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PREFACE This publication Quarterly Economic Review of the food and beverage Industry in South Africa: April to June 2015 is the first quarterly review by the Directorate: Agro-processing Support to provide an overview of the economic performance of the food and beverage industry in South Africa. Food and beverages industry in South Africa is one of the sub-sectors of agro-processing that plays a dominant role in terms of output and employment in the agro-processing sector. By adding value to the primary agriculture and fisheries production, the food and beverages industry stimulates output and job creation in the primary sector and contributes directly to the food security of the country. In addition, it played a pivotal role in supplying inputs to the food and beverage service industry, wholesale and retail sectors. One of the core businesses of the Directorate: Agro-processing Support is to provide timely and updated economic information regarding the food and beverages industry to monitor its performance and provide insight into the effects of economic policies and exogenous factors on the industry. The main economic indicators reviewed are the changes in prices, production, capacity utilisation, value of sales, formal employment and trade. An outlook of the industry for the next quarter is also presented. In addition, some indicators of food and beverages service industry, wholesale and retail sectors are reviewed to evaluate the forward linkages of the food and beverages industry. Any comments and suggestions on the content of the publication are most welcome. Victor Mahlogedi Thindisa Director: Agro-processing Support Pretoria Disclaimer: The Department of Agriculture, Forestry and Fisheries did everything to ensure the accuracy of the information reported in this publication. The department will, however, not be liable for the results of action based on this publication. ii
CONTENTS PREFACE... ii EXECUTIVE SUMMARY... iii 1. INTRODUCTION... 1 2. FOOD PRODUCTS... 1 2.1 PRICE... 2 2.2 Production... 4 2.3 Value of sales... 5 2.4 Income from food sales in the service industry... 7 2.5 Trade... 9 2.6 Employment... 18 2.7 Outlook... 19 3. BEVERAGES... 19 3.1 Price... 20 3.2 Production... 21 3.3 Value of sales... 22 3.4 Income from bar sales in the service industry... 22 3.5 Trade... 23 3.6 Employment... 29 3.7 Outlook... 30 4. CONCLUSION... 31 REFERENCES... 31 Compiled by Directorate: Agro-processing Support All correspondence can be addressed to: Director: Agro-processing Support Private Bag X416, Pretoria 0001, South Africa Tel.: +27 12 319 8457 Fax: +27 12 319 8093 E-mail: DES@daff.gov.za This publication is also available on the internet at: http://www.daff.gov.za iii
1. INTRODUCTION Global economic growth declined in the first half of 2015, reflecting a further slowdown in emerging markets and a weaker recovery in advanced economies. It is now projected at 3,1 percent for 2015 as a whole, slightly lower as compared to 2014, and 0,2 percentage point below the forecasts at the end of 2015 second quarter. The South African economy, however, contracted by 1,3% following a 3,3% growth registered in the previous quarter, driven mainly by the decline in primary sector caused by contraction in the mining sector by 6,8% from a 10,2% growth in. The secondary sector decelerated by 4,7% following a contraction of 1,4% in the preceding quarter driven by a shrink of 6,3% in the manufacturing sector (Reserve Bank, 2015). In the quarter under review, the food industry shed 4150 jobs, as compared to 2275 jobs created in the previous quarter. In addition, the total employment and output of the manufacture sector, contributed a loss of 1,9% and 1,1% respectively, in 2015, it furthermore contributed 4,8% of the total export. This quarterly review assesses the economic performance of the food and beverages industry in given real output of the agricultural sector shrank at a rate of 17,4 % in the second quarter of 2015. Table 1: Overview of the world economic outlook projections (percentage change) Projections 2014 2015 2016 World output 3,4 3,1 3,6 Advanced economies 1,8 2,0 2,2 US 2,4 2,6 2,5 Euro area 0,9 1.5 1,6 Japan -0,1 0,6 1,0 Emerging market and developing economies 4,6 4,0 4,5 China 7,3 6,8 6,3 India 7,3 7,3 7,5 Russia 0,6-3,8-0,6 Brazil 0,1-3,0-1,0 Sub-Saharan Africa 5,8 3,8 4,3 South Africa 1,5 1,4 1,3 Source: IMF (2015) 2. FOOD PRODUCTS According to the Standard Industrial Classification, the food industry incorporates groups of products which are categorized into the following four codes: Code 301 refers to manufacturing, processing and preservation of meat, fish, vegetables, fruits, oils, and fats; Code 302 refers to manufacturing, processing and preservation of dairy products; 1
Code 303 refers to manufacture of grain mill products, starch products and prepared animal feeds; Code 304 refers to manufacture of other food products like bread, sugar, chocolate, pasta, coffee, nuts, and spices Hence, food products refer to those primary agricultural and fisheries products that have undergone some form of change through manufacturing and processing or performed some value addition activities such as preservation. 2.1 PRICE Consumer Price Index (CPI) 1 In, The quarter-to-quarter and year-on-year total consumer price index moderated by 0,2% and 1,4% following a 0,3% and 1,4%, respective growths recorded in the previous quarter. During the same period, the consumer price index of (milk, eggs and cheese), meat, food, and (sugar, sweets and deserts) grew by 4,7%,1,5%, 0,9%, and 2,2% respectively, while it contracted by 0,8% and 3,2% respectively for bread and cereals and oils and fats. Similarly the quarter-to-quarter price index for bread and cereals and oils and fats contracted by 0,3% and 0,6% respectively in. However, (milk, eggs and cheese), fruit, meat, and (sugar, sweets and deserts) increased by 0,7%, 0,7%, 0,6%, and 0,2%, respectively in the quarter under review. In general price inflation for all of food products moderated and shrank more than the overall consumer price inflation (see Table 2.1). Table 2:1 Consumer price Index of food products Food products Source: (Stats SA, 2015a) Indices Weight % change between and All items (CPI Headline) 100 109,4 110,8 111,0 1,4 0,2 Food and non-alcoholic beverages 15,4 110,0 110,8 111,1 1,0 0,2 Food 14,2 110,2 110,9 111,2 0,9 0,2 Processed 6,8 110,6 112,0 112,4 1,7 0,4 Unprocessed 7,4 109,9 109,9 110,1 0,2 0,2 Bread and cereals 3,5 111,2 110,6 110,3-0,8-0,3 Meat 4,6 107,0 108,0 108,6 1,5 0,6 Fish 0,4 112,2 112,9 113,1 0,8 0,2 Milk, eggs and cheese 1,7 114,5 119,0 119,8 4,7 0,7 Oils and fats 0,5 104,2 101,4 100,8-3,2-0,6 Fruit 0,2 101,3 97,9 98,5-2,8 0,7 Vegetables 1,6 114,7 114,2 114,1-0,6-0,1 Sugar, sweets and deserts 0,6 112,8 114,8 115,0 2,2 0,2 Other food 0,9 116,2 116,2 107,8-0,1-0,1 and 1 Stats SA defines CPI as a current social and economic indicator that is constructed to measure changes over time in the general level of prices of consumer goods and services that households acquire, use, or pay for. 2
