A PROFILE OF THE SOUTH AFRICAN DAIRY MARKET VALUE CHAIN

A PROFILE OF THE SOUTH AFRICAN DAIRY MARKET VALUE CHAIN 2017 Directorate Marketing Tel: 012 319 8455 Private Bag X 15 Fax: 012 319 8131 Arcadia E-mail:MogalaM@daff.gov.za 0007 www.daff.gov.za TABLE OF CONTENTS 1

1. DESCRIPTION OF THE INDUSTRY... 1 1.1. MILK PRODUCTION AREAS... 1 1.2. PRODUCTION TRENDS... 2 1.3. EMPLOYMENT... 3 2. MARKET STRUCTURE... 3 2.1. DOMESTIC MARKET AND PRICES... 4 2.2. EXPORT AND IMPORT OF DAIRY PRODUCTS... 5 2.2. EXPORTS... 6 2.2.1. Export values of milk and dairy products... 8 2.3. IMPORTS... 15 2.5. MARKETING CHANNELS IN THE DAIRY INDUSTRY... 18 3. EMPOWERMENT PLANS BY THE INDUSTRY... 20 3.1. SUCCESSFUL VENTURES: COMMERCIALLY VIABLE... 20 3.2. TRAINING PROGRAMMES... 20 3.3. MAGAZINES... 20 4. BARRIERS TO THE LEVEL OF PARTICIPATION BY THE EMERGING SECTOR... 20 5. OPPORTUNITIES AND WEAKNESSES... 21 6. MARKET INTELLIGENCE... 21 6.1. EXPORT TARIFFS... 21 Product Code... 22 Trade Regime Description... 22 6.2. IMPORT TARIFFS... 25 7. COMPETITIVENESS OF THE DAIRY INDUSTRY... 34 7.1. EXPORTS... 34 7.1.1. Milk and cream (neither concentrated nor sweetened)... 34 7.1.2. Milk and cream, concentrated or sweetened... 40 7.1.3. Buttermilk and yoghurt... 46 7.1.4. Whey and other natural milk products... 52 7.1.5. Butter and other fats and oils derived from milk... 58 7.1.6. Cheese and Curd... 64 7.2. IMPORTS... 70 7.2.1. Milk and cream (neither concentrated nor sweetened)... 70 7.2.2. Milk and cream, concentrated or sweetened... 76 7.2.3. Buttermilk and yoghurt... 82 7.2.4. Whey and other natural milk products... 88 7.2.5. Butter and other fats and oils derived from milk... 94 14.2.6. Cheese and Curd... 100 8. ACKNOWLEDGEMENTS... 106 2

Million Rands 1. DESCRIPTION OF THE INDUSTRY The contribution of milk production in South Africa makes approximately 0.5% to the world milk production. There are four major dairy breeds in South Africa namely, Holstein, Jersey, Guernsey and Ayrshire. The industry comprises of number of different economic activities and significant differences exist between farming methods and processing of dairy products. These activities involve the production and marketing of raw milk, pasteurized milk and cream, fermented milk, long-life milk and cream, yoghurt, cheese and its by-product whey, milk powder, sweetened and unsweetened concentrated milk, butter and butter oil (ghee). 16000 14000 12000 10000 8000 6000 4000 2000 Figure 1: Gross value of fresh milk production 0 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Years Source: Statistics and Economic Analysis, DAFF The gross value of production for milk is dependent on the quantity produced and prices received by producers. Figure 1 indicates that the gross value of fresh milk has been moving at an increasing rate and reached its new peak of R15 billion in 2014/15. However, in 2015/16 the gross value experienced a decrease of 6% due to the drought experienced in 2015 to 2016. There is an exponential increase of 136% during 2015/16 relative to 2006/07. The average gross value of milk produced amounted to R10.4 billion for the past ten years. 1.1. Milk production areas The coastal areas are more suitable for milk production because of mild temperatures as well as good rainfall ensuring good quality natural and artificial pastures. The inland production areas are generally climatically less favourable for milk production. Dairy farming in these areas necessitate intensive and high cost feedlot production systems. Figure 2 shows contribution of provinces to total milk production in South Africa in 2016. 1

North West 5% Figure 2: Milk production per province 2016 Gauteng 2% MpumalangaLimpopo 3% 1% Free State 7% Western Cape 31% KwaZulu-Natal 24% Eastern Cape 28% Northern Cape 0% Source: MPO The Western Cape contributed 31% of the total milk produced in South Africa followed by Eastern Cape and KwaZulu Natal with 28% and 24% respectively. This may be because the three provinces are coastal areas. The Free State contributed 7%, North West 5%, Mpumalanga 3%; Gauteng 2%; while the Northern Cape and Limpopo provinces shared less than 1%. It is clear from the figure that the coastal arears contribute about 83% to the total milk production in the country. This is the case due to the better pasturage amongst other reasons. 1.2. Production trends South Africa produces some 2.8 million tons per annum over the period of ten years. Irrespective of the number of producers exiting in milk production, milk production per annum shows a steady linear upward trend over the period under analysis. However, there was a slight decrease of 0.2% in 2015/16 from the previous year. The number of dairy cows has been fluctuating throughout the period under review. The number of cows and milk production has increased by 28% and 23% respectively from 2006/07 to 2015/16. 2

Thousand tons No. of cows '000 3500 3000 2500 2000 1500 1000 500 0 Figure 3: Milk production and number of cows 1200 1000 800 600 400 200 0 Production Dairy of Cows '000 Source: Statistics and Economic Analysis, DAFF and LACTODATA 1.3. Employment The South African dairy industry is important to the job market with over 1 961 milk producers employing 60 000 farm workers and providing 40 000 people with indirect jobs within the value chain like milk processing and milling industry. 2. MARKET STRUCTURE The South African dairy market is divided into 60% liquid and 40% concentrated products. Pasteurized liquid milk and UHT milk are the major liquid products, while hard and semi-hard cheese is the major concentrated product. Different types in each category are shown in Figures 4 and 5. Figure 4: Composition of milk products (Liquid) in 2016 Flavoured Milk 2% Cream 1% Yoghurt 12% Other 8% Pasteurised Milk 34% Source: Milk SA, 2017 UHT 43% 3

Thousand tons Rands per Litre Figure 4 shows that UHT (long life) has the highest percentages of 43% followed by pasteurized milk with 34%, yoghurt by 12%. Flavoured milk and cream commanded the lowest market share of liquid milk with 2% and 1% respectively. Figure 5: Composition of concentrated milk products 2016 SMP 4% FMP 9% Butter 13% Whey Powder 9% Buttermilk Powder 1% Cheese 57% Condensed Milk 7% Source: Milk SA, 2017 Concentrated milk products consist of 57%, cheese followed by Butter with 13%, FMP and Whey powder at 9% each, and then condensed milk at 7%, SMP at 4% and Buttermilk powder with 1%. 2.1. DOMESTIC MARKET AND PRICES Local milk consumption and prices are illustrated in Figure 6. 2200 2100 2000 1900 1800 1700 1600 Figure 6: Consumption and price of fresh milk 5,0 4,0 3,0 2,0 1,0 0,0 Consumption Rands/litre Source: Statistics and Economic Analysis, DAFF 4

Million kilograms Figure 6 indicates that milk price started low in 2006/07, and then started moving at slight fluctuation rate from 2007/08 to 2011/12 which followed by an increasing trend up to year 2014/15. During the period 2015/16 milk price experienced a 4% decline. Consumption of milk has been fluctuating throughout the period under review and reached the new peak of 2.1 million tons in 2014/15, followed by a slight decrease of 0.7% in 2015/16. Milk consumption is driven by global population growth and growth in per capita consumption. Despite the fluctuating trend, milk consumption has increased by 17% from 2006/07 to 2015/16. 2.2. EXPORT AND IMPORT OF DAIRY PRODUCTS The most important producers of milk internationally are Asia, the European Union (EU), North America and Central America. Milk production in South Africa makes a very small contribution (0.5%) to the world production but in terms of the values of agricultural production in South Africa, it is the sixth largest agricultural industry Milk is produced much more cheaply in New Zealand and certain parts of the world than in South Africa. Imported milk from the EU and US is cheaper than in South Africa because of subsidies in these countries. Dairy companies in those countries are paid a guaranteed floor price for designated quantities of dairy products. Dairy companies in both countries are given a subsidy to bridge the gap between the supported domestic price and world market price. In the EU, dairy farmers are paid subsidies for the use of certain inputs. The annual imports and exports of dairy products of South Africa from 2007 to 2016 are shown in Figure 8. Figure 8: Imports and exports quantity of milk and dairy products 700 600 500 400 300 200 100 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Export Import Source: Quantec EasyData Figure 8 showed that South Africa was a net importer in 2007 and became a net exporter of milk and dairy products during the periods 2008 to 2016. The increase in exports from 2010 to 2012 was due to the attractive international price of milk, which encouraged more exports. Despite fact that South Africa is a net exporter, the trends show that from 2013 to 2016 the exports are slightly decreasing while the imports are increasing from 2013 to 2015. 5

Thousand tons Million Rands 2.2. EXPORTS The dairy industry is an important earner of foreign exchange. In 2014 only, exports of dairy products amounted to 175 411 tons valued at over R 2, 7 billion. There was a significant increase in quantity and value of milk and dairy products exported to the world in 2016 compared to 2007. Figure 9 below shows the exports of dairy products from 2007 to 2016. 700 600 500 400 300 200 100 0 Figure 9: Exports of milk and dairy products 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 3000 2500 2000 1500 1000 500 0 Quantity Value Source: Quantec EasyData From Figure 9 above, exports quantity fluctuated throughout the period under analysis. Exports of milk and dairy products experienced the lowest exports during the periods 2007 to 2009 before increasing substantially in 2010 to 2012 and shown decreasing trend during the following years. The decrease in quantity experienced in 2009 was due to the low production in the local market. Exports of dairy product trend shows that it was profitable to export during the period under analysis except in 2012 as high quantity was exported at a lower value. 6

Figure 10: South african milk and dairy products destination in 2016 Tanzania 2% Zambia Angola 2% 3% Zimbabwe 4% Zambia 1% Others 0% Lesotho 11% Botswana 41% Swaziland 11% Namibia 12% Mozambique 13% Source: Quantec EasyData Figure 10 shows that during 2016 Botswana commanded the greatest market share of South African milk and dairy products exports accounting for 41% followed by Mozambique with 13% and Namibia 12%, Swaziland and Lesotho with 11% each. The rest of the countries shared remaining 12%. Noteworthy is the fact that most of the South African export market of dairy is SADC countries. 7

Kilograms 450000000 400000000 350000000 300000000 250000000 200000000 150000000 100000000 50000000 Figure 11: Quantities of milk and dairy products exports by South Africa 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Quantec EasyData Milk and cream, not concentrated nor sweetened Milk and cream, concentrated or sweetened Buttermilk, curdled milk and cream, yoghurt Whey Butter and other fats and oils Cheese and curd Figure 11 shows the quantities of milk and dairy products exports by South Africa. In total, the milk and cream (concentrated or sweetened) dominated the export market of milk and dairy products and commanded the total highest export share of 40%. Milk and cream, not concentrated nor sweetened commanded the second greatest share of 36% followed by buttermilk with 15.6% during 2007 to 2016. Whey commanded the lowest export quantities share of 2% during the past decade. 2.2.1. Export values of milk and dairy products Figures 12 21 shows the export of milk and dairy products from Provinces and District Municipalities. 8

