 66% growth. 10 The leading import product into Kenya was wheat and meslin, valued at ZAR3.3bn. This equates to a 0.7% of global imports of wheat and meslin. Rice (ZAR2.1bn) and palm oil (ZAR2bn) were the second and third largest imported products in the sector. There was strong growth in the import of wheat and meslin (49.3%) and cane or beet sugar (35%). The 19% import growth in other food preparations is an opportunity for the Western Cape as it is the 7 th largest export to Kenya in the food and beverage category and the 9 th largest export product to Kenya from the Western Cape worth ZAR3.34m. RANK KENYA S GLOBAL EXPORTS OF FOOD & BEVERAGES, 2013 KENYA S GLOBAL IMPORTS OF FOOD & BEVERAGES, 2013 PRODUCT VALUE 2013 (ZARm) % GROWTH 2012-2013 RANK PRODUCT VALUE 2013 (ZARm) % GROWTH 2012-2013 1 Tea 8 811.7 13.5% 1 Wheat and meslin 3 261.7 49.3% 2 Coffee 2 053.2-15.1% 2 Rice 2 102.2 18.8% 3 Leguminous vegetables, shelled or unshelled, fresh or chilled 4 Preserved fruits nes 729.0 55.3% 4 1 617.4 5.3% 3 Palm oil & its fraction 2 014.7 23.8% Cane or beet sugar and chemically pure sucrose, in solid form 1 840.1 34.8% 5 Dried vegetables, shelled 566.6 452.1% 5 Tea 1 644.9 14.1% 6 Prepared or preserved vegetables nes (excl. frozen) 471.0 66.4% 6 Dried vegetables, shelled 425.0 13.8% 7 Dates, figs, pineapples, mangoes, avocadoes, guavas 398.3 18.3% 7 Food preparations, nes 380.2 18.9% 8 Vegetables nes, fresh or chilled 335.5 8.5% 8 9 Sugar confectionery (incl white choc), not containing cocoa Milk and cream, concentrated or sweetened 257.1 24.8% 314.4 26.8% 9 Maize (corn) 236.5-49.3% 10 Nuts nes 310.2-10.3% 10 Grain sorghum 212.1-15.6% TOTAL EXPORTS 19 193.0 8.8% TOTAL IMPORTS 17 218.4 19.0% Source: TradeMap, 2015
Value (ZARm) 3.2 South African Trade of Food and Beverages with Kenya As depicted in the graph below, South Africa has a positive trade balance with Kenya and is a net exporter of food and beverage products from the country. In 2013, South Africa exported food and beverages valued at ZAR493m compared to ZAR355m in 2012, representing an increase of 39%. South Africa imported food and beverages from Kenya valued at ZAR118m in 2013 compared to ZAR100m in 2012, representing an increase of 18%. The exports from South Africa in 2009 are so high due to a spike in the export of maize worth ZAR2.3bn. Recent reports from the International Grain Council have repeatedly reported expected increases in maize demand in Kenya. This expected demand is mainly due to Kenya s declining domestic production, owing to erratic rains (BMI Research, 2014). Kenya, however has a ban on GMO maize, although governors are lobbying for this to be lifted allowing access for South African exports (GrainSA, 2014). SOUTH AFRICA'S TRADE OF FOOD & BEVERAGES WITH KENYA, 2004-2013 3000 2500 2000 1500 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Exports (ZARm) 389,0 285,5 246,0 286,8 1001,2 2705,1 767,8 309,9 355,1 493,4 Imports (ZARm) 23,6 30,9 37,7 33,8 52,8 40,7 57,5 55,7 99,8 117,6 Trade Balance (ZARm) 365,4 254,6 208,4 253,0 948,5 2664,4 710,3 254,2 255,3 375,8 Source: Quantec, 2015 The leading export product to Kenya was grape wines, valued at ZAR95.2m, followed by apples, pears and quinces (ZAR89m) and cane and beet sugar (ZAR61m). The largest growing export to Kenya 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 ZAR41m, followed by tea (ZAR25m). Fresh or chilled leguminous vegetables (ZAR17m) were the third largest import in value terms. Frozen vegetables were the largest growing import into South Africa growing at 112% in 2013. 