Producer price index (PPI) 2 Producer price index of food products grew by 0,9% year-on-year and by 0,1% quarter-toquarter. The year-on-year growth is mainly due to the growth of oils and fats (4,9%), Meat and meat products (3,3%), bakery products (2,9%), dairy product and (2,7%), other food products (2,1%) and fish and fish products (0,6%). However, the grain mill products, fish and fish products and oils and fats contracted by 1,5%, 1,0% and 1,0% respectively in, while the meat and meat, (starch and starch products, animal feeds) and dairy grew by 1,6%, 0,5%, and 0,4% respectively (see Table 2.2). Table 2.2: Producer price index of food products Source: Stats SA (2015b) Food products Final manufactured goods (Headline PPI) Indices % change between Weight and 100 114,0 114,9 115,1 0,9 0,1 Food products 26,3 113,8 115,1 115,5 1,5 0,3 Meat and meat products 4,5 114,0 115,8 117,7 3,3 1,6 Fish and fish product 1,6 126,7 127,7 127,5 0,6-0,1 Fruit and vegetables 2,4 111,2 112,0 112,5 1,2 0,4 Oil and fats 0,5 111,2 105,9 105,8 4,9-0,1 Dairy products 3,3 119,1 121,9 122,4 2,7 0,4 Grain mill products 1,8 114,5 113,5 112,8-4,5-1,5 Starch and starch products, animal feeds 1,6 116,6 117,1 117,6 0,8 0,5 Other food products 0,9 113,9 115,9 116,3 2,1 0,4 Bakery products 6,9 118,5 121,2 121,9 2,9 0,5 Sugar 1,9 104,5 103,8 103,5-0,9-0,3 and Import unit value index 3 Import unit values of selected food products are given in Table 2.3. The year-on-year unit value of total food increased by 6,1%, mainly as a result of an increase in grain mill products (1,7%). Similarly, the import unit values of selected food increased quarter-to-quarter by 1,6% driven by an increase in grain mill products (15,4%) and fats and oils (0,3%). 2 OECD defines the Producer Price Index (PPI) as a measure of the change in the prices of goods either as they leave their place of production or as they enter the production process. The PPI can be used as an economic indicator of inflation, as an escalator in contracts and as a deflator in the calculation of the national accounts. 3 IMF defines export and import unit value index as a measure the overall change in the prices of transactions in goods and services between the residents of an economic territory and residents of the rest of the world. The average unit value is obtained by dividing the value of exported/imported goods in monetary terms with the respective volume/weight of the goods. 3
2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 Index (2010 = 100) Table 2.3: Import unit value index of food products Food products Source: Stats SA (2015c) Indices % change between and Food (total) 115,1 119,6 121,2 6,1 1,6 Fats and oils 111,2 109,3 109,6-1,6 0,3 Grain mill products 114,5 110,8 116,2 1,7 15,4 and 2.2 PRODUCTION Figure 2.1: Seasonally adjusted physical volume of production: food products 120 110 100 90 80 70 60 50 Meat, fish, fruit etc Grain mill products Dairy products Other food products Source: Statistics SA (2015d) A physical volume of production by the food products division is presented in Figure 2.1. The quarter-to-quarter physical volume of production of meat, fish, fruit etc. other food products contracted by 0,5% and 2,1% following a growth of 0,2% and 1,7% respectively in. However, the quarter-to-quarter physical volume of production of dairy moderated by 1,1% following a growth of 2,0% recorded in the previous quarter, while grain mill products decelerated by 0,6% following a contraction of 1,7% in. The year-on-year physical volume of production of meat, fish, fruit etc. moderated by 0,7% following a growth of 3,3% in the previous quarter, dairy increased by 3,3% in from a 1,2% growth in the preceding quarter, while the grain mill products and other food products decelerated by 4,0% and 0,4% following a contraction of 1,6% and 1,5%, respectively in the previous quarter. 4
2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 R million Production capacity Table 2.4: Utilisation and reasons for underutilisation of production capacity by large enterprises: Food products (percentage) Period Utilisation Reasons for underutilisation Total underutilisation Raw materials Shortage of Skilled Labour Semi and unskilled Insufficient demand Other 80,1 19,9 2,2 1,2 0,1 11,5 4,5 81,1 18,9 2,0 1,6 0,3 11,1 3,9 82,7 17,3 1,9 1,4 0,2 10,9 3,0 Source: Statistics SA (2015e) The utilisation of production capacity by large enterprises of food products showed a moderate increase year-on-year and quarter-to-qaurter. (see Table 2.4). Insufficient demand is the main reason of under utilisation followed by other reasons such as downtime because of maintenance; seasonal factors and lower productivity. 2.3 VALUE OF SALES Figure 2.2: Seasonally adjusted value of sales (current prices): food products 80 000 70 000 60 000 50 000 40 000 30 000 20 000 Source: Statistics SA (2015d) During the second quarter of, the year-on-year seasonally adjusted value of sales of aggregate food products moderated by 1,2% following a growth of 4,5% in the preceding quarter. Similarly, the quarter-to-quarter seasonally adjusted value of sales of food products moderated by 0,3% following a 0,4% growth it recorded in the preceding quarter. 5