Thousand Rand Figure 12: Value of milk and dairy products from provinces 2500000 2000000 1500000 1000000 500000 Source: Quantec EasyData 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Western Cape 63416 101264138006 97622 75848 102163135389318890678893775792 Eastern Cape 2 0 0 0 0 88 97 4 97 929 Northern Cape 0 0 0 0 0 0 0 1 100 36 Free State 0 0 1665 1646 2406 10155 6632 21896 87313 115723 KwaZulu-Natal 4272 15249 12338 16264 12911 20490 56483 65380 95219 69449 North West 298 391 796 129 0 11 19 577 1518 566 Gauteng 139554269902380244133227143795170034208107217732157200153967 Mpumalanga 14042 11118 3315 10803 24802 50541 99740 113438107178 66808 Limpopo 1875 4526 1182 11402 13305 17438 27330 9799 7672 11962 Figure 12 illustrates that Gauteng Province played a major role in the exports of milk and dairy products from 2007 to 2016 peak value of R2.2 billion in 2014. This may be due to the fact that Gauteng is the main exit point to the SADC region as most of these exports were destined to SADC region. Western Cape Province commanded the second highest of milk and dairy products exports throughout the period under review. On average, Gauteng commanded R1.26 billion followed at a distance by Western Cape with R248 million, then Mpumalanga and KwaZulu-Natal Provinces which commanded R50 million and R36.8 million respectively. The lowest value of milk and dairy products were recorded in Eastern Cape and Northern Cape provinces with R 122 000 and R14 000 respectively. Eastern Cape, Northern Cape and North West recorded fractional exports from 2007 to 2016. 9

Thousand Rands Thousand Rands Figure 13: Values of milk and dairy products exported from the Western Cape Province 600000 500000 400000 300000 200000 100000 Source: Quantec EasyData 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 City of Cape Town 42989 63148 81853 47236 36239 44710 53632 87353 111313165457 West Coast 457 464 1017 0 300 0 0 1080 4264 4689 Cape Winelands 19659 37516 54267 47450 38194 52725 74611 211756524319538073 Overberg 0 0 0 0 0 0 0 111 76 75 Eden 311 71 815 1835 159 625 5508 9093 29506 57289 central Karoo 0 65 54 1101 956 4103 1637 9498 9415 10209 In Western Cape Province, Cape Winelands District Municipality and City of Cape Town Metropolitan Municipality played an important role in the export of milk and dairy products throughout the period under analysis. Fractional exports were recorded from West Coast, Central Karoo and Overberg District Municipalities. There was a drastic increase of export value of milk and dairy products from Cape Winelands, which accounted for an export share of 77% in 2015 and 69% in 2016. Figure 14: Value of milk and dairy products exported from the Eastern Cape Province 80000 70000 60000 50000 40000 30000 20000 10000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Cacadu 8002 14982 19619 9552 16815 30547 37014 53744 75270 63626 Joe Gqabi 0 0 0 0 0 0 0 175 102 0 Alfred Nzo 0 0 0 0 0 0 0 133 204 99 Nelson Mandela Bay 4 1451 0 263 297 0 0 11705 57969 74970 Buffalo City 333 0 0 5 0 0 0 0 8 543 Source: Quantec EasyData 10

Thousand rands In Eastern Cape Province, high milk and dairy products exports values have been recorded from Cacadu District Municipality, which commanded the highest values from 2007 to 2015. Cacadu has decreased its exports in 2016 by 15%. Nelson Mandela Metropolitan Municipality has upped its exports and took over the highest position in 2016 with export share of 54%. Irregular exports of milk and dairy products were recorded in the Nelson Mandela Bay Metropolitan Municipality, Joe Gqabi, Alfred Nzo and Buffalo City District Municipalities. Figure 15: Value of milk and dairy products exported from Free State Province 70000 60000 50000 40000 30000 20000 10000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Xhariep 0 0 0 0 0 3073 5882 352 320 140 Lejweleputswa 0 0 0 0 0 1 174 3031 12182 33371 Thabo Mofutsanyane 0 0 0 19 33 104 345 3064 17633 18632 Fezile Dabi 0 0 1665 365 0 0 1 3185 11171 4870 Mangaung 0 0 0 1262 2372 6978 230 12264 46008 58711 Source: Quantec EasyData Intermittent values were recorded from Free State Province in all District Municipalities (Xhariep, Thabo Mofutsanyane, Fezile Dabi, Lejweleputswa and Mangaung). Mangaung District Municipality recorded a highest value of R58.7 million in 2016 and Lejweleputswa recorded the second highest values of R33 million in 2016. These accounted for 51% and 29% respectively. There were no records of exports from Free State Province during 2007 and 2008. 11

Thousand Rand Thousand Rand Figure 16: Value of milk and dairy products exported from KwaZulu- Natal Province 70000 60000 50000 40000 30000 20000 10000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Ugu 0 0 63 1 0 0 0 0 0 0 UMgungundlovu 5 0 10 0 50 126 11 11590 31060 26491 Uthukela 0 0 0 0 0 0 0 13 4 18 Zululand 0 0 0 0 0 0 0 2 0 1 Uthungulu 0 0 0 14 0 0 0 17 11 0 ilembe 0 994 786 122 0 0 0 2 51 0 Sisonke 0 0 0 0 0 0 0 0 39 0 ethekwini 4268 14255 11479 16127 12861 20364 56472 53756 64054 42938 Source: Quantec Easy data In KwaZulu-Natal Province, high milk and dairy products export values have been recorded at ethekwini Metropolitan Municipality throughout the period of analysis. Other District Municipalities (Ugu, UMgungundlovu, UThukela, Zululand, UThungulu, Sisonke and ilembe) recorded intermittent exports of milk and dairy products during the past decade. Milk and dairy products export values from ethekwini peaked in 2015 record of R 64 million. EThekwini has recorded an export share of over 90% from 2007 to 2013. From 2014 to 2016, Umgungundlovu recorded higher values of exports, which accounted for 18%, 33% and 38% respectively. Figure 17: Value of milk and dairy products exported by North West Province 1200 1000 800 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bojanala 0 0 0 129 0 11 0 443 54 234 Ngaka Modiri Molema 298 0 0 0 0 0 0 131 394 329 Dr Ruth Segomotsi Mompati 0 0 0 0 0 0 0 0 4 1 Dr Kenneth Kaunda 0 391 796 1 0 0 19 3 1066 2 Source: Quantec EasyData 12

Thousand Rands Intermittent values were recorded in North West Province from all District Municipalities (Bojanala, Ngaka Modiri Molema, Dr Ruth Segomotsi Mompati and Dr. Kenneth Kaunda). Dr. Kenneth Kaunda District Municipality recorded a sharp increase of R796 thousand in 2009 and decreased substantially in 2010 before experiencing an increase in 2013 and decreasing again in 2014. The district reached peak in 2015. In total, Dr Kenneth Kaunda has recorded 53% of exports followed by Ngaka Modiri Molema and Bojanala with 26% and 20% respectively. Lastly, Dr Ruth Segomotsi Mompati recorded the lowest exports share of less than 1% for the past decade. Figure 18: Value of milk and dairy products exported from Gauteng province 2500000 2000000 1500000 1000000 500000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sedibeng 1 1 11 14 51 19 32 554 125 325 West Rand 476 434 1704 39 182 279 416 1991 3733 360 Ekurhuleni 13665 22520 45029 32555 57583 87418 115068 168000 271752 266041 City of Johannesburg 123145 241863 307739 123607 129805 157424 194109 196916 120761 115131 City of Tshwane 2267 5084 25761 63591 82077 38380 24472 37611 88786 121640 Source: Quantec EasyData In Gauteng Province, high milk and dairy products export values have been recorded for the past ten years at the City of Johannesburg Metropolitan Municipality with the new peak in 2014 valued at approximately R2 billion. However, the milk and dairy products export values decreased by 38% in 2015 and 5% in 2016. Ekurhuleni District Municipality commanded the second level following City of Johannesburg at a distance. Sedibeng, West Rand, Ekurhuleni, City of Johannesburg and City of Tshwane recorded regular exports of milk and dairy products. City of Johannesburg Metropolitan Municipality has recorded export share of over 90% from 2010 to 2016. 13

Thousand rands thousand rands Figure 19: Value of milk and dairy products exported from Mpumalanga Province 120000 100000 80000 60000 40000 20000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Gert Sibande 120 0 552 1 0 286 146 5613 16230 5550 Nkangala 0 0 1 13 0 0 0 1 6 122 Ehlanzeni 13922 11118 2762 10790 24801 50255 99594 107824 90942 61136 Source: Quantec EasyData In Mpumalanga Province, outstanding export values of milk and dairy products were recorded at Ehlanzeni District Municipality, which recorded exports regularly during the past decade. Irregular exports of milk and dairy products were recorded from Gert Sibande and Nkangala District Municipalities. Ehlanzeni District Municipality has reached its peak in 2014 record of R107 million, and then showed a decreasing trend in 2015 to 2016. Figure 20: Value of milk and dairy products exported from Limpopo Province 30000 25000 20000 15000 10000 5000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Vhembe 1766 4522 1122 7952 10958 15993 25408 7541 5463 10666 Capricorn 109 3 55 3447 2343 1443 1914 1278 246 545 Waterberg 0 0 0 0 0 0 7 980 1963 750 Greater Sekhukhune 0 1 5 3 4 2 0 0 0 0 Source: Quantec EasyData Limpopo Province recorded minimal exports of milk and dairy products during 2007 to 2009. Vhembe and Capricorn District Municipalities recorded exports regularly. Vhembe recorded the highest exports for the entire decade. Waterberg and Greater Sekhukhune District Municipalities have recorded intermittent exports. Waterberg District Municipality reached a peak in milk and dairy products export values and became second highest exporter in 2015, accounting for 26% share. 14

Thousand tons Million Rands Rands Figure 21: Value of milk and dairy products exported from Northern Cape Province 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 Quantec EasyData 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Namakwa 0 0 0 0 0 40 0 0 14578 22805 Siyanda 0 0 0 0 0 0 0 1307 85621 12974 Source: Northern Cape Province has not been recording any exports from 2007 to 2011 and in 2013. The Province attained its peak in 2015 through Siyanda District Municipality n export share of 85%. However, in 2016, the Municipality dropped significantly and then Namakwa took a lead with an export share of 64%. 2.3. IMPORTS South Africa is an importer of dairy products. The average import quantity and value over the past ten years amounted to 45 347 tons at a value of R1.2 billion over the past 10 years. Figure 22 presents the imports of milk and dairy products from 2007 to 2016. Figure 22: South Africa imports of milk and dairy products 80 70 60 50 40 30 20 10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Quantity Value Source: Quantec Easydata 15

Kilograms Figure 22 above shows that imports of milk and dairy products fluctuated in both quantity and value throughout the period under analysis. The import quantity of milk and dairy products reached the new peak of over 70 454 tons and the value reached a new peak of over R1.8 billion in 2015. The quantity and value dropped significantly in 2013 and remained constant throughout 2014. This might be due to the weaker South African Rand. In 2016, both import quantity and value have declined by 18% and 6%. Figure 23 below shows the different types of milk and dairy products imported from 2007 to 2016 in terms of quantity. 30000000 Figure 23: Quantities of milk and dairy products imported by South Africa 25000000 20000000 15000000 10000000 5000000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Milk and cream, not concentrated nor sweetened Buttermilk, curdled milk and cream, yoghurt, kephir Butter and other fats and oils Milk and cream, concentrated or sweetened Whey Cheese and curd Source: Quantec EasyData Figure 23 shows that milk and cream (concentrated or sweetened), whey and milk and cream (not concentrated nor sweetened) were among the most imported dairy products in South Africa during the period under analysis. Milk and cream (concentrated or sweetened) commanded the greatest quantities of the import market in 2007. Milk and cream (not concentrated and sweetened) dominated the imports market from 2008 to 2010, 2012, 2015 and 2016 whereas whey recorded the highest quantities imported during 2011 and 2014. Buttermilk, curdled milk and Butter and other fats and oils contributed lower to the exports of milk and dairy products for the entire period of analysis. Figure 24 below shows the different types of milk and dairy products imported from 2007 to 2016 in terms of value. 16

