AGRI-PARKS MASTER BUSINESS PLAN
Gert Sibande Agri-Park
Final Master Business Plan
April 2016
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AGRI-PARKS MASTER BUSINESS PLAN
This Report has been read and approved by:
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Chief Director: PSSC Head Date
Ms. Z Sihlangu
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REID Director: Mr. MC Madolo Date
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RID Director: Ms. A Mametja Date
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GSDM: District Agri-Park Coordinator Date
Mr. A Sibuyi
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AGRI-PARKS MASTER BUSINESS PLAN
URBAN-ECON DEVELOPMENT ECONOMISTS Suite 203 Metropolitan House 15 Russell Street Mbombela 1200 Tel: 013 752 4932 E-mail: [email protected] Website: www.urban-econ.com
Manstrat Agricultural Intelligence Solutions Tel: 012 460 2499 Email: [email protected] Website: www.manstrat.co.za
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AGRI-PARKS MASTER BUSINESS PLAN
Content
EXECUTIVE SUMMARY ...... 8
1 Introduction ...... 11
1.1 Introduction ...... 11
1.2 Project Goals and Objectives ...... 11
1.3 Methodology ...... 12
1.4 Project Purpose ...... 12
2 The Agri-Park Model ...... 14
2.1 Understanding the Agri-Park Concept ...... 14
2.2 Defining the Agri-Park System ...... 16
3 Policy Review ...... 20
3.1 National Government Policies ...... 20
3.2 Provincial Government Policies ...... 32
3.3 District Policy Review ...... 34
4 Locational Context...... 36
4.1 District Description ...... 36
4.2 Location of Agri-Hub ...... 38
4.3 Maps ...... 39
4.4 Economic Infrastructure ...... 39
5 Main Role-Players in the District ...... 42
5.1 Government ...... 42
5.2 Organisations and Industry Associations ...... 46
6 Economic and Socio-Economic Analysis ...... 48
6.1 Introduction ...... 48
6.2 Socio-Economic Profile ...... 48
6.3 Economic Analysis ...... 51
7 Agriculture Sector Overview ...... 55
7.1 Gert Sibande Agriculture Sector Analysis ...... 55
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7.2 Contribution to Gross Value Added ...... 59
7.3 Resource Analysis ...... 60
7.4 Commodity Selection ...... 62
7.5 Gert Sibande Selected Commodities ...... 66
8 Red Meat ...... 69
8.1 Market assessment ...... 69
8.2 Red Meat Market Price ...... 81
8.3 Value chain assessment ...... 83
8.4 Main Competitors ...... 91
8.5 Stakeholders ...... 91
8.6 Technology ...... 92
8.7 Demand and Needs Analysis ...... 99
8.8 Job Creation ...... 100
8.9 Contribution to Food Security ...... 101
8.10 Regulatory Requirements ...... 102
8.11 Substitute Products ...... 106
8.12 Societal Trends ...... 107
8.13 Barriers to Entry ...... 108
8.14 SWOT analysis ...... 110
9 Vegetables ...... 111
9.1 Market assessment ...... 111
9.2 Value chain assessment ...... 118
9.3 Agro-processing opportunities ...... 120
9.4 Competitors ...... 124
9.5 Stakeholders ...... 125
9.6 Technology ...... 125
9.7 Demand and Needs Analysis ...... 133
9.8 Job Creation ...... 134
9.9 Contribution to Food Security ...... 135
9.10 Regulatory Requirements ...... 135
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9.11 Substitute Products ...... 140
9.12 Societal Trends ...... 140
9.13 Barriers to Entry ...... 141
9.14 SWOT Analysis ...... 142
10 Agroforestry ...... 144
10.1 Forestry Sector ...... 144
10.2 Market Assessment ...... 145
10.3 Forestry Value Chain ...... 161
10.4 Agroforestry Value Chain ...... 162
10.5 Stakeholders ...... 163
10.6 Technology ...... 164
10.7 Job Creation ...... 165
10.8 Regulatory Requirements ...... 166
10.9 Substitute Products ...... 167
10.10 SWOT Analysis ...... 167
11 Maize ...... 169
11.1 Market Assessment ...... 171
11.2 Value Chain Assessment ...... 173
11.3 Agro-Processing...... 174
11.4 Main Input Suppliers ...... 175
11.5 Competitors...... 175
11.6 Stakeholders ...... 176
11.7 Technology ...... 177
11.8 Demand and Needs Analysis ...... 182
11.9 Socio-Economic (Job Creation) ...... 183
11.10 Contribution to Food Security ...... 183
11.11 Regulatory Requirements ...... 184
11.12 Substitute Products and Services ...... 186
11.13 Societal and Cultural Trends ...... 187
11.14 SWOT Analysis ...... 188
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12 Agri-Park Concept Development ...... 190
12.1 Introduction of the Agri-Park Concept ...... 190
12.2 Proposed Development Concept of Red Meat ...... 192
12.3 Proposed Development Concept for Vegetables ...... 197
12.4 Proposed Development Concept for Agroforestry ...... 201
12.5 Proposed Development Concept – Maize ...... 205
12.6 Combined Agri-Park Concept ...... 210
12.7 Farmer Production Support Units ...... 217
12.8 Estimated Capital Expenditure (CAPEX) ...... 219
12.9 Conclusion ...... 220
13 Organisational Structure ...... 221
13.1 Introduction ...... 221
13.2 Advisory Structures ...... 221
13.3 Approval Structures ...... 223
13.4 Implementation and Monitoring Structures ...... 226
14 Implementation Guidelines ...... 228
14.1 Introduction ...... 228
14.2 Implementation Process ...... 228
14.3 Alignment with Government Programmes ...... 230
14.4 Recommendations ...... 234
14.5 Roll-out plan ...... 233
15 References ...... 242
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AGRI-PARKS MASTER BUSINESS PLAN Gert Sibande DM Master Agri-Park Business Plan Road Map
Chapter 1: Introduction Chapter 2: Agri-Park Model
Summary: An introduction to the master business plan report is Summary: This chapter provides an overall overview to the Agri- provided in this chapter through: the project background, goals Park model which was developed by the DRDLR. and objectives, the project’s purpose and a demonstration of the Key words: Agri-Park model, small-scale/smallholder farmers, FPSU, project methodology. AH, RUMC, production, facilities, information, large-scale/ Key words: concept, smallholder/small-scale farmer, FPSU, AH, commercial farmers RUMC, capital expenditure Must read if the reader: Must read if the reader: Is not familiar with the Agri-Park’s concept. Does not have a background on the Master Agri-Park Business Seeks to understand the 3 units of the Agri-Park model. Plan Project. Does not know what the goals and objectives of the project are. Is interested in the project process.
Chapter 5: Main Role Players Chapter 4: Location Context Chapter 3: Policy Review
Summary: A list of role-players that are Summary: This chapter provides an overview of Summary: The important policies that important for the GSDM Agri-Park the GSDM and its features that are important for affect the GSDM Agri-Park are reviewed Development are listed in this chapter, the development of the Agri-Park. in this chapter and the alignment of the along with potential duties that they Key words: GSDM, local municipalities, location, Agri-Park to the policy is identified. may take on. economic infrastructure, economic activities Key words: policies, strategies, national, Key words: government, private, Must read if the reader: provincial, local, implications, alignment associations, organisations, financial Does not know the location of the GSDM Must read if the reader: institutions, companies, service Does not know the status of important Is not familiar with policies that are providers, roles locational features of the GSDM. influential to the GSDM Agri-Parks Must read if the reader: Does not know the Agri-Hub location and its Programme. Is not familiar with the role-players selection. Is not familiar with the policy that are expected be involved with implications for the Agri-Park. the GSDM Agri-Park. Is interested in the potential duties to be taken up by the role players Chapter 7: Agricultural Industry Chapter 8, 9, 10 and 11: Analysis Commodity Analysis Chapter 6: Economic and Summary: In this chapter, an analysis of Waterberg’s agricultural features is provided, as Summary: The four commodities that Socio-Economic Analysis well important factors that are influential to have been selected to be produced in agricultural development. The four agricultural the initial phase of the Agri-Park Summary: This chapter analyses the commodities to be produced in the district’s programme are individually analysed. economic and socio-economic status Agri-Park are identified. quo of the GSDM through statistics of Key words: agricultural activities, GVA, Commodities: red meat, maize, agro- the following indicators: commodities, climate, resources, projects, forestry and vegetables demographics, economic profile, selection criteria, prioritisation, top three unemployment status, skills level, commodities Must read if the reader: income and poverty Must read if the reader needs to know: Is interested in the commodities’ Must read if the reader: The current agricultural status of the Gert market trends. Does not know the socio-economic Sibande DM. Is interested commodities’ business status quo of the GSDM. The status of resources and climate features enabling features. Does not have knowledge of the affecting agriculture in the Gert Sibande DM. Needs to know the value chain effect of the socio-economic status The process of selection of commodities. relations. quo on the GSDM Agri-Park The three selected commodities.
Chapter 13: Agri-Park Chapter 14: Implementation Organisational Structure Guidelines Chapter 12: Agri-Park Concept
Summary: The organisational structure Summary: The implementation guidelines for Development for the Agri-Park is demonstrated the development of the Agri-Park are schematically and explored. Summary: The concepts for the GSDM Agri- discussed. Park are developed, based on the Agri Park Key words: implementations, guidelines, Key words: structures, organisational, Model, and a basic capital expenditure is process recommendations, programmes, advisory, approval, implementation, provided. action plan, timeframes monitoring Key words: concept, smallholder/small-scale Must read if the reader needs to know: Must read if the reader: farmer, FPSU, AH, RUMC, capital expenditure The implementation of the GSDM Agri- Does not know how the Agri-Park is Must read if the reader needs to know: Park. organised. What the concept of the GSDM Agri-Park is. How government programmes are How the 3 units in the Agri-Park will function. aligned with the Agri-Park.
The recommended action plan and
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AGRI-PARKS MASTER BUSINESS PLAN
EXECUTIVE SUMMARY
The Agri-Park concept together with the introduction of an Agri-Park per district municipality is a relatively new concept in South Africa. This document represents the master business plan which will serve as a guiding document in the implementation of the Agri-Park model that was developed by the Department of Rural Development and Land Reform (DRDLR). Section 1 - Introduction: provides the background information on the Agri-Park concept. It also provides the goals and objectives of the project. Lastly, the section presents the purpose of the master business plan and outlines the various steps that are undertaken in completing the master business plan i.e. the project methodology. Section 2 - Agri-Park Model: provides an insight into the Agri-Park model. The section provides the definition of the Agri-Park and describes the three basic units within the Agri-Park. All the basic functions together with how the basic units will interact are also described in this section. Section 3 - Policy Review: in order to achieve its set objectives, the Agri-Park Model seeks to align with some of the key government strategies set out in existing policy frameworks. For this reason, the section three (3) of this document provides an overview of the national, provincial and local policies that will guide the development of the Agri-Park Project. The policy review section provides a background on the relevant policies; identifies key focus areas and targets; and discusses the implications of the policies for the Gert Sibande District Municipality (GSDM) Agri-Park. Section 4 - Locational Context: in order to establish an Agri-Park in the GSDM, it is important to have a good understanding of the strength, weaknesses and the comparative advantages that the district holds. Section 4 therefore describes some of the main features and the major economic infrastructure that are crucial to the development of the Agri-Park in the GSDM. The proposed location of the Agri-Hub together with some of the existing infrastructure that can be utilised by the Agri-Park are also described. Section 5 - Main Role-Players per District: section 5 outlines the main role-players that could potentially be involved in the GSDM Agri-Park at varying levels of the development process. The role-players are summarised into three categories such as: Government and Public Sector; Private Companies; and Associations and Organisations. The purpose of this chapter is to provide an insight into the possible partnership opportunities with regards to the recommended agricultural opportunities. Section 6 - Economic and Socio-Economic Analysis: The purpose of this Section is to describe the economy of the Gert Sibande District Municipality in relation to population and economic growth; job creation; and income and poverty level, as viewed against the economic performance of Mpumalanga and South Africa as a whole. A sectoral analysis is also provided, setting out the structure of the GSDM economy with respect to the different economic sectors and their output and employment contributions to the district’s economy.
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Section 7 - Agricultural Industry Analysis: Part of the objectives of the Agri-Park project is to identify three dominant or most feasible commodities within the district. Hence, this section provides an overview of the main agricultural activities occurring in the district, focusing on the types of commodities or products farmed and produced. Part of the purpose of this section is to provide relevant information regarding the current agricultural practices as well as the various opportunities and constraints that the GSDM’s Agricultural sector presents. Furthermore, this section identifies the three dominant commodities (Red Meat, Agroforestry and Vegetables) in the GSDM, through a thorough prioritisation process that was discussed in details in this section. Products related to the four (4) selected commodities are also briefly discussed during this section. Section 8, 9, 10 and 11 - Commodity Analysis: This section provides an analysis of the local, global, capital and commodity markets for the four (4) selected commodities. Other major topics covered in this section include: Value chain assessment, Agro-processing opportunities, main inputs suppliers, competitors, stakeholders, technology requirement, the demand and need analysis, job creations opportunities, contribution to food security, regulatory requirements, substitute products and services, barriers to entry, societal and cultural trends and SWOT analysis. Section 12 - Agri-Park Concept Development: This section describes the Agri-park concept in relation to the four (4) identified commodities (i.e. Red Meat, Agroforestry and Vegetables) in the GSDM. The purpose of this section is to align the value chain that has been developed for each commodity with the Agri-Park model. Section 13 – Organisational Structure: The proposed organisational structure of the Gert Sibande DM Agri-Park is explored. A discussion is provided of how activities such as task allocation, coordination and supervision are managed to lead to the successful implementation of the Agri-Park in the Gert Sibande DM. Section 14 - Implementation Guidelines: In this section, the implementation guidelines describe the processes that will be applied in executing the Agri- Park project. The purpose of the implementation guidelines is to provide the relevant stakeholders with a practicable document that will ensure that the project is implemented in an efficient and agreed-on manner, based on the concept spelled-out in the previous chapters. The implementation guidelines cover the areas such as: the implementation process, alignment with government programmes, specific recommendations as well as the roll – out plan.
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Key Role Training Infrastructure/ Location Equipment
Eight (14) FPSUs were proposed for the The following forms of training would be The FPSU will serve the GSDM Agri-Park, in the following proposed provided at the RUMC: following core functions: locations: Chief Albert Luthuli - 3 1. Training of training personnel(s) on how to disseminate 1. Agricultural input supplies. Dipaleseng - 2 information to the SHF, AH and The FPSU would require to put in 2. Mechanisation support, Dr Pixley - 2 the FPSU, 3. Extension support, Govan Mbeki – 2 place the following major 2. Market analysis skills, 4. Local logistics support, Lekwa – 2 equipment / infrastructure: 3. Supply chain and logistics skills, 5. Primary produce collection, Mkhondo – 3 4. Trading techniques (local and 6. Through-put to Agri-Hubs, Msukaligwa - 2 international), 7. limited sorting, packaging, storage, 1. Transport facilities (e.g. 5. Agriculture computer Bakkie or pick-up vehicles), 8. Some processing for local markets, Criteria for selection: programme training. 9. Packaging of products for the local 2. Curing shed, 1. Proximity to small scale farmers, market, small retail outlets and the 3. Sorting facilities, 2. Land suitability, fresh produce markets, 4. Cleaning, sorting, grading, 3. Proximity to the existing farming drying machines, 10. Transportation of produce destined for processing directly from the farm Activities, 5. Weighing and packaging
to the AH, machines, 4. Existing infrastructure. 11. Some marketing and distribution, 6. Local packhouses, 12. Auctioning of produce where 7. Small scale processing applicable (e.g. auctioning of live FPSU Capital facilities for local market, animals Human 8. Produce sorting facility, Expenditure 9. Auction facility, Resources 10. Storage facility,
11. Farming/mechanisation The FPSU will provide the following core equipment required for HR/HR facilities: farming activities. The estimated capital expenditure for the 1. Agricultural extension officers support office, GSDM FPSUs is described as follows: 2. Machine operators/ Local The GSDM FPSU Quantity mechanisation centre and workshops, Quantity 14 3. Agronomists, Total cost R391 669 040 4. Researchers,
5. Voluntary/Established commercial
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Key Role Training Infrastructure/ Location Equipment
Some of core training activities that would
take place within the Agri-Hub include: There would be only one Agri-Hub in the The Agri-Hub will serve the following GSDM at the initial phase of the project. It functions: 1. Training of processing staffs on was proposed by the Province that the Agri- how to handle and operate The AH would require to put in place 1. Training, Hub should be located in eMkondo, in various processing equipment, the following equipment / 2. Training on best practices, based 2. Logistics, Mkhondo LM. infrastructure: 3. Agro-Processing/value – addition, on changing demand and
4. Storage/warehousing, supply, 3. Training on new innovations as 1. Administrative facilities, 5. Packaging, 6. Product distribution. they surface, 2. Rental facilities, 4. Processing skills, 3. Agro-Processing facilities, 5. Health and safety training, 4. Feedlots,
6. Management skills. 5. Abattoir, 6. Auction facilities,
7. Packaging facilities, 8. Quality control facilities,
AH 9. Agricultural input distribution and sales Human centre, Capital 10. Retail facilities, Resources Expenditure 11. Training centre, The AH will provide the following HR: 12. Student and staff housing, The estimated capital expenditure for the 13. Logistics and transport 1. Administrative staff, 2. Quality control personnel, GSDM AH is described as follows: facilities. 3. Processing/floor staff, The GSDM Agri-Hub Quantity 4. Research and demonstration Quantity 1 personnel, 5. Training personnel. Total Cost R93 628 200
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Key Role Training Infrastructure/ Location Equipment
The following forms of training would be The RUMC will serve the There will be only one RUMC in the province provided at the RUMC: following function: and will be located in Mbombela, Ehlanzeni 1. Training of the training personnel
1. Market intelligence, DM. The RUMC will be located in Mbombela on how to disseminate The RUMC would require to put in 2. Assist farmers, and processors in for the following reasons: information to the SHF, AH and the FPSU, managing a nexus of contracts, 1. Mbombela is the economic hub of place the following equipment 2. Market analysis skills, 3. Large warehousing and cold the province, /infrastructure: 3. Supply chain and logistics skills, storage facilities. 2. Has existing infrastructure, and is 4. Trading techniques (local and also the location of the international), 1. Large warehouses/ holding Mpumalanga Fresh Produce 5. Agriculture computer facilities, Market, and programme training. 2. Cold storage facilities, 3. It is linked with major routes and the 3. Administrative facilities/ KMIA. information centre,
4. Customer service desks.
RUMC
Human Resources The RUMC will provide the following HR; 1. IT expert/personnel, 2. Administrative manager,
3. Training personnel,
4. Marketing personnel.
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1 Introduction
1.1 Introduction
Urban-Econ has been appointed by the Department of Rural Development and Land Reform (DRDLR) to develop an Agri-Park Business Plan for Gert Sibande District. The DRDLR has been commissioned the implementation of an Agri-Parks programme that is aimed at the eradication of rural poverty, a critical challenge for the government. This requires that a business plan is developed for the Agri-Park in order to move forward with the implementation of the programme.
1.2 Project Goals and Objectives
Goals and objectives that drive the Master Agri-Parks Business Plan are defined by expressing the main aim of the programme as well as the milestones that need to be met to reach this aim.
The goal of the project will be to develop a Master Agri-Park Business Plan that aligns with the Agri-Park Model that was developed by the Department of Rural Development and Land Reform and the dominant Commodity Value Chains within the District
The project team understands that the objectives of the project can be summarised as follows:
To understand the Agri-Park Model developed by the DRLDR. To identify the existing agro-processing facilities and farmers within each district municipality and to establish possible linkages. To identify three possible agro-processing business opportunities for each Agri-Park To develop an institutional/operational plan for each Agri-Park that indicated how existing farmers will be linked with the Agri-park. Review all existing documentation, maps and information. To work with the representative of the districts and the CSIR. SWOT analysis that includes a legal, environmental, financial and technical analysis. Identify current agro-processing initiatives and possible synergies, linkages and opportunities to buy into existing businesses. Do a financial analysis of the proposed agro-business opportunities.
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To conduct a feasibility and viability assessment of the proposed agro-processing facilities. Develop an operational plan for the business park Determine the costing of the Agri-park. The Agri-Park must maximize the use of existing agro-processing, bulk and logistics infrastructure, including the availability of water, energy and roads The Agri-Park must support growing towns and revitalisation of rural towns in terms of high economic growth, high population growth and promote rural urban linkages
1.3 Methodology
Figure 1.1 provides for a methodology illustration of the various steps that are undertaken for the study, these are issue described below in more detail.
Figure 1.1: Methodology
Step 1: Step 2: Policy Step 3: Status Orientation Review Quo
Step 5: Agri-Hub Step 4: Identify Step 6: Feasibility Opportunity existing Assessment Analysis initiatives
Step 7: Financial Step 8: Step 9: Business Analysis Operational Plan Plan
1.4 Project Purpose
The purpose of the business plan is to guide the process of setting up an agri-park in the district municipality. Therefore, the master business plan serves to ensure that the agri-hub is aligned to the district’s commodities in the proposed agri-hub components. Furthermore, the
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AGRI-PARKS MASTER BUSINESS PLAN identification of current and potential enterprises, potential collaborations and associations founded on market analysis need to be reflected in the business plan, as well as the identification of three agro-processing business opportunities.
The business plans for the Agri-Parks will therefore, be structured around the identification of commodities, products, location, potential public and private partners, social mobilisation, value chain linkages, funding sources, a governance model and a budget. These are all viewed as critical success factors associated with the project. Importantly, an assessment of each district’s comparative advantages, in terms of agriculture, will inform the development of the Agri-Parks.
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2 The Agri-Park Model
2.1 Understanding the Agri-Park Concept
The lack of co-ordination and an integrated package has thus led to the Agri-Parks initiative, a concept relatively new in a South African context. The concept follows an integrated Agri- Parks approach of collective farming efforts, farmer incubation programmes, Agri-Clusters, and Eco-Villages; while also contributing to land conservation and preservation. The initiative is similar to that of a traditional agricultural business park or hub model, where multiple tenants and owners operate under a common management structure where a range of enterprises can exist.
The Agri-Parks model is required to have a strong social mobilisation component for the organisation, and the mobilisation of black farmers and agri-business entrepreneurs to actively support the initiative. Furthermore, the model should strengthen partnerships between government, the private sector, and civil society, while partnering with DAFF and COGTA is essential as well.
For the successful mobilisation of the programme, the Agri-Parks should: Be based on the locational economic and comparative advantages. Have all the elements of a value chain (cluster) present for a dominant comparative, or product advantage. Be able to lay a solid economic foundation for the development of rural industrialisation.
To ensure the mobilisation of the Agri-Parks programme the following guiding principles should be followed: 1. One Agri-Park per District (44 nationally, 6 provincially) 2. Agri-Parks must be farmer controlled. 3. Agri-Parks must be the catalyst around which rural industrialization will takes place. 4. Agri-Parks must be supported by government (for 10 years) to ensure economic sustainability. 5. Partnerships between government and private sector stakeholders should be strengthened, ensuring increased access to water, energy, and transport services, and production and develop existing and create new markets to strengthen and expand value-chains. 6. Maximise production of state land with high agricultural potential. 7. Increase and maximise access to markets to all farmers, especially emerging farmers and rural communities.
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8. Maximise the use of land with high agricultural potential (i.e. land with high production capability). 9. Maximise use of existing agro-processing, bulk and logistics infrastructure. 10. Revitalise rural towns and provide support to towns with good growth potential, particularly towns with high current or potential economic growth, and high population growth over the past ten years.
The Agri-Parks system is a relatively new concept to South Africa, but the idea draws from existing models locally and abroad, including educational/experimental farms, collective farming, farmer-incubator projects, agri-clusters, eco-villages, and urban-edge allotments, as well as market gardens. These models exist in both a public and private capacity, serving as transition or buffer zones between urban and agricultural uses. The naming of the concept as a “Park” is intended to convey the role that the Mega Agri-Park (nationwide network) will play in open space preservation.
Although the term “Agri-Parks” suggests permanent land conservation and recreational use that is synonymous with the description “public park”, it brings to the fore a more traditional model of an agricultural “business park”, or “hub”, where multiple tenants and owners operate under a common management structure. The Agri-Parks are intended to provide a platform for networking between producers, markets and processors, while also providing the physical infrastructure required for the transforming industries.
The focus of the Agri-Park is primarily on the processing of agricultural products, while the mix of ‘non-agricultural’ industries may be low or non-existent. Of prime importance is access to viable agricultural land, where a range of productive agri-horticultural enterprises may exist.
The following are the strategic objectives of the Agri-Parks Programme: Establish Agri-Parks in all of South Africa’s Districts District Municipalities that will kick start the Rural Economic Transformation for these rural regions. Promote the growth of the smallholder sector by creating 300 000 new small-scale producers, as well as 145 000 new jobs in the agro-processing industry by the year 2020 (as set out in the National Growth Path). Promote the skills of, and support to, small-holder farmers through the provision of capacity building, mentorship, farm infrastructure, extension services, production inputs and mechanisation inputs. Strengthen existing and create new partnerships within all three spheres of government, the private sector and civil society to develop critical economic
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AGRI-PARKS MASTER BUSINESS PLAN
infrastructure such as roads, energy, water, ICT and transportation/logistics corridors that support the Agri-Park value chain. Enable producer ownership of the majority of Agri-Parks equity (70%), with the state and commercial interests holding minority shares (30%). Allow smallholder producers to take full control of Agri-Parks by steadily decreasing state support over a period of ten years. Bring under-utilised land (especially in Communal Areas Land and land reform farms) into full production over the next few years, and expand irrigated agriculture. Contribute to the achievement of the National Development Plan’s “inclusive rural economy” and target of 1 million jobs created in agriculture sector through creating a higher demand for raw agricultural produce, primary and ancillary inputs, as well as generating increased downstream economic activities in the sector.
2.2 Defining the Agri-Park System
An Agri-Park can be defined as an innovative system of agro-production, processing, logistics, marketing and training, and extension services located in District Municipalities. As a network, it enables a market-driven combination and integration of various agricultural activities and rural transformation services. The Agri-Parks contain 3 basic units:
1. The Farmer Production Support Unit (FPSU). The FPSU is a rural outreach unit connected with the Agri-Hub. The FPSU does primary collection, some storage, some processing for the local market, and extension services including mechanisation. 2. Agri-Hub Unit (AH). The AH is a production, equipment hire, processing, packaging, logistics and training (demonstration) unit. 3. The Rural Urban Market Centre Unit (RUMC). There will be one RUMC per province. The RUMC has three main purposes; i. Linking and contracting rural, urban and international markets through contracts. ii. Acts as a holding-facility, releasing produce to urban markets based on seasonal trends. iii. Provides market intelligence and information feedback, to the AH and FPSU, using latest Information and communication technologies.
The model will be implemented over each of the districts in South Africa, leading to the creation of a Mega Agri-Park. Therefore, the business plans for the Agri-Parks will be structured around the identification of suitable products, location, potential public and private partners,
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AGRI-PARKS MASTER BUSINESS PLAN social mobilisation, value chain linkages, funding sources, a governance model, and a budget. These are all viewed as critical success factors associated with the project. Importantly, an assessment of each district’s comparative advantages, in terms of agriculture, will inform the development of the Agri-Parks. Diagram 2.1 provides a visual representation of the information and produce flows within the Agri-Hub system.