2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 R million 30 000 Figure 2.3: Seasonally adjusted value of sales (current prices): food products 25 000 20 000 15 000 10 000 5 000 0 Meat, fish, fruit etc Grain mill products Dairy products Other food products Source: Statistics SA (2015d) The seasonally adjusted value of sales for meat, fish, fruit etc. and grain mill products decelerated by 0,4% and 0,6% during, following a contraction of 0,3% and 1,5%, respectively in the preceding quarter. However, dairy increased by 4,8% in the quarter under review following a growth of 1,4% in the previous quarter, while other food products moderated by 0,2% following a growth of 1,5% in. The year-on-year seasonally adjusted value of sales for meat, fish, fruit etc. decelerated by 0,7% from a growth of 4,8%, while the dairy moderated by 5,4% following a 8,5% growth, the other food products grew by 3,4% following a 2,8% growth and the grain mill products decelerated by 4,5% following a 0,7% contraction. Wholesale and retail sales 4 The current value of wholesale and retail sales of food, beverages and tobacco are given in Figure 2.4. The quarter-to-quarter and year-on-year of wholesale trade sales moderated by 1,5% and 0,1% following a growth of 1,9% and 6,8%, respectively. The quarter-to-quarter retail trade sales increase moderately by 1,7% following a growth of 0,1% in the previous quarter. However, the year-on-year value of wholesale and retail sales of food, beverages and tobacco moderate by 2,7% following a growth of 2,9% in the previous quarter.hence the current value of income from wholesale and retail sales of food, beverages and tobacco increased from R63,9 billion and R14,2 billion in the previous quarter to R64,9 billion and R14,5 billion, respectively in. 4 Statistics South Africa (Stats SA) conducts a monthly survey covering enterprises in the wholesale and retail trade industry. The results of the monthly wholesale and retail trade sales survey are used to compile estimates of the gross domestic product (GDP) and its components, which are used in monitoring the state of the economy and formulation of economic policy. These statistics are also used in the analysis of comparative business and industry performance. 6
2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 R million Figure 2.4: Wholesale and retail trade sales of food, beverages and tobacco (current prices) 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 Wholesale Retail Source: Statistics SA (2015f, 2015g) 2.4 INCOME FROM FOOD SALES IN THE SERVICE INDUSTRY 6 The graph below shows Income from food sales 5 in the service industry includes food sales in restaurants and coffee shops 6, take-away and fast food outlet 7 and catering services 8. The current income from food sales in the service industry remained unchanged at 4,8% year-onyear. (see Figure 2.5). 5 Income from food sales in the service industry refers to income from the sale of meals and non-alcoholic drinks. 6 Restaurants and coffee shops refers to enterprises involved in the sale and provision of meals and drinks, ordered from a menu, prepared on the premises for immediate consumption and with provided seating. 7 Take-away and fast food outlet refers to eenterprises involved in the sale and provision of meals and drinks, ordered from a menu, prepared on the premises for takeaway purposes in a packaged format, at a stand or in a location, with or without provided seating. 8 Catering services refers to eenterprises involved in the sale and supply of meals and drinks prepared on the premises on a contract basis and brought to other premises chosen by the person ordering them, to be served for immediate consumption to guests or customers. Catering services also include bars, taverns, other drinking places, ice-cream parlours, etc. 7
2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 R million 11 000 Figure 2.5: Income from food sales in the service industry 10 000 9 000 8 000 7 000 6 000 5 000 4 000 Source: Statistics SA (2015h) The year-on-year total income from food sales in catering services stagnated by 4,8%, mainly because of the moderation in take-away/fast food outlet and catering services by 8,3% and 4,0% from a 8,4% and 4,3% growth respectively in, while the restaurants and coffee shops grew by 1,7% following a 1,4% in the previous quarter. The quarter-to-quarter current income increase in the food sales in the service industry is mainly due to the increase in income from food sales in restaurants and coffee shops, which increased by 1,4% following a growth of 1,2% in the previous quarter, while the take-away/fast food outlet rebounded by 1,2% following a 0,3% contraction in 2015:Q1. The catering services moderated by 1,3% following a 2,1% growth in the previous quarter (see Figure 2.6). Therefore, the total income of the industry grew by R9,5 billion to R9,7 billion in the quarter under review. 8
2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 R million 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 Figure 2.6: Income from food sales in the service industry Restaurants and coffee shops Catering services Take-away/fast food outlets Source: Statistics SA (2015h) 2.5 TRADE Main food export destinations and products Figure 2.7 shows the share of continents as an export destination for South African food products. Africa, which accounts the total food export of 68%, was the main export destination during the second quarter of 2015 followed by Asia and Europe, which contributed to 14% and 12%, respectively, of the total food export destination. Americas and Oceania, altogether accounts for 4% of the total food export. The trend during the past five years shows that the share of Asia as export destination increased and became comparable with Europe during the period. As a result, the share of Europe is slowly decreasing; however, Asia has increased to become second major destination for the most part of second quarter during this year (see Figure 2.8). 9