Rand 800000000 700000000 600000000 500000000 400000000 300000000 200000000 100000000 Figure 24: Value of milk and dairy products imported by South Africa 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Milk and cream, not concentrated nor sweetened Buttermilk, curdled milk and cream Butter and other fats and oils Milk and cream, concentrated or sweetened Whey Cheese and curd Source: Quantec Easydata Figure 24 above indicate that cheese and curd, milk and cream (concentrated or sweetened) and whey commanded the greatest share of milk and dairy products imported by South Africa during the past decade. On average cheese and curd and milk and cream (concentrated or sweetened) commanded a share of R418 million and R 285 million per annum respectively. Followed by whey with R 218 million, butter, other fats and oils at R121 million. Milk and cream not concentrated nor sweetened at R83 million, and Buttermilk R49 million. Figure 25 shows the origin of milk and dairy products imported to South Africa in 2016. 17

Figure 25: Countries of origin for milk and dairy products imported by South Africa during 2016 Belgium 3% Netherlands 3% Ireland 5% Other 11% Poland 23% Germany 7% United Kingdom 8% Uruguay 10% New Zealand 13% France 17% Source: Trade map Figure 25 above shows that the main supplier of milk and dairy products to South Africa in 2016 was Poland which had an import market share of 23%, followed by France which exported 17%, then New Zealand with 13%, and Uruguay with 10% of milk and dairy products to South Africa. Plenty of countries exported minimal amounts of milk and dairy products to South African in 2016. 2.5. MARKETING CHANNELS IN THE DAIRY INDUSTRY Milk production in South Africa is mainly by two sectors; commercial producers, and small and medium size producers (see Figure 26). Commercial producers sell milk to dairy processors. Small and medium size producers sell most of their milk directly to consumers and some to processors. Dairy processors buy milk from farmers and import milk concentrates and produces dairy products for primary distribution to retailers, exports and for further processing. 18

Figure 26: Marketing Channels. Commercial Dairy farms Small and Medium Dairy Farms Bulk collection Imports Dairy Processors Dairy Products (Cheese, Butter, etc.) Secondary dairy products Exports Primary Distribution Retailers Small and informal trade Institutions Consumers 19

3. EMPOWERMENT PLANS BY THE INDUSTRY The following is a list of ventures/projects/programmes. Media releases were arranged for the dairy industry. The MPO, in conjunction with the provincial departments and municipalities and other relevant stakeholders were responsible for these empowerment plans. 3.1. Successful ventures: Commercially viable Fort Hare Dairy Trust outside Alice in Eastern Cape started in 2004 and the first cow was milked in October 2007. The trust started between a partnership between 70 white farmers from the Tsitsikamma and the Underberg area through their company Amandlelo Agri and University of Fort Hare. The University donated land and the cost of the project was R22 million (R2 million donated by University, R5 million by Amandlelo and 15 million by Land Bank of which 7.5 million is loan). The farmers signed on an empowerment company Vuwa Investments which was given 35% stake in the company. The farmers kept 49 % and the rest was shared among 600 workers from the 70 dairy farms. Today Fort Hare Dairy Trust is a state-of-the-art commercial dairy farm. It has 800 cow rotary parlour that produces approximately 10 000 litres of milk a day much of which is supplied to Clover milk company. The farm that requires 600 tons of maize is sourced from farmers in the Alice area. Every year Amandlelo takes between 10 and 15 black interns. Some of them are sent to Fort Hare Dairy Trust. Farmers are rewarded with cattle as they pass through different stages. This will enable them to start their own full time dairy farming (Pretoria News, 17 June 2009). 3.2. Training Programmes Agri SETA accredited farm worker training. Agri SETA accredited emerging farmer training. Workers training funded by MILK SA. Training of Extension officers of Department of Agriculture in North West Province and Free State. 3.3. Magazines Ubisi Mail and Dairy Mail are distributed free of charge to emerging farmers. 4. BARRIERS TO THE LEVEL OF PARTICIPATION BY THE EMERGING SECTOR The low profitability of milk production is the major barrier to entry for the emerging farmers. Access to credit facilities and financial package specially structured to their needs also plays a role. The volatility of the market and the effect of imports in depressing producer prices make it difficult for the emerging farmers to enter the industry. The dynamics of pricing in the dairy industry as well as the shelf life of the products is such that the farmers are squeezed to accept whatever price that the producers/processors offer them to dispose of their products. The market is dominated by 4 major processors in the milk industry making it extremely difficult for the emerging farmers to make inroads in the dairy processing industry. They lack the necessary capital to invest in dairy equipment. The volume of milk produced may not be sufficient to invest in capital equipment. To form a cooperative would assist in increasing the volume through the collection of milk from several small farms. However the infrastructure and the 20

underdeveloped roads and the great distances between farms could be inhibiting factors to go this route. Smaller processors tend to pay higher raw milk prices than the larger processors during periods of seasonal milk shortages because they lack the bargaining power that the larger processors have. During periods of surpluses, the large producers dump their products in the retail sector at very low prices making it difficult for the small processors to compete. The big players in the market have facilities to convert raw milk into milk powder, butter, cheese or long-life milk, which can be stored for longer periods of time. This facility is capital intensive and for the volumes of raw milk produced by the emerging farmers, it is not really worth it in the long term. The farmers/producers lack the expertise, equipment to pasteurize milk. Transport and the quantity are major deterrents for small farmers to get their products to the big processors. The big processors/buyers find it not worth the effort to access these farmers due to the road infrastructure and small inconsistent and small volumes of milk produced. 5. OPPORTUNITIES AND WEAKNESSES Success in the dairy market depends on two factors namely: quality products and the support of processors. Successful advertising, exports and the development of new products are also important. Some consumers like to buy fresh milk direct from producers because the origin of the milk is known. A strong relationship can be built between producer/s and consumers. Producers can sell direct to small cafes and street vendors shortening the value chain cutting out some transaction costs resulting in an increase in profits. This channel will require higher capital and involves more risks. A sound relationship needs to be in place between the sellers and the buyers. Since deregulation, the number of smaller milk producers has increased dramatically and processors are willing to receive milk from the smaller producers. However, this supply channel will require high-level control measures on hygiene and the producer has to comply with the required standards. High demand of value added products such as sour milk, yoghurt and cheese can be a market to be explored. However to go this route would require high investment, market knowledge and the necessary training. Packaging to promote brand identification can open an opportunity but this would require market research and knowledge, training and investment. 6. MARKET INTELLIGENCE 6.1. Export Tariffs Tariffs that different importing countries applied to milk and dairy products originating from South Africa in 2015 and 2016 are shown in Tables 1 to 6 below. 21

Table 1: Milk and cream (neither concentrated nor sweetened) Country Product Trade 2015 2016 Code Regime Description Applied Tariffs Total Ad Botswana; Lesotho; Swaziland & Namibia Mozambique Zimbabwe Source: Market Access Map 04011007; 04011009; 04011090; 04011000; 04012090 04011000: 04012000; 04013000 Intra SACU rate Preferential tariff for SA Preferential tariff for South Africa Applied Total Ad valorem Equivalent Tariff (estimated) Tariffs valorem Equivalent Tariff (estimated) 0% 0% 0% 0% 15% 15% 0% 0% 0% 0% 0% 0% Botswana, Lesotho, Swaziland and Namibia allowed the importation of milk and cream (not concentrated or sweetened) from South Africa duty free during 2015 and 2016 using the Intra SACU rate. The protected market existed in Mozambique which applied the 15% of preferential tariff for South Africa. However, in 2016 and in 2016, the tariff decreased to 0%. Zimbabwe provided South Africa with 0% preferential tariff during 2015 and 2016. Table 2: Milk and cream (concentrated or sweetened) Country Product Trade Regime 2015 2016 code Description Applied Total Ad Applied Total Ad Tariffs valorem Tariffs valorem Equivalent Tariff (estimated) Equivalent Tariff (estimated) Mozambique 04021010, MFN Duties 0% 0% 0% 0% 04022110 04021090, 04029100, 04029990, 04029910, 0 Preferential tariff for South Africa 15% 15% 0% 0% 4022900 & 04022190 04022120 Preferential tariff for 0% 0% 0% 0% Zimbabwe 04021010 04022110 & 04022910 Botswana; 04021010 Swaziland; Namibia 04021090 & Lesotho 04022110 04022190 04022900 Source: Market Access Map South Africa Preferential (SADC) for Africa tariff South 0% 0% 0% 0% Intra SACU rate 0% 0% 0% 0% Intra SACU rate 0% 0% 0% 0% 22

Mozambique has applied MFN duties of 0% for HS codes 04021010 and 04022110 for period 2015 and 2016. Preferential tariff for South Africa was applied at 15% in 2015 and 0% in 2016 on the selected HS codes products in Table 2 above. Zambia applied a preferential tariff (SADC) for South Africa of 0% for exports of milk and cream (concentrated or sweetened) from South Africa during 2015 and 2016. Botswana, Swaziland, Namibia and Lesotho have applied an Intra SACU rate of 0% for the mentioned HS codes products in the table above in 2015 and 2016. Table 3: Buttermilk, cream, yoghurt, etc. Country Product Code Trade Regime Description Angola 04031000 & 04039000 Mozambique Botswana; Lesotho; Namibia Swaziland & 04031000 Preferential tariff for South Africa 04039000 04031000; 04039010; 04039020 & 04039030 Source: Market Access Map 2015 2016 Applied Tariffs Total Ad Applied Total Ad valorem Equivalent Tariff (estimated) Tariffs valorem Equivalent Tariff (estimated) MFN duties 10% 10% 10% 10% Preferential tariff for South Africa Intra SACU rate 15% 15% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% South African exports of buttermilk, cream and yoghurt to Angola received 10% MFN duties rate during 2015 and 2016 respectively. Mozambique has charged South Africa a preferential tariff of 15% in 2015 and 0% in 2016 for 04031000 and 0% for HS code 04039000 products in 2015 and 2016. Botswana, Lesotho, Namibia and Swaziland applied the Intra SACU rate of 0% to buttermilk, curdled milk, cream and yoghurt originating from South Africa in 2015 and 2016. Table 4: Whey and natural milk products Country Product Trade Regime 2015 2016 code Description Applied Total Ad Applied Total Ad Tariffs valorem Tariffs valorem Equivalent Tariff (estimated) Equivalent Tariff (estimated) Japan 040410111; MFN duties 35% 35% 35% 35% 040410119 MFN duties 25% 25% 25% 25% Zimbabwe 04041000 & 04049000 Preferential tariff (SADC) for SA 0% 0% 0% 0% Zambia 04041000 & Preferential tariff for SA 0% 0% 0% 0% 04049000 23