Diagram 2.1: Agri-Park produce and information flows
Agri-Parks
Large-Scale Farmers (LSH) Small-Holder Farmers (SHF) Co-operatives
LSF will be Farmer Production Support Unit (FPSU) 1. SHFs will be encouraged to use encouraged to use the Agri-Park process the Agri-Park process established as established as Agri-Hub (AH)
depicted. It is within Produce depicted. However, this process that SHF will be supported due to their existing over the next ten Rural Urban Market Centre (RUMC)
experience and years. Information product volumes they 2. SHF will be able to may choose to enter move produce from Market the Agri-Parks process the FPSU to the RUMC without going through the AH, if no further Value-adding
Farmer Production Support Units (FPSU): Are centres (more than one per district) of
agricultural input supplies, extension support, mechanisation support, local logistics
support, primary produce collection, and through-put to Agri-Hubs. The FPSUs have limited
sorting, packaging, storage, and processing for local markets with through-put of excess
products to Agri-hubs.
Agri-Hub: Agri-Hubs are located in central places in a District Municipality, preferably
places with sufficient physical and social infrastructure to accommodate
storage/warehousing facilities; Agri-processing facilities; packaging facilities; logistics hubs;
agricultural technology demonstration parks; accommodation for extension support
training; housing and recreational facilities for labourers. Agri-hubs receive primary inputs
form FPSU’s for processing, value adding and packaging, which is through-put into the
Rural Urban Market Centres or exported directly to markets.
A Rural Urban Marketing Centre (RUMC): RUMC is located on the periphery of large urban
area, these facilities provide market intelligence assist farmers, processors in managing a
nexus of contracts. With large warehousing and cold storage facilities to enable market
management. Both FPSU’s and Agri-hubs provide inputs to the RUMC. Agri-Parks will share
the RUMC as there will be one RUMC per province.
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Diagram 2.2 depicts the catchment area of the Agri-Park in the grey circle, essentially illustrating the size and contents of the Park that includes farmers, FPSU’s, AH’s and RUMC’s. The Agri-Hub, or AH, forms the central point of the Agri-Park that is linked to the FPSU’s. There will be more than one FPSU per district, which is intended to provide a supporting role between the AH and the farmers. All these components of the Agri-Hub are interlinked, providing a streamlined and integrated approach to agricultural and rural development.
Diagram 2.2: Strategic Representation of the Agri-Park model
Table 2.1 provides the relevant detail of the catchment of each component.
Table 2.1: Norms and Standards for Agri-Parks Component Proposed catchment area in Proposed catchment area in areas of low density areas of high density population population FPSU 30km 10km Agri-Hub 120km 60km RUMC 250km 150km
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The FPSU is designed to have catchment areas of 30km in low density areas and 10km in high density areas, indicating that there will be several per district. The AH is designed to have catchment areas of 120km in low density areas and 60km in high density areas, indicating fewer AH’s than FPSU’s. The RUMC is designed to have the largest catchment areas of 250km in low density areas and 150km in high density areas. It is important to note that there will be one RUMC in the province in order not to duplicate resources.
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3 Policy Review
3.1 National Government Policies
3.1.1 National Growth Path Government adopted the New Growth Path (NGP) in 2010 as the driver of the country’s job creation strategy. The NGP suggests that in order to achieve growth and transformation of economic imbalances, firm choices and shared determination are required from every structure within the South African society. The goal is to grow employment by five million jobs by 2020; to ensure that half of the working-age population in South Africa will be employed and that unemployment would be reduced from 25% to 15%. The NGP is also formulated to reduce inequality and eliminate rural poverty by identifying areas where long term structural and feasible changes can be made.
STRATEGIC PRIORITIES / FOCUS AREAS The strategic focus of the NGP is to support employment creation. Efforts will be prioritised in key sectors such as infrastructure, the agricultural value chain, the mining value chain, green economy manufacturing, tourism, and certain high- level services. To achieve these objectives, the framework seeks to:
Identify areas that have potential for large scale employment creation.
Develop a policy package to facilitate employment creation in the areas identified.
Create a consensus on the new local and global opportunities, and see how these opportunities can be seized in order to achieve socially desirable and sustainable outcomes.
Strengthen the domestic and regional agricultural markets by supporting smallholder farmers.
Broaden the markets for South African goods and services through a stronger focus on exports.
Provide quality basic and secondary education.
Invest in health including effective measures to address HIV/AIDS.
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The agricultural value chain has been prioritised to play an important role in the provision of job opportunities and improve the standard of living of farm workers. The NGP targets opportunities for 300,000 households in agricultural smallholder schemes, plus 145,000 jobs in agro-processing by 2020, while there is potential to upgrade conditions for 660,000 farm- workers. It can be concluded that the NGP supports the development of the Agri-Parks.
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3.1.2 National Development Plan – 2030 (2010) South Africa’s first National Planning Commission was set by President Jacob Zuma and inaugurated in May 2010. The objective posed to the National Planning Commission was to take an independent view of South Africa, and from that, derive a Vision and a Plan that is focused on enabling a much better quality of life for all South Africans by 2030. The primary channels through which improvement in quality of life are likely to come about, are through eliminating poverty and reducing inequality - the two single biggest problems in South Africa. These aspects affect every other aspect of development and every aspect of life for the citizens of this country. As both a cause and result of these primary problems, the NDP has identified nine specific and predominant challenges: 1. Too few people work. 2. The quality of school education for black people is poor. 3. Infrastructure is poorly located, inadequate, and under-maintained. 4. Spatial divides hobble inclusive development. 5. The economy is unsustainably resource-intensive. 6. The public health system cannot meet demand or sustain quality. 7. Public services are uneven and often of poor quality. 8. Corruption levels are high. 9. South Africa remains a divided society.
STRATEGIC PRIORITIES / FOCUS AREAS The three broad frameworks identified to ensure the proposed vision set out by the NDP is achieved are the following: 1. Raising employment through faster economic growth. 2. Improving the quality of education, skills development, and innovation. 3. Building the capability of the state to play a developmental, transformative role.
Given the complexity of national development, the plan sets out six interlinked priorities by which the main challenges will be addressed:
Uniting all South Africans around a common programme to achieve prosperity and equity.
Promoting active citizenry to strengthen development, democracy, and accountability.
Bringing about faster economic growth.
Higher investment and greater labour absorption, focusing on key capabilities of people and the state.
Building a capable and development state.
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Encouraging strong leadership throughout society to work together to solve problems.
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The National Development Plan views agriculture as critical to employment and food security. It is estimated that Agriculture would potentially create a million jobs by 2030. Agri- Parks will serve as important mechanisms to execute the NDP’s proposed rural development strategy due to their potential for supporting small-scale agricultural production and stimulating agro-processing in rural areas.
One core element of this approach is conducting commodity and value-chain analyses and mapping exercises to determine the best areas to establish Agri-Parks based on the growth potential of value-adding commodities. As such, each Agri-Park will focus on specific prioritised commodities that have the highest prospect of succeeding in their region. This is directly in line with the NDP’s approach of targeting high value commodities (most of which are labour intensive) to stimulate industrial growth, accompanied by measures that ensure sustainable production on redistributed land and an improved institutional support system.
In this regard, the NDP identifies certain agricultural sub-sectors that have the most potential for development, which are categorised into large labour-intensive industries, smaller labour-intensive industries, and large existing industries with significant value-chain linkages. For instance, small-scale labour intensive agriculture, including macadamia, pecan nut, rooibos tea, olive, fig, cherry, and berry industries, are found to have the greatest expansion potential due to the significant market demand for these products. The NDP projects that approximately 80 000 jobs can be created by further developing these particular areas of small-scale agriculture. By providing the necessary inputs, facilities, institutions, market- linkages, and partnerships, Agri-Parks can enable small-scale producers and rural residents to create new, and expand existing enterprises in these industries, which will have positive growth impacts on the rural economy. The NDP states that in South Africa a highly centralised, vertically integrated agro-processing sector already exists for staple foods such as maize, wheat, sugar, sunflower oil, tea, flour, peanut butter, cigarettes, beer, fruit juices, and canned goods. Key proposals identified for the agriculture and agro-processing sectors include the following:
Greater investment in providing innovative market linkages for small-scale farmers in communal and land-reform areas.
As part of a comprehensive support package for farmers, preferential procurement mechanisms should be put in place to ensure that new agricultural entrants can also access these markets.
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Growth in agricultural production has always been fuelled by technology, and the returns to investment in agricultural research and development are high. Technology development should therefore, be prioritised.
Policy measures to increase intake of fruits and vegetables, and reduce intake of saturated fats, sugar and salt, as recommended in the South African food dietary guidelines, to accompany strategies to increase vegetable and fruit production.
3.1.3 Industrial Policy Action Plan (IPAP)-2013/14 – 2015/16 The Industrial Policy Action Plan (IPAP) 2013/14-2015/16 is in the fifth iteration of IPAP and the apex policy document of the Department of Trade and Industry (DTI). It is drawn from a range of visions set out by successive industrial policies such as the NDP, NGP, and National Industrial Policy Framework (NIPF). The IPAP sets out an industrial policy framework with overriding interventions that will prevent industrial decline and support growth, as well as diversifications of South Africa’s manufacturing sectors. IPAP will ultimately lead to a restructured economy with more value-adding, labour intensive, and environmentally sustainable industrial activities.
STRATEGIC PRIORITIES / FOCUS AREAS IPAP focuses on building on, and fulfilling, the plans set out in IPAP 2012/2013 in its transversal and sector-specific interventions. These transversal interventions are in the areas of:
Public procurement
Competition policy
Innovation and technology
Skills for the economy
Industrial financing
Developmental trade policy
Regional integration
Special economic zones
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT IPAP identifies the agro-processing industry as a sector with potential to spur growth and create jobs, because of its strong backward linkage with the primary agricultural sector. The agriculture and agro-processing value chain represents an important source of labour intensive growth. In addition, this value chain is central to the rural development and smallholder farmer development objectives of government.
The key-programmes identified for agro-processing within the IPAP are the following: 1. Development of a Food-processing Strategy and Action Plan with the objective of accelerated growth in the food-processing sector.
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2. Development of a small-scale milling industry to enable small-scale maize milling enterprises to produce for local markets at competitive prices. 3. Enhancement of competition in the fruit and vegetable canning industry - The creation of a sustainable platform for the long-term growth and competitiveness of the industry. 4. Development of a Soybean Action Plan promoting market linkages between primary agricultural producers and processors. 5. Development of the organic food sector – The development of a competitive organic sub-sector producing high-quality food products for both local and export markets. 6. Supporting the Public-Private Partnership (PPP) for Food Security – Entails smallholder farmer access to formal retail chains, Government procurement, and small scale processing opportunities. With infrastructure investment as one of its main components, upon which all other proposed actions rest, the Agri-Park Programme is key in advancing the objectives of IPAP. The Agri- Parks Programme will further promote an approach to land reform and rural development consisting of comprehensive spatial planning, appropriate categorisation of land and beneficiaries to ensure sustained agricultural development, associated/targeted skills development, employment creation, significant infrastructural expansion, improved public service delivery, more dedicated investment in agriculture through a targeted approach, and the increased involvement of the private sector in land reform and rural development initiatives.
3.1.4 Agricultural Policy Action Plan (APAP) (2015-2019) The Agricultural Policy Action Plan (APAP) (2015-2019) aligns itself to other existing national plans such as the NGP, NDP, and the IPAP. These plans were geared towards providing decent employment through inclusive growth, rural development, food security/ protection, as well as enhancement of environmental assets and rural resources; with key job drivers identified as agriculture, infrastructure, mining, manufacturing, tourism, and the green economy. The APAP sets an action plan for a five-year period (2015-2019), and seeks to translate the high-level responses offered in the Integrated Growth and Development Plan (IGDP) into tangible, concrete steps.
STRATEGIC PRIORITIES / FOCUS AREAS The APAP seeks to provide both a long-term vision, and focused interventions in a 5-year rolling schedule, to be updated annually. APAP is based on Sectoral Key Action Programmes (commodities) and Transversal Key Action Programmes (e.g. research and innovation). It furthermore, presents institutional arrangements and processes for achieving this objective –especially to integrate planning, M&E between DRDLR and DAFF across 3 spheres of government. The APAP has 4 policy levers which are:
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1. Equity and Transformation: Ensuring a more producer-friendly (and consumer-friendly) market structure
Accelerating implementation of the Charters and the Small-scale fisheries policy;
Promoting local food economies; and
Investment in agro-logistics 2. Equitable Growth and Competitiveness: Promoting import substitution and export expansion through concerted value chain/commodity strategies;
Reducing dependence on industrial and imported inputs;
Increasing productive use of fallow land; and
Strengthening R&D outcomes. 3. Ecological Sustainability: Climate Smart Agriculture 4. Governance: Support services;
Skills development;
Research and development;
Knowledge and information management (integrated spatial economic planning);
Market access, information and regulation; and
Institutional arrangements
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The evaluating measurements used within the APAP to meet its short- and medium-term in objectives are the following: 1. Contribution to food and security 2. Job creation 3. Value of production 4. Potential contribution to trade balance The APAP informs the Agri-Parks Business Plan through the identification of the following specific sub-sectors for key action programmes: 1. Poultry/Soybeans/Maize Integrated Value Chain 2. Red meat value chain 3. Wheat value chain 4. Fruits and vegetables 5. Wine industry 6. Forestry 7. Small scale fisheries
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The developments of Agri-parks are in line with the APAP policy levers and would help in achieving its set out goals.
3.1.5 Department of Agriculture, Forestry and Fisheries Agro-processing Strategy (2012) The Department of Agriculture, Forestry and Fisheries’ (DAFF) Agro-Processing Strategy was developed to create a strategic direction on agro-processing for both national and provincial government. The strategy seeks to provide a response on the agro-processing job creation and related government priority targets set out in existing policy frameworks such as the NGP and IPAP.
STRATEGIC PRIORITIES / FOCUS AREAS The strategic objective is to articulate how government should intervene to support and develop Small and Medium Enterprises (SMEs), agro-processing in the local and global agricultural sector, as well as forestry and fisheries value chains. The following strategic interventions are set out by this strategy: 1. Facilitate access to incentives and support packages 2. Facilitate access to infrastructure 3. Promote value chain linkages 4. Support technical and managerial training 5. Facilitate access to appropriate technology 6. Facilitate access to business development services The implementation of this strategy is to be aligned with the implementation of the Smallholder Development Programme, the Zero Hunger Plan, and the Marketing Strategy of the DAFF to realise its intended objectives.
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT Developing and supporting the currently underserviced agro-processing SME has been identified as key to achieving government’s priority targets of promoting job creation, economic growth, and equity. The findings of the Department of Agriculture, Forestry and Fisheries Agro-processing Strategy forms a vital input in formulating the Agri-parks Master Business Plans due to the scope of agro-processing in the national economy.
3.1.6 Strategic Plan for the Department of Agriculture, Forestry and Fisheries (2013/14 – 2017/18) The Strategic Plan for the DAFF was guided by other key policies such as NGP, NDP, IPAP and the work of the Presidential Infrastructure Coordinating Commission (PICC); aimed at tackling the challenges of poverty, inequality, and unemployment. The Strategic Plan for the DAFF sets out programmes of action and projects for a period of five years (2013/14 – 2017/18), and is
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STRATEGIC PRIORITIES / FOCUS AREAS The Strategic Plan of the DAFF aims to address the social and economic challenges that the AFF sectors are faced with. It further sets new opportunities for service delivery with relation to job creation, food security, rural development, and skills development. The opportunities or action areas highlighted for key policy development include the following:
Food security production programmes
Strategic plans for supporting small producers
Aquaculture programmes
Agro-processing strategic frameworks
The strategic goals set out in the document are the following:
Increased profitable production of food, fibre, and timber products by all categories of producers.
Sustained management of natural resources.
Effective national regulatory services and risk management systems.
A transformed and united sector.
Increased contribution of the sector to economic growth and development.
Effective and efficient governance.
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The Strategic Plan of the DAFF supports the development of the Agri-parks development. Agro-processing is highlighted to play a key role in ensuring an equitable food-secure economy. Interventions should focus on developing processed agricultural products, while at the same time targeting increased export-trade. Investment in agro-processing should be increased as a means of reinvigorating specific strategic value chains such as soya beans, rooibos, beverages, fruit and vegetables, as well as forestry. An equitable food-security economy will improve access to markets, especially for smallholder farmers.
3.1.7 National Policy Framework on the Development of Small and Medium Agro-Processing Enterprise in the Republic of South Africa The National Policy Framework on the Development of Small and Medium Agro-Processing Enterprise in the Republic of South Africa was initiated by the DAFF.
STRATEGIC PRIORITIES / FOCUS AREAS The objectives of this document are the following:
Rural industrialisation through the establishment of agro-processing industries that are closer to production areas.
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Local economic growth through increased trade in rural areas.
Job creation through the establishment of SME agro-processors to improve livelihoods of both smallholder agro-processors and producers. However, the specific challenge that this policy aims to address is the limited active participation of rural-based SMEs agro-processors in the agro-processing mainstream value chain. The strategic objective is to create a profitable, competitive and thriving small and medium agro-processing industry. To achieve this, the policy seeks to:
Provide entrepreneurial support to small and medium agro-processors.
Support enterprise development through facilitating access to markets, finance, incubation, and mentorship.
Facilitate agro-processing industry research and technology transfers.
Facilitate infrastructure investment specifically within rural areas.
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The major constraints to developing the thriving agro-processing value chain identified in the framework are lack of appropriate technology, inadequate infrastructure, access to finance, and low levels of technical and entrepreneurial skills. The Agri-Parks developments will focus on providing continuous support to small and medium scale agro-processing enterprises. Continuous support will assist in increasing the number of enterprises and address the challenges they face with integrating and actively participating in the mainstream economy.
3.1.8 Strategy for the Development of Small and Medium Agro-Processing Enterprises in the Republic of South Africa (2014 – 2019) The Strategy for the Development of Small and Medium Agro-processing Enterprises in the Republic of South Africa was developed to support increased participation of small and medium scale agro-processing enterprises in the agro-processing sector. The strategy aims to support the vision of the DAFF, which aligns with the NDP and IPAP, while linking directly to the outcomes of the Medium Term Strategic Framework (MTSF, 2009).
STRATEGIC PRIORITIES / FOCUS AREAS The strategy seeks to articulate how the small and medium agro-processing enterprises within the agriculture, forestry and fisheries sector in South Africa can be supported and developed at all levels of government (national, provincial, and local).
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IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The Strategy for the Development of Small and Medium Agro-processing Enterprises in the Republic of South Africa informs the Agri-parks Master Business Plan through identifying the following four intervention pillars needed to for the development of Small and Medium Agro- processing Enterprises: 1. Entrepreneurial support 2. Enterprise development (Access to finance, market access and incubation) 3. Industry research and technology transfer 4. Infrastructure investment
3.1.9 Agriculture, Forestry and Fisheries: Integrated Growth and Development Plan 2012 The Integrated Growth and Development Plan (IGDP) was developed for the Medium Term Expenditure Framework (MTEF) (2011/12 – 2014/15) with the aim of providing a long-term strategy for the growth and development of the agricultural, forestry and fisheries sector in South Africa. The IGDP seeks to address the current realities and challenges that these sectors face, and to develop a common vision that will ensure equitability, productivity, competitiveness, and sustainability.
STRATEGIC PRIORITIES / FOCUS AREAS The strategic priorities of the IGDP for the agricultural, forestry, and fisheries sector are the following:
Attaining equity and transformation
Equitable growth and competitiveness
Environmental sustainability
Good governance
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The IGDP identifies that in terms of agro-processing, there is a need to support South African exporters to position their products better in fast-growing, developing country destinations and Africa. This may require focused export intelligence and marketing support, as well as intergovernmental assistance to ensure that South African products are not unfairly subject to nontariff barriers. Greater emphasis and investment is required in the understanding and managing of international trade standards and regulations, especially in the areas of food safety and sanitary and phytosanitary measures.
3.1.10 Department of Rural Development and Land Reform: Comprehensive Rural Development Programme The Comprehensive Rural Development Programme (CRDP) is aimed at being an effective response against poverty and food insecurity through maximising the use and management
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AGRI-PARKS MASTER BUSINESS PLAN of natural resources to create vibrant, equitable, and sustainable rural communities. A CRDP must improve the standards of living and welfare, but also rectify past injustices through rights- based interventions and address skewed patterns of distribution and ownership of wealth and assets. The strategic objective of the CRDP is therefore, to facilitate integrated development and social cohesion through participatory approaches in partnership with all sectors of society. This document therefore, serves as the policy framework document for the Comprehensive Rural Development Programme - or 'CRDP'. The document thus, aims to set out the programme principles.
STRATEGIC PRIORITIES / FOCUS AREAS The vision of the CRDP is to create vibrant, equitable, and sustainable rural communities include: contributing to the redistribution of 30% of the country’s agricultural land; improving food security of the rural poor; creation of business opportunities, de-congesting and rehabilitation of over-crowded former homeland areas; and expanding opportunities for women, youth, people with disabilities, and older persons who stay in rural areas.
The ultimate vision of creating vibrant, equitable, and sustainable rural communities will be achieved through a three-pronged strategy. The components of this three-pronged strategy are also the key elements that characterise the CRDP and are as follows:
Coordinated and integrated broad-based agrarian transformation,
Strategically increasing rural development,
Improved land reform.
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The types of priorities that are typically catered for in the CRDP, categorised according to the three key strategies mentioned above, include – but are not limited to – the following:
A. Economic Development Agrarian Transformation
Livestock farming and related value chain development (exploring all possible species for food & economic activity).
Cropping and related value chain development (exploring all possible species, especially indigenous plants for food and economic activity). Rural Development
The establishment of business initiatives, agro-industries, cooperatives, cultural initiatives, and vibrant local markets in rural settings.
B. Social Development Rural Development
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The empowerment of rural communities, especially women and the youth, through facilitating and mediating strong organisational and institutional capabilities and abilities to take full charge of their collective destiny.
Capacity building initiatives, where rural communities are trained in technical skills, combining them with indigenous knowledge to mitigate community vulnerability to, especially, climate change, soil erosion, adverse weather conditions and natural disasters, hunger and food insecurity.
C. Physical and Infrastructure Development Rural Development
Revitalisation and revamping of old, and the creation of new economic, social, and information communication infrastructure and public amenities and facilities in villages and small rural towns.
D. Institutional Development Land Reform
Projects will be linked to the acquisition of, and access to, land through the three land reform programmes (redistribution, tenure, and restitution). All projects implemented through the three programmes will be implemented efficiently but in a sustainable manner linked to the strategic objective of the CRDP.
3.1.11 Department of Agriculture, Forestry and Fisheries
1. COMPREHENSIVE AGRICULTURE SUPPORT PROGRAMME (CASP) To ensure the commercial viability of emerging farmers from a household food security level to a commercial level, a farmer-to‐ farmer mentorship policy has been developed. The department regards skills development as one of its critical focus areas and this obviously includes providing hands-on training to emergent farmers in various fields of farm management. 2. MICRO‐ AGRICULTURAL FINANCIAL INSTITUTIONS OF SOUTH AFRICA (Mafisa) The Micro‐ Agricultural Financial Institutions of South Africa (Mafisa) encourage partnerships between established agricultural enterprises and emerging farmers and entrepreneurs by providing access to finance for farmers, especially beneficiaries of the land restitution, redistribution, and land tenure reform programmes. The Land Bank administers the credit scheme on behalf of the department and provincial departments provide assistance to access the scheme. Four development finance institutions are currently participating in the disbursement of Mafisa funds in the provinces.
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3. ILIMA-LETSEMA The grant provides for farmers who lack access to credit to be assisted to access agricultural production inputs. The inputs are necessary to increase agricultural production and hence, to improve household and national food security. Jobs are sustained and new ones created when farm enterprises are made operational, and this requires provision of the production inputs
4. AGRICULTURAL BROAD-BASED BLACK ECONOMIC EMPOWERMENT (AgriBEE) The AgriBEE Charter seeks to provide direction on the integration of emerging participants into mainstream agriculture by creating linkages, partnerships, and networks for balanced, mutually benefiting results for all concerned. It specifically encourages partnerships between established agricultural enterprises and emerging farmers and entrepreneurs. It seeks to ensure enhanced competitiveness and sustainable development with improvement/expansion of the existing businesses, rehabilitation of ailing agricultural business concerns, and expanded entry for new businesses in the sector.
3.2 Provincial Government Policies
3.2.1 Mpumalanga Spatial Development Framework Spatial Development Framework (SDF) is a planning tool informed by the international, regional and national initiatives and legislations. The purpose of the SDF is to strategically plan the implementation of development projects in the province.
STRATEGIC PRIORITIES / FOCUS AREAS The framework identifies the economic sector growth strategies in agriculture as follows: The exploitation of competitive advantage in agricultural and forestry sector within Msukaligwa LM, Mkhondo LM, Dr Pixley Ka Isaka Seme LM, Dipaleseng LM, Victor Khanye LM, Emakhazeni LM, Umjindi LM and Nkomazi LM. The roll-out of the Comprehensive Rural Development Programme must assist in expanding agriculture potential to ensure food security and provide for agro- processing The application of new sources of water for irrigation and water technology to provide sustainable agricultural products for agro-processing and commercial farming
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The challenge of new sources of water will impact Agro-Parks in commercial crop farming and agro-processing. Agro-processing systems will need factor the shortage of water and develop water saving processes. Research in Agri-Parks will need to factor such challenge and come up will innovative and water-saving processes.
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3.2.2 Mpumalanga Economic Growth and Development Path (2011) Mpumalanga Economic Growth and Development Path (MEGDP) illustrate economic landscape of Mpumalanga with a view of future economic growth and development. The MEGDP correlates with the National Growth Path in identifying job drivers and economic sectors with the potential to generate high employment. The provincial plan takes into consideration province-specific comparative and competitive advantages and the linkages to key provincial strategic objectives.
STRATEGIC PRIORITIES / FOCUS AREAS Key objective of MEGDP is to promote economic growth that creates jobs and reduce poverty and inequality in Mpumalanga. Key sectors that promote job creation were identified, which included agriculture among other priority sectors. Interventions to facilitate growth and job creation in the Province are identified as: Infrastructure development: pack houses, dams, silos, agro-processing infrastructure Skills development Support to small-scale farmers and agri-businesses Fast-track the settlement of outstanding land claims
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The interventions needed by the Province to develop skills and support small-scale farmers will be provided by the Agri-Park. The Agri-Park objectives is fulfilling the provincial plan of supporting small-scale farmers and develop infrastructure in the agricultural sector.
3.2.3 Mpumalanga Vision 2030: Strategic Implementation Framework The provincial vision sets specific targets that are required to develop the province using the long-term approach. Specific targets are in line with a number of factors that influence such targeted development. The vision is aligned with the National Development Plan
STRATEGIC PRIORITIES / FOCUS AREAS The province has identifies employment and education as top two critical needs for the long term development of the province. Mpumalanga has then set the following targets for development: Economy and employment priorities: Specific targets are set for increased employment and GDP growth for year 2030 Education, training and innovations: The province has targeted to improve the pass rate to 80% in 2030 Create an effective social welfare system Improve health care system
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IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT Objective of creating sustainable employment and offer relevant training in agricultural activities serves priority of employment while increasing production and provincial economy of Mpumalanga
3.3 District Policy Review
3.3.1 Gert Sibande Spatial Development Framework Gert Sibande District SDF is planned to align with the district Integral Development Plan (IDP) and all National and Provincial plans. The purpose of the document is to facilitate the implementation of the IDP
STRATEGIC PRIORITIES / FOCUS AREAS Gert Sibande District Municipality SDF objectives are as follows:
To provide strategic, indicative and flexible forward planning instrument to guide decisions on land development; To provide a set of policies, principles and directives for spatial development; To provide a clear and logical framework for private and public sector investment; To promote sustainable development in terms of natural and built environment conservation; To facilitate the social, economic and environmental sustainability; To provide a framework for dealing with key issues such as natural resource management, land reform, and land use management; To facilitate the development of aesthetical urban and rural landscape
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT The Agri-Park key goal of transforming rural areas and create linkages between municipalities will ensure that Gert Sibande DM plans to develop rural areas is ensured. The project goal to support agricultural sector for at least 10 years means that long term impact and sustainable job crating will be evident. The project has a good chance of being a success in the long-run when government municipalities work in partnership with a number of stakeholders to nurture and properly guide the management of the project. This plan clearly indicates that he success of the project lies in good relationship between government and private sector to stir the project in the good direction.