2013: Q1 2013: Q2 % Figure 2.7: The food export destinations'share of continents in 2015:Q2 Asia 14% Americas 4% Oceania 2% Europe 12% Africa 68% Figure 2.8: The food export destination's share of the continents (2013-2015) 18 16 14 12 10 8 6 4 2 0 Africa Europe Asia Americas Figure 2.9 shows the food export destinations share of the main regions 9 in the second quarter of 2015. Among the main regions, SADC accounted the highest share of 33% followed by EU (11%). Eastern Asia and Western Asia comprised 7% and 6% of the total food export share. South Central and NAFTA comprised 4% and 3%, Western Africa has 2% accounts of the total food export share during the period. 9 The main regions which are included in the analysis are the top eight regions: SADC, Western Africa, EU; NAFTA (North Atlantic Free Trade Area consists of USA, Canada and Mexico); Eastern Asia (includes China, Japan, North Korea, South Korea); Western Asia (mostly middle east countries); South Central Asia (include India, Pakistan and Bangladesh) and Australia and New Zealand 10
Zambia Lesotho Mozambique Zimbabwe Botswana Netherlands United Kingdom China Germany Japan % Figure 2.9: The food export destinations'share of main regions in South Central Asia 4% Others 17% SADC 33% European Union 11% Western Asia 6% Eastern Asia 6% NAFTA 3% Western Africa 2% Eastern Asia 7% EU 11% Figure 2.10: The share of top ten food export destination countries in 14 12 10 8 6 4 2 0 Figure 2.10 shows that the top ten countries for food export destinations during the second quarter of 2015 were SADC countries and altogether contribute 45,5% of the total food export share. Zambia was the major food export destination followed by Lesotho. Among EU countries, Netherlands and United Kingdom are the key food export destination. China is the main country in Asia that accounts for 4,5% of the total food export during the second quarter of 2015. Table 2.5 presents the major exported food products during the second quarter of 2014 and Table 2.6 show the year-on-year high and low export performers of food products during the same quarter by comparing the export values of the present quarter to the same quarter of the previous year (year-on-year). 11
Table 2.5: Major exported food products in HS Code Food product Total amount (R million) HST1206 Sunflower seeds, whether or not broken 199,3 HST1105 Flour, meal, powder, flakes, granules and pellets of potatoes. [HST1105] 93,4 HST12 Oil seeds and oleaginous fruits; miscellaneous grains 58,8 HST1106 Flour, meal and powder of the dried leguminous vegetables 56,3 HST15094 Olive oil and its fractions, whether or not refined 35,2 HST0405 Butter and other fats and oils derived from milk; dairy spreads. [ 26,0 HST1702 Other sugars, including chemically pure lactose, maltose 22,2 HST10 Cereals 20,9 HST1704 Sugar confectionery (including white chocolate) 19,5 HST1511 Palm oil and its fractions, whether or not refined 17,3 HST2105 Ice cream and other edible ice, whether or not containing cocoa. 16,6 HST0406 Cheese and curd. 16,2 HST1905 Bread, pastry, cakes, biscuits and other bakers' wares 13,5 HST1902 Pasta, whether or not cooked or stuffed 9,6 HST1803 Cocoa paste, whether or not defatted 8,6 HST11 Products of the milling industry; malt; starches 7,2 HST19 Preparations of cereals, flour, starch or milk 4,7 HST1517 Margarine; edible mixtures or preparations of animal] 4,2 HST2104 Soups and broths and preparations 3,7 HST0401 Milk and cream, not concentrated 2,0 HST1806 Chocolate and other food preparations containing cocoa 1,7 HST1701 Cane or beet sugar and chemically pure sucrose, in solid form. 1,6 HST1904 Prepared foods obtained by the swelling or roasting of cereals 1,5 HST18 Cocoa and cocoa preparations 0,4 Table 2.6: Export performance of food products HS Code Food product Changes compared to a year ago (R million) High performers HST1801 Cocoa beans, whole or broken, raw or roasted. 85,5 HST0307 Molluscs, whether in shell or not, live, fresh, chilled, frozen, dried, salted or in brine; smoked molluscs, whether in shell or not, whether or not cooked before or during the smoking process; flours, meals and pellets of molluscs. HST0906 Cinnamon and cinnamon-tree flowers. 53,0 HST2105 Ice cream and other edible ice, whether or not containing cocoa. 46,2 72,0 HST1602 Other prepared or preserved meat, meat offal or blood. 46.2 HST1209 Seeds, fruit and spores, of a kind used for sowing. 41,3 12
HST1107 Malt, whether or not roasted. 36,3 HST1513 HST2304 Low performers HST1522 HST1603 HST2308 HST2302 HST2205 HST0408 Coconut (copra), palm kernel or babassu oil and fractions thereof, whether or not refined, but not chemically modified. Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of soya bean oil. Degras; residues resulting from the treatment of fatty substances or animal or vegetable waxes. Extracts and juices of meat, fish or crustaceans, molluscs or other aquatic invertebrates. Vegetable materials and vegetable waste, vegetable residues and byproducts, whether or not in the form of pellets, of a kind used in animal feeding, not elsewhere specified or included. Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants. Vermouth and other wine of fresh grapes flavoured with plants or aromatic substances. Birds' eggs, not in shell, and egg yolks, fresh, dried, cooked by steaming or by boiling in water, moulded, frozen or otherwise preserved, whether or not containing added sugar or other sweetening matter. 37.0 34,9-84,2-73,8-61,3-59,3-46.3-47.4 HST2203 Beer made from malt. [HST2203 ] -41.7 HST1805 HST2101 Cocoa powder, not containing added sugar or other sweetening matter. Extracts, essences and concentrates, of coffee, tea or maté and preparations with a basis of these products or with a basis of coffee, tea or maté; roasted chicory and other roasted coffee substitutes, and extracts, essences and concentrates. -39.9-27.3 HST1701 Cane or beet sugar and chemically pure sucrose, in solid form. -27.3 HST1101 Wheat or meslin flour. -24.0 Main source of food imports and imported food products South Africa s main source of food import during the second quarter of 2015 is presented in Figure 2.11. South Africa imported 36% and 29% of its food from Asia and Europe, respectively, while Africa and Americas accounted for 17% and 16%, respectively. The contribution of Oceania was minimal at 2% during the period. Figure 2.12 indicates that during the past two years, while Asia has become the major source of food import, the share of Africa s import is increasing significantly. 13