Country Namibia; Botswana & Lesotho Product code 04041000; 04049010 & 04049090 Source: Market Access Map Trade Regime 2015 2016 Description Applied Total Ad Applied Total Ad Tariffs valorem Tariffs valorem Equivalent Tariff (estimated) Equivalent Tariff (estimated) Intra SACU rate 0% 0% 0% 0% Japan has applied the highest tariff of whey and natural milk products originating from South Africa, 35% for 040410111 and 25% for 040410119. Zimbabwe allowed importation of whey from South Africa charging South Africa 0% tariff for SADC countries.in 2015 and 2016. Zambia applied a preferential tariff for South Africa of 0% in 2015 and 2016. Namibia, Botswana and Lesotho have applied an Intra SACU rate of 0% for whey and natural milk product originating from South Africa in 2015 and 2016. Table 5: Butter and other fats and oils derived from milk Country Product Trade Regime 2015 2016 code Description Applied Tariffs Total Ad Namibia, Botswana and 04051000, 04052000, Lesotho 04059000 Mozambique 04051000, 04052000, 04059090 Applied Total Ad valorem Equivalent Tariff (estimated) Tariffs valorem Equivalent Tariff (estimated) Intra SACU rate 0% 0% 0% 0% Preferential tariff for SA 0% 0% 0% 0% 04059010 Preferential tariff for SA 0% 0% 0% 0% Mauritius 04051000, 04052000 & 04059000 MFN duties (Applied) 0% 0% 0% 0% 04051000, Zimbabwe 04052000 & 04059000 Source: Market Access Map MFN duties (Applied) 40.00% 40.00% 40.00% 40.00% Namibia, Lesotho and Botswana apply Intra SACU rate of 0% for butter and other fats and oils derived from milk originating from South Africa. Mozambique has charged South Africa a 0% preferential tariff of the selected product in Table 14 above. Mauritius has charged South Africa 0% MFN duties on butter and other fats and oils derived from milk exported to them in 2015 and 2016. The most protected market exists in Zimbabwe pplied MFN duties of 40% during 2015 and 2016. 24

Table 6: Cheese and curd Country Product code Trade Regime Description Namibia, Swaziland Botswana & 04061000; 04062000; 04063000; 04064000 & 04069000 Intra rate SACU 2015 2016 Applied Total Ad Applied Total Ad Tariffs valorem Equivalent Tariff (estimated) Tariffs valorem Equivalent Tariff (estimated) 0% 0% 0% 0% Mozambique 04061000; 04062000; 04063000& 04064000 04061000; 04062000; Zambia 04063000; 04064000 & 04069000 04061000; 04062000; Zimbabwe 04063000; 04064000 & 04069000 Source: Market Access Map Preferential tariff for SA Preferential tariff for SA MFN duties (Applied) 15% 15% 0% 0% 0% 0% 0% 0% 40% 40% 40% 40% Namibia, Botswana and Swaziland applied an Intra SACU rate of 0% for cheese and curd originating from South Africa in 2015 and 2016. Mozambique applied a preferential tariff of 15% in 2015 and 0% in 2016 to South Africa. Zambia applied a preferential tariff of 0% to South African cheese and curd during 2015 and 2016. Zimbabwe was the most protected market for South African exports of cheese and curd with the MFN duties of 40% during 2015 and 2016. 6.2. Import tariffs Tables 7 to 12 below present the tariff structure applied by South Africa to imports of milk and dairy products originating from presented trade agreements in 2017. Table 7: Milk and cream, neither concentrated nor sweetened Rate of Duty Article Description Statistical unit General EU EFTA SADC MERCOSUR 04.01 Milk and cream, not concentrated nor containing added sugar or other sweetening matter: 0401.10 Of a fat content, by mass, not exceeding 1 per cent: 25

0401.10.07 Ultra high temperature (UHT) Kg free free free free free or "long life" milk in containers holding 1 li or less, whether or not containing added minerals, vitamins, enzymes and similar additives solely for the purpose of increasing the nutritional value and provided these additives do not exceed 1 per cent by volume of the final product 0401.10.09 Other milk, whether or not Kg free free free free free containing added minerals, vitamins, enzymes and similar additives solely for the purpose of increasing the nutritional value and provided these additives do not exceed 1 per cent by volume of the final product 0401.10.90 Other Kg free free free free free 0401.20 Of a fat content, by mass, exceeding 1 per cent but not exceeding 6 per cent: 0401.20.07 Ultra high temperature (UHT) Kg free free free free free or "long life" milk in containers holding 1 li or less, whether or not containing added minerals, vitamins, enzymes and similar additives solely for the purpose of increasing the nutritional value and provided these additives do not exceed 1 per cent by volume of the final product 0401.20.09 Other milk, whether or not Kg free free free free free containing added minerals, vitamins, enzymes and similar additives solely for the purpose of increasing the nutritional value and provided these additives do not exceed 1 per cent by volume of the final product 0401.20.90 Other Kg free free free free free 0401.40 Of a fat content, by weight exceeding 6 per cent but not exceeding 10 per cent: 26

0401.40.07 Ultra high temperature (UHT) Kg free free free free free or "long life" milk in containers holding 1 li or less, whether or not containing added minerals, vitamins, enzymes and similar additives solely for the purpose of increasing the nutritional value and provided these additives do not exceed 1 per cent by volume of the final product 0401.40.09 Other milk, whether or not Kg free free free free free containing added minerals, vitamins, enzymes and similar additives solely for the purpose of increasing the nutritional value and provided these additives do not exceed 1 per cent by volume of the final product 0401.40.90 Other Kg free free free free free 0401.50 Of a fat content by weight, exceeding 10 per cent: 0401.50.07 Ultra high temperature (UHT) Kg free free free free free or "long life" milk in containers holding 1 li or less, whether or not containing added minerals, vitamins, enzymes and similar additives solely for the purpose of increasing the nutritional value and provided these additives do not exceed 1 per cent by volume of the final product 0401.50.09 Other milk, whether or not Kg free free free free free containing added minerals, vitamins, enzymes and similar additives solely for the purpose of increasing the nutritional value and provided these additives do not exceed 1 per cent by volume of the final product 0401.50.90 Other Kg free free free free free Source: SARS, 2017 27

Table 7 above indicates the sub products of milk and cream, not concentrated nor containing added sugar or other sweetening matter, and their rates of duty applied by South Africa. It is clear from the table that, within the presented trade agreements (EU, EFTA, SADC and MERCOSUR) and all other countries bringing the said products into South Africa, imports enter South Africa free of charge. In this case, there is no quota allocated for these products. Table 8: Milk and cream, concentrated or sweetened Article Description Rate of Duty Statistical unit General EU EFTA SADC MERCOSU R 04.02 Milk and cream, concentrated or containing added sugar or other sweetening matter: 0402.10 In powder, granules or other solid forms, of a fat content, by mass, not exceeding 1,5 per cent: 0402.10.10 Not flavoured and not containing added sugar or other sweetening matter Kg 450c/kg of 96% 0402.10.90 Other Kg 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% free free 450c/kg of 96% 450c/kg of 96% 0402.2 In powder, granules or other solid forms, of a fat content, by mass, exceeding 1,5 per cent: 0402.21 Not containing added sugar or other sweetening matter: 0402.10.10 Not flavoured Kg 450c/kg of 96% 0402.10.90 Other Kg 450c/kg of 96% 0402.29 Other Kg 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% free free free 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 0402.9 Other: 0402.91 Not containing added sugar or other sweetening matter Kg 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% free 450c/kg of 96% 0402.99 Other: 28

0402.99.10 In aerosol containers Kg 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% free 450c/kg of 96% 0402.99.90 Other Kg 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% free 450c/kg of 96% Source: SARS, 2017 Table 8 above indicate the tariff duties applied to trade agreement members of EU, EFTA, SADC, MERCOSUR and General members on sub products of milk and cream, concentrated or containing added sugar or other sweetening matter. South Africa applied tariff of R4.50c/kg of 96% to trade agreements (EU, EFTA, MERCOSUR and General member of WTO) and duty free for SADC members. The total annual quota allocated for these products is 4 470 tons for a rebate of 19.2%. Table 9: Buttermilk, cream, yoghurt, etc. Rate of Duty Article Description Statistical unit General EU EFTA SADC MERCOSUR 04.03 Buttermilk, curdled milk and cream, yoghurt, kephir and other fermented or acidified milk and cream, whether or not concentrated or containing added sugar or other sweetening matter or flavoured or containing added fruit, nuts or cocoa: 0403.10 Yoghurt kg free free free free free 0403.90 Other: 0403.90.10 Flavoured or containing fruits, nuts or cocoa 0403.90.20 Cultured milk, not concentrated or containing any sugar or other sweetening matter, unflavoured and not containing any fruits, nuts or cocoa (excluding buttermilk) kg kg 450c/kg of 96% 450c/kg of 96% 0403.90.90 Other: kg 450c/kg of 96% Source: SARS, 2017 free free free 450c/kg of 96% free free 450c/kg of 96% 450c/kg of 96% free free 450c/kg of 96% 450c/kg of 96% 29

Table 9 above indicate the tariff duties applied to trade agreement members of EU, EFTA, SADC, MERCOSUR and General members on sub products of Buttermilk, curdled milk and cream, yoghurt, kephir and other fermented or acidified milk and cream, whether or not concentrated or containing added sugar or other sweetening matter or flavoured or containing added fruit, nuts or cocoa. South Africa applied duty free for all countries on HS product 0403.10. On HS product 0403.90.10, the EU, EFTA and SADC received a duty free and MERCOSUR and General Members received R4.50c/kg of 96%. Lastly, for HS products HS 0403.90.20 and HS 0403.90.90, EFTA, MERCOSUR and General Members received a rate of duty of R4.50c/kg of 96% and EU and SADC received duty free. The total annual quota allocated for these products is 213 tons rebate of 19.2%. Table 10: Whey and other natural milk products Rate of Duty Article Description Statistical unit General EU EFTA SADC MERCOSUR 04.04 Whey, whether or not concentrated or containing added sugar or other sweetening matter; products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included: 0404.10 Whey and modified Whey, whether or not concentrated or containing added sugar or other sweetening matter 0404.90 Other Dairy powder blends, containing at least 30% (m/m) milk protein calculated on a 0404.90.10 fat-free basis kg kg 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% free free 450c/kg of 96% 450c/kg of 96% 0404.90.90 Other kg Source: SARS, 2017 450c/kg of 96% 450c/kg of 96% 450c/kg of 96% free 450c/kg of 96% The tariff duties applied to trade agreement members of EU, EFTA, SADC, MERCOSUR and General members on sub products of whey, whether or not concentrated or containing added sugar or other sweetening matter; products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included are presented in Table 10 above. South Africa 30

applied tariff of R4.50c/kg of 96% to trade agreements (EU, EFTA, MERCOSUR and General members) and free trade for SADC members. The total annual quota allocated for these products is 2 786 tons rebate of 19.2%. Table 11: Butter and other fats and oils derived from milk 0405 Article Description 0405.10.10 In immediate packaging of a content of 20 kg or more Rate of Duty Statistical unit General EU EFTA SADC MERCOSUR Butter and other fats and oils derived from milk; dairy spreads: kg 500c/kg 500c/kg of 79% of 79% 0405.10.90 Other kg 500c/kg of 79% 500c/kg of 79% 500c/kg of 79% 500c/kg of 79% free free 500c/kg of 79% 500c/kg of 79% 0405.20 Dairy spreads kg 500c/kg of 79% 500c/kg of 79% 500c/kg of 79% free 500c/kg of 79% 0405.90 Other kg 500c/kg of 79% 500c/kg of 79% 500c/kg of 79% free 500c/kg of 79% Source: SARS, 2017 The tariff duties applied to trade agreement members of EU, EFTA, SADC, MERCOSUR and General members on sub products of Butter and other fats and oils derived from milk; dairy spreads are presented on table 11 above. South Africa applied tariff of R5/kg of 79% to trade agreements (EU, EFTA, MERCOSUR and General member) and duty free for SADC members. The total annual quota allocated for these products is 1 167 tons for a rebate of 15.8%. Table 12: Cheese and curd Rate of Duty Article Description 04.06 Cheese and curd: Fresh (unripened or uncured) cheese, including whey cheese, and curd 0406.10 Statistica l unit General EU EFTA Kg 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% SAD C free MERCOSU R 500c/kg of 95% 31