11 SOUTH AFRICA S EXPORTS OF FOOD & BEVERAGES TO KENYA, 2013 VALUE GROWTH RANK PRODUCT 2013 2012- (ZARm) 2013 1 Grape wines(including fortified), alcoholic grape must SOUTH AFRICA S IMPORTS OF FOOD & BEVERAGES FROM KENYA, 2013 VALUE GROWTH RANK PRODUCT 2013 2012- (ZARm) 2013 95.17 40.24% 1 Vegetables, leguminous dried, shelled 40.85 109.56% 2 Apples, pears and quinces, fresh 89.05 46.30% 2 Tea 24.57-0.07% 3 4 5 6 Solid cane or beet sugar and chemically pure sucrose Ethyl alcohol, undenatured and > 80%, or denatured Liqueur, spirits and undenatured ethyl alcohol <80% Chocolate and other foods containing cocoa 60.59 197.03% 3 44.29 81.31% 4 Leguminous vegetables, fresh or chilled Cabbage, cauliflower, kohlrabi & kale, fresh, chilled 16.78 23.68% 7.52 41.63% 28.72 14.92% 5 Vegetables nes, fresh or chilled 6.41 25.69% 24.06 161.67% 6 7 Food preparations, nes 17.85-25.15% 7 8 Citrus fruit, fresh or dried 17.64 58.56% 8 9 Fruits nes, fresh 11.97 105.79% 9 10 Maize (corn) 11.83 45.76% 10 Vegetables (uncooked, steamed, boiled) frozen Onions, shallots, garlic, leeks, etc. fresh or chilled Sauce, condiments, mixed seasoning and mustard Jams, jellies, marmalades, fruit, nut pastes, purees Coffee, coffee husks and skins and coffee substitutes 5.92 112.15% 3.41 2.98% 3.27-38.51% 3.10 18.29% 2.46-54.11% TOTAL EXPORTS 493.35 38.93% TOTAL IMPORTS 117.59 17.79% Source: Quantec, 2015
Value (ZARm) Looking at the growth trends over a longer period, from 2009-2013, the highest compound average annual growth (CAGR) in the top ten exports were found in the following: Chocolate and other foods containing cocoa; 116% p.a. Other fresh fruit; 103% p.a. Grape wine; 30% p.a. The fastest growing imports (CAGR) in the period 2009-2013 were: Cabbage, cauliflower, kohlrabi & kale, fresh, chilled; 132% Fresh or chilled onions, shallots, garlic, leeks; 48% Fresh or chilled leguminous vegetables; 65% 3.3 Western Cape Trade of Food and Beverages with Kenya As depicted in the graph below, the Western Cape also had a positive trade balance with Kenya from 2004 to 2013. In 2013, exports were valued at around ZAR251m compared to ZAR182m in 2012, increasing by 38%, while imports were valued at ZAR39m in 2013 compared to ZAR14m in 2012, increasing by 181%. WESTERN CAPE TRADE OF FOOD & BEVERAGES WITH KENYA, 2004-2013 400 350 300 250 200 150 100 50 12 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Export (ZARm) 34,96 55,86 61,34 85,22 111,55 348,90 158,43 157,38 182,05 251,48 Import (ZARm) 3,20 4,19 1,88 3,24 4,45 4,25 8,58 2,85 14,02 39,34 Trade Balance (ZARm) 31,76 51,67 59,46 81,98 107,10 344,65 149,85 154,53 168,03 212,14 Source: Quantec, 2015 The leading export product from the Western Cape to Kenya in the food and beverages sector was grape wine, valued at ZAR93m. Sixty-nine percent of the wine exports were white wine, followed by 29% red and 1% each for sparkling and rose respectively (SAWIS, 2015). The second largest export to Kenya was apples, pears and quinces (ZAR73m) followed by liqueur (ZAR29m). Of all exports from South Africa to Kenya, the Western Cape exports 99.7% of the liqueur, 97.8% of the grape wines and 90% of the fruit and vegetable juices. Fresh or chilled leguminous vegetables was the leading import product into the Western Cape from Kenya valued at ZAR14.5m, 86% of South Africa s imports. The second largest import from Kenya to the Western Cape were fresh and chilled cabbage, cauliflower, kohlrabi & kale (ZAR7.5m), followed by frozen vegetables (ZAR5.9m). The Western Cape imports 33.46% of food and beverages imported by South Africa.