2013: Q1 2013: Q2 % Europe 29% Figure 2.11: The share of continents as a source of food import in 2015:Q2 Oceania 2% Africa 17% Americas 16% Asia 36% 45 40 35 30 25 20 15 10 5 0 Figure 2.12: The share of continents as a source of food import (2013-2015) Asia Europe Americas Africa As the main trading region, EU accounts 28% of the total food imports, followed by South Eastern Asia (23%), SADC (Excluding SACU) (13%), South Central Asia (7%), NAFTA and South central Asia (4%) each and Australian and New Zealand (2%). The Asian countries accounted 34% of the total food imports during the second quarter of 2015 (see Figure 2.13). 14
Netherlands Brazil India Thailand Swaziland Malaysia Namibia Spain United States Italy % Figure 2.13: The share of regions as a source of food import in Australia and Newzealand 2% Others 17% SADC (Excluding SACU) 13% NAFTA 4% Eastern Asia 4% South-central Asia 7% EU 28% South Eastern Asia 23% 5 5 4 4 3 3 2 2 1 1 0 Figure 2.14: The share of top ten countries as a source of food import in During the second quarter of 2015 the significant share of food were sourced from the countries illustrated on the above graph, the countries are: the Netherlands (4,3%), Brazil (4,3%), India (3,8%), Thailand (3,8%), Swaziland (3,5%), Malaysia (3,2%) and Namibia (3,1%). while United Sates and Italy contributed 3,0% each. (see Figure 2.14). Brazil is the only Latin American country that accounted for 4,3% total of the food import share. From Africa, Namibia accounted for 3,1% of import share in. 15
Table 2.6: Top 30 imported food products in HS Code Food product Changes compared to a year ago (R million) High performers HST1801 Cocoa beans, whole or broken, raw or roasted. 85,5 HST1511 Palm oil and its fractions, whether or not refined, but not chemically modified. HST2105 Ice cream and other edible ice, whether or not containing cocoa. 45,7 HST2304 HST2103 HST2104 HST1513 HST1509 HST1901 HST1702 Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of soya bean oil. Sauces and preparations therefor; mixed condiments and mixed seasonings; mustard flour and meal and prepared mustard. Soups and broths and preparations therefor; homogenized composite food preparations. Pasta, whether or not cooked or stuffed (with meat or other substances) or otherwise prepared, such as spaghetti, macaroni, noodles, lasagne, gnocchi, ravioli, cannelloni; couscous, whether or not prepared. Olive oil and its fractions, whether or not refined, but not chemically modified. 71,6 34,9 29,2 24,1 22,7 20,5 Malt extract; food preparations of flour, groats, meal, starch or malt 15,9 extract, not containing cocoa or containing less than 40 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included; food preparations Other sugars, including chemically pure lactose, maltose, glucose and fructose, in solid form; sugar syrups not containing added flavouring or colouring matter; artificial honey, whether or not mixed with natural honey; caramel. HST1704 Sugar confectionery (including white chocolate), not containing cocoa. 12,9 HST1508 Ground-nut oil and its fractions, whether or not refined, but not chemically modified HST1803 Cocoa paste, whether or not defatted. 7,9 HST1905 HST1507 Low performers HST1603 HST2302 HST2205 HST0408 HST1805 Bread, pastry, cakes, biscuits and other bakers' wares, whether or not 6,7 containing cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products. Soya-bean oil and its fractions, whether or not refined, but not chemically modified. Extracts and juices of meat, fish or crustaceans, molluscs or other aquatic invertebrates. Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants. Vermouth and other wine of fresh grapes flavoured with plants or aromatic substances. Birds' eggs, not in shell, and egg yolks, fresh, dried, cooked by steaming or by boiling in water, moulded, frozen or otherwise preserved, whether or not containing added sugar or other sweetening matter. Cocoa powder, not containing added sugar or other sweetening matter. 15,7 8,3 4,1-73,8-59,3-46,3-47,4-39,9 HST2007 Jams, fruit jellies, marmalades, fruit or nut purée and fruit or nut pastes, -32,5 16
2013: Q1 2013: Q2 R million HST2101 obtained by cooking, whether or not containing added sugar or other sweetening matter. Extracts, essences and concentrates, of coffee, tea or maté and preparations with a basis of these products or with a basis of coffee, tea or maté; roasted chicory and other roasted coffee substitutes, and extracts, essences and concentrates the -27,3 HST1701 Cane or beet sugar and chemically pure sucrose, in solid form. -27,3 HST1101 Wheat or meslin flour. -24,0 HST1510 HST1512 HST2306 Other oils and their fractions, obtained solely from olives, whether or not refined, but not chemically modified, including blends of these oils or fractions with oils or fractions of heading Sunflower-seed, safflower or cotton-seed oil and fractions thereof, whether or not refined, but not chemically modified. Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils, other than those of heading. -20,3-20,0-13,9 Figure 2.15: Quarterly trade balance of food products 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 Export Import Figure 2.15 shows the quarterly trade balance of processed food products. The export and import of food products rebounded by 12,5% and 1,9%, respectively, as compared to the previous quarter. However, the year-on-year export and import of food products contracted by 1,1% and 6,1%, respectively. As a result, the trade deficit decreased from R 2 384,4 million in the previous quarter to R 1 430,0 million during. 17