0406.20 Grated or powdered cheese, of all kinds Processed cheese, not grated or powdered 0406.30 Blue-veined cheese and other cheese containing veins produced by PENICILLIUM 0406.40 ROQUEFORTI 0406.90 Other cheese: 0406.90.1 Cheddar 0406.90.1 Imported from 1 Switzerland Kg Kg Kg Kg 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% free free free free 500c/kg of 95% 500c/kg of 95% 500c/kg of 95% 500c/kg of 95% 0406.90.1 2 Other Kg 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% free 500c/kg of 95% 0406.90.2 Gouda 0406.90.2 Imported from 1 Switzerland Kg 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% free 500c/kg of 95% 0406.90.2 2 Other Kg 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% free 500c/kg of 95% 0406.90.9 Other 0406.90.9 Imported from 1 Switzerland Kg 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% free 500c/kg of 95% 0406.90.9 9 Other Kg 500c/kg maximu m of 95% 500c/kg maximu m of 95% 500c/kg maximu m of 95% free 500c/kg of 95% Source: SARS, 2017 32

The tariff duties applied to trade agreement members of EU, EFTA, SADC, MERCOSUR and General members on sub products of Cheese and curd are presented in Table 12 above. South Africa applied tariff of R5/kg of 95% to trade agreements (EU, EFTA, MERCOSUR and General member) and duty free for SADC members. The total annual quota allocated for these cheese and curd (excluding cheddar and Gouda cheese) is 1 167 tons for a rebate of 15.8%. 33

7. COMPETITIVENESS OF THE DAIRY INDUSTRY 7.1. Exports 7.1.1. Milk and cream (neither concentrated nor sweetened) Table 13: List of importing markets for the product exported by South Africa in 2016 South Africa s exports represent 0.7% of world exports for milk and cream, (not concentrated or sweetened), its ranking in world s exports is 26. Select your indicators Importers Value exported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's exports (%) Quantity exported in 2016 Quantity unit Unit value (USD/unit) Growth in exported value between 2012-2016 (%, p.a.) Growth in exported quantity between 2012-2016 (%, p.a.) Growth in exported value between 2015-2016 (%, p.a.) Ranking of partner countries in world imports Share of partner countries in world imports (%) Total imports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) faced by South Africa (%) World 49478 39729 100 80657 Tons 613-6 -9-12 100-2 Botswana 11713 11713 23.7 25205 Tons 465 10-10 -1 49 0.3 33 0 Lesotho 10354 10335 20.9 13437 Tons 771-10 0-2 65 0.1-10 0 Mozambique 7675 7675 15.5 11045 Tons 695-3 9 20 75 0.1 26 Swaziland 5948 5948 12 12146 Tons 490-3 10-12 82 0.08-3 0 Namibia 5698 5698 11.5 7060 Tons 807-2 -28 0 77 0.09-2 0 Zimbabwe 2297 2297 4.6 3040 Tons 756-34 -30-78 113 0.03-35 0 Tanzania 2214 2214 4.5 3722 Tons 595-4 5 18 96 0.05-21 Mauritius 857 857 1.7 1513 Tons 566 18 50 43 87 0.07 0 0 Malawi 599 599 1.2 760 Tons 788 16 31 9 166 0 20 Angola 486 486 1 729 Tons 667 18 36 21 44 0.4 2 Comoros 372 372 0.8 611 Tons 609-1 12 20 155 0.01-4 0 DRC 358 358 0.7 418 Tons 856 3 22 184 119 0.03-3 5 Zambia 313 313 0.6 215 Tons 1456 0 4 61 176 0-20 0 Source: ITC Trademap. 34

Table 13 shows that during 2016, South Africa exported a total of 80 657 tons of milk and cream (not concentrated or sweetened) at an average value of US$613/unit. South Africa exported greater quantities of milk and cream (not concentrated or sweetened) to Botswana, Lesotho and Mozambique. The greatest share of South African milk and cream (not concentrated or sweetened) exports were destined to Botswana which commanded 23.7% share during the year 2016 followed by Lesotho at 20.9% and then Mozambique at 15.5%. South Africa s milk and cream (not concentrated or sweetened) exports decreased by 6% in value and 9% in quantity between the periods 2012 and 2016. During the same period, exports of milk and cream (not concentrated or sweetened) to Botswana increased by 10% in value while quantity decreased by 10% and Lesotho decreased by 10% in value and 0% change in quantity. Between the periods 2015 and 2016 South Africa s exports of milk and cream (not concentrated or sweetened) decreased by 12% in value. During the same period, Botswana and Lesotho decreased by 1% and 2% respectively in value. 35

Figure 26: Growth in demand for milk and cream exports by South Africa in 2016 Source: ITC Trademap 36

Figure 26 illustrates South Africa s exports of milk and cream (not concentrated or sweetened) in 2016. Between 2012 and 2016 South Africa s milk and cream, not concentrated or sweetened to Singapore, Congo, Nigeria, Angola, Mauritius, DRC, Zambia, Tanzania and Zimbabwe were growing at a rate that is greater than their import growth from the world. This means that South Africa is gaining the market in the mentioned countries. During the same period, South Africa s milk and cream (not concentrated or sweetened) exports to Botswana, Mozambique, Malawi, Namibia, Swaziland and Lesotho were growing at a rate that is less than their imports from the rest of the world. Therefore, South Africa is losing the market share in those countries. Zimbabwe, Tanzania and Lesotho represent loses in the dynamic market. Botswana experienced the highest growth in demand of milk and cream not concentrated nor sweetened imports during the periods 2012 to 2016. Annual growth of exports to Singapore and Congo was 137% and 119% respectively. 37

Figure 27: Prospects for market diversification for milk and cream exported by South Africa in 2016 Source: ITC Trademap 38

South Africa is currently exporting large quantities of milk and cream, not concentrated nor sweetened to Botswana, and it has a market share of 23.67% of South Africa s exports (see Figure 27). South Africa exports to Botswana are less than that of the world. South Africa can penetrate Nigeria import market because its annual growth stands at 32%. If South Africa wishes to diversify its exports of milk and cream (not concentrated or sweetened), Malawi is the other fastest growing market n annual imports growth of 20%. 39

7.1.2. Milk and cream, concentrated or sweetened Table 14: List of importing markets for the product exported by South Africa in 2016 South Africa's exports represent 0.3% of world exports for milk and cream (concentrated or sweetened), its ranking in world exports is 35. Select your indicators Importers Value exported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's exports (%) Quantity exported in 2016 Quantity unit Unit value (USD/unit) Growth in exported value between 2012-2016 (%, p.a.) Growth in exported quantity between 2012-2016 (%, p.a.) Growth in exported value between 2015-2016 (%, p.a.) Ranking of partner countries in world imports Share of partner countries in world imports (%) Total imports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) faced by South Africa (%) World 47550 23527 100 44225 Tons 1075-14 -40-4 100-6 Botswana 14962 14892 31.5 30534 Tons 490-20 -43 6 109 0.06-30 0 Namibia 8265 8229 17.4 4549 Tons 1817-8 -7 10 119 0.04-10 0 Mozambique 4076 4076 8.6 2035 Tons 2003-19 -20-53 106 0.07-23 Swaziland 3878 3862 8.2 1933 Tons 2006-18 -29-38 148 0.02-18 0 Zimbabwe 3373 3373 7.1 1006 Tons 3353-13 -14 39 170 0.01-48 17.9 Lesotho 3356 3321 7.1 1019 Tons 3293-6 -16-36 155 0.02-6 0 Zambia 2366 1951 5 984 Tons 2404-27 -13 67 132 0.03-19 0 Angola 1762 1762 3.7 418 Tons 4215 15-24 88 51 0.4-12 DRC 1092 1092 2.3 299 Tons 3652 30-7 18 71 0.2-8 5 Tanzania 832 832 1.7 248 Tons 3355 122 96 1040 158 0.02 12 Malawi 759 759 1.6 230 Tons 3300-8 0 49 146 0.02-7 Mali 511 511 1.1 134 Tons 3813 10 39 724 72 0.2-5 Congo 482 482 1 111 Tons 4342 53-14 122 99 0.09-12 10.1 Source: ITC calculations based on COMTRADE statistics. 40

Table 14 shows that during 2016 South Africa exported a total of 44225 tons of milk and cream (concentrated or sweetened) at an average value of US$ 1 075/unit. South Africa exported greater quantities of milk and cream (concentrated or sweetened) to Botswana, Namibia and Mozambique. The greatest share of South African milk and cream (concentrated or sweetened) exports were destined to Botswana which commanded 35.1% share during the year 2016 followed by Namibia with 17.4% then Mozambique with 8.6%. South Africa s milk and cream (concentrated or sweetened) exports decreased by 14% in value and 40% in quantity between the periods 2012 and 2016. During the same period, exports of milk and cream (concentrated or sweetened) to Botswana decreased by 20% in value and 43% in quantity and Namibia decreased by 8% in value and 7% in quantity during the period 2012 to 2016. Between the periods 2015 and 2016, South Africa s exports of milk and cream (concentrated or sweetened) decreased by 4% in value. During the same period, Botswana and Namibia experienced an increase of 6% and 10% respectively. 41

Figure 28: Growth in demand for sweetened milk and cream exported by South Africa in 2016 Source: ITC Trademap 42

Figure 28 illustrates that South Africa s exports of milk and cream (concentrated or sweetened) represent 0.3% of world exports. Between 2012 and 2016, South Africa s milk and cream (concentrated or sweetened) exports to Zambia, Swaziland, Lesotho and Malawi were growing at a rate that is less than their imports growth from the world. During the same periods, South Africa was gaining the market shares of milk and cream (concentrated or sweetened) exports to Seychelles, Tanzania, Congo, Mauritius, DRC, Angola, Mali, Namibia, Mozambique, Botswana and Zimbabwe because imports from South African were growing at a rate that is greater than their imports from the rest of the world. Countries which have the most imports growing demand of South African Milk and Cream (Concentrated and sweetened) are Seychelles and Tanzania with the annual exports growth of 111% and 122% respectively. 43

Figure 29: Prospects for market diversification for sweetened milk and cream exported by South Africa in 2016 Source: ITC Trademap 44

Most of South African milk and cream (concentrated and sweetened) were destined to Botswana. However, this country imported more from South Africa than the rest of the world (see Figure 29). South Africa can either penetrate Seychelles import market or diversify to Colombia. China, Hong Kong is the biggest market of milk and cream (concentrated or sweetened) in the world, with the world s imports market share of 8.85%. 45

7.1.3. Buttermilk and yoghurt Table 15: List of importing markets for Buttermilk and yoghurt exported by South Africa in 2016 South Africa s exports represent 1% of world exports for Buttermilk and yoghurt, its ranking in world exports is 20. Select your indicators Importers Value exported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's exports (%) Quantity exported in 2016 Quantity unit Unit value (USD/unit) Growth in exported value between 2012-2016 (%, p.a.) Growth in exported quantity between 2012-2016 (%, p.a.) Growth in exported value between 2015-2016 (%, p.a.) Ranking of partner countries in world imports Share of partner countries in world imports (%) Total imports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) faced by South Africa (%) World 39993 35204 100 34111 Tons 1172-6 -6 5 100-3 Botswana 10652 10652 26.6 10952 Tons 973 4 0 12 51 0.3 1 0 Angola 7483 7483 18.7 2906 Tons 2575-23 -26-5 35 0.6-13 Mozambique 7376 7376 18.4 7052 Tons 1046 1 14-1 63 0.2 29 Namibia 4544 4544 11.4 4128 Tons 1101 0-27 63 70 0.1 3 0 Swaziland 3270 2921 8.2 3487 Tons 938 3 6-11 83 0.08 2 0 Lesotho 2878 2861 7.2 2646 Tons 1088 2 4-30 90 0.07 2 0 Zambia 848 848 2.1 989 Tons 857-2 17 55 127 0.02-1 0 Zimbabwe 768 768 1.9 494 Tons 1555-22 -17 198 154 0-45 14.5 Malawi 720 720 1.8 573 Tons 1257 29 46 32 132 0.02 17 Equatorial Guinea 314 314 0.8 181 Tons 1735 199 104 0.05 1 30 DRC 200 200 0.5 129 Tons 1550-9 8-32 140 0.01-11 10 Seychelles 174 174 0.4 103 Tons 1689-6 3-18 116 0.03 3 Nigeria 161 160 0.4 74 Tons 2176-16 -15 38 45 0.4-2 Comoros 126 126 0.3 80 Tons 1575 80 52 158 0 30 0 Source: ITC Trademap. 46