WESTERN CAPE S EXPORTS OF FOOD & BEVERAGES TO KENYA, 2013 RANK 1 PRODUCT Grape wines(including fortified), alcoholic grape must VALUE 2013 (ZARm) SHARE OF SA EXPORTS (%) 93.05 97.78 1 2 Apples, pears and quinces, fresh 73.16 82.16 2 3 Liqueur, spirits and undenatured ethyl alcohol <80% 28.64 99.71 3 WESTERN CAPE S IMPORTS OF FOOD & BEVERAGES FROM KENYA, 2013 RANK PRODUCT SHARE VALUE OF SA 2013 IMPORTS (ZARm) (%) Leguminous vegetables, fresh or chilled 14.51 86.44 Cabbage, cauliflower, kohlrabi & kale, fresh, chilled 7.52 100.00 Vegetables (uncooked, steamed, boiled) frozen 5.92 100.00 4 Citrus fruit, fresh or dried 15.47 87.67 4 Vegetables nes, fresh or chilled 4.95 77.21 5 Grapes, fresh or dried 9.02 81.21 5 6 Fruit and vegetable juices, not fermented or spirited 6.85 90.31 6 7 Fruits nes, fresh 5.08 42.40 7 8 Cereal food (roasted, swelled), cooked grain not maize 4.58 76.58 8 9 Food preparations, nes 3.34 18.72 9 10 Sugar confectionery, non-cocoa, white chocolate Onions, shallots, garlic, leeks, etc. fresh or chilled Carrots, turnips, beetroot, etc. fresh or chilled Coffee, coffee husks and skins and coffee substitutes Jams, jellies, marmalades, fruit, nut pastes, purees Lettuce and chicory, fresh or chilled 3.41 100.00 1.53 100.00 0.95 38.57 0.25 8.17 0.11 100.00 3.23 57.45 10 Other spices 0.08 94.63 TOTAL EXPORTS 251.48 50.97 TOTAL IMPORTS 39.34 33.46 Source: Quantec, 2015 Other fresh fruit was the fastest growing export products in the short term (2012 to 2013), growing at 84.35% followed by fresh or dried citrus and fresh apples, pears and quinces growing at 73.3% and 50.49% respectively. In the medium term (2009-2013), the fastest growing export product category was also other fresh fruit at 245% growth. GROWTH OF WESTERN CAPE EXPORTS OF FOOD AND BEVERAGES TO KENYA 13 2009-2013 growth 2012-2013 growth Fruits nes, fresh Citrus fruit, fresh or dried Apples, pears and quinces, fresh Sugar confectionery, non-cocoa, white chocolate Cereal food (roasted, swelled), cooked grain not maize Grape wines(including fortified), alcoholic grape must Fruit and vegetable juices, not fermented or spirited Grapes, fresh or dried Food preparations, nes Liqueur, spirits and undenatured ethyl alcohol <80% 84,35% 30,92% 73,32% 26,21% 50,49% 84,98% 49,97% 23,43% 48,93% 31,08% 39,14% -1,77% 21,99% 41,07% 15,88% -2,35% 15,79% 8,60% 15,72% 244,92% Source: Quantec, 2015 Fresh or chilled carrots, turnips, beetroot, etc., fresh or chilled lettuce and chicory and other spices were three imports in the top ten imports into the Western Cape in 2013 that did not have imports in 2012. Onions, shallots, garlic, leeks, etc. was the fastest growing import to the Western Cape in 2013 growing from ZAR266000 to ZAR3.4m.