2013: Q2 2013: Q2 2.6 EMPLOYMENT 180 000 Figure 2.16: Total number of formal employment: food products 175 000 170 000 165 000 160 000 155 000 150 000 Source: Statistics SA (2015i) 100 000 Figure 2.17: Number of formal employment: food products 80 000 60 000 40 000 20 000 0 Production, processing and preservation of meat, fish, fruit, vegetables, oils and fats Dairy products Grain mill products, starches and starch products and prepared animal fat Other food products Source: Statistics SA (2015i) Figure 2.16 shows the formal employment in the food products industry. Having increased by 3,9% year-on-year in the previous quarter, employment in the food industry moderated by 2,7% during the second quarter of 2015. In addition, formal employment in the food division contracted by 2,4% as compared to the previous quarter. The production, processing and preservation of (meat, fish, fruit, vegetables, oils and fats) and other food products has shed more jobs than the dairy and grain mill products industries, resulting in 4150 jobs lost in the food products division in the period under review (see Figure 2.17). 18
2.7 OUTLOOK Table 2.7: Net balance 10 of BER manufacturing survey: food products 2015:Q3* Domestic sales volumes 43 31 24 2 Export sales volumes 2 2-7 37 Production volumes 19-13 3 10 Domestic order volumes received 43 21 47-7 Export order volumes received -1 28 17 21 General business conditions -15-44 -36-53 Number of factory workers -21-24 -36-25 Fixed investment 8 21 28-25 Business confidence 11 47 56 44 Expected volume of goods imported in 12 months time Expected volume of goods exported in 12 months time Expected real investment in machinery and equipment in 12 months time 16-5 3 34 4 54 20-16 18 Expected business conditions in 12 months time -30-27 -7 * Expected Source: BER (2015) A survey of food manufacturing by the Bureau for Economic Research (BER) is presented in Table 4.5. The survey shows that the year-on-year outlook is negative for domestic order volumes, general business conditions, employment and fixed investments. 3. BEVERAGES Beverages according to SIC classification is code 305 and it comprises the following beverage products: Distilling, rectifying and blending of spirits; ethyl alcohol production from fermented materials; manufacture of wine Manufacture of beer and other malt liquors and malt Breweries, except sorghum beer breweries Sorghum beer breweries Mmanufacture of malt Manufacture of soft drinks; production of mineral waters 10 BER calculates the net balance statistics by subtracting the % of the respondents replying down from the % replying up to a particular question. Respondents are asked to compare the current quarter s experience to that of a year ago. A positive net balance implies an improvement (i.e. positive year-on-year growth) and vice versa. Therefore, the net balance varies from -100 to 100 where -100 is the most negative response; 0 is a situation of no change and 100 is the most positive response. 11 BER calculates the business confidence index by asking respondents to rate current business conditions as satisfactory or unsatisfactory. Then the index is derived as a gross percentage of the respondents replying satisfactory. A value of 50 is indicative of neutrality, 100 indicative of extreme confidence and 0 of extreme lack of confidence. An index greater than 50 shows the majority of respondents are satisfied with the prevailing economic conditions. 19
3.1 PRICE Table 3.1 shows the consumer and producer price indices and export unit value of beverages. The consumer price inflation for hot beverages, beer, wine, alcoholic beverages and spirits grew by 5,5%, 4,5%, 1,6% 1,4%, 1,2%, and 0,3%, respectively year-on-year following a 2,9%, 2,3%, 2,0%, 6,8%, 6,8% and 1,8%, growths respectively in the previous quarter. Similarly, the consumer price for beer moderated by 4,5% following a 6,8% growth year-on-year. Similarly, it increased quarter-to-quarter for cold beverages (1,6%), wine (0,9%), alcoholic beverages (0,7%) and Spirits (0,3%). However, it moderated for beer and hot beverages by 0,4% each. The export unit value of beverages contracted from 7,4% year-on-year in the previous quarter to 1,3% during the period. Table 3.1: Price indices of beverages Beverages products Source: Stats SA (2015a, 2015b, 2015c) Indices Weight and Consumer price indices % change between All items (CPI Headline) 100 109,4 110,8 111,0 1,4 0,2 Alcoholic beverages 3,9 112,0 112,6 113,4 1,2 0,7 Spirits 0,8 109,4 109,4 109,7 0,3 0,3 Wine 0,7 111,8 112,4 113,4 1,4 0,9 Beer 2,5 109,5 114,0 114,4 0,4 4,5 Non-alcoholic beverages 1,2 106,8 109,2 109,6 2,9 0,4 Hot beverages 0,3 109,9 115,4 115,9 1,6 0,4 Cold beverages 0,9 105,6 106,9 107,3 1,6 0,4 Producer price indices Beverages 8,5 111,1 113,1 113,1 0,2 0,0 Export unit value Beverages 125,0 124,5 123,7 1,3 0,6 and 20
2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 Index (2010 = 100) 3.1 PRODUCTION 120 Figure 3.1: Seasonally adjusted physical volume of production: beverages 110 100 90 80 70 60 50 Source: Statistics SA (2015d) Figure 3.1 presents the seasonally adjusted physical volume of production for beverages. During, the volume of production for beverages moderated year-on-year by 2,9% following a 5,7% growth it registered in the previous quarter. However, it increased marginally quarter-to-quarter by 0,7% following a growth of 0,6% in the preceding quarter. Production capacity Table 3.2: Utilisation and reasons for underutilisation of production capacity by large enterprises: Beverages division (percentage) Period Utilisation Reasons for underutilisation Total underutilisation Shortage of Raw materials Labour Skilled Semi and unskilled Insufficient demand 82,5 17,5 2,0 1,5 0,2 8,8 5,0 84,7 15,3 2,2 1,3 0,2 7,7 4,0 82,6 17,4 2,7 1,1 0,2 9,4 3,9 Source: Statistics SA (2015e) Other Table 3.2 shows the uutilisation and reasons for underutilisation of production capacity by large enterprises of the beverages division. The year-on-year and quarter-to-quarter utilisation capacity showed a marginal increase during. The increase is consistent with the increase in prodution volumes of the beverages division. Insufficient demand and other reasons such as seasonal factors and are the reasons behind underutilisation. 21