3.3.2 Gert Sibande District Integral Development Plan Review (IDP) Integral Development Plan (IDP) is an approach to planning that identifies the best solution to long-term development. The IDP outlines the projects and programmes that municipality has
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STRATEGIC PRIORITIES / FOCUS AREAS The priority Development Objectives emanating from the IDP are as follow: To accelerate the provision of, and to ensure that all communities have access to clean water and decent sanitation infrastructure; To accelerate the provision of, and to ensure that all communities have access to electricity services; To accelerate the provision of, and to ensure that all communities have access to better roads and stormwater infrastructure; To provide infrastructure that will create an environment that is conducive to economic growth and development; To provide infrastructure via using the approach of the Expanded Public Works Programme (EPWP), so as to halve unemployment; To accelerate the provision of quality health services that is affordable and accessible to all communities; To support the provision of comprehensive community facilities and services that is affordable and accessible to all communities where such facilities are needed by communities; To ensure that housing developments are located closer to places of work / economic opportunity; To provide comprehensive and effective disaster management, fire and emergency services to all communities; To ensure comprehensive transport planning in support of economic growth and development; To promote tourist attraction areas, and to increase the participation and beneficiation of the previously marginalised communities; To ensure protection of the environment.
IMPLICATIONS FOR THE AGRI-PARKS DEVELOPMENT Agri-Parks establishments aim at supporting agricultural sector and empower activities in this sector. Support to small-scale farmers and arising businesses in the value chain will motivate local people. Priority will be given to local people in job creation.
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4 Locational Context
4.1 District Description
Gert Sibande District is the south-eastern District of Mpumalanga, bordering Swaziland in the east, Kwazulu-Natal and Free State in the south and Gauteng in the west. Gert Sibande District is divided into seven local municipalities, namely (see Map 4.1): Chief Albert Luthuli Local Dr. Pixley Ka Isaka Seme Local Municipality, Municipality, Mkhondo Local Municipality, Dipaleseng Local Municipality, Msukaligwa Local Municipality, Lekwa Local Municipality, and Govan Mbeki Local Municipality.
Map 4.1: Local Municipalities of Gert Sibande DM
The primary nodes in the District include Ermelo and Secunda while Standerton, Bethal, eMkhondo (Piet Retief) and Carolina are classified as secondary nodes.
Map 4. indicates the spatial overview for Gert Sibande DM.
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Map 4.2: Gert Sibande Spatial Overview
(Source: Mpumalanga SDF, 2013)
Gert Sibande DM has a very good road network which includes the N11, the N2 and the N17. This District also shared a border with Swaziland which can be used to promote trade and tourism. The Table below provides an overview of nodal development areas within Gert Sibande DM.
Table 4.1: Gert Sibande DM Spatial Overview and Economic Activities Cluster Area
Mining The majority of mining activities (mostly coal mining) are located in the central and western areas of the District i.e. the Secunda region, the Bethal region and the Standerton region. Some mining also occurs in the northern areas of the District near Carolina. Primary Industrial The primary industrial area of the District is located in Secunda (Govan Mbeki Cluster and LM) where SASOL is situated. Other industrial areas also include Standerton, Manufacturing Ermelo and eMkhondo. Agricultural Cluster Agriculture is prominent in central and eastern part of District, with a focus on crop and livestock farming. Agriculture clusters in the District include Balfour (Dipaleseng LM), Standerton (Lekwa LM) Bethal (Govan Mbeki LM) and Ermelo (Msukaligwa LM)
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Cluster Area Forestry cluster Major forestry activities occur along the Swaziland Border in the east with the node for this industry being in eMkhondo. Key Tourism Nodes The two most important tourism nodes in the District is the town of Wakkerstroom, which is located in the south of the District, bordering KwaZulu- Natal and the Chrissiesmeer Lake District in the north-east of the District. Other tourism nodes include the Grootdraai Dam, Heyshope, Malolotja reserve, Nkomazi Wilderness, Nooitgedacht Nature Reserve and the Barberton Mountainlands.
4.2 Location of Agri-Hub
The selection criteria for determining locations of the agri-hub include the following elements: 1. Existing Land Capability 2. Existing Agricultural infrastructure (e.g. silos, abattoirs, millers, ginners, food processors, fresh produce, etc.) 3. Proximity to potentially vacant state land parcels 4. Proximity to water sources (dams, rivers, reservoirs) 5. Proximity to CASP, Ilima-Letsema, PLAS, Restitution claims, recapitalisation projects 6. Identification of enterprise areas (DAFF 1936) e.g. cattle, sheep, maize 7. Proximity to social relief projects 8. Proximity to EDD gateways 9. Existing Road and Rail connectivity 10. Proximity to retail markets (SPAR, Pick N Pay food stores) 11. Proximity to PIMD poorest wards 12. Proximity to Land Care projects 13. Proximity to rural towns 14. Proximity to AVMP farms 15. Proximity to existing CRDP wards
Based on the analysis done by the Province it was decided that eMkhondo (Piet Retief) town is to be the best location for the establishment of the Agri Hub for the following reasons: • It is an EDD district gateway • It is surrounded by the poorest wards (PIMD) • Good road and railway connectivity (N2) • Close to a CRDP project to the north of the location • Land capability is moderate to good • State land parcels to the north and west which are far located from Mkhondo town
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• There are PLAS projects, Land Care, CASP, Land Reform project, 2 SPAR food stores at the location • There is also a miller and 3 cooperatives at the location • There should be sufficient water supply available in the form of rivers near the location • There are a few CASP 15-16 projects surrounding Mkhondo town • There are RID projects to the west of the proposed location • There are 3 Cooperatives in Mkhondo town • Surrounded by poorest wards (PIMD)
4.3 Maps
The Agri-Park for Gert Sibande will be located in eMkhondo (Piet Retief) as seen in Map 4.3.
Map 4.3: Gert Sibande District Agri-Hub
Source: Urban-Econ GIS Unit, 2015
4.4 Economic Infrastructure
4.4.1 Transport Network As far as the transport network is concerned, the main features include the N3, N17, N2 and N11 freeways. These constitute important spatial structuring elements, as they not only link the
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District’s first order settlements to one another, but to prominent economic activity areas outside of the District such as Middelburg, Witbank, the larger Gauteng area, Newcastle, Pietermaritzburg, Durban, Richards Bay, and Mbabane in Swaziland (via the Oshoek border post). Significantly, the N2/N17 and N11 freeways provide the District with a direct link to two of South Africa’s harbours on the east coast, namely Richards Bay and Durban.
The N17 follows an east-west alignment reaching from Gauteng (Johannesburg) in the west to Swaziland at the Oshoek border post in the east. The road currently passes through or alongside important urban areas in the district including Leandra, Evander, Secunda, Trichardt, Bethal and Ermelo, and some smaller areas such as Davel, Kinross, Warburton, Lochiel and Hartebeeskop. Notably, the N17 is an important freight corridor for the transportation of timber, agricultural produce and coal, as well as goods from Richards Bay. Given the importance of the road as an international link between Gauteng and Swaziland, SANRAL is in the process of upgrading the entire route as a continuous roll road.
Map 4.4: GSDM Transport Network
Source: GSDM SDF, 2014
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The N11 follows a north-south alignment passing through Ladysmith, New Castle (outside the district), Volksrust, Amersfoort, Ermelo and Hendrina towards the N4. Like the N17 it is an important freight transport corridor, but also carries commuter, private and tourism traffic.
The N2 leads northwards from the KwaZulu-Natal north coast via Piet Retief to Ermelo, where, although it terminates, links up with either the N17 (east-west), or the N11 (north-south). It is an important link in the extended Johannesburg – Richards Bay freight and tourism corridor. Although only a short stretch of the N3 traverses the District just outside of Heidelberg, given its spatial location in orientation to the District’s centres of economic activity, the freeway has no real development impact on the District. Traffic along the N3 is essentially Johannesburg – Durban based and little diversion from the mainstream occurs.
4.4.2 Water Bulk water supply for each of the local municipal areas is obtained from the various rivers and dams forming part of the aforementioned river systems. In turn, each local municipality is responsible for purification and reticulation of the bulk water supply it receives. The reticulation systems generally include reservoirs, pumping stations and a network of pipes servicing individual stands.
The quality of water is a big concern amongst farmers, retailers and financial institutions. The poor maintenance of sewerage systems and water from old mines has the effect that water is not treated before it flows into catchment dams. The water from catchment dams is used to irrigate fresh produce and other crops. If the quality of water is poor, it influences not only the quality of crop, but can also cause diseases in humans and animals.
High volumes of water remain unaccounted for and in order to provide a sustainable and cost effective service, it is necessary that this be urgently addressed. Water infrastructure investments will be a major consideration for future farming projects to assist with the delivery of water for irrigation and livestock to deep rural areas.
4.4.3 Electricity Electricity supply is critically important to the farming of some agricultural products and essential to all agro-processing activities. Most areas within major centres in the District are able to be electrified relatively easy. Farms situated in rural areas may require significant electricity infrastructure investments.
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5 Main Role-Players in the District
The following section will outline the various role-players in the Gert Sibande District Municipality (GSDM) who would play role in the Agri-Park (AP) and Agri-Hub (AH). There are three categories of role-players which will be discussed, namely government, private companies, and associations and organisations.
Extension services would play a pivotal role in providing support services to both the Agri-Hub (AH) and Agri-Park (AP). This section focuses on the main role players that will contribute to the overall development of the Gert Sibande District.
Table 5.1: Main Role Players Government Organisations and Associations Department of Rural Development and Land Red Meat Industry Forum Reform (DRDLR) Red Meat Producers Organisation Mpumalanga Department of Agriculture, Emerging Farmers Rural Development, Land and Environmental South African National Halaal Authority Affairs (DARDLEA) (SANHA) Gert Sibande District Municipality South African Feedlot Association (SAFA) National Development Agency (NDA) National Emergent Red Meat Producers Department of Trade and Industry Organisation (NERMPO) Small Enterprise Development Agency (SEDA) National African Farmers Union (NAFU) Local Municipalities (LM) BKB Department of Agriculture, Forestry and African Farmers Association of South Africa Fisheries (DAFF) (AFASA) Mpumalanga Economic Growth Agency AgriMega (MEGA) Women in Agriculture (WARD) Red Meat Abattoir Association (REMA) Agriculture Resource Council (ARC)
Other potential role players include financial institutions such as First National Bank, Standard Bank Agriculture, ABSA Agribusiness and Land Bank as well as training institutions such as the University of Mpumalanga and AgriSETA.
Industry role players are discussed in detail on subsequent sections.
5.1 Government
Government role in the industry to ensure that Agri-Parks are a successful intervention involves a number of responsibilities such as: 1. Mpumalanga DARDEA supports the management of Agri-Parks to ensure sustainability
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2. National and Mpumalanga DAFF provide extension services to Small Holder and Farmers and Large Scale Farmers. The department will also ensure efficient management of Agri-Park by supporting farmers 3. Gert Sibande District Municipality will ensure relationships between stakeholders and role players in the market. 4. Department of Trade and Industry offers financial incentives to local municipalities and communities to promote rural transformation 5. Small Enterprise Development Agency (SEDA) will support FPSUs and other agri-business in the value chain. The agency supports entrepreneurs in starting businesses and offer guidance in managing businesses. 6. National Development Agency (NDA) sill support agri-businesses in FPSUs as well as co- operatives 7. Mpumalanga Economic Growth Agency (MEGA) will support FPSUs and RUMCs
Government supports agricultural sector in order to transform rural communities and promote economic activities. Government support in sustaining development in the sector involves promotion of extension services by both government and private sector companies. Extension services refer to continuous and changing process in the rural area. The process of extension involves four elements as identified by Food and Agriculture Organization of the United Nations (FAO); namely: Knowledge and skills: Extension brings farmers more information and transfer skills to farmers in different business areas, such as business management, record keeping Technical advice and support: technical support applies directly to production activities of the farm and action needed to improve production Farmer organization: Extension services also help to set up, structure and develop organizations of local farmers Motivation and confidence: extension programmes seek to support and motivate farmers to take the initiative and participate in these services rather that work in isolation. A number of private companies in partnership with government departments offer services in a form of training in business, mentorship, capacity building
The Department of Agriculture is currently developing the national policy on extension and advisory services for agriculture, forestry and fisheries. The process of developing the policy has started in partnership with Agricultural Research Council. The policy purpose is to guide and regulate the provision of extension and advisory services in the country.
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Table below summarises a few of government department or agencies that offer extension services to various businesses in agriculture.
Table 5.2: Extension services offered by government and private organizations Agency Description Small Enterprise Provides information to small enterprises and perspective Development Agency (Seda) entrepreneurs that will help and encourage them to start and build sustainable businesses. Services provided by SEDA includes: information advice and referrals; import and export training; trade information; technical support; business mentoring; market access Grain South Africa: Farmer Grain SA in partnership with a number of organizations and Development Programme government department offer extension advisory through individual contact with the farmers, mentorship, study groups and specific training courses. South African Sugarcane Offers extension services to producers in the sugar industry. The Research Institute services include regional extension (service medium to large scale commercial growers) and small-scale grower extension. Agricultural Research Agricultural Research Council division of Subtropical crops offers Council: Subtropical Crops extension and advisory services to its members in a form of organising extension and advisory study groups, farm visits develop government extension advisors. services
Government has a number of agencies mandated to finance businesses in agricultural sector. A number of these financing products developed are aimed at promoting small businesses to better participate in the economy of the country. Financing is available in different forms such as loans, grants, incentives schemes.
The department of Trade and Industry (DTI) together with other government formed agencies has a number of funding programmes for businesses involved in agricultural activities or located in rural areas with disadvantaged backgrounds, see Table 5.3.
Table 5.3: Government Funding Programmes Department of Trade and Industry programmes Programme Description Business Process BPSI aims at attracting investment and creating employment opportunities Services Incentive in South Africa through offshoring activities. (BPSI) The BPSI comprises of two components as follows: a) A base incentive, b) a two-tier differential incentive for non-complex jobs and complex jobs, based on the Rand value per job determined by fully loaded costs.
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Department of Trade and Industry programmes Programme Description The base incentive is a five-year operational expenditure (OPEX) grant that tapers down in line with the narrowing cost gap between South Africa and other offshoring destinations. Critical Infrastructure CIP is a cost sharing grant for projects designed to improve critical Programme (CIP) infrastructure in South Africa. The Co-Operative The CIS is a grant scheme that supports broadening economic participation Incentive Scheme by historically disadvantaged communities to enter the mainstream (CIS) economy Incubation Support ISP to develop incubators and create successful enterprises with the Programme (ISP) potential to revitalise communities and strengthen local and national economies. ISP aims to ensure that SMMEs graduate into the mainstream economy through the support provided by the incubators. Black Business Supplier BBSDP is a cost-sharing grant offered to small black-owned enterprises to Development assist them to improve their competitiveness and sustainability in order to Programme (BBSDP) become part of the mainstream economy and create employment. The Technology and THRIP is a partnership programme funded by the DTI and managed by the Human Resources for National Research Foundation (NRF). On a cost-sharing basis with industry, Industry Programme THRIP supports science, engineering and technology research (THRIP) collaborations focused on addressing the technology needs of participating firms and encouraging the development and mobility of research personnel and students among participating organisations. SEDA Technology STP was created as part of government’s national strategy of consolidating Programme (STP) and rationalizing small enterprises support interventions across the different government departments and government agencies, within the overall objective of improving the delivery of small business support services to entrepreneurs and small enterprises. STP is a merger of the following programmes: Godisa Trust, the National Technology Transfer Centre (NTTC), the three business incubators of the DTI, the Technology Advisory Centre (TAC), the technology-transfer activities of the Technology for Women in Business (TWIB) programme the support programmes for small enterprises of the South African Quality Institute Isivande Women’s IWF aims at accelerating women’s economic empowerment by providing Fund (IWF) more affordable, usable and responsive finance. The IWF assists with support services to enhance the success of businesses. It pursues deals involving
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Department of Trade and Industry programmes Programme Description start-up funding, business expansion, business rehabilitation, franchising and bridging finance.
Black Business Supplier This cost-sharing grant is offered to black owned small enterprises to assist Development them in improving their competitiveness and sustainability. The programme Programme provides grants to a maximum of R1 million: R800 000 for tools, machinery and equipment on a 50:50 cost sharing basis R200 000 for business development and training interventions on n 80:20 cost sharing basis The programme will be administered up to 31 July 2017 Agencies National Development Public entity that grants funds to civil society organisations to implement Agency community-driven programmes with key focus areas in : Early childhood development Food security Income generation and Capacity building
5.2 Organisations and Industry Associations
Industry associations facilitate information sharing and promote industry development. Associations discussed below are specifically related to the district priority commodities.
5.2.1 African Farmers Association of South Africa (AFASA) The continental association in farming, AFASA was forms to assist African farmers develop and form a strong business relationship to improve and promote agricultural sector. The organisation is formed by individuals that strive to be efficient and effective in promoting farmers.
5.2.2 South African Poultry Association (SAPA) The Poultry Association acts as a channel for any matter that the industry needs to address. Information is shares and detailed studies are done in order to assist industry participants in any area of the business. The national associations has dealt with a number of issues in the industry such as; agricultural trade policy, food safety issues, training and technology transfer, curtailing smuggling, developing poultry farmers and codes of practice to name a few.
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5.2.3 National African Farmers’ union of South Africa (NAFU) The national association was formed to address access to land, financial resources, development opportunities and skills amongst black farmers. The Association has formed an Agri Business Chamber that focuses purely on the business side of NAFU. Agri-Business Chamber functions are: Build a good relationship with government department and various stakeholders in the industry Develop Agri linkages to build capacity of smallholder farmers in doing business Build agri-business institution to address the needs of smallholder farmers Facilitate development of viable projects according to farmers needs Build Agri-Business Chamber as a BBBEE agricultural institution for the country.
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6 Economic and Socio-Economic Analysis
6.1 Introduction
This Section provides a brief overview of Gert Sibande and a comparison of the local municipalities in terms of a socio-economic profile as well as an economic analysis. The socio- economic profile will contain the following information: population and household figures, employment statistics, levels of education and average household income. The economic analysis will discuss the contribution of economic sectors to the local economy and employment.
This Section also discusses spatial aspects that need to be taken into consideration when developing economic interventions within Gert Sibande DM. These spatial aspects will be discussed on using information obtained from the Gert Sibande DM SDF
6.2 Socio-Economic Profile
6.2.1 Population and Household
Table indicates the population figures and number of households in Gert Sibande DM.
Table 6.1 Population and Household Figures Average Annual Growth Rate Estimated Population 2011 Census 2001 – 2011 2030
Population 1,043,191 1.26% 1,424,223 Households 273,488 2.1% 405,679 (Source: Statistics South Africa Census 2011)
The majority of the population of Gert Figure 6.1: Population Distribution, 2011
Sibande is located in Govan Mbeki LM, Albert Luthuli Chief Albert Luthuli LM and Lekwa LM. There 18% is thus added pressure on these local 28% Msukaligwa municipalities to be able to supply an 14% Mkhondo enabling environment and proper services 4% 11% 16% for economic growth and development 8% Pixley Ka which will result in employment Seme
opportunities for local communities. (Source: Statistics South Africa Census 2011 and
Urban-Econ Calculations, 2015)
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6.2.2 Levels of Education
Figure indicates the highest level of education achieved in the municipalities of Gert Sibande DM
Figure 6.2: Highest Level of Education (Ages 20+), 2011
35%
30%
25%
20%
15%
10%
5%
0% No Some Complete Some Complete Higher schooling Primary Primary Secondary Grade 12
2001 2011
(Source: Statistics South Africa Census 2011 and Urban-Econ Calculations, 2015)
The number of people with no schooling has decreased considerably and overall education levels have improved. However, there is still room for improvement; there is still a large amount of the population who only have some secondary education which can have a negative effect on an economy as it affects the employability of its population. Adult learning, skills development programmes and FET courses are critical for communities with low levels of education and can promote the development of SMMEs; which is a way of creating long term, sustainable jobs. 6.2.3 Employment
This subsection distinguishes between three major groups of employment: Employed individuals Unemployed individuals The Not Economically Active (NEA) portion of the population
Economic interventions should assist to decrease unemployment as well as encourage not economically active people to participate in the economy in order to decrease their dependence on the working population, especially in Chief Albert Luthuli LM, which has a high number of people who are not economically active.
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From the Figure, it is evident that Figure 6.3: Unemployment Rate interventions are required in Dr 40% 35% Pixley Ka Isaka Seme LM as well 30% as in Dipaleseng LM which will 25% create employment 20% 15% opportunities for the local 10% communities, as the 5% 0% unemployment rate in these municipalities are very high. By analysing the unemployment rate together with the levels of education, it is evident that in
general, the higher the levels of Gert Sibande
education, the lower the (Source: IHS Global Insight Regional Explorer, 2013) unemployment rate will be. Interventions, especially in Dr Pixley Ka Isaka Seme and Dipaleseng LM should focus on ensuring that there are more people with Grade 12 (or equivalent) and some form of higher education. 6.2.4 Household Income
Figure indicates the average Figure 6.4: Average Annual Household Income, 2011 annual household income in R 140,000 the municipalities of Gert R 120,000 R 100,000 Sibande DM. This Figure assists R 80,000 to draw attention to the R 60,000 R 40,000 importance of higher levels of R 20,000 education. For example, Chief R 0 Albert Luthuli LM has lower levels of education, compared to the other municipalities, which has a negative effect on employment and in turn, Gert Sibande DM resulting in generally lower
levels of income, compared to (Source: Statistics South Africa Census 2011 and Urban-Econ the other local municipalities. Calculations, 2015
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6.3 Economic Analysis
6.3.1 Production Structure
The local municipality contributing Figure 6.5: Gert Sibande DM GVA Contribution, 2013 the most to the economy of Gert 6% 13% Sibande DM is Govan Mbeki LM. The economic growth rate of the 6% 55% 4% municipalities of Gert Sibande DM 13% fluctuates constantly. 2% By comparing Figure and Figure it is Chief Albert Luthuli evident that there is a high positive Msukaligwa correlation between the size of the Mkhondo local economy and the average Dr Pixley Ka Isaka Seme annual income. It is thus critical that Lekwa interventions will have a positive effect on sector growth. Interventions Dipaleseng should have a specific focus on local Govan Mbeki
economic growth, especially in Chief (Source: IHS Global Insight Regional Explorer,2013) Albert Luthuli LM, Dipaleseng LM, Dr Pixley Ka Isaka Seme LM and Lekwa LM.
Table 6.2: Gert Sibande DM Average Annual GDP Growth Gert Sibande DM 1996 - 2013 2013 - 2018 Sectors with High Growth Potential
Chief Albert Luthuli LM 2.6% 2.2% Agriculture, forestry and tourism Msukaligwa LM 2.3% 2.1% Agriculture Mkhondo LM 1.4% 2.5% Agriculture and forestry Dr Pixley Ka Isaka Seme LM 3.2% 2.5% Agriculture and transport Lekwa LM 0.7% 1.9% Agriculture and mining Dipaleseng LM 0.6% 2.4% Agriculture Govan Mbeki LM 1.9% 1.6% Mining and manufacturing (Source: IHS Global Insight Regional Explorer, 2013)
From the Figure it is evident that community services sector which includes government services, contribute significantly to many the municipalities of Gert Sibande DM, but not Govan Mbeki LM. Interventions should be developed to grow other sectors to ensure that there is a smaller reliance on Government for employment and income, especially in Chief Albert Luthuli LM.
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Figure illustrates the sectoral production structure of the local municipalities of Gert Sibande DM. Forward and backward linkages with prominent sectors, such as manufacturing in Govan Mbeki LM, within municipalities and between municipalities should be developed and promoted.
From the Figure it is evident that community services sector which includes government services, contribute significantly to many the municipalities of Gert Sibande DM, but not Govan Mbeki LM. Interventions should be developed to grow other sectors to ensure that there is a smaller reliance on Government for employment and income, especially in Chief Albert Luthuli LM.
Figure 6.6: Sectoral Production Structure, 2013
50% 40% 30% 20% 10% 0%
Chief Albert Luthuli Msukaligwa Mkhondo Dr Pixley Ka Isaka Seme Lekwa Dipaleseng Govan Mbeki
(Source: IHS Global Insight Regional Explorer, 2013)
6.3.2 Sectoral Employment
Figure 6.7 indicates the sectoral employment for each of the local municipalities in Gert Sibande DM. The trade sector is a prominent employer, as well as community services sector. As previously mentioned, there must be an enabling environment that will encourage employment creation in other prominent sector to ensure that the reliance on the Government sector for employment will decrease.
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Figure 6.7: Sectoral Employment, 2013
30% 25% 20% 15% 10% 5% 0%
Chief Albert Luthuli Msukaligwa Mkhondo Dr Pixley Ka Isaka Seme Lekwa Dipaleseng Govan Mbeki
(Source: IHS Global Insight Regional Explorer, 2013)
6.3.3 Level of Concentration: Tress Index
The local municipalities of Gert Sibande DM are diversified, except for Govan Mbeki LM. Economic interventions should thus focus on diversifying the local municipalities. Govan Mbeki LM is the manufacturing hub of the Province due to the large private manufacturing firms that are established in Secunda.
Table 6.3: Tress Index, 2013 Tress Index
Chief Albert Luthuli LM 46.06
Msukaligwa LM 44.05
Mkhondo LM 36.78
Dr Pixley Ka Isaka Seme LM 38.62
Lekwa LM 42.08
Dipaleseng LM 47.32
Govan Mbeki LM 62.05
(Source: IHS Global Insight Regional Explorer, 2013)
6.3.4 Comparative Advantage: Location Quotient
This subsection aims at revealing the sectors in the study area economy that have a comparative advantage. To have a comparative advantage means that this economy has the ability to render or produce a product or service more effectively and efficiently, than its
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Table 6.4: Location Quotient Interpretation LQ Label Interpretation
Less than 0.75 Low Local needs are not being met by die resident sector. The region in important goods and services in this particular sector. 0.74 – 1.24 Medium Most of the local needs are being met by the resident sector. Te region is both importing and exporting goods and services in this sector 1.24 – 5.00 High The sector is serving needs beyond the sector, exporting goods and services from this sector More than 5.00 Very High The is an indication of a very high level of local dependence on a sector, typical a “single-industry” community
Table 6.5: Comparative Advantage, 2013 Sector Chief Msukaligwa Mkhondo Pixley Lekwa Dipaleseng Govan Albert LM LM Ka Isaka LM LM Mbeki Luthuli Seme LM LM LM
Agriculture 3.46 1.82 5.29 5.70 3.66 6.50 0.32 Mining 1.20 2.05 1.38 0.17 2.65 0.67 3.14 Manufacturing 0.19 0.12 0.54 0.10 0.34 0.16 2.94 Utilities 1.45 1.29 0.50 4.91 5.94 5.66 0.64 Construction 0.96 0.41 0.59 2.05 0.58 0.57 0.74 Trade 1.19 1.42 1.32 1.32 0.74 1.85 0.71 Transport 0.67 1.25 0.94 1.17 0.50 0.43 0.37 Finance 0.53 0.71 0.65 0.33 0.28 0.29 0.30 Community Services 1.52 0.95 0.97 0.86 0.76 0.70 0.29 (Source: IHS Global Insight Regional Explorer, 2013)
The municipalities of Gert Sibande DM have high comparative advantages in numerous sectors. Interventions should strengthen the impact these sectors have on the economy and promote linkages between these sectors and other sectors within and between municipalities.
