Majority of SA agribusinesses would consider opportunities in rest of Africa

According to a recent survey, 71% of respondents in South Africa’s agribusiness industry indicated that they would consider opportunities in the rest of Africa. The survey was conducted and published by professional services firm PwC.

PwC’s Agribusinesses Insights Survey 2012, released last month, surveyed a group of agribusinesses that contribute to a large and significant part of the South African agricultural industry and GDP of the country. “They are strategic role players and leaders in the industry as they are in the middle of the agricultural value chain with direct links to primary producers on the one side and processing businesses on the other side,” said Frans Weilbach, national agribusiness industry leader at PwC.

The survey suggests that the 71% of respondents considering opportunities in the rest of Africa could be related to the view that exploration of new markets is an opportunity for growth. “On being prompted on the main reasons for the growth expectations for their agribusinesses in the coming 12 months, 43% of respondents indicated that new geographical markets present the most opportunities for them,” according to the survey.

The department of agriculture in South Africa‘s Western Cape province has cited improved political and macro-economic stability as one of the main reasons behind economic growth in Africa. “Furthermore, per capita production of agricultural products has increased through the last three decades, contributing to the allure of diversification into Africa,” added the survey.

However, responding agribusiness CEOs highlighted five perceived threats for business growth as their main concerns.

  • Government regulations
  • Increasing energy costs
  • Protracted global recession / vulnerable market environment
  • Inadequacy of basic infrastructure
  • Availability of key skills

While these threats were also identified in the 2011 survey, the order of importance has changed with ‘government regulations’ being named the number one threat to business growth. According to PwC’s report, “the importance of this item increased over the past number of years, which might be an indication that the industry has become more regulated and that respondents are finding it increasingly difficult to keep up with the demands of compliance.”

In the past few years South African agribusiness and food companies have been increasingly looking at the rest of Africa for growth opportunities.

Last year South African consumer goods giant Tiger Brands bought a controlling stake in Dangote Flour Mills, one of Nigeria’s largest flour and pasta producers. Tiger Bands has been increasing its footprint across Africa in recent years and currently has operations in Cameroon, Ethiopia, Kenya, Zimbabwe and Nigeria.

Rainbow Chicken, a producer of a range of poultry products and a supplier to fast-food outlets such as KFC, recently announced that it will buy a 49% share in Zam Chick, a subsidiary of Zambian agribusiness firm Zambeef. Zam Chick currently manages and operates Zambeef’s broiler (chickens bred and raised specifically for meat production) business, including a chicken abattoir and processing plant.

“In an African context, agriculture accounts for 65% of employment and 75% of domestic trade. This means agriculture is likely to drive Africa’s economic growth in the 21st century,” explained Weilbach, citing the UN Industrial Development Organisation in 2011. “South Africa will play a pivotal role in taking agriculture in sub-Saharan Africa to the next level – in terms of its own contribution as well as its partnerships with agricultural projects and operations in other countries.”