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. 3.4.1. 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. 3.4.2. 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%. Some other African countries benefit from a 0% tariff on this product. This is followed by dairy products, eggs, honey and other edible animal product with an imposed tariff of 53.1%. 14 TARIFFS IMPOSED BY KENYA TO SOUTH AFRICAN FOOD AND BEVERAGE IMPORTS HS CODE PRODUCT EQUIVALENT AD VALOREM TARIFF 02 Meat and edible meat offal 25 03 Fish, crustaceans, molluscs, aquatic invertebrates nes 25 04 Dairy products, eggs, honey, edible animal product nes 53.1 07 Edible vegetables and certain roots and tubers 25 08 Edible fruit, nuts, peel of citrus fruit, melons 24.9 09 Coffee, tea, mate and spices 25 10 Cereals 35.1 11 Milling products, malt, starches, inulin, wheat gluten 34.1 12 Oil seed, oleagic fruits, grain, seed, fruit, etc., nes 5.3 15 Animal, vegetable fats and oils, cleavage products, etc. 13.3 16 Meat, fish and seafood food preparations nes 25 17 Sugars and sugar confectionery 71.9 18 Cocoa and cocoa preparations 11.6 19 Cereal, flour, starch, milk preparations and products 21.4 20 Vegetable, fruit, nut, etc. food preparations 25 21 Miscellaneous edible preparations 15.3 22 Beverages, spirits and vinegar 25 Source: TradeMap, 2015
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%. 15
Value (ZARm) 4. FDI 4.1 Inward FDI into the Kenyan Food & Beverage Sector Between January 2003 and September 2014 a total of 39 FDI projects were recorded into the Kenyan food and beverage sector. These projects represent a total capital investment of ZAR9.29bn which is an average investment of ZAR237.86m per project. During the period, a total of 7,636 jobs were created. Kenya is a net recipient of investment in this sector. GLOBAL INWARD FDI INTO THE KENYAN FOOD AND BEVERAGE SECTOR, 2003- SEPT 2014 1800 1600 1400 1200 1000 800 600 400 200 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Capex (ZARm) 305,8 468,7 1 640,4 308,2 159,4 1 017,0 563,6 515,6 1 059,2 295,3 1 607,6 1 347,5 Projects 4 3 1 3 1 3 3 3 2 2 10 4 12 10 8 6 4 2 Projects Source: FDI Intelligence, 2015 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 followed by Switzerland and Egypt with 6 and 4 investment projects respectively. 16 GLOBAL FDI INTO KENYA S FOOD, BEVERAGE & TOBACCO SECTORS, 2003- SEPT 2014 RANK SOURCE COUNTRY PROJECTS % PROJECTS CAPEX (ZARm) % CAPEX COMPANIES 1 United States 9 23.1 2 206.3 23.8 5 2 Switzerland 6 15.4 745.2 8.0 4 3 Egypt 4 10.3 412.4 4.4 1 4 Netherlands 3 7.7 398.4 4.3 3 5 United Kingdom 3 7.7 490.9 5.3 3 6 South Africa 2 5.1 365.6 3.9 2 7 China 2 5.1 449.9 4.8 2 8 Germany 2 5.1 151.2 1.6 2 9 Italy 1 2.6 37.5.4 1 10 Russia 1 2.6 535.5 5.8 1 TOTAL 39 100.0 9 286.9 100.0 30 Source: FDI Intelligence, 2015 The table overleaf shows the companies investing into Kenya s food and beverage sector by number of projects from January 2003 to September 2014. Coca-Cola was the largest investor into Kenya s beverage, food and tobacco sector, with 5 projects worth ZAR1.72bn. In November 2014 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).