2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 R million 3.3 VALUE OF SALES Figure 3.2: Seasonally adjusted value of sales (current prices): beverages 110 000 100 000 90 000 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 Source: Statistics SA (2015d) The seasonal adjusted value of sales of beverages moderated by 1,2% year-on-year mainly owing to the increase in production volumes. Similarly, it moderated by 0,3% in following a growth of 0,4% in the previous quarter (see figure 4.6). 3.4 INCOME FROM BAR SALES IN THE SERVICE INDUSTRY 12 Income from bar sales in the food and beverages service industry slightly increased from R1 191,2 billion in the previous quarter to R1 193,0 billion in the second quarter of 2015, representing a 2,0% marginal increase as compared to the previous quarter, mainly due to a rebound of restaurants and coffee shops by 0,3% and an increase of 2,3% by the takeaway/fast food outlets. However, the year-on-year income from bar sales decelerated by 8,8% following a 8,3% contraction in the previous quarter. The year-on-year decrease is as a result of a deceleration in restaurants and coffee shops and catering services by 7,0% and 14,7% following a contraction of 6,8% and 12,9%, respectively, in the quarter under review. 12 Income from bar sales refers to income from liquor sales. 22
2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 R million 2010: Q2 2010: Q3 2010: Q4 2011: Q1 2011: Q2 2011: Q3 2011: Q4 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 R million 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 Figure 3.3: Total income from bar sales in the service industry Source: Statistics SA (2015h) 1 200 1 000 Figure 3.4: Income from bar sales in the service industry 800 600 400 200 0 Restaurants and coffee shops Catering services Take-away/fast food outlets Source: Statistics SA (2015h) 3.5 TRADE Main export destinations and food products Figure 3.5 shows Asia is by far the largest export destination for South African beverages in. Europe accounted for 39% of the total export followed by Africa (38%), Asia and Americas with (11%) each. Oceania played a marginal role as export destination for South African beverages export. Even though the share of Asia and Americas is significant, it also shows that Africa is growing and becoming comparable with Europe (see Figure 3.6). 23
2013: Q1 2013: Q2 % Figure 3.5: The beverage export destination's share of continents in 2015:Q2 Oceania 1% Europe 39% Africa 38% Asia 11% Americas 11% 60 Figure 3.6: The beverages export destination's share of the continents (2013-2015) 50 40 30 20 10 0 Europe Africa Americas Asia Among the main trading region, EU accounts for almost half of the total export, followed by SACU, which accounts for 20%. SACU (Excluding SADC) accounted for 15%, followed by NAFTA (9%), eastern Asia (6%), Angola (6%), then South Eastern Asia by 3% during the second quarter of 2015 (see Figure 3.7) 24
Namibia Nethelands Germany Angola Canada Denmark France Kenya Belgium United Arab Emirates % Figure 3.7: The share of top beverage export destination regions in NAFTA 9% South Eastern Asia 3% Eastern Asia 6% Western Africa 2% European Union 41% Eastern Africa Rest 3% SACU (Excluding SADC) 15% SADC Exluding SACU 20% 9 8 7 6 5 4 3 2 1 0 Figure 3.8: The share of top ten beverages export destination countries in The above graph shows the top ten beverages export destination countries in. The graphs shows that Namibia accounted for 7,9% share of export, followed by the Netherlands (6,7%), Germany (6,6%), Angola (5,1%), Canada (3,2%), Denmark (2,2%), France (2,2%), Kenya (1,8%), Belgium(1,7%) and United Arab Emirates (1,5%). Canada is the main country from USA that exported to South Africa; while from Europe, Germany, France, Denmark and Belgium are main exporters (see Figure 3.8). 25
Table 3.3: Major exported beverages products in HS Code Beverages products Total amount (R million) HST22 Beverages, spirits and vinegar 3772,9 HST2204 Wine of fresh grapes, including fortified wines; grape must other than that of heading 20.09. 2131,3 HST2009 Fruit juices (including grape must) and vegetable juices 816,1 HST2208 Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80 % vol 440,4 HST2207 Undenatured ethyl alcohol of an alcoholic strength by volume of 80 % vol 423,3 HST2202 Waters, including mineral waters and aerated waters 376,8 HST2206 Other fermented beverages (for example, cider, Perry, mead) 252,8 HST2203 Beer made from malt. 112,5 HST2101 Extracts, essences and concentrates, of coffee, and tea 31,6 HST2201 Waters, including natural or artificial mineral waters and aerated 25,6 HST2209 Vinegar and substitutes for vinegar obtained from acetic acid. 9,2 HST2205 Vermouth and other wine of fresh grapes flavored with plants or aromatic substances. 1,1 Table 3.3 presents major exported beverages during the second quarter of 2015 and Table 3.4 shows high and low export performers of beverages during the same quarter by comparing the export values of the present quarter to the same quarter of the previous year (year-on-year). Table 3.4: Export performance of beverages in HS Code Beverages Changes compared to a year ago (R million) High performers HST2207 Undenatured ethyl alcohol of an alcoholic strength by volume of 80 % vol. HST2202 Waters, including mineral waters and aerated waters 28,4 HST2206 Other fermented beverages 28,3 HST2201 Waters, including natural or artificial mineral waters 24,2 HST2208 Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80 % vol HST22 Beverages, spirits and vinegar 6,6 Low performers HST2203 35,1 13,7 Beer made from malt. -141,7 HST2205 Vermouth and other wine of fresh grapes -46,3 HST2101 Extracts, essences and concentrates -27,3 HST2209 Vinegar and substitutes for vinegar obtained from acetic acid. -8,0 HST2009 Fruit juice -1,3 26
2013: Q1 2013: Q2 % Main imported beverage products and the source Figure 3.9 illustrates the share of continents as a source of beverage import in the second quarter of 2015. Europe, which account to 68% was the largest source of beverage import during the second quarter of 2015. Africa contributed 7% of the import, while Oceania, Americas and Asia altogether accounts to 18%, of the total beverages import during the period. Figure 3.10 shows that in the past quarters has been the key source of beverages import, followed by Africa. Figure 3.9: The share of continent's as a source of beverages import in 2015:Q2 Oceania 8% Africa 14% Americas 7% Asia 3% Europe 68% 80 70 60 50 40 30 20 10 0 Figure 3.10: The share of continents as a source of beverages import (2013-2015) Europe Americas Africa Asia 27