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7 Agriculture Sector Overview
South Africa has a dual agricultural economy, with both well-developed commercial farming, and more small-scale subsistence-based production in the deep rural areas. Agricultural activities range from intensive crop production and mixed farming in winter rainfall and high summer rainfall areas to cattle ranching in the bushveld and sheep farming in the arid regions. Maize is most widely grown, followed by wheat, sugar cane and sunflowers. Citrus and deciduous fruits are exported, as are locally produced wines and flowers. 81.9% of South Africa’s land coverage is defined as farmland, with only 13.5% that is arable.
Table 7.1 indicates the agricultural land characteristics within each of the provinces in South Africa.
Table 7.1: Land use characteristics related to agriculture in South Africa Province Total area Farmland Farmland Potentially Arable land Grazing (ha) (ha) as % of arable land utilised (ha) land as % total area as % of of total total area area
South Africa 105 207 300 86 186 026 81.9 13.5 12 900 122 68.4 Western Cape 12 938 600 11 560 609 89.3 19.0 2 126 342 70.4 Northern Cape 36 338 900 29 543 832 81.3 1.3 218 247 80.1 Free State 12 711 500 11 572 000 91.0 32.9 3 995 948 58.1 Eastern Cape 11 886 200 10 815 867 91.0 5.4 601 651 85.6 KwaZulu-Natal 5 540 700 3 439 403 62.1 15.1 834 637 46.9 Mpumalanga 7 504 100 4 486 320 59.8 21.3 1 742 601 38.5 Northern 8 348 200 7 153 772 85.7 14.0 660 090 71.7 Province Gauteng 1 876 000 828 623 44.2 23.4 405 773 20.8 North West 8 063 100 6 785 600 84.2 29.9 2 314 833 54.3 Source: Abstract of Agricultural Statistics, 2015
7.1 Gert Sibande Agriculture Sector Analysis
Agriculture is a prominent economic activity in Gert Sibande District. Agricultural products produced in this District include: maize, sunflower, grain, sorghum, wheat, soya beans, potatoes, sweet potatoes, groundnuts, livestock, dairy and wool. The majority of commercial crops are grown on dryland but some irrigated farming does occur to the south of Ermelo and to the north and east of eManzana (Badplaas). Table 7.2 illustrates the agriculture potential of Gert Sibande District Municipality.
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Table 7.2: Agriculture Potential of Gert Sibande DM, 2015 DISTRICT LOCAL TOTAL COMMERCIAL COMMERCIAL SUBSISTENCE CROP MUNICIPALITY AREA DRY LAND IRRIGATION AGRICULTURE POTENTIAL AREA (%) GERT Chief Albert 555 939 37 817 7 540 8 258 9.64% SIBANDE Luthuli Dipaleseng 261 656 99 621 1 177 0 38.52%
Govan Mbeki 295 469 98 950 283 0 33.58%
Lekwa 458 419 181 961 1 374 0 39.99%
Mkhondo 488 217 37 777 476 6 183 9.10%
Msukalikwa 601 567 99 420 376 284 16.64%
Dr. Pixley Ka 522 723 86 338 675 2 358 17.10% Isaka Seme Source: DARDLEA, 2015
Table 7.2 illustrated the agriculture potential for dryland, irrigation and current subsistence agriculture in each of the seven local municipalities in the district. Three municipalities in the district, namely; Chief Albert Luthuli, Mkhondo and Dr Pixley ka Isaka Seme have significant subsistence farming taking place. As the focus of the agri-parks is on emerging and small scale farming these areas are priority areas.
7.1.1 Local Projects There are a number of support programmes and projects in Gert Sibande District that play a vital role in the success of the Agri-Park. These projects and programmes provides assistance in developing farmers and the local agriculture sector which is vital for the success of the Agri- Park. Table 7.3 illustrates the farmers that area currently being supported by the department of agriculture in the Gert Sibande District.
Table 7.3: Farmers to be supported Association Number of Farmers Hectares Commodities Irrigation Schemes 32 600 Grains Primary Agricultural 76 85 Vegetables, Poultry Co-operatives Land reforms farms 150 13,040 Grains, Vegetables, Livestock Total 258 13,725 - Source: DARDLEA, 2015
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Table 7.4: Registered Projects Aligned to Agri-Parks Project Name Land Acquisition The Bends Steenwyk RECAP Grootlaagte and Schoondegizt Nooitgezein Kromhoek & Enon Coalbank Intonzimandla CPA Thembanani CPA Ekwaluseni Welgemeend(Fuka Jeffrey Malomane) REID Business and marketing plan for Msobotsweni bakery cooperative Business and marketing plan for Sibambisane brickmaking project One goal Multiservices Cooperative Yekumona toilet manufacturing coopeartive Arts and Craft programme in Mpumalanga Grain Production (Maize and Beans) Project Red meat improvement project Donkerhoek Bottling project Sibuyela Emandvulo RID Agripark at Gert Sibande district Lekkerloop AVMP Source: DARDLEA, 2015
The department is currently supporting and implementing projects across four of its programmes to support agriculture and rural development in the district. The project range from crop production, agriculture infrastructure, brickmaking, bakeries and a bottling plant as illustrated in Table 7.4.
Table 7.5: DARDLAE Registered Projects Municipality Name of Farm Hectares Commodity Msukaligwa LM Nooitgedacht Farm 107 Livestock Athole Farm 392 IT 856 Livestock Dr Pixley Ka Isaka Vlakplaats 130 HS 405 Crops Seme LM Mkhondo LM Siyaphambili 80 Sunflowers, vegetables Total - 1,448 - Source: DARDLEA, 2015
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Table 7.5 provides details on DARDLAE projects registered within the Gert Sibande District. The farms being supported are located in Msukaligwa LM, Dr Pixley Ka Isaka Seme LM and Mkhondo LM. There are some existing developments that will support the Agri-Park, however, not all of the infrastructure is in working order. See Table 7.6.
Table 7.6: Current Development within Agri-Parks Support Infrastructure Location Approx. Distance from Agri-Park Condition Maize Mill Driefontein 40 km Completed 2 X 40 000 Poultry Piet Retief 17 km Under Construction Houses Water Bottling Plant Driefontein 45 km Operational Source: DARDLEA, 2015
Table 7.7 illustrates the number of processors in each local municipality within the Gert Sibande District Municipality. The bulk of the agriculture infrastructure currently lies with maize processors, grain silos and red meat processing.
Table 7.7: Local Processers, Markets and Infrastructure Processors and/ or Chief Dipales Govan Lekwa Mkhond Msukali Dr Albert eng Mbeki o gwa Pixley Markets Luthuli Ka Isaka Seme
Maize Processor 1 2 7 1 4 2 5 Sorghum Processor 0 0 1 0 0 0 1 Wheat Processor 0 0 1 0 0 0 0 Barley Processor 0 0 1 0 0 0 0 Soybean Processor 0 0 0 1 0 0 0 Sunflower Processor 0 0 0 1 0 0 0 Peanut Processor 0 0 1 0 0 0 1 Grain Silos 2 3 3 5 1 3 1
Millers 1 2 3 1 1 1 3 Poultry Abattoirs 0 0 1 0 1 0 0
Red Meat Abattoirs 3 2 2 2 1 4 2 Commercial Co- 1 2 5 4 5 3 0 Operatives Feedlots 0 1 1 0 0 1 0 SAGIS Agri-Firms/ Co- 2 5 5 8 3 6 1 Operatives
SAGIS Agri Processors 1 1 1 1 1 1 1 Sawmills 3 0 0 0 15 4 0 Source: APAP Commodity Tables, 2015
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7.2 Contribution to Gross Value Added
Grass Value Added (GVA) indicates is the measure of the value of goods and services produced in an area, industry, or sector of an economy. GVA is a good indicator of the importance of the industry to the specific area and how it compares other industries in the same vicinity.
Figure 7.1: Gert Sibande GVA, 2001 and 2013
Source: Mpumalanga SERO, 2015
Agriculture declined by 1.3% over the 12-year period but is still the third largest contributor to the district economy.
Figure 7.2: Contribution to Agriculture, Forestry and Fisheries
GVA Contribution (R'million) 700 600 500 400 300 200 100 0 Chief Albert Msukalikwa Mkhondo Dr. Pixley Ka Lekwa Dipaleseng Govan Mbeki Luthuli Isaka Seme
2011 2012 2013
Source: Mpumalanga SERO, 2015
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Lekwa LM has the largest agriculture sector followed by Mkhondo LM and Govan Mbeki LM.
7.3 Resource Analysis
The resource analysis will focus on land capability, grazing capacity and annual rainfall in Gert Sibande District. Map 7.1 illustrates the land capability with regards to arable land and grazing land.
Map 7.1: Gert Sibande Land Capability
Source: Manstrat GIS Unit, 2015
The green shaded areas on Map 7.1 illustrates the arable land with high potential agriculture land. These areas are concentrated towards the mid-eastern part of the district around Ermelo, Bethal, eMkhondo, Standerton, Davel and small pockets to the south west of Balfour.
The yellow shaded areas indicate the moderate potential arable land and are located west of Ermelo in the Morgenzon area and the areas south of Standerton. The orange and red shaded areas indicate low arable potential as well as grazing potential. These areas are located mostly in the regions where forestry is taking place along the eastern axis of the district as well as the mining areas of Amersfoort in Dr Pixley Ka Isaka Seme LM and pockets in the west around Balfour.
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Map 7.2 illustrates the grazing capacity in the district. The green shaded areas are optimal grazing land and are concentrated in the central part of the district these areas require less than 4 ha per livestock unit (LSU). The brown shaded areas are not available for grazing as they are currently used for forestry in the eastern parts of the district around Amsterdam, eMkondo and Warburton. The brown areas in the western and central areas of the district are currently used for mining, specifically coal mining, as well as electricity generation at the various power stations in the district.
Map 7.2: Grazing Capacity
Source: Manstrat GIS Unit, 2015
Map 7.3 illustrates the average rainfall per annum for the Gert Sibande District. From the map it is clear that the majority of rainfall occurs in the eastern parts of the district with average annual rainfall of between 750mm and 950mm. The central areas of the district, in Carolina, Ermelo and Volksrust the average annual rainfall ranges from 650mm and 750mm.
The areas with the lowest rainfall are located in the western side of the district in areas like Greylingstad, Secunda and the area south of Balfour. Some of these areas experience less than 650mm rainfall per annum.
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Map 7.3: District Rainfall Patterns
Source: Manstrat GIS Unit, 2015
7.4 Commodity Selection
This subsection focuses on the commodity selection process that was followed to derive at the main commodities that needs to be research in further detail.
7.4.1 Commodity Selection Criteria (APAP)
The Agricultural Policy Action Plan (APAP) is a strategy developed by the Department of Agriculture, Forestry and Fisheries to align the development of the agricultural sector with the goals as set out in the National Development Plan (NDP). It was approved by the Cabinet as of July 2013. It is estimated that the agricultural sector could potentially create 1 million jobs by 2030.
Such a strategy is of critical importance not only for the declining agricultural sector but also the decrease in manufacturing encounter within the national economy. In accordance with this the selection criteria for the prioritisation model used for the MMM commodities will take cognisance and include these APAP criteria. As such APAP has structured the following figure to illustrate commodities that can be classified as NDP winners.
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Figure 7.3: NDP Commodity Evaluation
Source: APAP, 2015
In accordance with APAP the criteria for commodity selection should focus on its contribution to food security, job creation opportunities, growth potential and potential contribution to trade balance that includes import substitution.
7.4.2 Commodity Identification
This commodity identification was done on basis of systematic evaluation process that focussed on all critical parameters that plays different roles in the successful production and processing of all commodities found within MMM. As such environmental conditions, economic and market considerations and smallholder constraints and preferences were anticipated within this systematic approach.
The specific commodity identification criteria are illustrated in the following figure:
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Figure 7.4: Commodity Selection Criteria
• Temperature • Water/moisture Biophysical • Land type, capability and soil • weed, pest and disease resilience • Adaptibility to adverse conditions
• Transport, market access and demand Enterprise • Strategy, payback and profitability Viability • Human, physical and financial capital
• Linkages and processing opportunities Economic • Job creation Development • Local development • Global competitiveness and trade
• Political and insititutional issues Political and • Social criteria Social • Food security and sustainability
Each of the commodities were scored in respect to the above criteria and then these scores were weighed in order to derive at a priority framework for each of the commodities, as such the following scoring was used: 3 = Within optimal range, most favourable or ideal condition; 2 = Within near-optimal range, sufficiently favourable but not ideal condition; 1 = Within marginal range (technically possible but probably not profitable or competitive); 0 = Impossible to grow or almost certainly not profitable or competitive, or highly unfavourable condition that are unlikely to be managed successfully. A score of zero may disqualify the enterprise, although mitigation might be possible in some cases.
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The weights is referenced as follows: 3 = High importance 2 = Medium importance 1 = Low importance
7.4.3 Commodity Prioritisation
The different commodities and their scores in accordance with the selection criteria are illustrated in the table below:
Table 7.7: Commodity Scorecard for GSDM
Scoring per Prioritisation Criteria
Commodity Enterprise Economic Political and Biophysical Total Viability Development Social
Red meat production (beef cattle 28 63 50 54 93% and mutton sheep) 27 43 46 39 74% Dairy
21 43 44 30 66% Wool sheep
19 44 43 48 73% Appels
26 56 48 48 85% Vegetables Grains (maize 28 57 55 40 86% and sorghum)
20 53 48 45 79% Soya Beans
28 58 42 51 85% Dry beans
24 53 44 34 74% Sunflower Canola 17 44 36 29 60% (rapeseed)
26 32 25 34 56% Mushrooms
30 54 50 49 87% Agroforestry Source: Urban-Econ and Manstrat, 2015
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Table 7.7 illustrates that the number of commodities scores are close to each other owing to the similar conditions and economic implications of these commodities. The highest scores are indicated in bright green (most favourable) and as the score is lower it is indicated in bright red (least favourite).
7.5 Gert Sibande Selected Commodities
Stakeholder engagements were held with a number of stakeholders within the GSDM to further investigate the viability and suitability of the selected commodities. This was done to gather information relating to the top 4 commodities that will be further investigated within this report. It has to be stated once again that this is the first step towards the establishment of the Gert Sibande Agri-park and subsequent agri-hub in eMkhondo and the other commodities can be pursued over the next 10 years as the Agri-park further develops. With more opportunities created there is also the chance of exploiting spin-off opportunities within the agri-park, not just commodity related but also with relation to extension and supporting services.
The four selected commodities for Gert Sibande are:
1. Red Meat Excellent extensive beef production potential, especially in combination with optimal supplementary feeding. Most suitable breeds include Bonsmara, Beefmaster and indigenous breeds. Also excellent opportunities for intensive production in feedlots due to proximity to both feedstock and markets and a favourable climate. Good potential for mutton sheep. Due to the similarities of these value chains (beef and sheep) they have been grouped and are presented as the generalised Red Meat value chain. All livestock classes showcase excellent to the local environment. Red Meat products scored highly in ‘enterprise viability’ with high scores in such areas as transport, market access, market demand, business strategy & positioning and ease to finance. On average, for every R 1 million of production in the Red Meat industry, 2.07 jobs are created directly on-farm, with a further 1.61 jobs created through up- & downstream linkages and 1.88 jobs in the wider economy. All Red Meat classes score very well in the Political and Social Criteria section of the prioritisation matrix. Beef and mutton are highly suitable to emerging farmers. Beef in particular scores highly due to the familiarity of local communities with cattle farming.
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2. Agroforestry Various tree species (including drought tolerant indigenous trees and shrubs) tailored to the area can be planted to produce wood (for timber, energy or craft), food (including honey, indigenous fruits, fodder to increase animal carrying capacity, medicinal plant material, environmental functions etc. Require little capital, skills, effort or water. Highly suitable for marginal land where no other crop can be grown or animal enterprise can be cost efficiently established. Important guard against possible future food security and climate change impacts, and income generation potential for the poorest of the poor. Although agroforestry could be practiced in most parts of the country using non-timber trees and shrubs, timber orientated community forestry or out- grower schemes in partnership with lumber mills or paper producers are particularly applicable to the Mkhondo area.
3. Vegetables Very competitive in Potatoes, Onion, Cabbage, Onions, Carrots and Peas (including dried pea varieties), while there are also scope for competitive commercial production of Asparagus, Tomatoes and Sweet potatoes. While vegetable farming is scored lower relative to the red meat products, it is farmed in a different manner and at a different scale. Furthermore, the biophysical criteria score the commodities at a broad district level. Hence while there may not be as much land perfectly suited to vegetable farming – as there is with bee and mutton – there are a large number of areas where vegetable farming may be successfully implemented. The vegetable product class is incredibly broad and includes a large variety of product sub-classes which vary greatly in their requirements for water, soil condition and infrastructure etc. While this may limit the potential for specific crops in some areas it does mean that there is usually a large selection of crops that are adequately suited for production in an area. Treating vegetables as a broad product class is beneficial for Agri-Park planning in rural areas as it allows for flexibility to changing market conditions, local skill levels and distances to markets. Thus instead of focussing intensively on the production of one vegetable product – i.e. Tomatoes – across the district the Agri-Park may identify areas for production of a variety of crops, or assist emerging farmers in growing the crop of their choice. It allows smaller farmers to access funding and promotes the development of numerous small to medium farming concerns over large single crop focussed concerns. This has positive implications for employment as well as job quality / decency. On average, for every R 1 million of production in the Red Meat industry, 2.49 jobs are created directly on-farm, with a further 1.37 jobs created through up- & downstream linkages and 1.89 jobs in the wider economy.
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4. Maize Maize is one of the most important grain crops in South Africa and is the staple food of a large portion of the population. The South African maize industry was deregulated in 1997 and is operating in a free-market environment where producers sell to whomever they wish and the prices are determined by supply and demand. Maize is produced across South Africa, and production has increased considerably over the last ten years. Production as well as the total area planted (ha) within South Africa. From the Figure it is evident that although the area planted has decreased somewhat, the yield per hectare has almost doubled over the past ten years. This can be a result of increased usage of GMO seeds and farms under irrigation. As maize is an internationally traded commodity, it is also subjected to the international market conditions. The demand and supply conditions of maize in the international market influence domestic prices directly. Another important factor that impacts on the domestic market is the import tariff, which is used to protect domestic producers from lowly priced maize imports. Whilst prices have generally been on an increasing trend over the past decade, it has also fluctuated substantially in aligned to supply and demand issues. The lowest average maize producers price was recorded in 2004/05 (R513/ton) and the highest was recorded in 2015/16 (R4995/ton).
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Map 7.1: Commodity Location Potential
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8 Red Meat
The South African red meat market covers several commodities, most important to the local market being: beef (cattle), mutton (sheep).
8.1 Market assessment
8.1.1 Red Meat Global Market Global red meat production was 191 million tons (including beef, pork, mutton and chevon) in 2013. With red meat production per region as follows: Asia 87 million tons (45.5%). North America 25 million tons (13.3%). Central America 4 million tons (2.3%). South America 21 million tons (11.2%). Europe 39 million tons (20.2%). Africa 10 million tons (5.2%). Oceania 5 million tons (2.4%).
Table 8.1 and Table 8.2 provides global livestock production figures by region and heads of stock for 2013. African livestock producers are a significant contributor to global mutton and chevon production. The main global regional producers of beef are South America and Asia. Whilst the main pork producer globally is Asia.
South Africa leads Southern Africa production (see Table 8.3), producing 1.2 million tons of red meat, or 12.5% of Africa’s total. Other notable producers of red meat across the continent are Ethiopia (5.0%), Egypt (6.0%), and Nigeria (11.3%), with these three countries contributing 31.5% of Africa’s total population. In Table 6.3 the production of red meat in South Africa is compared to neighbouring trading partners in SADC, namely Botswana, Lesotho, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe.
South Africa is a major red meat producer within SADC (see Table 8.4), dwarfing its neighbours in terms of beef, mutton, and total production. Mozambique produces a relatively large amount of pork, almost 10% of the African total. Southern African chevon production is relatively small compared to its production of other red meat products. The African continent is the 2nd largest producer of chevon globally, behind Asia, and chevon produced within South Africa is primarily for the export market.
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Table 8.1: Global Red Meat Production (2013) Beef Pork Mutton Chevon Total
% of % of % of % of % of (Tons) (Tons) (Tons) (Tons) (Tons) Total Total Total Total Total 5 694 19,7 24,2 Africa 271 8,9% 1 304 128 1,2% 1 687 934 % 1 301 339 % 9 987 672 5,2% 14 373 22,5 64 448 57,0 49,5 70,8 86 881 45,5 Asia 105 % 557 % 4 254 075 % 3 805 643 % 380 % 10 140 15,8 27 121 24,0 13,2 38 504 20,2 Europe 072 % 641 % 1 130 148 % 112 260 2,1% 121 % North 12 754 19,9 12 486 11,0 25 331 13,3 America 389 % 933 % 90 280 1,1% 2 0,0% 604 % Central 2 502 America 264 3,9% 1 804 085 1,6% 74 155 0,9% 52 342 1,0% 4 432 846 2,3% South 15 617 24,4 21 304 11,2 America 999 % 5 371 205 4,8% 242 076 2,8% 73 491 1,4% 771 % 2 901 12,9 Oceania 429 4,5% 498 264 0,4% 1 110 589 % 27 329 0,5% 4 537 611 2,4% 63 983 100,0 113 034 100,0 100,0 100,0 190 980 100,0 World 529 % 814 % 8 589 257 % 5 372 407 % 007 % Source: FOASTAT, 2015
Table 8.2: Global Livestock Populations (2013) Cattle Pigs Sheep Goat Total
Heads Heads of % of Heads of % of Heads of % of Heads of % of of % of
Cattle Total Pigs Total Sheep Total Goat Total Livestoc Total k 304 746 20,8 35 732 328 450 28,2 347 957 1 016 3,7% 35,7% 22,2% Africa 910 % 880 262 % 726 887 778 494 982 589 902 511 796 571 051 2 167 33,7% 60,4% 44,0% 58,5% 47,3% Asia 171 648 697 689 733 205 122 048 184 006 129 945 16 527 452 528 8,3% 18,8% 11,2% 1,7% 9,9% Europe 722 466 891 388 467 North 101 515 77 654 188 258 6,9% 7,9% 6 246 750 0,5% 2 841 350 0,3% 4,1% America 311 800 211 Central 55 632 24 735 11 744 12 367 104 480 3,8% 2,5% 1,0% 1,3% 2,3% America 189 788 464 813 254 South 348 401 60 060 68 340 21 096 497 899 23,7% 6,1% 5,9% 2,2% 10,9% America 875 193 324 760 152 40 221 5 181 106 351 155 714 2,7% 0,5% 9,1% 3 960 537 0,4% 3,4% Oceania 546 471 147 701 1 467 100.0 977 274 100.0 1 162 875 100.0 975 803 100.0 4 583 100,0 World 548 724 % 246 % 535 % 263 % 501 768 % Source: FOASTAT, 2015
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Table 8.3: African Red Meat Production (2013) Beef Pork Mutton Chevon Total
% of % of % of % of % of (Tons) (Tons) (Tons) (Tons) (Tons) Total Total Total Total Total South 14,9 16,6 12,5 Africa 851 000 % 216 000 % 143 750 8,5% 35 450 2,7% 1 246 200 % Botswana 47 000 0,8% 500 0,0% 1 876 0,1% 5 760 0,4% 55 136 0,6% Lesotho 13 500 0,2% 3 700 0,3% 4 250 0,3% 2 240 0,2% 23 690 0,2% Mozambi que 25 500 0,4% 129 600 9,9% 1 008 0,1% 22 200 1,7% 178 308 1,8% Namibia 35 800 0,6% 4 675 0,4% 13 200 0,8% 3 840 0,3% 57 515 0,6% Swaziland 17 100 0,3% 1 310 0,1% 526 0,0% 1 782 0,1% 20 718 0,2% Zambia 197 827 3,5% 35 244 2,7% 882 0,1% 9 000 0,7% 242 953 2,4% Zimbabw e 103 750 1,8% 31 900 2,4% 448 0,0% 13 200 1,0% 149 298 1,5% 5 694 100,0 100,0 100,0 100,0 100,0 Africa 271 % 1 304 128 % 1 687 934 % 1 301 339 % 9 987 672 % Source: FOASTAT, 2015
Table 8.4: African Livestock Populations (2013) Cattle Pigs Sheep Goat Total
Heads of % of Heads of % of Heads of % of Heads of % of % of Total Cattle Total Pigs Total Sheep Total Goat Total Total South 14 000 1 600 25 000 46 800 4,6% 4,5% 7,6% 6 200 000 1,8% 4,6% Africa 000 000 000 000 2 500 4 503 0,8% 13 500 0,0% 290 000 0,1% 1 700 000 0,5% 0,4% Botswana 000 500 2 826 665 000 0,2% 81 000 0,2% 1 230 000 0,4% 850 000 0,2% 0,3% Lesotho 000 Mozambi 1 690 1 800 8 090 0,6% 5,0% 250 000 0,1% 4 350 000 1,3% 0,8% que 000 000 000 2 370 7 607 0,8% 72 500 0,2% 2 930 000 0,9% 2 235 000 0,6% 0,7% Namibia 000 500 Swaziland 635 000 0,2% 35 000 0,1% 36 000 0,0% 270 000 0,1% 976 000 0,1% 4 026 1 098 7 865 1,3% 3,1% 240 000 0,1% 2 500 000 0,7% 0,8% Zambia 658 951 609 Zimbabw 5 150 8 925 1,7% 650 000 1,8% 375 000 0,1% 2 750 000 0,8% 0,9% e 000 000 304 746 100.0 35 732 100.0 328 450 100.0 347 957 100.0 1 016 100,0 Africa 910 % 880 % 262 % 726 % 887 778 % Source: FOASTAT, 2015.
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8.1.2 National Market a. Beef In large parts of South Africa livestock farming is the only viable agricultural activity with approximately 80% of South African agricultural land suitable for extensive grazing. As a result the livestock sector is one of the better growing sub-sectors of the agricultural economy. Cattle are found throughout the country but cattle numbers reveal the Eastern Cape, KwaZulu Natal, Free State, North West and Mpumalanga provinces as being the most prominent.
Over the past decade (from 2004) cattle numbers have increased from 13.5 million to more than 14 million in 2014. Approximately 80% of the total cattle herds are for beef cattle and the remaining 20% is for dairy cattle. Beef cattle producers vary from highly sophisticated commercial farmers (who rely on high technology) to communal subsistence producers (who rely more on indigenous knowledge and appropriate technology). Approximately 60% of the 14 million cattle available in South Africa are owned by commercial farmers and 40% by emerging and communal farmers. Cattle breeds range from international breeds to local indigenous breeds such as the Afrikaner, Nguni and Bonsmara. There are also various breeder organisations and producer organisations such as the Red Meat Producers Organisation (RPO) and the National Emerging Red Meat Producers Organisation (NERPO) representing producers in the commercial and emerging sectors respectively (Trends in the Agricultural Sector, 2012).
i. Production Areas Beef is produced throughout South Africa. The amount of beef produced depends on the infrastructure such as feedlots and abattoirs, not necessarily by the number of cattle available in those areas. South Africa has highly developed transport infrastructure that allows movement of cattle and calves from one area to another, even from other countries such as Namibia. For these reasons, Mpumalanga commands the greatest share of beef production in South Africa accounting for 23% of the beef produced.