Table 15 shows that during 2016 South Africa exported a total of 34 111 tons of buttermilk and yoghurt at an average value of US$ 1 172/unit. South Africa exported greater quantities of buttermilk and yoghurt to Botswana, Angola and Mozambique. The greatest share of South African buttermilk and yoghurt exports were destined to Botswana which commanded 26.6% share during the year 2016 followed at by Angola and Mozambique with 18.7% and 18.4% respectively. South Africa s buttermilk and yoghurt exports have decreased by 6% in value and 6% in quantity from 2012 to 2016. During the same period, exports of buttermilk and yoghurt to Botswana increased by 4% in value and 0% change in quantity; Mozambique increased by 23% in value and 26% in quantity. Between the periods 2015 and 2016, South Africa s exports of buttermilk and yoghurt increased by 5% in value. During the same period, Botswana increased by 12% while Angola and Mozambique decreased by 5% and 1% respectively in value. 47

Figure 30: Growth in demand for buttermilk and yogurt exported by South Africa in 2016 Source: ITC Trademap 48

Figure 30 illustrates that South Africa s exports of buttermilk and yoghurt represent 1% of the world exports in 2016. South Africa was losing the market share of buttermilk and yoghurt in Mozambique, Namibia, Zambia, Lesotho, Nigeria, Angola and Ghana because its exports were growing at a rate that is less than their import growth from the rest of the world. During the same periods, South Africa s buttermilk and yoghurt exports to United Arab Emirates, Democratic Republic of Congo, Congo, Botswana, Malawi and Swaziland were growing at a rate that is greater than their imports from the rest of the world. Therefore, South Africa is gaining the market share in these countries. The fastest growing market of South African buttermilk and Yogurt exist in Congo with the annual South African exports of 38%. 49

Figure 31: Prospects for market diversification for buttermilk and yogurt exported by South Africa in 2016 Source: ITC Trademap 50

South Africa s exports of buttermilk and yoghurt are dominant in Botswana. If South Africa wishes to diversify its exports the most attractive markets will be Comoros and Congo (see Figure 31). Their growth of imports from the world is at 30% and 19% respectively. 51

7.1.4. Whey and other natural milk products Table 16: List of importing markets for whey and natural milk exported by South Africa in 2016 South Africa's exports represent 0.3% of world exports for whey and natural milk and its ranking in world exports is 34. Select your indicators Importers Value exported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's exports (%) Quantity exported in 2016 Quantity unit Unit value (USD/unit) Growth in exported value between 2012-2016 (%, p.a.) Growth in exported quantity between 2012-2016 (%, p.a.) Growth in exported value between 2015-2016 (%, p.a.) Ranking of partner countries in world imports Share of partner countries in world imports (%) Total imports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) faced by South Africa (%) World 10146-3674 100 4762 Tons 2131 15 9 54 100-10 Japan 5520 5520 54.4 3060 Tons 1804 62 52 143 8 2.9-7 Namibia 2462 2462 24.3 427 Tons 5766 20 6-4 73 0.07 21 0 Botswana 651 651 6.4 170 Tons 3829-2 -30 20 113 0.01-7 0 Lesotho 422 422 4.2 304 Tons 1388-3 9-3 117 0.01-3 0 Zambia 305 305 3 326 Tons 936-12 -1-13 124 0-15 0 Zimbabwe 252 252 2.5 293 Tons 860 7 27 63 103 0.02 15 0 HK, China 229 229 2.3 28 Tons 8179 941 53 0.2 12 0 DRC 180 180 1.8 83 Tons 2169 65-2 105 118 0.01 27 5 Swaziland 41 40 0.4 40 Tons 1025-66 -68 925 126 0-32 0 Indonesia 24 24 0.2 3 Tons 8000 6 3.7-10 5 Saint Helena 18 18 0.2 4 Tons 4500 99 41 500 174 0 99 Nigeria 15 15 0.1 8 Tons 1875-20 12 45 0.2 33 Malawi 11 11 0.1 6 Tons 1833-21 11 179 0-25 Mozambique 9 9 0.1 3 Tons 3000-46 -51-47 162 0-34 Source: ITC Trademap. 52

Table 16 shows that during 2016 South Africa exported a total of 4 762 tons of whey and natural milk products at an average value of US$2 131/unit. South Africa exported greater quantities of whey and natural milk products to Japan and Namibia. The greatest share of South African whey and natural milk products exports were destined to Japan which commanded 54.4% share during the year 2016 and Namibia taking 24.3%, followed at a distance by Botswana with 6.4%. South Africa s whey and natural milk products exports increased by 15% in value and 9% in quantity between the periods 2012 and 2016. During the same periods, exports of whey and natural milk products to Japan increased by 62% in value and 52% in quantity and Namibia experienced increases of 20% in quantity and 6% in value; while Botswana decreased by 2% in value and 30% in quantity. Between the periods 2015 and 2016, South Africa s exports of whey and natural milk products increased by 54% in value. During the same period, Japan increased by 143% while Namibia decreased by 4% and Botswana increased by 20% respectively in value. 53

Figure 32: Growth in demand for whey exported by South Africa in 2016 Source: ITC Trademap 54

Figure 32 illustrates that South Africa s exports of whey and natural milk products represent 0.3% of the world exports. Between 2012 and 2016 South Africa s whey and natural milk products exported to Namibia, Lesotho, Swaziland, Mozambique, Nigeria and Zimbabwe were growing at a rate that is less than their import growth from the rest of the world. Therefore, South Africa is losing the market share in the mentioned countries. During the same period, South Africa is gaining the market shares of whey and natural milk products exports in Japan, DRC, Botswana, Malawi and Zambia because their imports from South Africa were growing at a rate that is greater than their imports from the rest of the world. Saint Helena annual growth of imports of whey and a natural milk product from the world is the highest at 99% rate. 55

Figure 33: Prospects for market diversification for whey exported by South Africa in 2016 Source: ITC Trademap 56

The chart illustrates that Japan is the biggest importer of South African whey and natural milk products share of 54.41% (see Figure 33). The biggest market exists in Indonesia with the world import share of 3.71%. South Africa might look on developing a new market in Maldives because its annual import growth is at 148%. The fastest growing market although small exists in Saint Helena. Saint Helena s annual import growth is at 148%. Therefore, this market might be the most attractive market for South Africa s diversification. 57

7.1.5. Butter and other fats and oils derived from milk Table 17: List of importing markets for butter and other fats and oils derived from milk exported by South Africa in 2016 South Africa s export represent 0.1% of world export for butter and other fats and oils derived from milk, its ranking in world exports is 34. Select your indicators Importers Value exported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's exports (%) Quantity exported in 2016 Quantity unit Unit value (USD/unit) Growth in exported value between 2012-2016 (%, p.a.) Growth in exported quantity between 2012-2016 (%, p.a.) Growth in exported value between 2015-2016 (%, p.a.) Ranking of partner countries in world imports Share of partner countries in world imports (%) Total imports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) faced by South Africa (%) World 9347-7736 100 3277 Tons 2852-4 -13-33 100-1 Namibia 3322 3322 35.5 1354 Tons 2453-4 -17-57 96 0.05-7 0 Mozambique 1637 1637 17.5 560 Tons 2923 4 16-10 114 0.03 18 Botswana 878 878 9.4 313 Tons 2805-12 -34-1 135 0.01-2 0 Zambia 741 741 7.9 182 Tons 4071 0 3 19 138 0.01-1 0 Mauritius 732 732 7.8 201 Tons 3642 8 17-33 78 0.1-6 0 Zimbabwe 683 683 7.3 194 Tons 3521-12 2-13 141 0.01-19 0.2 Lesotho 322 322 3.4 190 Tons 1695-22 3 213 168 0-22 0 Tanzania 261 261 2.8 82 Tons 3183 35 60-23 131 0.01 20 Malawi 258 258 2.8 62 Tons 4161 8 8 32 176 0 7 Swaziland 173 173 1.9 54 Tons 3204-33 -28 30 183 0-33 0 DRC 156 156 1.7 32 Tons 4875-2 -3 126 108 0.03-6 20 Saint Helena 59 59 0.6 24 Tons 2458 11 21-8 198 0 0 Sources: ITC Trademap. 58

Table 17 shows that during 2016 South Africa exported a total of 3 277 tons of butter and other fats derived from milk at an average value of US$2 852/unit. South Africa exported greater quantities of butter and other fats derived from milk to Namibia, Mozambique and Botswana. The greatest share of South African butter and other fats derived from milk exports were destined to Namibia which commanded 35.5% share during the year 2016 followed by Mozambique (17.5%) and then Botswana received a share of 9.4%. South Africa s butter and other fats derived from milk exports decreased by 4% in value and 13% in quantity between the periods 2012 and 2016. During the same period, exports of butter and other fats derived from milk to Namibia decreased by 4% in value and 17% in quantity. Mozambique increased by 4% in value and 16% in quantity and Botswana decreased by 12% in value and 34% in quantity. Between the period 2015 and 2016, South Africa s exports of butter and other fats derived from butter and other fats and oils decreased by 33% in value. During the same period, Namibia decreased by 57% and Mozambique decreased by 10% in value. 59

Figure 34: Growth in demand for butter exported by South Africa in 2016 Source: ITC Trademap 60

Figure 34 illustrates that South Africa s exports of butter and other fats and oils represent 0.1% of the world exports. Between 2012 and 2016 South Africa s butter and other fats exported to United Arab Emirates, Mozambique, Ghana, Botswana, Angola, Lesotho and Swaziland were growing at a rate that is less than their import growth from the rest of the world. During the same period, South Africa s butter and other fats exports to Tanzania, Seychelles, Saint Helena, Mauritius, Malawi, Zambia, Namibia and Zimbabwe were growing at a rate that is greater than their imports from the rest of the world. Swaziland, Zimbabwe and Lesotho represent the declining market while Ethiopia and Tanzania represent gains in the dynamic market. The most growing demand of butter and other fats and oils exist in Ethiopia nnual imports growth of 28% per annum during the period of 2012 to 2016. 61

Figure 35: Prospects for market diversification for butter exported by South Africa in 2016 Source: ITC Trademap 62

Figure 35 illustrates that South Africa is currently exporting most of its butter and other fats to Namibia followed by Mozambique but if South Africa needs to diversify its export market, the biggest market exist in Ethiopia n annual import growth of 28% and also the fact that South Africa is currently exporting less than what Ethiopia imports from the world. 63