France Bangladesh Belgium Austria Unied States Netherlands United Arab Emirates Australia Ireland Italy % Among the top trading regions, EU (68%) still accounts the largest share followed by SACU (Excluding RSA), (14%). NAFTA, Australia and New Zealand accounted for 14% and 8%, respectively of the total beverages import. Figure 3.11: The share of top regions as a source of beverages import in 2015: Q2 Australia and Newzealand 8% SACU (Excluding RSA) 14% Others 5% NAFTA 5% EU 68% 14 12 10 8 6 4 2 0 Figure 3.12: The share of top ten countries as a source of beverages import in Most of the South Africa source of beverages import is from the EU. UK countries alone accounts for 33,1% of the total import. United Arab Emirates is the only Asian country to be on the top ten with a share of 2,0% of the total beverage import (see Figure 3.12). Table 3.5 28
2013: Q1 2013: Q2 R million below illustrates the main imported beverages during the second quarter of 2015 ranked according to the import values. Table 3.5: Main imported beverages in HS Code Beverages products Total amount (R million) HST220850 Gin and Geneva 11,15 HST220410 Sparkling wine 11,06 HST220840 Rum and other spirit 9,47 HST220210 Water included mineral water 4,84 HST220830 Whiskies 3,16 HST220300 Beer made from malt 2,66 HST220110 Mineral water and aerated water 0,86 HST220870 Liqueurs and cordials 0,26 HST220860 Vodka 0,07 HST220900 Vinegar and substitute for vinegar 0,01 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 Figure 3.13: Quarterly trade balance of beverages Export Import The quarter-to-quarter export of beverages rebounded by 15,3% from contraction of 29,1% the previous quarter. However, the year-on-year export bevarages moderated by 3,9% following a growth of 4,1% recorded in the previous quarter. Similarly, quarter-to- quarter import of beverages rebounded by 11,5% following a acontraction of 16,7% in the previous quarter. However, the year-on-year import beverages contracted by 1,2% following a 7,3% growth in the preceding quarter. 29
2013: Q2 3.6 EMPLOYMENT Figure 3.14: Number of formal employment: beverage and tobacco products 43 000 42 000 41 000 40 000 39 000 38 000 37 000 36 000 Source: Quantec EasyData (2015i) Figure 3.14 shows the formal employment in the beverages and tobacco division. Following the production and export trend, formal employment increased substantially by 4,3% yearon-year during the second quarter of 2015, following a 0,2% growth in the preceding quarter. However, it contracted by 4,4% following a 5,7% growth in. As a result, the total formal employment in the division decreased from 41 905 in the previous quarter to 40 066 during the second quarter of 2015. 3.7 OUTLOOK Table 3.6: Net balance of BER manufacturing survey: Beverages 2015: Q3* Domestic sales volumes 77 76 98 64 Export sales volumes 11 75 88 46 Production volumes 60 83 95 6 Domestic order volumes received 77 86 98 64 Export order volumes received 11 76 87 46 General business conditions 59-88 3-18 Number of factory workers -7-2 0 0 Fixed investment 1 83 83 18 Business confidence 23 6 90 68 Expected volume of goods imported in 12 27-82 -76 months time Expected volume of goods exported in 12 85 77 99 months time Expected real investment in machinery and 15 3 2 equipment in 12 months time Expected business conditions in 12 months time 8 0-1 *Expected Source: BER (2015) The survey of the beverages division by BER shows that the year-on-year outlook is positive for all variables except for general business conditions. 30
4. CONCLUSION Despite the contraction of the economy during the second quarter of 2015, the food and beverages industry the producer price index of food products grew by 0,9% year-on-year and by 0,1% quarter-to-quarter. However, the year-on-year seasonally adjusted value of sales of aggregate food products moderated by 1,2% following a growth of 4,5% in the preceding quarter, while the quarter-to-quarter and year-on-year of wholesale trade sales moderated by 1,5% and 0,1% following a growth of 1,9% and 6,8%, respectively in the previous quarter. During the period, the food and beverages service income from food and bar sales grew by R9,5 billion to R9,7 billion in the quarter under review, while the current income from food sales in the service industry remained unchanged at 4,8% year-on-year. Among the main regions, SADC accounted the highest share of 33% followed by EU (11%). Eastern Asia and Western Asia comprised 7% and 6% of the total food export share. The main source of beverages import during the quarter is from the UK countries which alone accounts for 32,1% of the total import. Unites States accounted for 3,4% share of the total beverage import under the period. Due to the decline in the global and the South African markets in the period under review, a total of 5 989 formal jobs were shed in the food and beverages division of the agroprocessing sector mainly in the production, processing and preservation of (meat, fish, fruit, vegetables, oils and fats) and other food products. REFERENCES BER (2015), Manufacturing Survey. Bureau for Economic Research, University of Stellenbosch. Quantec EasyData (2015), RSA International Trade. Accessed in June 2015. Statistics SA (2015a), Consumer Price Index, various issues. Statistics South Africa. Statistics SA (2015b), Producer Price Index, various issues. Statistics South Africa. Statistics SA (2015c), Export and Import Unit Value Indices, various issues. Statistics South Africa. Statistics SA (2015d), Manufacturing: Production and Sales, various issues. Statistics South Africa. Statistics SA (2015e), Manufacturing: Utilisation of Production Capacity by Large Enterprises. Statistics South Africa. Statistics SA (2015f), Wholesale Trade Sales, various issues, Statistics South Africa. Statistics SA (2015g), Retail Trade Sales, various issues, Statistics South Africa. Statistics SA (2015h), Food and Beverages, various issues, Statistics South Africa. Statistics SA (2015i), Quarterly Employment Statistics, various issues. Statistics South Africa. Reserve Bank (2015), Quarterly Bulletin, June 2015, South African Reserve Bank. 31
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