In terms of divestment, in October 2014 international-owned confectionery producer Cadbury reported plans to cease all manufacturing operations at its unit in Nairobi, Kenya. However, it would retain the marketing and distribution functions of the business. The move is part of the global transformation strategy to reinvent the company's supply chain (BMI Research, 2015). COMPANIES INVESTING INTO KENYA S FOOD & BEVERAGE SECTOR, 2003-SEPT 2014 INVESTING COMPANY ACTIVITY COUNTRY OF ORIGIN PROJECTS CAPEX (ZARbn) Coca-Cola United States 5 1.72 Wadi Egypt 4 0.41 Nestle Switzerland 3 0.56 Asia Plantation Capital Singapore 1 0.20 GZ Industries Nigeria 1 1.17 Bacardi Bermuda 1 0.22 Heineken Netherlands 1 0.22 PepsiCo United States 1 0.33 Preesman Netherlands 1 0.10 Unilever United Kingdom 1 0.10 TOTAL FROM TOP 10 INVESTORS 19 5.04 Source: FDI Intelligence, 2015 4.2 Outward FDI Between January 2003 and September 2014 a total of 9 FDI projects were recorded from Kenya into the global food and beverage sector, representing a total capital investment of ZAR2.76bn which is an average investment of ZAR306.7m per project. During the period, a total of 2,299 jobs were created. DATE GLOBAL FDI FROM KENYA S FOOD, BEVERAGE & TOBACCO SECTORS, 2003- SEPT 2014 INVESTING COMPANY DESTINATION COUNTRY SUB-SECTOR INDUSTRY ACTIVITY VALUE (ZARm) Sep 2013 Brookside Dairy Nigeria Dairy products Manufacturing 652.64 Jul 2012 VP Group (Vegpro Group) India Sep 2011 Sameer Group Uganda Dec 2008 SAMEER Agriculture and Livestock Limited (SALL) Fruits & vegetables & specialist foods Fruits & vegetables & specialist foods Manufacturing 301.13 Manufacturing 283.55 Uganda Dairy products Manufacturing 283.55 Sep 2008 Bidco Oil Refineries (BIDCO) Uganda Grains & oilseed Manufacturing 283.55 Aug 2008 Nakumatt Holdings Tanzania Food & Beverage Stores (Food & Retail 194.50 Tobacco) May 2006 Kenya Maltings Uganda Breweries & distilleries Sales, Marketing & Support 222.62 Apr 2005 BIDCO Uganda Uganda Grains & oilseed Manufacturing 117.17 Dec 2003 Kenn Foods Germany Fruits & vegetables & specialist foods Manufacturing 421.81 TOTAL 2760.54 Source: FDI Intelligence, 2015 17
4.3 Bilateral FDI between South Africa and Kenya Between January 2003 and September 2014 a total of 2 FDI projects were recorded from South Africa into Kenya in the food and beverage sector. These projects represent a total capital investment of ZAR365.6m which is an average investment of ZAR182.8m per project. During the period, a total of 360 jobs were created. DATE FDI FROM SOUTH AFRICA INTO THE KENYAN FOOD & BEVERAGES SECTOR, 2003- SEPT 2014 INVESTING COMPANY SOURCE PROVINCE INDUSTRY SECTOR SUB-SECTOR INDUSTRY ACTIVITY VALUE (ZARm) Aug 2004 Nutro Manufacturing EPZ Gauteng Food & Tobacco Grains & oilseed Manufacturing 72.65 May 2004 Coca-Cola Sabco Eastern Cape Beverages Soft drinks & ice Manufacturing 292.93 Source: FDI Intelligence, 2015 There was no FDI from Kenya into the South African food and beverages sector. 4.4 FDI with the Western Cape 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 http://wesgro.co.za/publications 18