Figure 8.1 outlines the beef production per province. The main producer is Mpumalanga with 23% of total beef production followed by the Free State at 19% of total production and Gauteng at 14% of total beef production in South Africa.
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Figure 8.1: Beef Production, 2014 Beef Production per Province Western Cape, 4% Eastern Cape, 6%
North West, 11%
Northern Cape, 6%
Free State, 19% Mpumalanga, Gauteng, 14% 23%
KwaZulu Natal, Limpopo, 5% 12%
Source: Profile of SA Beef Market Value Chain, 2014.
ii. Production versus Local Consumption
There has been a steady increase (13%) in beef production for the past 10 years and production increased from approximately 800 000 ton in 2005 to 980 000 ton in 2014
Figure 6.2 shows the local consumption of beef compared to total production for each year to determine if the country is self-sufficient in terms of beef production. The statistics show that South Africa is not self- sufficient because beef consumption was higher than beef production throughout the period under analysis. It should further be noted that SA also imports a considerable number of live cattle from Namibia to supplement own production stock (refer imports section below).
Both production and consumption followed the same trend – moving on an increasing trend from 2005/06 to 2013/14 (even though there were sporadic declines within this period due to the global economic meltdown which led to a decreased disposable income of larger number of consumers). Consumption increased by more than 10% from 2010/11 to 2013/14. The beef industry produces around 980 000 tons of meat and imports around 20 000 tons while exporting 4 000 tons. Per capita consumption is around 18.5 kg and number of consumers is around 50 million.
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Figure 8.2: Beef Production vs Consumption, 2005-2014 1200
1000
800
600 Tons
400
200
0 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14
Production Consumption
Source: Trends in the Agricultural Sector, 2014
Persistent drought conditions in the early part of 2015 resulted in domestic feed grain prices rising, and while domestic beef prices have reached record levels, producer margins remain tight. In the face of growing demand, prices are projected to increase continuously over the next decade, reaching R57/kg by 2024. This represents an average annual increase of 5.7%, which is marginally above general inflation and hence in real terms prices increase slightly over the baseline. Within this higher price scenario, the potential premium that can be obtained for extensive beef production (grass fed, hormone free) is reduced and in a cycle of lower feed grain prices the prevalence of intensive production systems (feedlots) that convert feed to meat more efficiently is expected to increase. This trend is already evident in a recent survey conducted by the South African Feedlot Association, which showed an increasing number of smaller, privately operated feedlots entering the market (BFAP Baseline Agricultural Outlook, 2015). iii. Beef Market Assessment
The red meat industry in SA evolved from a highly regulated environment to one that is totally deregulated today. Since the deregulation of the agricultural marketing dispensation in 1997, the prices in the red meat industry are determined by demand and supply forces. Meat consumption in South Africa has expanded rapidly over the past decade and while continued growth in meat consumption is projected in the coming decade, a confluence of macroeconomic factors is expected to result in higher meat prices and slower consumption growth relative to the past. Income growth remains the core driver of rising meat consumption and hence the cautious outlook for income growth in South Africa is a fundamental factor underlying slower demand growth. Furthermore, relative prices and consumer preferences
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While 2013 marked a return to profitability in the global context, severe drought conditions in South Africa and neighbouring countries as well as substantial depreciation in the exchange rate resulted in persistently high feed prices and continued depreciation of the local beef industry. The drought conditions induced a significant oversupply in the beef market both from South Africa and neighbouring countries, depressing prices, despite the upward trend in global markets. Whilst prices increased sharply in 2014, cattle slaughter numbers increased for the second consecutive year, which would indicate that domestic producers have yet to enter a phase of herd rebuilding, despite improved profitability. Persistent drought conditions in the early part of 2015 resulted in domestic feed grain prices rising, and while domestic beef prices have reached record levels, producer margins remain tight. Prices of beef increased significantly over the past 3 years increasing from around R 24/kg in 2010/11 to R 32/kg in 2013/14 which is an increase of 25% (Extension Suite Online). In the face of growing demand, prices are projected to increase continuously over the next decade, reaching R57/kg by 2024. This represents an average annual increase of 5.7%, which is marginally above general inflation and hence in real terms prices increase slightly over the baseline (BFAP Baseline Agricultural Outlook, 2015).
The beef supply chain has become increasingly vertically integrated. This integration is mainly fueled by the feedlot industry where most of the large feedlots own their own abattoirs and/or have some business interest in certain abattoirs. In addition, some feedlots have integrated further down the value chain and sell directly to consumers through their own retail outlets. Some abattoirs have also started to integrate vertically towards the wholesale level. Under the previous marketing regime, wholesalers mostly bought carcasses through the auction system. Currently, many wholesalers source live slaughter animals directly from farmers or feedlots on a bid and offer basis, i.e. they take ownership of the animal before the animal is slaughtered. The animal is then slaughtered at an abattoir of the wholesaler’s choice, where after the carcass is distributed to retailers. In some instances, the public can also buy carcasses directly from wholesalers. The abattoir industry has expanded tremendously in number and in capacity. In this regard, it is important to note that this industry can be divided into those abattoirs that (i) are linked to the feedlot sector and the wholesale sector, or are owned by municipalities and (ii) those that are mainly owned by farmers and SMME’s. The former abattoirs are mainly class A and B abattoirs, whereas the latter are usually classified as C, D and E class abattoirs. There are approximately 500 abattoirs slaughtering 2.3 million cattle on an annual basis. Approximately 40% of all slaughtering are performed by abattoirs that may slaughter an unlimited number of animals (Class A) and approximately 60% of cattle are
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AGRI-PARKS MASTER BUSINESS PLAN slaughtered by highly regulated abattoirs (Class A & B) (Profile of SA Beef Market Value Chain, 2014). iv. Exports Beef exports quantities are relatively small and SA is not regarded as a serious exporter within the world market. Exports were relatively higher in the early 2000’s (around 11 000 tons) and then started on a fluctuating but decreasing trend to date. Export quantities for the past few years averaged around 4 000 tons per annum. However, there was there was a significant increase of 86% in export quantity and a decrease of 36% in import quantity during 2013 compared to 2012. The increase in exports might be due to the unbanning of South African bovine animals and its products. In 2013 South Africa exported 8 000 tons of beef yielding an export value of R 396 million. In recent years (2013) exports are mainly to SADC and other African countries (6 000 tons) and Asia (1 800 tons) with Europe in the third place. Within SADC Mozambique is the largest importer (73% of total exports) followed by Angola and Mauritius. Other African countries to whom we export are Egypt, Nigeria and DRC (Profile of SA Beef Market Value Chain, 2014. Of the provinces Gauteng has recorded the highest export values of beef between the periods 2002 and 2011. This is mainly due to the fact that most exporters of beef are situated in Gauteng Province and the greatest proportion of beef was exported to neighbouring countries with Gauteng Province as the main exit point. Exports of beef were also recorded in all other eight provinces. v. Imports South Africa imported approximately 4 400 tons of beef in 2013 at an estimated value of R 97 million. The import quantity decreased by 36% in 2013 compared to 2012, this might be due to the outbreak of Foot and Mouth Disease (FMD) which made South Africa to be self-sufficient in beef and global economic meltdown which pushed consumers to switch to low priced protein content meat like chicken meat. For the period 2004 to 2013 the quantity of beef imports has decreased by 73 per cent (with imports peaking in 2005 at 20 000 tons). In earlier years we imported beef mainly from the Americas and the highest quantities of imports were from South America (Brazil, Uruguay, Argentina and Paraguay). In recent years SA import primarily from Oceania with Australia serving as the main exporter (14 000 tons in 2012) followed by New Zealand. Namibia also exports 70% of its total beef production to South Africa in the form of livestock (amounting to approximately 25 000 tons) to increase local stock. South Africa applies the MFN import tariff of 40.00% to all imports of beef excluding Namibia which is a member of SADC. Namibia receives an Intra SACU tariff rate of 0.00% for the past two years when exporting fresh or chilled beef carcasses and half carcasses to South Africa. South Africa also applies a preferential tariff rate of 0.00% to SADC (Profile of SA Beef Market Value Chain, 2014).
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b. Mutton In large parts of South Africa livestock farming is the only viable agricultural activity with approximately 80% of South African agricultural land suitable for extensive grazing. As a result the livestock sector is one of the better growing sub-sectors of the agricultural economy. Sheep farming is practiced throughout South Africa but concentrated in the more arid parts of the country, i.e. Northern Cape, Eastern Cape, Western Cape, Free State and Mpumalanga Flock sizes vary from less than 50 to more than 1 800 sheep. Sheep are farmed for both wool and mutton production. There are an estimated 8 000 commercial sheep farms throughout the country and approximately 5 800 communal sheep farmers. i. Production
Mutton is produced throughout South Africa. The amount of mutton produced in an area is also dependent on the available infrastructure such as feedlots and abattoirs, and is not only determined by the number of sheep and lamb prevailing in an area. In this regard South Africa has a highly developed transport infrastructure that allows movement of sheep from one area to another (even from neighbouring countries such as Namibia).
Figure 8.3 outlines the sheep distribution per province. The largest distribution of sheep can be found in the Eastern Cape with 29% of total distribution followed by the Northern Cape and the Free State.
Figure 8.3: Distribution of Sheep per Province, 2013 Mpumalanga, 7% Limpopo, 1% North Gauteng, 1% West, KwaZulu Natal, 3% 3% Western Cape, 11%
Eastern Cape, Northern Cape, 29% 25%
Free State, 20%
Source: Profile of Mutton Market Value Chain, 2014.
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The estimated number of sheep in South Africa is approximately 24 million distributed throughout all nine provinces. The Eastern and Northern Cape commands the greatest share of mutton production in South Africa. Most of the mutton produced in South Africa is consumed locally. ii. Production versus Local Consumption There has been a steady increase in mutton production for the past 10 years with production increasing from approximately 135 000 ton in 2004 to a reported 200 000 tonnes in 2014(Abstract of Agricultural Statistics, 2015). The gross value of mutton production increased continuously with the average gross production value amounting to R4.3 billion per annum for the ten year period and reaching a high of R 6.5 billion in 2013. The gross value of mutton production is dependent on the price and quantity of meat produced. Figure 8.4 shows a steady increase in gross value of mutton production from 2004 to 2013.
Figure 8.4: Production of Mutton Gross value of mutton production 7,000
6,000
5,000
4,000
3,000
Million Million Rands 2,000
1,000
0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Years
Source: Profile of Mutton Market Value Chain, 2014.
Mutton consumption levels have also been steadily increasing for the past decade with a slight decrease in 2011 and 2012. Whilst the above figure only provides data up to 2013, it is reported that consumption increased in 2014-2015 to an all-time high of 207 000 tonnes of mutton being consumed (Abstract of Agricultural Statistics, 2015).
Figure 8.5 shows the local consumption of mutton compared to total production for each year to determine if the country is self-sufficient in terms of mutton production. The statistics show that South Africa is not self- sufficient because mutton consumption was almost always higher than production throughout the period under analysis. It should further be noted that SA also imports a considerable number of live sheep and mutton from Namibia to supplement its own
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AGRI-PARKS MASTER BUSINESS PLAN production stock. Both production and consumption followed the same trend – moving on an increasing trend from 2005/06 to 2013/14 (even though there were sporadic declines within this period due to the global economic meltdown which led to a decreased disposable income of larger number of consumers). In 2013 the mutton industry produced around 158 000 tons of meat and imported a further 7 000 tons. Per capita consumption is around 3.8 kg and the estimated number of consumers is around 50 million.
Figure 8.5 also shows that the amount of mutton consumed is more than what was domestically produced during the period under review. This shows that South Africa will still remain a net importer of mutton to satisfy the local demand. Declining sheep numbers through predation and stock theft and rapid population growth in South Africa have led to an increase in demand and subsequent shortages in the supply of mutton. According to BFAP (2015), mutton consumption is projected to expand by just over 17% by 2024 (BFAP Baseline Agricultural Outlook, 2015).
Figure 8.5: Mutton Production vs Consumption, 2004-2013 180
160
140
120
100
80
Thousand Thousand Tons 60
40
20
0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Production Consumption
Source: Trends in the Agricultural Sector, 2014
There has been a gradual increase in the slaughtering of sheep at abattoirs. An increase of more than 17% in domestic slaughter numbers in 2013 was followed by another, albeit smaller increase in 2014 leading to approximately 8 million sheep slaughtered (BFAP Baseline Agricultural Outlook, 2015 and (Abstract of Agricultural Statistics, 2015)
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AGRI-PARKS MASTER BUSINESS PLAN iii. Mutton Market Assessment
In South Africa sheep is sold through five different marketing channels i.e. directly to feedlots if it is small numbers, abattoirs, livestock marketing agents, butchers or sold through auctions. Research has found that public auctions and informal sales are the most preferred marketing outlets for emerging farmers.
Sheep and lamb are slaughtered in abattoirs that are distributed all over South Africa. Slaughtering outside the abattoirs also take place but these are not easy to record and hence there are no substantial records. Meat from the abattoirs is distributed through wholesalers, retailers and butcheries. Some is exported or processed. Import of mutton is done by retailers and wholesalers and processors while exports are mainly undertaken through abattoirs. iv. Local Markets The red meat industry in SA evolved from a highly regulated environment to one that is totally deregulated today. Since the deregulation of the agricultural marketing dispensation in 1997, the prices in the red meat industry are determined by demand and supply forces.
Meat consumption in South Africa has expanded rapidly over the past decade and while continued growth in meat consumption is projected in the coming decade, a confluence of macroeconomic factors is expected to result in higher meat prices and slower consumption growth relative to the past. Income growth remains the core driver of rising meat consumption and hence the cautious outlook for income growth in South Africa is a fundamental factor underlying slower demand growth. Furthermore, relative prices and consumer preferences drive the choice between various meat types over time. Chicken remains the most affordable source of protein and is expected to account for 65% of additional meat consumed by 2024. As the most expensive meat alternative, lamb / mutton is typically consumed by higher income consumers that spend a smaller portion of their budget on food and are less sensitive to changes in price levels. Consequently, sheep meat consumption is projected to expand by just over 17% by 2024, following a contraction through the past decade (BFAP Baseline Agricultural Outlook, 2015).
Whilst prices increased sharply in 2014, sheep slaughter numbers increased for the second consecutive year, which would indicate that domestic producers have yet to enter a phase of herd rebuilding, despite improved profitability. Persistent drought conditions in the early part of 2015 resulted in domestic feed grain prices rising, and while domestic mutton prices have reached record levels, producer margins remain tight. Having declined steadily since 2008,
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AGRI-PARKS MASTER BUSINESS PLAN the share of imported lamb in domestic consumption will average 13% in the coming decade, down from 23% in the preceding 10 year period. (BFAP Baseline Agricultural Outlook, 2015).
Under the previous marketing regime, wholesalers mostly bought carcasses through the auction system. Currently, many wholesalers source live slaughter animals directly from farmers on a bid and offer basis, i.e. they take ownership of the animal before the animal is slaughtered. The animal is then slaughtered at an abattoir of the wholesaler’s choice, where after the carcass is distributed to retailers. In some instances, the public can also buy carcasses directly from wholesalers. v. Export South African is a very small player in the world of mutton exports with very small quantities exported. SA mutton was mainly exported to Angola and Mozambique in SADC during the early 2000’s and in more recent years Mozambique (36%) and the Democratic Republic of Congo (21%) are the largest African importers of mutton. It became profitable to export mutton from 2007 to 2013. The highest quantities exported (approximately 400 ton) were reached in 2005 and this figure declined to approximately 360 ton in 2013 (Profile of Mutton Market Value Chain, 2014) vi. Import South Africa is a net importer of mutton with the amount of mutton imported being much higher than the amount exported. South Africa imported an average of 16 000 tons per annum of mutton during the past decade (reach a high peak of 44 000 tonnes in 2006 then decreased thereafter to the lowest volume of 7 000 tonnes in 2014/2015 (Abstract of Agricultural Statistics, 2015). According to AMT, imports from Namibia of 4 700 tons of mutton, (including live animals) was also recorded in 2013.
8.2 Red Meat Market Price
South African market price is measured through the price per kilogram of the chilled carcass post slaughter. As can be seen within the graph below, all three commodities have seen an increase in their price over the 2003/04 to 2013/14 period. Prices increased for all products in 2006/07 and 2011/12. Mutton prices have been the most vulnerable to these price increases. Pork prices are the most stable of the three, with beef and veal prices performing between the two. In terms of total growth, cattle carcasses experienced the greatest increase in value between 2003/04 and 2013/14, increasing by 120.9%. Sheep carcasses increased by 114.8%, while pig carcasses increased by only 100.5% over the same period. In the most recent period, of 2012/13 – 2013/14, the inverse is true, with pork prices increasing by 13.2%, mutton by 4.0%, and beef & veal by only 1.6%.
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Figure 8.6: South African Price per Chilled Carcass
5,000 4,500 4,000 3,500 3,000 2,500
2,000 Cents/kg 1,500 1,000 500 0
Mutton Pork Beef & Veal
Source: DAFF, 2015A
Abattoirs generally purchase livestock from producers or feedlots at a price that is based on the cold carcass weight of the animal. The price paid for the carcass further depends on the age and type of slaughtered animal, as well as fat content. The carcass is first classified according to a classification system, and a price is then determined. The classification system is derived from two characteristics, namely age and carcass fat content. Animal carcasses are classified into four different groups according to age which is determined by the number of permanent incisors. The carcasses are then further classified according to subcutaneous fat content on a scale of 0 to 6 (i.e. 0 = no fat, 6 = high fat content).
Table 8.6 summarises the South African carcass classification described above. Animal suppliers are penalised with lower prices for older aged animals with high fat contents.
Table 8.6: South African carcass classification system Trait Beef/Sheep/Mutton Age A AB B C # Permanent Incisors 0 1-2 3-6 >6 Roller Mark AAA ABAB BBB CCC Colour Purple Green Brown Red Tenderness Most Tender Tender Less Tender Least Tender Fat Grade 0 1 2 3 4 5 6 Beef (Fat thickness mm) 0 <1 >1<3 >3<5 >5<7 >7<10 >10 Sheep (Fat thickness mm) 0 <1 >1<4 >4<7 >7<9 >9<11 >11 Source: Olivier, 2004
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Abattoirs and meat processors sell products that are priced according to meat cut and quality. Typically, A-grade meat products fetch a higher price than C-grade products do. Lower grade products, however, can go through a value adding process in order to increase margins. For example, lower grade meats marinated, spiced, pre-cooked, or minced to produce burger patties and meat balls. Hides are also produced from the abattoir, predominantly cattle hides, although a few sheep, goat and pig skins will also be produced. The prices for the hides are determined by hide quality and weight. Cattle hides currently trade at between R14.00 and R15.00 per kilogram, while sheep pelts trade for between R70.00 and R120.00.
8.3 Value chain assessment
a. Red Meat Value Chain
Hides & Skins, Wool Export
Auctions Processors
Feedlots Abattoirs
Traders Retailer
Subsistence Consumer
Importer Wholesale
Primary Producers: Large, Emerging, (livestock)
Importer
Informal Market
High Development Potential
Source: Department of Agriculture, 2014
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Feedlot Value Chain
Animal feed Purchase of Feed manufacturers% animal feed & production producers of other (mixing of other feed ingredients ingredients) ingredients
Commercial Calf purchases Receiving and farmers (stud adaptation of Marketing Animals to and/or animals Production (animals, Abattoirs commercial) hides& Offal)
Professional Purchase Services Professional Manure Offloading e.g.veterinary services Manageme of manure nt
High Development Potential
Medium Development Potential Injure, unfit or dead Destroy animals animals
Source: Department of Agriculture, 2014
8.3.1 Upstream Activities
As Beef production is classified as primary production the Up-stream activities relevant to the value chain are primary the input supplies used in the production system. The major inputs for livestock production include animal genetic resources, feeds and forages, veterinary drugs, vaccines, machinery equipment as well as knowledge. Most of these inputs are supplied by Agricultural Co-operatives in the respective areas. The main agricultureal co-operatives in the district are; Alfa Feeds TWK Nutribasics CC KK Animal Nutrition (PTY) Ltd
8.3.2 Primary Production Activities
Beef is produced throughout South Africa. The amount of beef produced depends on the infrastructure such as feedlots and abattoirs, not necessarily by the number of cattle available in those areas. South Africa has highly developed transport infrastructure that allows movement of cattle and calves from one area to another, even from other countries such as Namibia. For these reasons, Mpumalanga commands the greatest share of beef production
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Despite all the challenges, cattle form an integral part of the economy within the communal farming sector. To unlock this potential to its fullest, the first step would be to recognize that cattle-ownership for many people remain a culturally resonant, economically rational and socially acceptable option for strategies of production and accumulation. This being the case, the role players in this sector should be safeguarded and their investments enhanced with targeted interventions that expressly increase both the productivity and overall rand value of the herds. To be successful, the focus should be on increasing both the capacity and the options of poor people to enable them to make strategic investments in their own future. Overall, the emphasis should be on providing the services and know-how for doing the basics of animal husbandry more effectively, rather than more newsworthy – but far less effective – interventions such as bull leasing schemes.
Future research should address the incomplete picture that exists of the overall distribution of cattle across livelihoods in the province. A research void exists regarding herd productivity in situ, including reproductive rates, weaning rates, mortality rates, growth rates and present marketing patterns. The average age and composition of individual herds, which has a direct influence on productivity, is also largely unknown. Research and development into the effective utilization and enhancement of the grazing resource becomes a more pertinent issue as far as cattle is concerned as they tend to react faster to and recover slower after drastic changes in the grazing resource.
8.3.3 Downstream Activities
The market players in the beef industry are vertically integrated. They have their own feedlots, abattoirs, processors and distributors. It is estimated that there are approximately 50 000 commercial farmers currently farming with livestock. This includes producers that keep livestock as their main enterprise and those that keep livestock as a secondary enterprise. They own around 8.2 million cattle. There are 240 000 small-scale farmers and 3 million subsistence farmers that own around 5.69 million cattle.
The beef supply chain has become increasingly vertically integrated. This integration is mainly fuelled by the feedlot industry where most of the large feedlots own their own abattoirs, or at least have some business interest in certain abattoirs. In addition, some feedlots have integrated further down the value chain and sell directly to consumers through their own retail
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AGRI-PARKS MASTER BUSINESS PLAN outlets. Some abattoirs have also started to integrate vertically towards the wholesale level. Under the previous marketing regime, wholesalers mostly bought carcasses through the auction system. Currently, many wholesalers source live slaughter animals (not weaners) directly from farmers or feedlots on a bid and offer basis, i.e. they take ownership of the animal before the animal is slaughtered. The animal is then slaughtered at an abattoir of the wholesaler’s choice, where after the carcass is distributed to retailers. In some instances, the public can also buy carcasses directly from wholesalers. The abattoir industry has expanded tremendously in number and in capacity.
Main Abbattoirs in the district: Glen Aggy Abattoir Karan Beef Abattoir Goedehoop Leslie Abattoir Piet Retief Abattoir Standerton Abattoir E and T Vleismark and Abattoir
Main feedlots in the district: Karan Beef SIS Feedlot
8.3.4 Red Meat Value Proposition
Red Meat Value Proposition
Opportunity identification
The district has limited capacities with regards to processing and packing of red meat products in the district. The lack of infrastructure limits the options of most producers to market and distribute their products independently. The opportunity exist in the district being able to offer livestock farmers greater slaughter capacity in combination with options for processing and packaging serves so producer can have flexibility for marketing their products profitably.
The range of products to be produced could include:
Fresh meat (chilled half or quarter carcasses) Sausages Packaged fresh meat (prime and Semi-cooked specialty products forequarter cuts )
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Bacon Roasted products (e.g. Roast Ham beef/pork) Salami Cold meats Kebabs Offal’s Canned meat products, etc. Dairy products (milk, cheese, yoghurts)
Processing of mutton includes:
Sheep milk, cheese, yoghurt Meat is either combined with mutton products or other meat substance like sausages and polonies. Wool from sheep, hides and skins Mutton meat in various cuts, strictly halaal
Feasibility and competitive advantage
The district has a competitive advantage as there is numerous red meat abattoirs scattered in various districts of the province and processing activities will complement existing activities.
The competitive advantages offered by the district in terms of red meat processing include:
Conducive climate for livestock production, particularly cattle and sheep Existing red meat value addition activities such as abattoirs, feedlots and government livestock improvement programmes Increasing market locally and potential market from surrounding SADC regions
The viability of developing a red meat processing facility lies in the fact that a gap exists between the livestock production levels and the limited number of processing activities currently taking place in the Province.
Market demand
Increase for organic meat, grass fed meat
Addressing the low-profitability issue demands capturing a larger share of the retail price. This can be accomplished by diversifying, specialising, adding value at the farm and engaging in more direct marketing.
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Investment requirements
Investment requirements include capital expenditure on:
Site/Land; Equipment; and Buildings (buy, construction or rent); Furniture.
The buildings to be bought, rented or constructed would have to provide for the following facilities:
Livestock off-loading and raceway facilities Brine injection/tumbling/massaging Livestock reception and holding facilities room Ante-mortem inspection facilities Meat curing, fermenting, cooking and Abattoir with slaughter floor and offal smoking areas collection and processing rooms Ablutions, staff kitchen and canteen De-boning, slicing and packing facilities Laboratories, offices and storage Variety of carcass chillers and freezers at areas various points in the process Boiler house and by-products rendering facilities Product loading areas
The equipment required to operate a processing plant would include:
Livestock slaughtering equipment; Refrigeration, ventilation, evaporative Chiller rails cooling and air conditioning Offal processing equipment equipment De-boning and grinding equipment Effluent treatment plant Cooking, brining, smoking and roasting Generators equipment Laboratory and office equipment Packing, vacuum packing; wrapping and Site security and access control cartoning equipment equipment Fillers and stuffers Canteen equipment Scales Vehicles
Regulatory requirements
There are a number of regulations related to the establishment of an enterprise, the operation of a business and the processing of food products that need to be adhered to. Some of the key regulatory requirements include, but are not limited to:
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Business registration with Companies and Intellectual Property Commission (CIPC) Registration for taxes with South African Revenue Services (SARS) Trading license under Business Act 71 of 1991 Health Certification Essential National Standards for Abattoirs (as contained in the Meat Safety Act) Abattoir Construction Guidelines (2004) Land Use Change (if not in existing industrial area)
Other legislation and factors to comply with: Registration for Unemployment Insurance The South African Abattoir Fund and Workmen’s Compensation Corporation Act Basic Conditions of Employment Act The Water Services Act Department of Health Regulations Quality Assurance Standards Foodstuffs, Cosmetics and Disinfectants Good Manufacturing practices Amendment Act 32 of 1981 The Act on Marketing of Agricultural Public Health Act Products Agricultural Product Standards Act of 1990 Meat Commission‘s requirements Perishable Products Export Control Act, Act 9 of 1983
Potential locations
Concentration of livestock and sheep are found throughout Gert Sibande district, making the two district potential location for red meat processing. The availability of infrastructure is critical factors for processing facilities as slaughter plants generate waste that can be difficult to deal and a reliable supply of potable water is essential.
Alternative Arrangements
Mobile Slaughter Units
Exploring the option of mobile slaughter units for small scale and emerging farmers to assist those especially in rural areas, providing inspected processing facilities within a practical distance. Each unit contains hot and cold water, electric hydraulic pump, air compressor, generator, inside rails and units but no refrigeration but this can be addressed through providing refrigerated storage areas.
The unit can be operated by one butcher at a low capacity of 10 beef per day and these can assist with critical replace of degradation of infrastructure of rural communities. These mobile units can enhance the local economy, increase self-sufficiency and produce higher quality making it widely available to local communities.