7.1.6. Cheese and Curd Table 18: List of importing markets for the product exported by South Africa in 2016 South Africa s exports represent 0.1% of world exports of cheese and curd, its ranking in world exports is 44. Select your indicators Importers Value exported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's exports (%) Quantity exported in 2016 Quantity unit Unit value (USD/unit) Growth in exported value between 2012-2016 (%, p.a.) Growth in exported quantity between 2012-2016 (%, p.a.) Growth in exported value between 2015-2016 (%, p.a.) Ranking of partner countries in world imports Share of partner countries in world imports (%) Total imports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) faced by South Africa (%) World 32937-18719 100 9500 Tons 3467-1 -8 15 100-3 Namibia 10924 10924 33.2 2980 Tons 3666-1 -16 16 94 0.05-6 0 Mozambique 4441 4441 13.5 1211 Tons 3667-1 4 33 133 0.01 10 Botswana 4247 4246 12.9 1279 Tons 3321-7 -19-10 129 0.02-4 0 Zambia 3293 3293 10 915 Tons 3599 1 15 29 135 0.01-1 0 Zimbabwe 3069 3069 9.3 750 Tons 4092 4 14-2 145 0.01-4 0 Swaziland 2357 2357 7.2 952 Tons 2476-4 -8 14 148 0-4 0 Lesotho 1037 1036 3.1 248 Tons 4181-6 1 3 170 0-6 0 Malawi 725 725 2.2 233 Tons 3112 13 24 22 174 0 13 Angola 703 703 2.1 337 Tons 2086 2 22 229 84 0.06-12 Nigeria 464 464 1.4 164 Tons 2829-1 9 205 120 0.02 20 DRC 434 434 1.3 116 Tons 3741 12 19-32 149 0-7 19.8 Tanzania 242 242 0.7 43 Tons 5628 24 47 55 189 0-17 Ghana 237 237 0.7 60 Tons 3950-9 1 200 146 0.01-6 Uganda 170 170 0.5 55 Tons 3091 9 12 400 193 0-16 United Arab Emirates 108 108 0.3 28 Tons 3857 47 86-64 24 1 1 Sources: ITC Trademap. 64

Table 18 shows that during 2016 South Africa exported a total of 9 500 tons of cheese and curd at an average value of US$3 467/unit. South Africa exported greater quantities of cheese and curd to Namibia, Mozambique and Botswana. The greatest share of South African cheese and curd exports were destined to Namibia which commanded 33.2% share during the year 2016 followed by Mozambique with 13.5% and then Botswana by 12.9%. South Africa s exports of cheese and curd decreased by 1% in value and 8% in quantity between the period 2012 and 2016. During the same period, exports of cheese and curd to Namibia decreased by 1% in value and decreased by 16% in quantity. Mozambique decreased by 1% in value and increased by 4% in quantity and Botswana decreased by 7% in value and quantity by 19%. Between the period 2015 and 2016, South Africa s exports of cheese and curd increased by 15% in value. During the same period, Namibia increased by 16%, Mozambique increased by 33% and Botswana decreased by 10%. 65

Figure 36: Growth in demand for cheese and curd from South Africa in 2016 Source: ITC Trademap 66

Figure 36 illustrates that that South Africa s exports of cheese and curd represent 0.1% of the world exports. Between 2012 and 2016 South Africa is losing the market share of cheese and curd exports to Mauritius, Nigeria, Mozambique, Malawi, Seychelles, Swaziland, Botswana, Lesotho and Ghana because its exports were growing at a rate that is less than their import growth from the rest of the world. During the same period, South Africa gained the market share of cheese and curd exports to United Arab Emirates, Kenya, DRC, Zambia, Namibia, Zimbabwe, Angola, Uganda and Tanzania because these markets were growing at a rate that is greater than their imports from the rest of the world. The most growing demand for cheese and curd exist in Nigeria n annual import growth of 20%. 67

Figure 37: Prospects for market diversification for cheese and curd exported by South Africa in 2016 Source: ITC Trademap 68

Figure 37 shows that, Namibia, Botswana and Mozambique are the world s greatest importers of South African cheese and curd in 2016. They have shares in South African market of 33.17%, 12.9% and 13.48% respectively. If South Africa wishes to diversify, the small and fastest growing market is Ethiopia. Ethiopia s annual import growth is at 23% rate. This is the most lucrative market for South Africa. 69

7.2. Imports 7.2.1. Milk and cream (neither concentrated nor sweetened) Table 28: List of supplying markets for the product imported by South Africa in 2016 South Africa s imports represent 0.1% of world imports for milk and cream (not concentrated nor sweetened), its ranking in world imports is 67. Select your indicators Exporters Value imported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's imports (%) Quantity imported in 2016 Quantity unit Unit value (USD/unit) Growth in imported value between 2012-2016 (%, p.a.) Growth in imported quantity between 2012-2016 (%, p.a.) Growth in imported value between 2015-2016 (%, p.a.) Ranking of partner countries in world exports Share of partner countries in world exports (%) Total exports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) applied by South Africa (%) World 9749 39729 100 19221 Tons 507 3 8 52 100-6 Poland 5871-5871 60.2 12701 Tons 462 67 6 4 4 0 Uruguay 3172-3161 32.5 6077 Tons 522-19 -16 45 46 0.1-21 0 France 403-403 4.1 227 Tons 1775 136 49 2 9.5-6 0 Belgium 150-150 1.5 59 Tons 2542-21 -3 4 7.6-7 0 United Kingdom 51-51 0.5 48 Tons 1063-33 -23-19 10 3.6-10 0 Ireland 36-36 0.4 53 Tons 679 30 27 0.6-19 0 Germany 25-25 0.3 47 Tons 532-63 -62 525 1 17.3-5 0 Lesotho 19 10335 0.2 3 Tons 6333-48 -70-93 111 0-48 0 Denmark 15-15 0.2 4 Tons 3750 12 2.9 0 0 Brazil 3-3 0 1 Tons 3000 4 2 0.2-7 0 Italy 2-2 0 1 Tons 2000 24 1 18 0 Korea 1-1 0 0 Tons 41 0.2 41 0 Canada 1-1 0 0 Tons 58 0.07 4 0 Source: ITC Trademap. 70

Table 19 shows that during 2016 South Africa imported a total of 19 221 tons of milk and cream (not concentrated nor sweetened), at an average value of US$ 507/unit. South Africa imported greater quantities of milk and cream, (not concentrated or sweetened) from Poland, Uruguay, and France. The greatest share of South African milk and cream (not concentrated or sweetened) imports originated from Poland which commanded 60.2% share during the year 2016 followed at a distance by Uruguay with 32.5%. South Africa s milk and cream (not concentrated or sweetened) imports increased by 3% in value and 8% in quantity between the period 2012 and 2016. During the same period, imports of milk and cream (not concentrated or sweetened) from Uruguay decreased by 19% in value and 16% in quantity, France increased drastically in quantity by 136%. Between the period 2015 and 2016 South Africa s imports of milk and cream (not concentrated or sweetened) increased by 52% in value. During the same period imports of milk and cream (not concentrated or sweetened) from Poland to South Africa increased by 67% and Uruguay imports increased by 45% in value. 71

Figure 38: Competitiveness of suppliers to South Africa for unsweetened milk and cream in 2016 Source: ITC Trademap 72

Figure 38 illustrates that South Africa s imports between 2012 and 2016 represent 0.1% of the world s imports of milk and cream, not concentrated or sweetened. During the same period, South Africa is gaining the market share of milk and cream imports from Uruguay because South Africa s import growth were growing at a rate that is greater than these countries exports to the rest of the world. The most competitive market is Uruguay because its annual export growth rate was at -21% during the period 2012 to 2016, but the biggest market exists in Germany with the world share of 17.32%. 73

Figure 39: Prospects for diversification of suppliers for unsweetened milk and cream imported by South Africa in 2016 Source: ITC Trademap 74

Figure 39 illustrates that Germany is not a big supplier of South Africa s market for milk and cream (not concentrated or sweetened) but it was the world s greatest exporter of milk and cream (not concentrated or sweetened) over the period 2012 to 2016. However, Germany s annual export growth is very low at -5%. South Africa can easily diversify to Germany for market development. The second attractive market exists in Korea with the annual export growth of 41%. 75

7.2.2. Milk and cream, concentrated or sweetened Table 29: List of supplying markets for the product imported by South Africa in 2016 South Africa s imports represent 0.1% of world imports for milk and cream (concentrated or sweetened), its ranking in world imports is 79 Select your indicators Exporters Value imported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's imports (%) Quantity imported in 2016 Quantity unit Unit value (USD/unit) Growth in imported value between 2012-2016 (%, p.a.) Growth in imported quantity between 2012-2016 (%, p.a.) Growth in imported value between 2015-2016 (%, p.a.) Ranking of partner countries in world exports Share of partner countries in world exports (%) Total exports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) applied by South Africa (%) World 24023 23527 100 10754 Tons 2234-12 0-12 100-7 France 7104-7104 29.6 3380 Tons 2102-8 5-19 5 5.1-8 8.9 New Zealand 5508-5506 22.9 2640 Tons 2086-10 3 83 1 25.7-10 8.9 Belgium 2596-2596 10.8 1245 Tons 2085 8 24 56 7 4.1-11 8.9 United Kingdom 2255-2255 9.4 1107 Tons 2037 130 166-75 13 1.9 3 8.9 Germany 1549-1549 6.4 703 Tons 2203-33 -24 26 3 8-6 8.9 Italy 976-976 4.1 220 Tons 4436-21 -19 518 41 0.2 7 8.9 Netherlands 948-948 3.9 279 Tons 3398-30 -23 7 4 8-6 8.9 Malaysia 719-719 3 210 Tons 3424 552 281 168 16 1.4 3 8.9 Ireland 624-624 2.6 307 Tons 2033-31 -21 25 14 1.7-4 8.9 Zambia 415 1951 1.7 34 Tons 12206 101 0 0 Area Nes 372-366 1.5 181 Tons 2055 Source: ITC calculations based on COMTRADE statistics. 76

Table 20 shows that during 2016 South Africa imported a total of 10 754 tons of milk and cream (concentrated or sweetened), at an average value of US$2 234/unit. South Africa imported greater quantities of milk and cream, (concentrated or sweetened) from France, New Zealand and Belgium. The greatest share of South African milk and cream (concentrated or sweetened) imports originated from France which commanded 29.6% share during the year 2016 followed by New Zealand with 22.9% and Belgium with 10.8%. South Africa s milk and cream (not concentrated or sweetened) imports decreased by 12% in value and remained unchanged in quantity between the period 2012 and 2016. During the same period, imports of milk and cream (concentrated or sweetened) from France also decreased by 8% in value and increased by 5% in quantity and New Zealand decreased by 10% in value and increased by 3% in quantity. Between the period 2015 and 2016, South Africa s imports of milk and cream (concentrated or sweetened) decreased by 12% in value. During the same period, France s milk and cream (concentrated or sweetened) exports to South Africa decreased by 19% in value and New Zealand increased by 83% in value during the same period. 77

Figure 40: Competitiveness of suppliers to South Africa for sweetened milk and cream in 2016 Source: ITC Trademap 78

Figure 40 illustrates that between 2012 and 2016 South Africa s milk and cream (concentrated or sweetened) imports from New Zealand, France, Germany, Ireland, Netherlands, Italy and Australia were growing at a rate that is less than their export growth to the rest of the world. During the same period, South Africa s milk and cream, concentrated or sweetened imports from Belgium, Ukraine, Malaysia and United Kingdom were growing at a rate that is greater than their exports to the rest of the world. Botswana is the biggest competitive market n annual growth of 53%. 79

Figure 41: Prospects for diversification of suppliers for sweetened milk and cream imported by South Africa in 2016 Source: ITC Trademap 80