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Farmers must form cooperatives to purchase and operate the units. And once the animal is slaughtered, the carcass still has to be brought to a packing house for cutting and wrapping before the meat can be sold. Packing houses can be located in central areas for SMMEs to access.
Mobile Slaughter Unite Case Study, San Juan County, Washington, USA
Problem: Local farmers faced high number of closure of many small processing plants in the district and small farmers who wished to market their livestock directly to consumers, restaurants and local stores do not have inspected processing facilities available within a practical distance.
Solution: A group of farmers collectively purchased a mobile slaughter unit, containing all the physical requirements need for ‘inspected’ slaughtering.
Processing Capability
Each unit has the capacity to slaughter 10 beef, 24 pigs, or 40 sheep per day with two butchers. The unit can be operated by one butcher at a lower capacity. The hanging cooler in the trailer can hold up 2720kg of carcasses so the unit can operate for two days before returning to its base to unload carcasses and re-supply.
Features
The unit is equipped with a diesel generator, water system, hot water heater, acid was system, cook & processing area, refrigeration and tools to allow for fully self-contained operation. Carcasses begin chilling immediately after processing and are down to temperature by the next morning.
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8.4 Main Competitors
The main suppliers of Beef in the local market is Karan Beef, Emerging/SMME Farms and Bull Brand.
Figure 8.7: Market Players and their market share in the Beef Industry Chalmar Beefcor 5% 4% EAC Group SMME's/Emerging/ 6% Subsistence 23% Sparta Beef 7%
SIS 8%
Beef Master Karan Beef 10% 25% Bull Brand 12% Source: DAFF - A Profile of the South African Beef Market Value Chain 2010
Karan Beef in Balfour and SIS in Bethal are the biggest market players in the district.
8.5 Stakeholders
The Red Meat Producers’ Organisation (RPO) and the National Emergent Red Meat Producers’ Organisation (NERPO) represent producers in the commercial and emerging agricultural sectors respectively for the red meat production market. The Red Meat Abattoir Association (RMAA) also serves as a serves as a centralized point organising training sessions, to ensure hygiene and legislation adherence, as well as an information source for established and emerging abattoirs within the country.
International Meat Quality Assurance (IMQAS) National Emergent Red Meat Producers Organisation (NERPO) National Federation of Meat Traders Red Meat Producers Organisation (RPO) S A Federation For Livestock Auctioneers and Meat Brokers S A Feedlot Association (SAFA) S A Meat Processors Organisation (SAMPA) South African Meat Industry Company (SAMIC)
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Perishable Products Export Control Board
8.5.1 District Stakeholders There are a number of red meat stakeholders in the Gert Sibande District as illustrated by Table 8.7.
Table 8.7: Red Meat – Stakeholders Name Type Glen Aggy Abattoir Abattoirs Karan Beef Abattoir Abattoirs Goedehoop Leslie Abattoir Abattoirs Piet Retief Abattoir Abattoirs Standerton Slagpale Abattoirs E and T Vleismark and Abattoir Abattoirs Van Wyk Lewendehawe Auctioneers BKB Van Wyk (Ermelo) Auctioneers Drakensberger Cattle Breeders Society Breeders Alfa Voere Agri-business TWK (Piet Retief) Agri-business Nutribasics CC Agri-business KK Animal Nutrition (PTY) Ltd Agri-business Ermelo Department of Agriculture Department of Agriculture Mkhondo Service Office Department of Agriculture Standerton Department of Agriculture Department of Agriculture Volksrust Department of Agriculture Department of Agriculture Alzu Feeds (Ermelo) Feed Manufacturers Alzu Feeds (Secunda) Feed Manufacturers KK Animal Nutrition (Bethal) Feed Manufacturers Sis Farming Feedlots
8.6 Technology
Technology plays a vital role in the development of the agricultural industry and today farmers use technology to assist in producing food for a growing world. High tech advances have been assist in making farming life easier and more profitable. Smaller farmers can hold their own by moulding the technology to fit their management techniques and needs.
The Table below indicates the various technologies that the Agri-Park can use within Gert Sibande District. By utilising the various technologies, the small scale and emerging farmers can
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Table 8.8: Livestock Technologies Technology & Description Function/Benefit to Farmer Skill Level Required Mechanisation Small-scale implements and tractors: New Farmers benefit from modern Medium generation of farming implements and mechanisation and large leaps in tractors tailored for small-scale farming. productivity even though they farm at small scale, and at a much lower cost compared to conventional implements used by large commercial farmers. Precision farming, integrated farm management systems and software Precision farming: Gaining real-time or Optimising and tailoring production levels High exact information within particular parts of at precise and small-area level so that a single field e.g. moisture and nutrient yield is maximised and inputs are levels, soil type and depth etc., to minimised. determine the most appropriate rate of application of water, fertilizer and to adjust implement settings automatically and instantly. Precision farming can also be applied to animal production, aquaculture and agroforestry systems.
Integrated farm management software: Maximise profitability and efficiency High Combines information and management automate some management and systems from various on- and off-farms administrative tasks. Coordinate and sources to coordinate farming activities in a simplify management processes. highly efficient manner. Includes a variety of technologies e.g. farm asset tracking systems, cloud computing, record keeping, accounting, mapping, water and soil management, weather forecasting etc. Plan-A-Head Beef Management System: Integrate with the systems of cattle High Herd management and record keeping breeder societies and with other Plan-A- according to ICAR (International Head farming software to allow for whole- Committee for Animal Recording) farm enterprise management. Widely guidelines specifically for South African adopted therefore most software bugs beef cattle farmers. has already been fixed. The light edition is particularly suitable for small-scale
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Technology & Description Function/Benefit to Farmer Skill Level Required farmers. Particular strong features include the program's record keeping capabilities, especially regarding animal health, reproduction and feeding. SimJunior: Basic financial management Easy to use. Ideal for the small-scale Low and accounting software for the small- farmer scale farmer. Accord: Complete human resource Particular strong features of the system Moderate management system for farmers, including include its simplicity and coverage of payroll, HR record keeping and basic employment legislation. administration. Agribeef: Complete beef cattle herd Approved by most breeder societies. Moderate (commercial as well as stud) management Particularly strong in record keeping and system). reproduction management. Feedlot: Feedlot management system for Particularly strong in record keeping. Moderate camp groups, sales groups and purchase groups. Studmaster Beef: A comprehensive Particularly strong in animal breeding. Moderate computer program for the management of beef cattle of any breed, focusing more on the breeding side of the herd than the financials. Fully incorporates registration and performance testing. Groundwater access via wells or boreholes Manual well digging or borehole drilling: Gain access to groundwater resources Low to Although mechanical drilling can reach much more cheaply compared to medium depths of 150 meters, it is generally too conventional mechanical drilling. expensive for small-scale farmers. In case the groundwater table are less than 45 meter deep and the subsoil material are soft, manual drilling or well digging are a cost efficient option. Animal Reproduction Artificial insemination (AI): Introduction of A farmer can cost efficiently introduce Moderate the sperm (often stored and transported in generically superior traits into his/her herd a frozen form) into a female animal's uterus or flock without having to buy these (in-vivo fertilization). superior animals. Oestrous synchronization: Using hormone Pregnant cows and later their calves can Moderate treatment to ensure that female dairy and be handled in a single cohort, thereby
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Technology & Description Function/Benefit to Farmer Skill Level Required beef cattle becomes pregnant at increasing efficiencies of scale and approximately the same time. decrease cost and effort performing procedures through the different life stages. Animal Handling Hydraulic cattle clamps: Silent, less stressful During cattle handling, the traditional Low and precise clamping of cattle at the neck clamp causes significant stress to the to allow for safe handling of the animal. animal and the clamp often fit too loose or too tight. The new generation hydraulic clamps fits more precisely and does not produce a stress-causing noise.
Cattle hip-clamp: Instrument that allows for Allows for convenient, stress and injury Low easy lifting of cattle. free lifting of sick cattle or cattle that need assistance to stand upright again. Animal Feeding Rolling molasses lick: A tank filled with Ensuring a fresh supply of molasses as Low molasses with wheels that rotate through needed by the animals. the molasses at the bottom of the tank as the cattle lick the fresh molasses at the top of the tank.
Feed mixers with advanced feed Requires significantly less energy and time Moderate circulation capability: The new generation compared to conventional hammer mills. to high feed mixers are capable of circulating material that needs to be milled into a feed mix towards the centre of the container. Animal Watering Auto-refill watering troughs: Water troughs Not only steady and easy to clean, but Low fitted with a small reservoir and low pressure also re-fill automatically from a small floating valves to enable automated re- build-in reservoir which minimizes filling. contamination and risk of wastage. Animal Health Vaccination: Vaccines contains inactive Vaccines have a highly positive effect on Low parts (usually the capsid) or molecules that disease control and even eradication. resembles surface proteins of a pathogenic Very high return on investment. virus or bacterium, which are introduced into the animal's blood stream so that antibodies can be developed. This will
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Technology & Description Function/Benefit to Farmer Skill Level Required enable the animal to develop immunity and to be protected against the pathogen when and if exposed to it later in life. New vaccines are constantly developed therefore it is important to consult with an animal health professional on the most appropriate vaccination program. Antibiotics: Have two main applications in Increased growth rate and resistance High agriculture: 1) To treat infections, which is against disease in case of routine feeding an important technology but will not be supplementation, however, the cost to discussed in detail because it is a society could be large and devastating. specialised field that are taken care of by animal health professionals, and 2) As a routine feed supplement to animals in intensive farming systems (feedlots, piggeries, chicken houses, fisheries etc.) which can be considered a dangerous and unsustainable practice.
Veldt Management Bush-to-feed converter: Unit that produce Converts a liability (bushes that reduce Moderate feed pellets from shrubs and trees, the carrying capacity of the veldt) into a including species responsible for bush valuable asset (feed for game and encroachment. cattle). Could be an effective method of bush encroachment control. Land rehabilitation techniques: May differ in Stabilise soil, control or reverse erosion Low to technological complexity from as simple as damage and restore degraded land so medium brush packing to as complex as that it can again be utilised for biodegradable or long lasting soil cloths agricultural purposes. and mesh materials. Farm Energy Wind energy: Wind energy has been used Wind is a renewable form of energy and High for a long time in South Africa in the form of some areas in South Africa do have wind pumps. New generation wind sufficient wind development potential, technology allows for uses beyond wind especially when micro-climatic and small- pumping, including electricity generation area topographic factors are considered at micro or farm level scale. which is appropriate for very small-scale operations. Less vulnerable to theft compared to solar panels.
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Technology & Description Function/Benefit to Farmer Skill Level Required Solar technology incl. photovoltaic and Solar is a renewable form of energy and Low thermal panels and solar drying and most areas in South Africa do have cooking: There are two main forms of solar sufficient wind development potential. In energy harvesting, i.e. photovoltaic panels fact, some parts of the southern and that produces electricity, and thermal solar western Free State, western Limpopo, panels or tubes that heat water. Solar Gauteng and especially the Northern energy is also widely used on farms for solar Cape and North West have excellent drying and solar cooling. solar power potential even at global standards. Biogas fermenters: Biogas can be Enable the farmer to become Medium produced from a variety of on-farm independent of imported and sources, especially animal dung of animals increasingly expensive mineral or natural kept in confined areas. Can be used in the gas. Especially suitable for intensive same way as conventional petroleum livestock, pig and poultry farmers which derived or natural gas. produce large quantities of animal waste. New techniques enable even small farmers with just a few animals to produce gas in a viable manner. Farm protection, security and visual monitoring Video and photographical technology: Valuable to monitor veldt condition, Medium Fixed point photography, security camera effects of grazing or fire control regime, systems and remote sensor-triggered rehabilitation efforts, and to monitor photography. animal or criminal activity in remote parts of the farm. Some systems notify the farmer by SMS of sensed activity and immediately send the footage by MMS or video clips to the farmer's mobile device (in additional to conventional recording and storage of images or video). Apps for mobile phones and tablets The Merck Veterinary Manual Mobile App, Comprehensive animal health and High available for both Android and Apple. It reproduction reference not only to vets contains guidelines for the diagnosis, but to farmers as well. treatment, and prevention of animal disorders and diseases. Cattle breeds: Overview of the world's more Useful for the new farmer to help in breed Low important beef and dairy cattle breeds selection. and their characteristics.
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Technology & Description Function/Benefit to Farmer Skill Level Required Online and mobile information portals AgriSuite Online: Internet based agricultural The system can be accessed on a PC or Low information system developed and Mac, on tablets and smartphones, in the maintained for farmers. Provide a variety of office or on the farm. Contains the most general agricultural information directly to essential, useful and concise information farmers. in a very simple and user-friendly format. FAO Ecocrop: Provide detailed crop Enable the farmer to select suitable crops Medium requirement information for almost any to farm with, and to diversify the farm's crop that are cultivated throughout the enterprises. world, including its uses and requirements for temperature, rainfall/water, soil type, soil depth, soil pH, salinity, altitude etc. It also include hundreds of forage crop species for extensive animal farmers. Other Drones: Un-manned aircraft capable of Very useful for general inspections, High exploring the farm and taking photos from monitoring and mapping. Advanced the air. models can even perform some remote sensing functions. Remote sensing: Interpreting satellite Enable the farmer to make well informed High images to make farming decisions. Satellite decisions based on information that images provide valuable information on otherwise would have been too difficult or biomass production, soil and air mass expensive to obtain. Provides complete temperature, soil moisture, plant stress information of the entire farm. Some levels, fire warnings etc. information is provided daily or instantly. Integrated weed and pest management Usually much more effective and Medium to incl. biological control agents: Pests and sustainable than chemical control on its high weeds are major threats to farmers and own. food security. Chemical control has been effective for some pests and diseases but it is expensive and causes harm to human health and the environment. Consumers and governments locally and to export markets place increasing pressure on farmers to adopt integrated management practices to reduce reliance on only chemical control. Especially important is biological control where the natural enemy of the weed or pest are released locally to
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Technology & Description Function/Benefit to Farmer Skill Level Required control population levels. It is not only applicable to crop farmers but to all extensive and semi-intensive animal farmers as well (pasture or veldt management). Radio frequency identification technology: Know where the animal is at all times, and High Used to track and identify animals. to identify a particular animal instantly for record keeping and management purposes. Especially useful to extensive farming systems and game farmers.
8.7 Demand and Needs Analysis
8.7.1 Beef To summarise opportunities in specific market segments as discussed under “Specific marketing channels”, there are potential to capture more profit by organising abattoirs to perform just a slaughtering and butchering service rather than selling animals to the abattoirs, then to market the meat directly to small and large retailers, butcheries and catering or hospitality businesses. There are huge potential to properly brand local grass-fed and organic beef for the export market. Abattoirs as potential customers are important during the initial phase, and the hide industry needs to be further developed.
The most important marketing channels and channel related opportunities include custom processing arrangements with red meat abattoirs combined with contract farming directly for government institutions, hospitality industry and especially large retailers. Gaps in the market for red meat products are mainly limited to simple value adding techniques, including improved slaughtering, portioning, branding (huge scope for further development), packaging and freezing, and to some degree market development for red meat offal products. Extensive processing is not recommended during the establishment phase due to global competition and high capital expenditure.
It is possible to provide an estimate for demand based on historical consumption figures and populations. The Table provides a summary on estimated demand on a national and provincial level.
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Table 8.9: Estimated Demand for Beef Area of Demand Estimated Demand for Beef (tons) South Africa 1 017 245 Mpumalanga 79 514 Nkangala District 20 242 Ehlanzeni District 25 440 Gert Sibande District 33 832
The average annual per capita for beef is estimated to be 18.51 kg. The demand for beef in Mpumalanga is an estimated 8% of the total demand in South Africa (79 514 tons).
8.7.2 Mutton To summarise opportunities in specific market segments as discussed under “Specific marketing channels”, the most important marketing channels and channel related opportunities include: Abattoirs and meat processors will be the most important entry level marketing channel. Export markets should be developed for Geographic Indicator branding and organic mutton products, emphasizing extensive and organic production techniques. This does not apply to feedlot mutton.
Gaps in the market for processed mutton or lamb products include: Packaging (especially wrapping) and proper branding, including Geographic Indicator, organic and possibly Fair Trade certification. Drying, especially pastirma production. Market development for sheep and lamb offal products.
8.8 Job Creation
The production of beef cattle, like any of the other agricultural activities has an impact on the socio-economic development of South Africa. A critical aspect among socio-economic develop is that of job creation. The provision of job opportunities by the beef industry is crucial because this results into opportunities to receive an income that will contribute to socio economic-development in terms of eradication of poverty, food security and ultimately the uplifting of livelihoods. The government, including DAFF and DRDLR have supported and exploited the opportunities of the beef production socio-economic impact by initiating various programmes that ensure that the poor and rural communities can benefit from these opportunities
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There is an estimated 50 000 commercial livestock farmers, 240 000 small scale farmers and 3 million subsistence farmers. According the Department of Agriculture the beef industry employs an estimated 500 000 people and almost 2.1 million people are dependent on the livestock industry.
Cattle farming is a non-labour intensive activity, however, cattle farming has been identified as having high growth potential for employment creation by the Bureau for Food and Agricultural Policy (BFAP). The following job categories reveal some of the primary job opportunities that are involved in beef production:
General labourer Transfer, sorting and loading of Liarage worker carcass Processing Technical and foreman supervision Hygiene management
Source: Red Meat Abattoir Association
The direct employment multiplier, is relatively low, with only 2.07 jobs created per million produced. The indirect multiplier is likewise low, at 1.61 jobs, and the induced multiplier is only 1.88 jobs (OABS Development, 2015). Therefore, according to the above, the total job multiplier is 5.56 jobs created per R1 million produced.
8.9 Contribution to Food Security
DAFF launched a Zero Hunger Policy in 2012 in order to curb poverty and improve food security for vulnerable communities who are in need of support. The Zero Hunger Policy was created to uphold Section 27,1 (b) of the bill of rights which states that every citizen has the right to food and water and Section 28,1 (b) which states that every child has the right to basic nutrition shelter and basic care and social services. The policy suggest that adult daily calorie should be 1792 kcal (7502kj) per day for an adult and sets a food poverty line of R260 per individual expenditure for food every month (DAFF, 2002). Meat consumption is based largely on availability, price and tradition. Meat production is a very complex operation depending not only on demand (which is usually based on price and income) but on many social and economic influences such as official policy, price support mechanisms, and interrelations such as the interaction between beef and milk production etc. (FAO, 2002). While it is clear that meat is not essential in diets the inclusion of animal products makes it easier to ensure a good diet. Many diets in developing countries are based on cereals or root crops and are relatively bulky, especially where fats are in short supply, and this can limit the total energy intake (FAO,
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2002). The importance of meat in the diet is as a concentrated source of protein which is not only of high biological value but its amino acid composition complements that of cereal and other vegetable proteins (FAO, 2002).
Food security entails ready access to food that is of sufficient standard and amounts. The beef industry, as part of the livestock sector contributes to food security, as well as provides support to the livelihoods of almost a billion people around the world. Furthermore, 15 % of total food energy and 25% of dietary protein is provided by livestock produced (RSA DAFF: 2013). In South Africa, the limited opportunities for crop production have resulted in livestock farming being the prime income generator in many of the rural areas and climatic zones, thus contributing to the income used to purchase maize, wheat and vegetables as staple foods.
A significant contribution by animal food products is towards the quality of the diet. When compared to grain or vegetable products, the biological value of animal product proteins is higher. Vital nutrients are also supplied mainly by animal food, proving nutrients such as Vitamin A and Iron that are usually insufficient in diets of the rural population. (NDA: 2006)
8.10 Regulatory Requirements
There are numerous legislation documents governing the production of red meat. These range from regulations as to the production inputs (National Water Act), to those governing production (Meat Safety Act) and to production standards and consumption. The most pertinent of the acts are contained in Table 8.10 below.
Table 8.10: Regulatory Requirements Act Description Conservation of This Act provides for control over the utilisation of natural agricultural resources in Agricultural order to promote the conservation of soil, water sources and vegetation, and the Resources Act, combat of weeds and invader plants (Department of agriculture, Forestry and 1983 (Act No. 43 Fisheries, 1963). Of 1983) Implication: The Agri-Park will be required to implement policies that will maintain and monitor best agricultural practices to ensure the conservation of soil and vegetation, and also combat invader plant species. Animal Diseases The Act provides for control measures for the prevention of diseases and parasites Act, 1984 (Act No. and for schemes to promote animal health (Department of Agriculture, Forestry 35 Of 1984) and Fisheries, 1983). Implication: The Agri-Park needs to be aware of various animal diseases and the relative prevention measures necessary. The AP will be required to implement an animal health and monitoring programme to ensure the health of the broilers.
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Act Description Abattoir Hygiene This Act provides for the maintenance of proper standards of hygiene in the Act, 1992 (Act No. slaughtering of animals and in the handling of meat and animal products 121 Of 1992) (Department of Agriculture, Forestry and Fisheries, 1992). Implication: The Agri-Park will be required to implement a hygiene and monitoring programme to ensure hygiene standards are met in the abattoir facility. Livestock Brands The Act regulates the registration of a brand in the name of an owner of livestock Act, 1962 (Act No. for the purpose of identifying the livestock (Unknown, 1993). 87 Of 1962) Implication: It will be the responsibility of the Agri-Park management to register a brand in the name of the Agri-Park in order to identify livestock within the programme. Animals The act encompasses the prevention of cruelty towards animals. The act further Protection Act, encompasses the code of best practices for the handling and transport of 1962 (Act No. 71 livestock (Unknown, 1962). of 1962) Implication: The Agri-Park must ensure that no cruelty towards it livestock occurs through their handling (transport, feeding, housing, etc.). Fertilisers, Farm The act provides for the appointment of a Registrar of Fertilizers, Farm Feeds, Feeds, Agricultural Agricultural Remedies and Stock Remedies; for the registration of fertilizers, farm Remedies and feeds, agricultural remedies, stock remedies, sterilizing plants and pest control Stock Remedies operators; to regulate or prohibit the importation, sale, acquisition, disposal or use Act, 1947 (Act No. of fertilizers, farm feeds, agricultural remedies and stock remedies; to provide for 36 of 1947) the designation of technical advisers and analysts; and to provide for matters incidental thereto (Department of Agriculture, Forestry and Fisheries, 1947). Implication: The Agri-Park must ensure that all regulations regarding the manufacturing, distribution, importation, sale, use and advertisement of any fertilizers, animal feeds, pesticides, stock remedies as well as the operation of any pest control operators are adhered to. This can be done through the farmer support units which will need to have a programme in place for the above mentioned to be monitored. National Water This act encompasses laws relating to water resources and the use thereof Act, 1998 (Act (National Water Act, 1998 (Act No.36 of 1998), 1998). No.36 Of 1998) Implication: The Agri-Park must ensure that water used is used in a sustainable way to ensure the sustainability of the nation’s water resources.
Occupational The act aims to provide for the health and safety of persons at work and the health Health and Safety and safety of persons in connection with the activities of persons at work and to Act, 1993 (Act establish an advisory council for occupational health and safety (Department of No.85 of 1993) Labour, 1993).
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Act Description Implication: The Agri-Park must ensure that a safe working environment is established for all workers and must adhere to all the duties as listed in the occupational health and safety act. Basic Conditions The act encompasses those regulations associated with fair labour practices of Employment (Depart of Labour, 1983). Act, 1983 (Act No. Implication for AP: The AP must ensure that fair labour practices are followed to 3 of 1983) ensure that the basic conditions of employment are met, such as leave, working time, termination of employment etc. Municipal By-Laws Municipal by-laws will need to be investigated with regard to the establishment and Regulations, of the abattoir in a municipal area. (where relevant) Implication: The Agri-Park will not be able to operate an abattoir unless any by- laws regarding abattoirs are met. Marketing Act, The Act has authorised an establishment and enforcement of regulatory 1968 (Act No. 59 measures to intervene in the marketing of agricultural products, including the of 1968) introduction of levies on agricultural products (Department of Agriculture, Forestry and Fisheries, 1968). Implication: The Agri-Park should establish a programmes that will manage the marketing of its own products in order to meet the requirements of the Act. Agricultural The act controls and promotes specific product standards from mainly a quality Products point of view for local as well as export purposes. A list of products for which Standards Act, standards have been set through regulations is promulgated under the act by the 1990 (Act No. 119 minister of agriculture (Department of Agriculture, Forestry and Fisheries, 1990). of 1990) Implication: Food and its associated products will go through various agro- processing activities before being a marketable product. To maintain quality assurance it is recommended that the Agri-Park establishes a team that will be responsible for carrying out activities that will meet the requirements of the Act Stock Theft Act, This Act encompasses those laws associated with the theft of animal stock and 1959 (Act No. 57 produce (Department of Justice, 1959). of 1959) Implication: The act will assist the Agri-Park in recovering any stolen produce. Consumer To promote a fair, accessible and sustainable marketplace for consumer products Protection Act and services and for that purpose establish national standards relating to (Act No68 of 2008) consumer protection (National Consumer Tribunal, 2009). Implication: The act indicates that the Agri-Park has a responsibility to provide products which promote a fair, accessible and sustainable marketplace for the consumer The Food Safety The FSSC 22000 Food Safety System Certification provides a framework for Management effectively managing your organization's food safety responsibilities. FSSC 22000 is System FSSC fully recognized by the Global Food Safety Initiative (GFSI) and is based on existing 22000 Certification ISO Standards. It demonstrates your company has a robust Food Safety
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Act Description Management System in place that meets the requirements of your customers and consumers (FSSC 22000, 2015). Implication: By complying with the Food Safety Management System FSSC 22000 Certification the Agri-Park is ensuring that it products meet required standards thus meeting requirements of both the customer and consumer. Hazard Analysis HACCP is a management system in which food safety is addressed through the and Critical analysis and control of biological, chemical, and physical hazards from raw Control Points material production, procurement and handling, to manufacturing, distribution (HACCP) and consumption of the finished product (U.S Food and Drug Administration, 2015). Implication: By ensuring that food safety requirements are met the Agri-Park is taking into account the needs of both the customer and consumer as well as enabling a safe and hazard free work environment. Conservation Of This Act provides for control over the utilisation of natural agricultural resources in Agricultural order to promote the conservation of soil, water sources and vegetation, and the Resources Act, combat of weeds and invader plants (Department of agriculture, Forestry and 1983 (Act No. 43 Fisheries, 1963). Of 1983) Implication: The Agri-Park will be required to implement policies that will maintain and monitor best agricultural practices to ensure the conservation of soil and vegetation, and also combat invader plant species. Perishable This Act provides for the control of perishable products intended for export from Products Export the Republic of South Africa and for the continued existence of a statutory board Control Act, 1983 to bring about the orderly and efficient export of perishable products from the (Act No. 9 Of Republic (Department of Agriculture, Forestry and Fisheries, 1983). 1983) Implication: In the event of export, it is imperative that the Agri-Park establishes and maintains control over the export products. It is the onus of the Agri-Park to establish a team that is responsible for food health and safety regulations. Agricultural This Act provides for the establishment of and control over an agricultural Development development fund for the handling of money received for development Fund Act, 1993 (Unknown, 1993). (Act No. 175 Of Implication: Funding is a fundamental cornerstone to the development of the 1993) Agri-Park and its stakeholder. The Agri-Park management should play an intermediary role in accessing and use of such funding. Agricultural Credit The Act provides for a system of assistance to persons carrying on or undertaking Act, 1966 (Act No. to carry on farming operations, and control in respect of assistance rendered 28 Of 1966) (Unknown, 1993). Implication: The Agri-Park management should provide a service to its producers in the way of easing access to credit. The AP should, on behalf of the producers, assist in accessing credit for agricultural production purposes. Access to credit will
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Act Description allow producers access to the relevant inputs for agricultural production purposes and, as such, produce necessary products for the AH (marketing point). Livestock The Act regulates the collection and sale of semen and ova and the artificial Improvement Act, insemination and inoculation of certain animals, establishment of a system for the 1977 (Act No. 25 evaluation and certification of the performance of certain animals, quality control Of 1977) with regard to the importation and exportation of certain animals, semen, ova and eggs, incorporation of livestock breeders' societies and the maintenance of the legal personality of livestock breeders' societies, and granting of certain exclusive powers relating to the registration of pedigrees of certain livestock to the South African Stud Book and Livestock Improvement Association (Unknown, 1993). Implication: Improving livestock, in particular broilers, is integral in terms of production efficiency. It is thus recommended that the Agri-Park establishes committees and programmes that address issues of livestock improvement in order to maintain standards as set out by the Act.
8.11 Substitute Products
Substitute goods/products are goods which, as a result of changed conditions, may replace each other in use, or consumption. The Table below lists and describes potential substitutes beef.
Table 8.11: Beef Substitute Products Substitute Product Description High protein Consumers have a choice of consuming high protein vegetables, grains, or vegetables/grains/ legumes. Examples of high protein products include lentils, soy mince, tofu and legumes samp and beans. Proteins of this nature are considered affordable alternatives and are particularly popular amongst vegetarians. Other meat Consumers are likely to substitute price rather than taste, or preference within this category. Low income consumers, therefore, are likely to purchase cheaper meat alternatives when substituting beef. Examples might include offal, cheaper pork, chicken and other meat that are relatively cheap. Eggs Eggs are a cheap, and a high protein source and therefore a potential substitute, especially within low income households.
Depending on the availability of a consumer’s disposable income, the substitution effect may differ. A high income consumer, for example, will base their purchase decision of taste and preference, while a lower income consumer may base their decision to purchase based on price. As a result, a low income consumer may substitute for cheaper protein products, rather than more expensive protein products such as mutton.
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8.12 Societal Trends
Societal and cultural trends are trends that relate to the social and cultural values and practices within a society, or culture. These are long term trends (at least two to five years) that explain why people behave the way they do. The South African food industry’s direction is affected by the growing influence of demographics, especially with respect to societal and cultural trends. The trend in rising incomes within South Africa has provided the local consumer with increased purchasing power and, therefore, the ability to increase demand for food. Increased purchasing power has also allowed the consumer increased access to a variety of food, including processed, packaged and frozen red meat (or convenience foods as described below).
Convenience foods or also known as time-saving foods as they are partially, or complete prepared are increasing in demand as consumers spending power increases and more value is given to time-saving. Red meat specific convenience foods include microwave meals and already prepared dishes for the oven. The increasing demand of quick-food has increased the number of quick-food items available to consumers in the last two decades. The most likely consumers to buy these items include modern families (families that lead an individualistic lifestyle and do not sit down to as many traditional meals), middle- to high-income families, and younger families.
There has been a growing trend in terms of purchasing organically grown food. Organically grown red meat provides consumers with produce free of:
Less fat; More flavour; No GMO (Genetically Modified Organism); No hormones, antibiotics and drugs; Preserves ecosystem; Keeps children and future safe. Keeps children and future safe.
Non GMO red meat is growing in popularity. A variety of health risk have been attributed to GMO, such as organ damage, fertility, tumors, etc. (however these effects were noted under laboratory conditions). There are public concerns regarding GMO in terms of food safety, regulation, labelling, as well as environmental impact. Genetically modified crops grown in South Africa are pre-dominantly white maize, yellow maize, cotton and soya. Livestock (cattle, beef and pork) play a vital role in terms of economic, social and cultural in communities. Their significance includes contribution to food security, job creation, income, nutrition, “live banks”
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Small scale and emerging farmers in the informal market are generally supplied by communal farmers, who in terms of location, are far from any formal market. Informal markets include farmer-to-farmer or farmer-to-consumer and/ or farmer to unregistered buyer sales. Key players in the informal food chain include communal area farmers, auctioneers, speculators and local traders. Two important reasons for keeping cattle for example were income generation and for family consumption. Young small scale farmers indicated that preference was given to selling of livestock through abattoirs and auctions rather than through private sales and speculators, while older small scale farmers who have low education and mistrust the carcass classification system shun abattoirs as a result.
In South Africa offal is eaten by South Africans of different backgrounds. Offal refers to the internal organs and entrails of a butchered animal, however in SA sheep heads are very popular and are referred to as “Skopo” (township colloquial term meaning head) and smiley (refers to the expression of the head when cooked). Additionally, in SA Halaal food has become increasingly popular due to the growing Muslim population. Halaal food implies that for any food to be considered Halaal it must comply with the religious ritual and observance of Sharia law.
8.13 Barriers to Entry
Barriers to entry are obstacles that make entry into a given market difficult such as regulations, high infrastructure costs or competition in the given area. This section will discuss the barriers to entry of the red meat industry, as presented in Table 8.12.
Table 8.12: Barriers to Entry: Red Meat CONSTRAINT DESCRIPTION LEVEL OF INFLUENCE CAPITAL, RAW MATERIALS AND PRODUCTION ISSUES
Poor carrying capacity In many parts of the district the natural carrying - capacity of the veld has been reduced due to unsound grazing practices (mainly overstocking). Input Costs There has been an upward trend in input costs, - over the last several years particularly feed and electricity. This has an adverse impact on farmers bottom-line. Stock Theft The theft of stock is an ongoing challenge for both Provincial, District commercial and emerging/small scale farmers.
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Start-up costs There is a high capital cost associated with setting - up fixed structures, installing requisite technology and also the financing of the first production and the initial stock of weaners Poor breeding stock Poor quality breeding stock and a lack of quality Provincial, District amongst emerging weaners amongst emerging and small scale farmers farmers means that they are not able to improve the overall level of their herd which in turn negatively impacts profits. Disease and high The expansion of game farming in the Eastern Provincial mortality rates Cape has resulted in the spread of diseases that affect sheep and goats. Sheep must be dipped regularly to avoid catching diseases. Due to a lack of technical skills, emerging and traditional farmers especially have problems with disease and mortality rates. Availability of land There are good opportunities for sheep and goat Provincial for farming production, however limited land availability. Sheep farming has to compete with ostrich, cattle, and goat farming for production space. The costs and returns on each should be considered sufficiently before engaging in any of the options. INFRASTRUCTURE
Roads The poor road network and lack of connectivity Provincial, District within the district hampers the cattle industry, particularly given that animals have to be transported out of the area for finishing. Fencing The lack of fencing leads to an increased Provincial, District incidence of stock losses, theft and poorer quality products. The provincial government does have a programme in place to address the issue of fencing; however the resources of the Department of Agriculture are spread amongst a number of priority areas and are limited. COMPETITION AND ACCESS TO MARKETS
Consumer preference Red meat production faces stiff competition from National poultry meat; per capita consumption in this sector is not rising as fast as in the poultry sector. Within the sector, pork production and consumption are generally growing faster than beef and lamb. International (SADC) Increasing competition from Southern African - competition Development Community (SADC) and international producers with comparative advantage due to subsidies.
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Compliance with Meeting international standards of sanitary and Provincial international standards quality (especially proving that South Africa does meet the required standards). In short, the challenge is lack of a traceability system and a national quality assurance scheme. Source: Urban Econ, 2015
8.14 SWOT analysis
The following table summarises the strengths, weaknesses, opportunities and threats for the red meat industry within the district:
Table 8.10: SWOT analysis for Red Meat Strengths Weaknesses
SA traditions and customs Small scale livestock farmers do not have Food safety sufficient access to credit, transport and Quality assurance storage infrastructure as well as markets Good animal disease status High transport costs and processing costs Highly consumed product Lack of funds for small scale and emerging Good livestock industry infrastructure black farmers Established meat producing and processing Farm and livestock management industry in SA Limited access to formal markets Poor marketing infrastructure Inadequate access to market information and extension services Insufficient herd size
Opportunities Threats
Increased animal health and welfare Affordability Improving animal genetics through selection Fluctuating prices (market conditions) Emerging commercial farmers Disease Organic production Change in consumer preference Production of premium cuts and prepared Increasing competition meats Natural resources: limited land, pollution, Skills development programmes drought, availability of water Spin off opportunities for further agro- Animal health processing facilities, such as bone for fertilizer, Increase in food prices hides, etc. Tariffs (Import) Availability of emerging farmers Export opportunities
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9 Vegetables
The following market assessment provides an analysis of the local markets, global markets, capital markets and commodity markets for the vegetable industry within a South African context.
9.1 Market assessment
9.1.1 Local markets
Most commercial producers consider only one or two of the major national markets as marketing outlets, to the exclusion of all other possibilities. The larger producers will supply even some of the far-distant national markets, provided better prices prevail there. Nationally linked information networks can supply daily prices to producers. These national markets, in all the big centres, must remain the major outlets for many of the large vegetable growers, because of the scale of their operations, but even these growers should investigate other possibilities. Smaller producers may possibly be able to dispose of the bulk of their produce more profitably through outlets other than the national markets. Outlets to consider are: Direct sales to hawkers or consumers on the farm. Savings may be made on packaging, agents’ fees, market commission and transport and so on. Farm stalls. Savings as above, but require suitable reliable staff. Direct sales to wholesalers, retailers, consumer groups or individual consumers. Delivery costs may be disproportionately high for small consignments. Small municipal markets or farmers’ markets. Usually not very different to the national markets, more easily glutted, and lower throughput. Export.
In South Africa vegetables are sold through different marketing channels such as the National Fresh Produce Markets (NFPM), via wholesalers such as Freshmark, direct sales to retailers (in both the formal and informal sectors – e.g. supermarkets, greengrocers, hawkers, farm gate sales, to processors; and surplus produce is also exported. It was estimated that in 2014 approximately 46% of vegetables were sold via the NFPM’s while direct sales, exports and processing made up the balance.
Given the above indicated dominant role of the NFPMs (as the largest and preferred marketing and sales channel of vegetables in South Africa) the NFPM prices are subsequently used as the benchmark for all national vegetable sales. Figure indicates the volume of vegetables that are traded through various distribution channels that are available to farmers.
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Figure 9.1: Distribution Channels for Vegetables, 2014
Exports 4%
Fresh Produce Markets Direct Sales and Own 46% Consumption 43%
Processing 7% Fresh Produce Markets Processing Direct Sales and Own Consumption Exports
Source: Abstract of Agricultural Statistics, 2015
It is clear from Error! Reference source not found. that approximately 46% of the volume of egetables produced is traded on the major fresh produce markets. The total volume of vegetables sold on these markets during 2014 amounted to 2 293.6 thousand tons, compared to the 2 107.8 thousand tons that sold during 2010, an increase of approximately 9%.
9.1.2 Global markets
Imports and exports are an indicator of South Africa’s competitiveness on a global scale, while also contributing to trade balance – whether South Africa is a major exporter, or major importer. Exports, in general, indicate that South Africa produces a surplus of goods (has a competitive advantage in that specific good) that can be distributed to international markets. Imports are generally required to fill a consumption deficit (local production does not meet local consumption) and add to food security. In addition, importing products introduces competition to the local market, requiring that local producers remain efficient.
South Africa has historically been a nett exporter of agricultural products, importing only deficits in certain commodities, or niche products.
Figure indicates the quantity of vegetable products imported and exported by South Africa between 2001 and 2014.
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Figure 9.2: Import and export of vegetables and vegetable products, South Africa (2001-2014)
1,200,000
1,000,000
800,000
600,000
400,000
QUANTITY (TONS) QUANTITY 200,000
- 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Grand Total Quantity Imported Grand Total Quantity Exported
Source: ITC, Trade Map, 2015
Figure suggests that exports of vegetables and vegetable products was significantly higher than exports from 2010 to 2014. Most export figures for 2010 were, however, estimated by ITC Trade Map and could be over-estimated. Figures for 2012, 2013, and 2014 are more exact figures and not estimated. In summary, the figures suggests that recently South Africa has been a major net exporter of vegetables and vegetable products. The import and export products are listed in Table .
Table 9.1: Import and export products from South Africa Import products Export products 1. Dried vegetables, shelled 1. Potatoes 2. Frozen vegetables 2. Onions, garlic and leeks, fresh or chilled 3. Dried vegetables 3. Vegetables nes, fresh or chilled 4. Onions, garlic and leeks, fresh or chilled 4. Cabbages and cauliflowers, fresh or chilled 5. Vegetables nes, fresh or chilled 5. Tomatoes 6. Tomatoes 6. Carrots, turnips and salad beetroot, fresh or chilled 7. Leguminous vegetables, shelled or 7. Frozen vegetables unshelled, fresh or chilled 8. Manioc, arrowroot salep (yams) etc 8. Dried vegetables, shelled 9. Vegetables, provisionally preserved (unfit for 9. Leguminous vegetables, shelled or immediate consumption) unshelled, fresh or chilled 10. Cabbages and cauliflowers, fresh or chilled 10. Manioc, arrowroot salep (yams) etc 11. Potatoes 11. Lettuce and chicory, fresh or chilled 12. Carrots, turnips and salad beetroot, fresh or 12. Cucumbers and gherkins, fresh or chilled chilled 13. Cucumbers and gherkins, fresh or chilled 13. Dried vegetables 14. Lettuce and chicory, fresh or chilled 14. Vegetables, provisionally preserved (unfit for immediate consumption) Source: ITC, Trade Map, 2015
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Some of the major commodities exported from South Africa include potatoes, onions, fresh and chilled vegetables, tomatoes, carrots, and frozen vegetables. The export quantities of the respective products are indicated in Figure below.
Figure 9.3: Major vegetable export products from South Africa, 2014
160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000
-
Potatoes
Tomatoes
shelled
chilled
or chilled or
or chilled or
Cabbagesand
Dried vegetables, Dried
Frozen vegetables Frozen
Onions, garlic and Onions,
Carrots, turnips and turnips Carrots,
cauliflowers,fresh or cauliflowers,fresh
salad beetroot, fresh beetroot, salad leeks, fresh or chilled or fresh leeks, Vegetables nes, fresh nes, Vegetables Source: ITC, Trade Map, 2015
It is clear from Figure that potatoes and onions are the major export commodities from South Africa, especially since they are easily stored and transported. The major export destinations for the commodities are South African Development Community (SADC) countries including Namibia, Botswana, Angola and Mozambique as indicated in Map .
Map 9.1: Export markets, 2014
Source: ITC, Trade Map, 2015
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South Africa’s major import markets for vegetable products include China, Canada and United States of America (USA) as indicated by Map . The major import products include dried and frozen vegetables.
Map 9.2: Export markets, 2014
Source: ITC, Trade Map, 2015
It is clear from the above import-export analysis that South Africa is a net exported of vegetables and vegetable products, with SADC countries being the major markets for these products. The major export commodities include potatoes and onions which can be easily stored and transported to the SADC region with relative ease given the relative proximity and low trade barriers. Of interest is that these commodities are exported mostly in their primary for and have gone through little processing. Major imported vegetable products include dried vegetables and frozen vegetables with most imports originating from China. Importantly, the imported products have gone through value adding activities.
9.1.3 Commodity market A commodity market is a market that trades in primary economic sector rather than manufactured products. Soft commodities are agricultural products such as wheat, coffee, cocoa and sugar Commodities are generally traded through the South African Futures Exchange (SAFEX) and are long-lasting (i.e. can be stored for a long amount
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As was indicated by Figure approximately 46% if vegetables in South Africa are traded through NFPM’s indicating its relative importance within the industry. There are 19 fresh produce markets that trade in fruit and vegetable on a daily basis nationwide who sell product on to hawkers, retailers and fruit and vegetable stores and other stores. The market shares of the fresh produce markets are indicate in the following Figure .
Figure 9.4: Market share of major fresh produce markets based on turnover, 2014
45.0% 42.8% 40.0% 35.0% 30.0% 25.0% 19.4% 20.0% 15.0% 9.4% 9.0% 10.0% 7.2% 2.6% 2.5% 2.5% 5.0% 2.3% 2.2%
0.0%
Other
Springs
Durban
Tshwane
Cape Town Cape
East London East
Bloemfontein
Port Elizabeth Port Johannesburg Pietermaritzburg Source: Statistics on Fresh Produce Markets, 2014
It is clear that the Johannesburg Fresh Produce Market is the largest of the markets, followed by Tshwane. Both are located within the Gauteng province and in close proximity to the WRDM. Gauteng is a major marketing point for vegetables given the size of the market and, as such, there are many vegetable farmers that are situated within close proximity. The five major commodities that move through these markets include potatoes, onions, tomatoes, carrots and cabbage, all major staple foods.
Figure indicates the average price per ton for the five major commodities.
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Figure 9.5: Average prices of five major vegetables at 12 major markets, 2013 & 2014
7000
6000 5757.15
5000 4839.71
3644.31 3435.56
4000 3420.46
3381.73
3374.53 3175.97
3000
2323.75 2078.24
2000 Average Average Price ® 1000
0 Potatoes Onions Tomatoes Carrots Cabbage
average price 2013 average price 2014
Source: Statistics on Fresh Produce Markets, 2014
Tomatoes are clearly the most valued of the five major vegetable with an average price of R5 757 in 2014, a 19% increase over the previous year. Cabbage was valued at an average of R2 323 per ton in 2014, the lowest valued of the major vegetable products. These differences are a result of supply and demand conditions as well as the production potential of the relative crop. Cabbage is a relatively hardy vegetable crop and can be produced with relative ease in comparison to tomatoes that require closer management. The volume and value of trade of the five major commodities are assessed in more detail in Table below
Table 9.2: Volumes and Rand values of five major vegetables traded, 2013 & 2014 Item Tons Rand per ton Year 2013 2014 % 2013 2014 % change change Tshwane 2.9% 3,343 3,625 8.4% 337,698 347,563 Johannesburg 5.9% 3,387 3,573 5.5% 726,847 770,017 Bloemfontein 47,332 45,729 -3.4% 3,347 3,757 12.3% Kimberley 11,829 12,711 7.4% 3,456 3,699 7.0% Cape Town -4.5% 3,383 3,616 6.9% 174,239 166,403 Port Elizabeth 57,301 54,912 -4.2% 3,461 3,711 7.2% East London 52,693 51,237 -2.8% 3,658 3,971 8.5% Durban 4.1% 3,459 3,858 11.5% 170,781 177,733 Pietermaritzburg 50,916 49,197 -3.4% 3,254 3,715 14.2% Welkom 30,128 28,690 -4.8% 3,757 4,195 11.6% Klerksdorp 48,657 48,851 0.4% 3,584 3,915 9.2% Vereeniging 26,003 25,993 0.0% 3,026 3,205 5.9% Springs 59,488 58,830 -1.1% 2,874 3,103 8.0% Uitenhage 8,739 8,950 2.4% 3,656 3,386 -7.4% Witbank 11,488 11,192 -2.6% 3,360 3,454 2.8%
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Nelspruit 5,764 4,723 -18.1% 1,390 1,147 -17.5% Mpumalanga 31,465 27,659 -12.1% 2,479 2,345 -5.4% Kei (Mthatha) 5,459 7,053 29.2% 3,650 3,779 3.5% George 6,699 5,351 -20.1% 3,186 3,908 22.7%
The volume traded and the value (Rand per ton average) for the five major vegetables. It is clear that Johannesburg Fresh Produce Market is the largest trader of vegetables along with Tshwane, making Gauteng the largest market for these vegetables and, by implication, many other vegetables.
9.2 Value chain assessment
The following section will diagrammatically represent and provide an analysis of the vegetable value chain. The opportunity analysis will identify potential opportunities within the value chain. The development of sustainable supply and value chains in the vegetable sector from production through processing to markets is important.
Figure 7.6: Onion, Carrot and Cabbage Value Chain
Input Suppliers Farmers/Producers High Development
Harvesting & Drying Potential
Medium
Cleaning & Handling Development Potential
Quality Grade Standards Imports and Packaging
Storage, Transport & Distribution
NFPM, Retailers, Processors: Canning, Exports Wholesalers, Informal freezing, dehydration, oil markets extraction
Consumer
Source: Department of Agriculture, 2010
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Figure 9.6 illustrated the value chain for onion, carrot and cabbage. The value chain for tomato is illustrated in Figure 9.7 and that of potato in Figure 9.8
Figure 9.7: Tomato Value Chain
Tomato Producers: Large & Small Scale
Processors Produce Markets Wholesale Formal and Exporters Retail Informal Retailers
Paste, Sauces, 17 National Distribution Supermarkets, Direct Sales and Canning, Fresh Produce centres, Hawkers, Tuck Export Agents Freezing, Drying, Markets Satellite Chain shops Powder Stores
Further Processing
Catering Hospitalit Institutions y
High
Final Consumer Development Potential
Medium Local Consumption Regional Markets Development Potential
Source: Department of Agriculture, 2010
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Figure 9.8: Potato Value Chain
Producer
Certified Seeds
Table Crop 88% Seed Crop Farmers
12% Uncertified Seeds
Market No Market Processed
Informal Sector Export Fresh Fries
Formal Sector Trade Frozen Fries
High Development Mixed or Canned Exports Farm Areas Potential vegetables Medium Development
Rural Areas Crisp & other Potential
Institutions Wholesales & Retail
Consumer
Source: Department of Agriculture, 2010
9.3 Agro-processing opportunities
Harvesting, handling, washing, trimming, grading, packing, packaging, labelling and transporting are all important practices aimed at preserving the quality of the produce, and presenting it to the best advantage. Prices achieved, and thus differences in income obtained, can be greatly affected by the emphasis placed on these practices. They must, therefore, be considered as important elements in the agro-processing and marketing
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Table 9.3: Agro-processing opportunities Primary Vegetable Processing Opportunity Final Product 1. Cabbages • Juicing • Slaw • Slicing and Dicing • Juice 2. Carrots • Washing and sorting • Baby Carrots • Fresh packing and branding • Coloured Carrots • Freezing • Mixed frozen veg • Juicing • Baby food • Slicing and dicing
3. Potato’s Washing and sorting Crisps Fresh packing and branding Frozen fries Slicing and dicing Fresh fries Drying Canned veg Baking (crisps) Mixed frozen veg Canning Baby potato’s Powdered Baby food 4. Tomato’s Storage, ripening, washing and Tomato puree: Canned or sorting frozen Fresh packing and branding Tomato soup: Canned or Freezing frozen Slicing and dicing Tomato paste Cooking Dried tomatoes, possibly Drying stored in oil Canning/bottling of tomatoes Tomato powder Tomato jam or preserve Tomato cooking sauce or pizza/pasta sauce base (frozen or canned) Ketchup style tomato sauce Pickled tomatoes Ripe tomato chutney Green tomato chutney Baby tomato’s 5. Onion Canning Powdered for the use in Dehydration soups and flavouring Canned onion
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Storage, ripening, washing and Canned onion and tomato sorting mix Fresh packing and branding Frozen onion slices or Onion preserve, marmalade onions mixed in with other frozen vegetables
9.3.1 Upstream Activities
As Vegetable production is classified as primary production the upstream activities relevant to the value chain are primary the input supplies used in the production system. The major inputs for vegetable production include seedlings, fertilizing, weed, pest and disease control, irrigation equipment, machinery equipment as well as knowledge. Most of these inputs are supplied by Agricultural Co-operatives in the respective areas.
9.3.2 Production of Vegetables
The horticultural industry of South Africa accounts for nearly one-third of total gross farm income in the country. There are 17 major fresh produce markets throughout South Africa, the largest being the Johannesburg Fresh Produce Market (JFPM) which comprises a 34% market share with a total turnover of nearly 900,000 tons valued at over R2.0 billion in 2006 (NAMC Section 7 Report, 2006). In 2007, tomato volumes sold at the JFPM were 107 000 tonnes (JFPM Statistics, 2008) at a value of over R300 million. Potatoes, onions, and cabbages are the other major vegetables sold nationwide.
Between 2005 and 2006, gross income from horticultural products increased by 1.3%, from R20 388million to R20 648 million. Income from vegetable production rose by 13.9% to R7 229 million. In general, the South African horticultural industry is growing in both quantities produced and prices received.
In 2005-2007, total production of vegetables produced were 2 157 579 tons. Production of major vegetables such as tomatoes, potatoes, onion and carrots increased annually for vegetables and approximately 56% of potatoes produced in South Africa are traded on the fresh produce markets.
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9.3.3 Downstream Activities
Harvesting, handling, washing, trimming, grading, packing, packaging, labelling and transporting are all important practices aimed at preserving the quality of the produce, and presenting it to the best advantage. Prices achieved, and thus differences in income obtained, can be greatly affected by the emphasis placed on these practices. They must, therefore, be considered as important elements in the marketing strategy.
Most commercial producers consider only one or two of the major national markets as marketing outlets, to the exclusion of all other possibilities. The larger producers will supply even some of the far-distant national markets, provided better prices prevail there. Nationally linked information networks can supply daily prices to producers. These national markets, in all the big centres, must remain the major outlets for many of the large vegetable growers, because of the scale of their operations, but even these growers should investigate other possibilities. Smaller producers may possibly be able to dispose of the bulk of their produce more profitably through outlets other than the national markets. Outlets to consider are: Direct sales to hawkers or consumers on the farm. Savings may be made on packaging, agents’ fees, market commission and transport and so on. Farm stalls. Savings as above, but require suitable reliable staff. Direct sales to wholesalers, retailers, consumer groups or individual consumers. Delivery costs may be disproportionately high for small consignments. Small municipal markets or farmers’ markets. Usually not very different to the national markets, more easily glutted, and lower throughput. Export.
Significant Points of Sale for Vegetables produced are listed below: Fresh Produce Markets Prisons and school feeding schemes Retailers Significant informal trade
Significant Marketing Considerations of Vegetables produced are: Size of outlet, and cost of servicing it. Transport availability and cost. Distances, which affects cost, as well as deterioration of the product. Condition of the roads. Packaging required, e.g. pre-packs, cartons, boxes, pockets and their relative costs in relation to prices attained. Market or consumer preferences. Product quality or specifications. Contact person or agents. Seasonal price trends. Market commission and agents’ fees. Possible delays in payment for consignments.
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Various other possible requirements for the specified outlet.
Approximately 46% of the volume of vegetables in South Africa is traded on the major fresh produce markets and 43% are direct sales and for own consumption. Roughly 7% are destined for processing.
9.4 Competitors
The major vegetable processing players in South Africa are tabulated below.
Table 9.4: Competitors within the Vegetable Processing Industry Type of processing activity Competitor Fresh Produce o Fresh produce markets: o Johannesburg Fresh Produce Market o Vereeniging o Tshwane o Springs o Emalahleni o Mbombela Canning and Pickling o Rhodes o Langeberg Food Processors Ltd o Giants Canning - Everyday o Koo o All Gold o SA Fruit & Vegetable Canners’ Association (SAFVCA) Frozen o McCain Foods SA o Just Veggies o Nature’s Choice Products o Lamberts Bay Foods o Tender Harvest o Findus Foods Slice and Dice o Retailers own products Drying and Dehydration o Just Veggies o Carbocraft (Pty)Ltd
Amongst the above listed competitors are other competitors that are involved in vegetable agro-processing activities, including farmers who have the capacity to process their products.
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9.5 Stakeholders
Table 9.5 lists the stakeholders within the vegetables industry within the District. The closest market in Mpumalanga to the Agri-Park is the Mbombela Produce Market situated in Mbombela.
Table 9.5: Stakeholders - Vegetables Name Type
Economic Fruit Shop (PTY) Ltd Fruit and Vegetable Packers Fruit and Veg City (Ermelo) Fruit and Vegetable Packers Fruit and Veg City (Secunda) Fruit and Vegetable Packers Hi Veld Fruit Packers Fruit and Vegetable Packers
9.6 Technology
Technology plays a vital role in the development of the agricultural industry and today farmers use technology to assist in producing food for a growing world. High tech advances have been assist in making farming life easier and more profitable. Smaller farmers can hold their own by moulding the technology to fit their management techniques and needs.