Figure 41 illustrates that Italy is neither the biggest supplier of South Africa s market for milk and cream (concentrated or sweetened) nor the main world exporter. Its share in world exports was at 0.23% per annum over the period 2012 to 2016, n annual growth rate of 7%. Italy is therefore the biggest prospective supplier for South Africa s milk and cream (concentrated or sweetened). The chart also shows that Botswana is the second prospective import market due to its annual exports growth rate of 53% during 2012 to 2016. It represents a small possible supplier for South Africa s milk and cream (concentrated or sweetened). 81

7.2.3. Buttermilk and yoghurt Table 21: List of supplying markets for the product imported by South Africa in 2016 South Africa s imports represent 0.1% of world imports for Buttermilk and yoghurt, its ranking in world s imports is 71. Select your indicators Exporters Value imported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's imports (%) Quantity imported in 2016 Quantity unit Unit value (USD/unit) Growth in imported value between 2012-2016 (%, p.a.) Growth in imported quantity between 2012-2016 (%, p.a.) Growth in imported value between 2015-2016 (%, p.a.) Ranking of partner countries in world exports Share of partner countries in world exports (%) Total exports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) applied by South Africa (%) World 4789 35204 100 2929 Tons 1635-8 7 18 100-4 France 1433-1433 29.9 963 Tons 1488-12 4 150 2 15.1-8 0 Germany 977-977 20.4 363 Tons 2691-1 4-1 1 22-2 0 United Kingdom 718-718 15 400 Tons 1795 15 31-25 11 2.4 1 0 Ireland 695-695 14.5 476 Tons 1460 17 37-11 17 1.6-4 0 Swaziland 349 2921 7.3 373 Tons 936 80 0 0 New Zealand 320-320 6.7 197 Tons 1624-32 -20-51 13 2.1-13 8.1 Belgium 91-91 1.9 64 Tons 1422-48 -10 4 6.6-6 0 USA 87-87 1.8 35 Tons 2486 22 1 123 16 1.6-17 8.1 Netherlands 49-49 1 26 Tons 1885-37 -35 104 10 2.5-4 0 Italy 24-24 0.5 4 Tons 6000-20 -11 100 23 0.6 7 0 Lesotho 17 2861 0.4 11 Tons 1545 53 104 0 53 0 Spain 9-9 0.2 4 Tons 2250 41-57 5 4-4 0 Greece 9-9 0.2 2 Tons 4500 39 15-25 7 3.8 16 0 Area Nes 6-5 0.1 4 Tons 1500 Source: ITC calculations based on COMTRADE statistics. 82

Table 21 shows that during 2016 South Africa imported a total of 2 929 tons of buttermilk and yoghurt, at an average value of US$1 635/unit. South Africa imported greater quantities of milk and cream, (concentrated or sweetened) from France, Germany and United Kingdom. The greatest share of South African buttermilk and yoghurt imports originated from France which commanded 29.9% share during the year 2016 followed by Germany with 20.4% and United Kingdom with 15%. South Africa s buttermilk and yoghurt imports decreased by 8% in value and increased by 7% in quantity between the period 2012 and 2016. During the same period, imports of buttermilk and yoghurt from France also decreased by 12% in value and increased by 4 in quantity and imports from Germany decreased by 1% in value and increased by 4% in quantity during the same period. Between the periods 2015 and 2016, South Africa s imports of buttermilk and yoghurt increased by 18% in value. During the same period, France s buttermilk and yoghurt exports increased by 150%, Germany decreased by 1% while United Kingdom decreased by 25%. 83

Figure 42: Competitiveness of suppliers to South Africa for buttermilk and yogurt in 2016 Source: ITC Trademap 84

Figure 42 illustrates that between 2012 and 2016 South Africa s buttermilk and yoghurt imported from France, Italy, Thailand, Belgium, New Zealand and Netherland were growing at a rate that is less than their export growth to the world. During the same period, South Africa s buttermilk and yoghurt imports from United States of America, Ireland, United Kingdom, Greece and Germany were growing at a rate that is greater than their exports to the rest of the world. Germany is the most competitive market during the period 2012 and 2016 due to its world market share of 22.04%. 85

Figure 43: Prospects for diversification of suppliers for buttermilk and yogurt imported by South Africa in 2016 Source: ITC Trademap 86

France is the biggest supplier of buttermilk and yoghurt and has a share of 29.92% of South African s imports (see Figure 43). France has an annual export growth of -8%. South Africa can diversify to the fastest growing markets of buttermilk and yoghurt in Lesotho n annual export growth of 53%. 87

7.2.4. Whey and other natural milk products Table 22: List of supplying markets for the product imported by South Africa in 2016 South Africa s imports represent 0.4% of world s imports for whey and natural milk products; its ranking in world imports is 36. Select your indicators Exporters Value imported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's imports (%) Quantity imported in 2016 Quantity unit Unit value (USD/unit) Growth in imported value between 2012-2016 (%, p.a.) Growth in imported quantity between 2012-2016 (%, p.a.) Growth in imported value between 2015-2016 (%, p.a.) Ranking of partner countries in world exports Share of partner countries in world exports (%) Total exports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) applied by South Africa (%) World 13820-3674 100 7082 Tons 1951-15 -6-44 100-9 France 7442-7442 53.8 4246 Tons 1753-9 4-35 2 13.1-7 1.6 USA 2252-2252 16.3 468 Tons 4812-15 -13-39 1 15.4-10 9.3 Germany 1288-1288 9.3 364 Tons 3538 0 3-62 4 11.8-13 1.6 Argentina 804-804 5.8 500 Tons 1608-62 -5 12 1.8-17 9.3 Netherlands 705-705 5.1 348 Tons 2026 50 68-60 5 7.8-13 1.6 Denmark 435-435 3.1 702 Tons 620-22 -16-64 7 3.9 7 1.6 Belgium 403-403 2.9 87 Tons 4632 17 2 34 13 1.7-16 1.6 Ireland 365-365 2.6 250 Tons 1460-50 -41 711 9 3-9 1.6 Estonia 70-70 0.5 84 Tons 833 35 0.3-8 1.6 United Kingdom 30-30 0.2 6 Tons 5000-3 57 11 2.2 2 1.6 Hungary 23-23 0.2 25 Tons 920 20 0.9 17 1.6 New Zealand 2-2 0 0 Tons -88-33 3 12-7 9.3 Source: ITC Trademap. 88

Table 22 shows that during 2016 South Africa imported a total of 7 082 tons of whey and natural milk products, at an average value of US$1 951/unit. South Africa imported greater quantities of whey and natural milk products from France, United States of America and Germany. The greatest share of South African whey and natural milk products imports originated from France which commanded 53.8% share during the year 2016 followed by United States of America with 16.3% and Germany with 9.3%. South Africa s whey and natural milk products imports decreased by 15% in value and 16% in quantity between the period 2012 and 2016. During the same period, imports of whey and natural milk products from France decreased by 9% in value and increased by 4% in quantity. Imports from United States of America has decreased by 15% in value and 13% in quantity. Germany experienced no change in value and increased by 3% in quantity during 2012 to 2016. Between the period 2015 and 2016 South Africa s imports of whey and natural milk products experienced a decrease of 44% in value. During the same period, France whey and natural milk products exports to South Africa decreased by 35% in value while imports from United States of America decreased by 39% in value. 89

Figure 44: Competitiveness of suppliers to South Africa for whey in 2016 Source: ITC Trademap 90

Figure 44 illustrates that between 2012 and 2016 South Africa s whey and natural milk products imported from Argentina, USA, Denmark, United Kingdom, Ireland, France and New Zealand were growing at a rate that is less than their export growth to the rest of the world. During the same period, South Africa s whey and natural milk products imported from Netherlands, Belgium and Germany were growing at a rate that is greater than their exports to the rest of the world. The most competitive supplier of whey and natural milk products is Denmark which has an annual export growth of 7% followed by United Kingdom with 2%. 91

Figure 45: Prospects for diversification of suppliers for whey imported by South Africa in 2016 Source: ITC Trademap 92

South Africa is already importing from the biggest exporters of whey and natural milk products which are USA, France and Germany. USA has a world market share of 15.35%. France has 13.09% while Germany has a world market share of 11.82% during 2016. They have share of South Africa s import market of 16.3%, 53.85% and 9.32% respectively. 93

7.2.5. Butter and other fats and oils derived from milk Table 23: List of supplying markets for the product imported by South Africa in 2016 South Africa s imports represent 0.3% of world imports for butter and other fats and oils derived from milk, its ranking in world s imports is 51. Select your indicators Exporters Value imported in 2016 (USD thousand) Trade balance 2016 (USD thousand) Share in South Africa's imports (%) Quantity imported in 2016 Quantity unit Unit value (USD/unit) Growth in imported value between 2012-2016 (%, p.a.) Growth in imported quantity between 2012-2016 (%, p.a.) Growth in imported value between 2015-2016 (%, p.a.) Ranking of partner countries in world exports Share of partner countries in world exports (%) Total exports growth in value of partner countries between 2012-2016 (%, p.a.) Average tariff (estimated) applied by South Africa (%) World 17083-7736 100 5358 Tons 3188-3 2 16 100-1 New Zealand 8483-8483 49.7 3169 Tons 2677-7 -1-4 1 24.6 0 7.2 Ireland 5767-5767 33.8 1497 Tons 3852 8 18 124 3 9.3-1 7.2 Denmark 1100-1100 6.4 222 Tons 4955 9 15 11 8 3.2-6 7.2 United Kingdom 957-957 5.6 326 Tons 2936 306 325-53 9 3.1 3 7.2 France 408-408 2.4 76 Tons 5368 74 75 93 6 6.1 1 7.2 Netherlands 216-216 1.3 41 Tons 5268 142 2986 2 15.7 5 7.2 Belgium 145-145 0.8 25 Tons 5800-25 -18 867 4 8.5 0 7.2 India 2-2 0 0 Tons -89 17 0.6 5 7.2 Italy 2-2 0 0 Tons -34 19 0.6-1 7.2 Greece 1-1 0 0 Tons 52 0.03 30 7.2 Namibia 3322 96 0-16 0 Source: ITC calculations based on COMTRADE statistics. 94

Table 23 shows that during 2016 South Africa imported a total of 5 358 tons of butter and other fats, at an average value of US$3 188/unit. South Africa imported greater quantities of butter and other fats from New Zealand, Ireland and Denmark. The greatest share of South African butter and other fats imports originated from New Zealand, which commanded 49.7% share during the year 2016, followed by Ireland by 33.8% and Denmark by 6.4%. South Africa s butter and other fats imports decreased by 3% in value and increased by 2% in quantity between the period 2012 and 2016. During the same period, imports of butter and other fats from New Zealand decreased by 7% in value and 1% in quantity while Ireland increased by 8% in value and 18% in quantity. Denmark increased by 9% in value and 15% in quantity. Between the periods 2015 and 2016, South Africa s imports of butter and other fats increased by 16% in value. During the same period, New Zealand s butter and other fats exports to South Africa decreased by 4% in value while imports from Ireland increased by 124%. 95

Figure 46: Competitiveness of suppliers to South Africa for butter in 2016 Source: ITC Trademap 96

Figure 46 illustrates that between 2012 and 2016 South Africa s butter and other fats imported from New Zealand, Belgium and Italy were growing at a rate that is less than their export growth to the rest of the world. During the same period, South Africa s butter and other fats imports from Denmark, France, Ireland, Netherlands and United Kingdom were growing at a rate that is greater than their exports to the rest of the world. Netherlands is the most competitive supplier of butter and other fats because its world market share is 15.73% and its annual exports growth increased by 5% and its annual growth of butter and other fats to South Africa was 142% 97

Figure 47: Prospects for diversification of suppliers for butter imported by South Africa in 2016 Source: ITC Trademap 98