The Table below indicates the various technologies that the Agri-Park can use within Gert Sibande District. By utilising the various technologies, the small scale and emerging farmers can improve on the production of the variety of livestock farmed and ultimately increase their profit.
Table 9.6: Technologies – Vegetable Farming Technology & Description Function/Benefit to Farmer Skill Level Required Mechanisation New generation small hand tools Many farming activities, especially Low repetitive day-to-day work, can be greatly enhanced by hand tools designed for the particular task, speeding up production and reduce health and safety risk (e.g. back strain, wearing of joints and skin, etc.). Small-scale implements and tractors: Farmers benefit from modern Medium to New generation of farming implements mechanisation and large leaps in high and tractors tailored for small-scale productivity even though they farm at (especially for farming. small scale, and at a much lower cost maintenance and repair).
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Technology & Description Function/Benefit to Farmer Skill Level Required compared to conventional implements used by large commercial farmers. Precision farming, integrated farm management systems and software Precision farming: Gaining real-time or Optimising and tailoring production levels High exact information within particular parts at precise and small-area level so that of a single field e.g. moisture and yield is maximised and inputs are nutrient levels, soil type and depth etc, minimised. to determine the most appropriate rate of application of water, fertilizer and to adjust implement settings automatically and instantly. Precision farming can also be applied to animal production, aquaculture and agroforestry systems. Integrated farm management software: Maximise profitability and efficiency High Combines information and automate some management and management systems from various on- administrative tasks. Coordinate and and off-farms sources to coordinate simplify management processes. farming activities in a highly efficient manner. Includes a variety of technologies e.g. farm asset tracking systems, cloud computing, record keeping, accounting, mapping, water and soil management, weather forecasting etc. Plan-A-Head Nursery System Software: Integrate with other Plan-A-Head farming Medium Management of nurseries for flower, software to allow for whole-farm vegetable and tree (forestry or even enterprise management. Particular strong agroforestry) seedlings. features include germination monitoring and marketing (especially order taking and dispatch). Plan-A-Head Vegetable Management Integrate with other Plan-A-Head farming Medium Software Program with Vegetable software to allow for whole-farm Management System: Management enterprise management. A particular system for a vegetable production strong feature of the system is the fact enterprise. that it facilitates precision farming due to excellent monitoring, control and record keeping at field and even sub-field level, and it's mapping capability.
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Technology & Description Function/Benefit to Farmer Skill Level Required SimJunior: Basic financial management Easy to use. Ideal for the small-scale Low and accounting software for the small- farmer scale farmer. Accord: Complete human resource Particular strong features of the system Medium management system for farmers, include its simplicity and coverage of including payroll, HR record keeping basic employment legislation. and administration. Duet: Fruit and vegetable marketing Integrated with Technofresh (a market Medium and distribution software dealing with price information provider). different products, grades and varieties, prices, market agents, packaging, distribution and even workers involved in these marketing activities. Groundwater access via wells or boreholes Manual well digging or borehole drilling: Gain access to groundwater resources Low to Although mechanical drilling can reach much more cheaply compared to medium depths of 150 meters, it is generally too conventional mechanical drilling. expensive for small-scale farmers. In case the groundwater table are less than 45 meter deep and the subsoil material are soft, manual drilling or well digging are a cost efficient option. Water pumping/lifting Treadle pump: human-powered Enables small-scale irrigation and larger Low (stepping on pedals) suction water scale animal watering at a very low cost pump. Can be fixed (Lowe cost) or in areas with a shallow water table. portable. Rope pumps: human-powered (usually Enables small-scale irrigation and larger Low by hand crank) water pump. scale animal watering at a very low cost in areas with a deep water table. Hand piston pump: pump water from Relative low cost option to pump small Low depths up to 35 meter. quantities of water from a groundwater depth of up to 35 meter. Bulk and long-term water storage in-ground storage) Pond lining fabric: Ponds and earth Can store very large quantity of water at Medium dams may lose large quantities of water very low cost. through seepage, or may not be able to hold water at all if the soil is too
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Technology & Description Function/Benefit to Farmer Skill Level Required permeable. Lining will prevent this water loss to occur. Ferro-cement -lined tank: In-ground Can store fairly large quantity of water at Medium storage tanks made of cement and iron fairly low cost. wire mesh. Conventional plastic tank: Can store fairly large quantity of water at Low moderate cost. Conventional cement in-ground tank: Can store fairly to very large quantity of Low water. Header tanks for soon-to-be-used irrigation water Header bag: large open plastic bag Provide water for a drip irrigation system Medium suspended above the field on a frame at about half the cost compared to that can be produced from local conventional in-field tanks. Can store a materials. very small quantity of water but at a very low cost. Earth mound bag: Provide water for a drip irrigation system Medium to low at about half the cost compared to conventional in-field tanks. Can store a moderate quantity of water at very low cost. Can supply a fairly large field of 200m2. Robust and easy to maintain - it can be repaired using same materials,tools and techniques that is required for tyre repair. Jumbo Thai Jar: Can store a small quantity of water at a Low moderate cost. Can be build and maintained by farmers themselves using locally available material. Requires only a small space. Ideal closely spaced farms or urban agriculture. Irrigation systems (water delivery) Pre-punched drip tape: tubes comes Low water pressure requirement. Very Very low with holes already provided, therefore simple and low cost. easy to install. Button emitter irrigation: button emitters Low water pressure requirement. High are fitted to irrigation lines, which transport water directly to the root zone.
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Technology & Description Function/Benefit to Farmer Skill Level Required Baffle pre-punched drip irrigation: Low water pressure requirement. Use 50 - Very low Plastic sleeves/baffles localize water 70 percent less water compared to flow from pre-punched holes in the drip conventional drip irrigation. line. Mini sprinkler irrigation: Low flow system Can irrigate flat and sloping land. Ideal for Very low that require less pressure and is more hilly or sloping terrain or soils prone to water efficient than impact sprinklers water erosion, or areas planted with and conventional sprinkler irrigation. closely spaced crops but water are too scarce for higher flow irrigation systems such as impact sprinklers. Impact sprinkler irrigation: higher flow Can irrigate flat, sloping and hilly terrain. Very low system that requires more pressure and Ideal for closely spaced crops on larger water compared to mini sprinkler fields where water scarcity prohibits flood systems. irrigation.
Veldt management Land rehabilitation techniques: May Stabelise soil, control or reverse erosion Low to differ in technological complexity from damage and restore degraded land so medium as simple as brush packing to as that it can again be utilised for complex as biodegradable or long agricultural purposes. lasting soil cloths and mesh materials. Soil improvement and prevention of soil erosion Mulching technology: A variety of new Mulching material minimise or eliminate Low and efficient mulching materials are weed growth and water losses through developed. Mulching material are any evaporation, and also control various material that cover the soil surface. pests and diseases as well. Biodegradable mulches are also available. Biochar: Activated carbon ground into Significantly increase yield by assisting Low to a course powder, then worked into the with water and nutrient retention and medium soil. improving soil structure. Can be produced on-farm or at farmer community level using fairly simple techniques. Almost any plant or organic biomass can be turned into biochar. Lasts for thousands of years. In-field rainwater harvesting: Small Enable the soil to absorb much more Low basins (that can be made with a shovel) water that would have run off the field.
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Technology & Description Function/Benefit to Farmer Skill Level Required capture rainwater, preventing it from Depending on the type of soil, the immediately running off the field during additional moisture may benefit the crop a rain event. Apart from cultivated for several months and may increase yield fields, micro-basins can also be significantly. established on pastures to increase carrying capacity of animals.
Farm Energy Wind energy: Wind energy has been Wind is a renewable form of energy and High used for a long time in South Africa in the some areas in South Africa do have form of wind pumps. New generation sufficient wind development potential, wind technology allows for uses beyond especially when micro-climatic and small- wind pumping, including electricity area topographic factors are considered generation at micro or farm level scale. which is appropriate for very small-scale operations. Less vulnerable to theft compared to solar panels. Solar technology incl. photovoltaic and Solar is a renewable form of energy and Low thermal panels and solar drying and most areas in South Africa do have cooking: There are two main forms of sufficient wind development potential. In solar energy harvesting, i.e. fact, some parts of the southern and photovoltaic panels that produces western Free State, western Limpopo, electricity, and thermal solar panels or Gauteng and especially the Northern tubes that heat water. Solar energy is Cape and North West have excellent also widely used on farms for solar drying solar power potential even at global and solar cooling. standards. Farm protection, security and visual monitoring Video and photographical technology: Valuable to monitor veldt condition, Medium Fixed point photography, security effects of grazing or fire control regime, camera systems and remote sensor- rehabilitation efforts, and to monitor triggered photography. animal or criminal activity in remote parts of the farm. Some systems notify the farmer by SMS of sensed activity and immediately send the footage by MMS or video clips to the farmer's mobile device (in additional to conventional recording and storage of images or video). Apps for mobile phones and tablets
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Technology & Description Function/Benefit to Farmer Skill Level Required AgriApp: Farmer information tool for Useful general overview from a Low crop production. production perspective. Horticulture: General description of Useful general overview from a Low horticultural crop production, including production perspective. apples and vegetables. Online and mobile information portals AgriSuite Online: Internet based The system can be accessed on a PC or Low agricultural information system Mac, on tablets and smartphones, in the developed and maintained for farmers. office or on the farm. Contains the most Provide a variety of general agricultural essential, useful and concise information information directly to farmers. in a very simple and user-friendly format. FAO Ecocrop: Provide detailed crop Enable the farmer to select suitable crops Medium requirement information for almost any to farm with, and to diversify the farm's crop that are cultivated throughout the enterprises. world, including its uses and requirements for temperature, rainfall/water, soil type, soil depth, soil pH, salinity, altitude etc. It also include hundreds of forage crop species for extensive animal farmers. Other Recombinant DNA technology and Large gains in traits such as drought, salt, Low (from the genetic modified varieties: The process pest, pathogen or herbicide tolerance, farmer's of natural selection by traditional superior yields, nitrogen uptake ability, perspective) breeders can be accelerated by taste and texture etc. Particularly deliberate insertion of genes that code important to sustain future expanding for a particular trait into the host populations and to compensate for organism, thereby it is possible to climate change effects are drought and develop crop varieties that have more salt tolerance, nitrogen metabolism and desirable traits. even fixation, herbicide tolerance (to facilitate weeding, a major agricultural problem) and general yield improvements. Drones: Un-manned aircraft capable of Very useful for general inspections, High exploring the farm and taking photos monitoring and mapping. Advanced from the air. models can even perform some remote sensing functions. In-field soil and crop sensors: Measure a Know exactly when to irrigate or provide Medium to variety of soil factors, most importantly additional fertilizer, and how much high
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Technology & Description Function/Benefit to Farmer Skill Level Required moisture, pH, organic matter, salinity water/fertilizer to apply. It may also and temperature levels. Crop sensors indicate the best time to harvest. can sensor water stress, nitrogen and other nutrient levels. No-till or conservation tillage: Land Significant cost savings in terms of diesel Low to preparation for crop production without (very energy intensive to lift the soil of an medium tilling the land at all, or just partially entire field, especially in case of deep breaking up of the soil. tillage). Increased moisture retention. Reduced soil erosion. Remote sensing: Interpreting satellite Enable the farmer to make well informed High images to make farming decisions. decisions based on information that Satellite images provide valuable otherwise would have been too difficult or information on biomass production, soil expensive to obtain. Provides complete and air mass temperature, soil moisture, information of the entire farm. Some plant stress levels, fire warnings etc. information is provided daily or instantly. Integrated weed and pest management Usually much more effective and Medium to incl. biological control agents: Pests and sustainable than chemical control on its high weeds are major threats to farmers and own. food security. Chemical control has been effective for some pests and diseases but it is expensive and causes harm to human health and the environment. Consumers and governments locally and to export markets place increasing pressure on farmers to adopt integrated management practices to reduce reliance on only chemical control. Especially important is biological control where the natural enemy of the weed or pest are released locally to control population levels. It is not only applicable to crop farmers but to all extensive and semi-intensive animal farmers as well (pasture or veldt management).
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9.7 Demand and Needs Analysis
The following market segments relating to demand seems to be the most promising: National Fresh Produce Markets and potato processors during the early phases, thereafter moving on to more profitable segments as listed below. Street hawkers and visiting hawkers (bakkie traders) - coordinate transactions using modern technology to facilitate streamlined distribution of potatoes to informal markets. Large retail chains. Large restaurant groups and fast food chains. Government-run institutions and food programs Packhouses and vegetable packers in areas where packhouses that handle potatoes are situated.
Regarding value adding, the most important opportunity for potatoes is to produce fresh (uncooked, unbaked and not frozen) French fries in "catering-size" air-tight plastic bags, to brand it properly, position it as a steady, convenient and cost efficient source of ready-to-fry chips to local catering businesses, restaurants, fast food outlets and government institutions.
In terms of cabbage production, the most important opportunities include simple fresh packaging and branding (huge opportunity for improvement in the local and national market), but further processing will probably not be viable for cabbages in the current market situation
In terms of carrot production, the most important opportunities include simple fresh packaging and branding (huge opportunity for improvement in the local and national market) and possibly the production of a sweet jam (although extensive direct customer orientated market research is needed to assess viability).
It is possible to provide an estimate for demand based on historical consumption figures and populations. The Table below provides a summary on estimated demand on a national and provincial level.
Table 9.7: Estimated Demand for Vegetables Area of Demand Commodity Demand (tons) South Africa Vegetables (excl. potatoes) 2 363 130 Potatoes 1 923 478 Mpumalanga Vegetables (excl. potatoes) 184 717 Potatoes 150 351
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Area of Demand Commodity Demand (tons) Nkangala DM Vegetables (excl. potatoes) 47 024 Potatoes 38 276 Ehlanzeni DM Vegetables (excl. potatoes) 59 098 Potatoes 48 103 Gert Sibande DM Vegetables (excl. potatoes) 78 594 Potatoes 63 972
At an average per capita consumption of vegetables at 43kg and potatoes at 35kg, there is a clear demand for vegetables in South Africa. In South Africa there is a demand for 2 363 130 tons of vegetables (excluding potatoes) and a demand for 1 923 478 tons potatoes every year. The demand in Gert Sibande for vegetables is 78 594 tons and for potatoes it is 63 972 tons.
9.8 Job Creation
Agriculture and its value chain is one of the key sectors for job creation and a strategic rural development tool for the revival of the economies of small towns. The National Development Plan targets several sectors to create additional jobs by 2030, agriculture being one of these sectors. Estimates of new jobs in the primary production sector are based largely on more land being brought under agricultural cultivation, in particular through irrigation schemes. Commercializing communal land, reviving failed land reform projects and handling current ones better would make millions of hectares of land productive again.
Vegetables are a highly labour intensive and a very large proportion of minimally skilled labour is absorbed in the industry. The vegetable industry has an employment multiplier effect in the following sectors: Transport; Processing; Independent trading; Retail; Packaging; Informal trading
The direct employment multiplier is 2.49 jobs created per million produced. The indirect multiplier is at 1.37 jobs. The induced multiplier is 1.89 jobs (OABS Development, 2015). The total multiplier is 5.75 created per R1 million produced.
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The three multipliers measure the total numbers of job created in an ideal economic environment for the Vegetable and Fruit Market. Vegetables and fruit production require substantial seasonal labour activities, especially during harvesting, increasing substantially as the scale of production shifts from small to large-scale production. Indirect job creation via the washing, packaging and transport is limited.
9.9 Contribution to Food Security
Potatoes are the world’s most important root and tuber crop. In terms of global production, potato is the fourth most important food crop after corn, rice and wheat. It is grown in more than 125 countries and consumed almost daily by more than a billion people. Hundreds of millions of people in developing countries depend on potatoes for their survival. Potato plays a strong role in developing countries with its ability to provide nutritious food for the poor and hungry. Its ease of cultivation and nutritive content have made it a valuable food security and cash crop for millions of farmers. Potato’s very crucial role in ensuring food security and hunger alleviation owes to the fact: It can be produced all year round It is affordable, nutritious and healthy.
Potatoes are a non-fattening, nutritious and wholesome food that supplies many important nutrients to the diet. Potatoes contain approximately 78% water, 22% dry matter (specific gravity) and less than 1% fat. About 82% of dry matter is carbohydrate, mainly starch, with some dietary fibre and small quantities of various basic sugars. A single medium-sized potato contains about half the daily adult requirement of vitamin C. Potato is very low in fat, with just 5 percent of the fat content of wheat, and one-fourth the calories of bread. Boiled, it has more protein than maize, and nearly twice the calcium.
Cabbages are 90% water and a very good source of Vitamin A, C and B as well as minerals which makes cabbage an essential vegetable to combat malnutrition.
9.10 Regulatory Requirements
Local markets are governed by a series of policies that are put in place for various reasons. The most important of these Acts is the Agricultural Product Standards Act, 1990 which sets out to establish a set of norms and standards related to the sale, labelling, storage and packaging of vegetables throughout SA. This indicates that all vegetables sold in South Africa have to comply with the regulations set out in the norms. The vegetable containers have to be labelled correctly with the name of the cultivar, pack house code, grade, weight and number of units
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The various other acts and policies which also apply to the vegetable industry are included in the Table below.
Table 9.8: Polices Affecting the Vegetable Industry Act Description Agricultural This act aims to standardise quality norms for agricultural and related products by Product Standards establishing the criteria for such norms and distributing the information to all Act, 1990 (Act No. interested parties. These criteria may include the quality, packaging, marking and 119 Of 1990) labelling as well as the chemical composition and microbiological contaminants of the products. This relates to all goods made from vegetables e.g. labelling of carrots juice (100% carrot juice; 60% carrot juice with 40% tomato juice) (Department of Agriculture, Forestry and Fisheries, 1998). Implication: The Agri-Park must ensure that all vegetable products produced comply with the various criteria in order for products to be 100% compliant. Draft Plant Health Provides phytosanitary measures to prevent the introduction, establishment and (Phytosanitary) Bill spread of regulated pests in South Africa and the control of regulated pests. It also 2014 provides regulation of the movement of plants, plant products and other regulated articles into, within and out of South Africa include exports of agricultural goods (Deaprtment of Agriculture, Forestry and Fisheries). Implication: The Agri-Park must comply with all regulation and measures in order to ensure that all phytosanitary requirements are met. Agricultural Pests The purpose of the Agricultural Pests Act, 1983 (Act No. 36 of 1983) and its Act, 1983 (Act No. subordinate legislations is to provide for measures by which agricultural pests may 36 Of 1983) be prevented and combated and for matters connected therewith. The Act also mandates the Directorate Plant Health to regulate plants, plant products and other regulated articles when imported into South Africa. Plants, plant products and related materials are capable of harbouring quarantine pests, which if they enter South Africa with imported commodities and establish, may endanger the South African agricultural sectors. Similarly, pests that occur in South Africa may endanger countries to which we export and as a result South Africa may lose its export markets (Department of Agriculture, Forestry and Fisheries, 1983).
Implication: The Agri-Park must ensure that all plants, products and related material harbour no pests by complying with measures by which pests may be prevented and combated. The Agri-Park’s management should develop programmes/schedules to ensure the control of pests.
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Act Description Fertilisers, Farm The act provides for the appointment of a Registrar of Fertilizers, Farm Feeds, Feeds, Agricultural Agricultural Remedies and Stock Remedies; for the registration of fertilizers, farm Remedies And feeds, agricultural remedies, stock remedies, sterilizing plants and pest control Stock Remedies operators; to regulate or prohibit the importation, sale, acquisition, disposal or use Act, 1947 (Act No. of fertilizers, farm feeds, agricultural remedies and stock remedies; to provide for 36 Of 1947) the designation of technical advisers and analysts; and to provide for matters incidental thereto (Department of Agriculture, Forestry and Fisheries, 1947). Implication: The Agri-Park must ensure that all regulations regarding the manufacturing, distribution, importation, sale, use and advertisement of any fertilizers, animal feeds, pesticides, stock remedies as well as the operation of any sterilizing plants and pest control operators are adhered to. This can be done through the farmer support units which will need to have a programme in place for the above mentioned to be monitored. National Water This act encompasses laws relating to water resources and the use thereof Act, 1998 (Act (National Water Act, 1998 (Act No.36 of 1998), 1998). No.36 Of 1998) Implication: The Agri-Park must ensure that water used is used in a sustainable way to ensure the sustainability of the nation’s water resources. The Food Safety The FSSC 22000 Food Safety System Certification provides a framework for Management effectively managing your organization's food safety responsibilities. FSSC 22000 is System FSSC fully recognized by the Global Food Safety Initiative (GFSI) and is based on existing 22000 Certification ISO Standards. It demonstrates your company has a robust Food Safety Management System in place that meets the requirements of your customers and consumers (FSSC 22000, 2015). Implication: By complying with the Food Safety Management System FSSC 22000 Certification the Agri-Park is ensuring that it products meet required standards thus meeting requirements of both the customer and consumer.
Hazard Analysis HACCP is a management system in which food safety is addressed through the and Critical analysis and control of biological, chemical, and physical hazards from raw Control Points material production, procurement and handling, to manufacturing, distribution and consumption of the finished product (U.S Food and Drug Administration, (HACCP) 2015). Implication: By ensuring that food safety requirements are met the Agri-Park is taking into account the needs of both the customer and consumer as well as enabling a safe and hazard free work environment. Basic Conditions The act encompasses those regulations associated with fair labour practices Of Employment (Depart of Labour, 1983). Act, 1983 (Act No. Implication: The Agri-Park must ensure that fair labour practices are followed to 3 Of 1983) ensure that the basic conditions of employment are met, such as leave, working time, termination of employment etc.
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Act Description Municipal By-Laws Municipal by-laws will need to be investigated with regard to the establishment And Regulations, of the vegetable processing facilities in a municipal area. (where relevant) Implication: The Agri-Park will not be able to operate vegetable processing facilities unless any by-laws are met. Marketing Of The Act has authorised an establishment and enforcement of regulatory Agricultural measures to intervene in the marketing of agricultural products, including the Products Act, 1968 introduction of levies on agricultural products (Department of Agriculture, Forestry (Act No. 59 Of and Fisheries, 1968). 1968) Implication: The Agri-Park should establish a programmes that will manage the marketing of its own products in order to meet the requirements of the Act. Agricultural The act controls and promotes specific product standards from mainly a quality Products point of view for local as well as export purposes. A list of products for which Standards Act, standards have been set through regulations is promulgated under the act by the 1990 (Act No. 119 minister of agriculture (Department of Agriculture, Forestry and Fisheries, 1990) . Of 1990) Implication: Food and its associated products will go through various agro- processing activities before being a marketable product. To maintain quality assurance it is recommended that the Agri-Park establishes a team that will be responsible for carrying out activities that will meet the requirements of the Act Consumer To promote a fair, accessible and sustainable marketplace for consumer products Protection Act and services and for that purpose establish national standards relating to consumer protection (National Consumer Tribunal, 2009). Implication: The act indicates that the Agri-Park has a responsibility to provide products which promote a fair, accessible and sustainable marketplace for the consumer Conservation Of This Act provides for control over the utilisation of natural agricultural resources in Agricultural order to promote the conservation of soil, water sources and vegetation, and the Resources Act, combat of weeds and invader plants (Department of agriculture, Forestry and 1983 (Act No. 43 Fisheries, 1963). Of 1983) Implication: The Agri-Park will be required to implement policies that will maintain and monitor best agricultural practices to ensure the conservation of soil and vegetation, and also combat invader plant species. Plant Breeders' The Act regulates the granting of certain rights relating to new varieties of certain Right Act, 1976 kinds of plants, the protection of such rights and the issue of licences in respect of (Act No. 15 Of the exercising of the rights (Departmet of Agriculture, Forestry and Fisheries, 1976). 1976) Implication: By acquiring the required licence, it would allow Agri-Park farmers to use (re-sow) any protected plant on his or her holding should the Agri-Park require a protected/ new species of vegetable.
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Act Description Perishable This Act provides for the control of perishable products intended for export from Products Export the Republic of South Africa and for the continued existence of a statutory board Control Act, 1983 to bring about the orderly and efficient export of perishable products from the (Act No. 9 Of 1983) Republic (Department of Agriculture, Forestry and Fisheries, 1983). Implication: In the event of export, it is imperative that the Agri-Park establishes and maintains control over the export products. It is the onus of the Agri-Park to establish a team that is responsible for food health and safety regulations.
Agricultural This Act provides for the establishment of an Agricultural Produce Agents Council Produce Agents (AAC) and Fidelity funds in respect of agricultural produce agents, and for the Act, 1992 (Act No. control of certain activities of agricultural produce agents (Department of 12 Of 1992) Agriculture, Forestry and Fisheries, 1992).
This Act has not been brought into operation in its entirety but will eventually replace the Commission for Fresh Produce Markets Act, 1970 (Act No. 82 of 1970), and the Agricultural Produce Agency Sales Act, 1975 (Act No. 12 of 1975). Implication: The Agri-Park should play and intermediary role in moving produce from farm to market. As such, it is important that marketing activities are managed and monitored according to the standards set out by the Act. Agricultural Credit The Act provides for a system of assistance to persons carrying on or undertaking Act, 1966 (Act No. to carry on farming operations, and control in respect of assistance rendered 28 Of 1966) (Unknown, 1966). Implication: The Agri-Park management should provide a service to its producers in the way of easing access to credit. The Agri-Park should, on behalf of the producers, assist in accessing credit for agricultural production purposes. Additionally, access to credit will allow producers access to the relevant inputs for agricultural production purposes and, as such, produce necessary products for the Agri-Hub (marketing point) Agricultural This Act provides for the establishment of and control over an agricultural Development development fund for the handling of money received for development Fund Act, 1993 (Unknown, 1993). (Act No. 175 Of Implication: Funding is a fundamental cornerstone to the development of the 1993) Agri-Park and its stakeholder. The Agri-Park management should play an intermediary role in accessing and use of such funding.
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9.11 Substitute Products
Substitute goods/products are goods which, as a result of changed conditions, may replace each other in use, or consumption. A substitute good, in contrast to a complementary good, is a good with a positive cross-price elasticity of demand, meaning that as the demand for a good increase, the price of another good is increased. The Table below lists and describes potential substitutes for vegetables and vegetable products.
Table 9.9: Substitutes for Vegetables Substitute Products Description Other vegetables Consumers would be more likely to substitute for price and preference when substituting various vegetables. For example, a consumer may prefer sweet potatoes as an alternative to potatoes. Grains/legumes Grains and cereals may be considered as a cheaper alternative to vegetables, and cereals although they are often considered complements. A low income household would, however, closely consider price when deciding to purchase these products.
The consumption of vegetables, in general, is of a habitual nature with most consumers eating vegetables as a complement to their meat, or fish dishes. Given that some vegetables are a staple food item and consumed by habit, there is no real substitute for vegetables other than alternative types of vegetables due to the broad availability. A consumer, for example, may substitute potatoes with sweet potatoes within the vegetable category.
The impact that substitutes for vegetables might have on the Gert Sibande Agri-Park is likely to be minor, given the relative non-availability of substitutes for vegetables. The Agri-Park model should maintain a diverse vegetable product offering in order to compete with other vegetables available on the market. In addition, producing and processing of staple food vegetables will be a key undertaking in competing against potential substitutes.
9.12 Societal Trends
Societal and cultural trends are trends that relate to the social and cultural values and practices within a society, or culture. These are long term trends (at least two to five years) that explain why people behave the way they do. The South African food industry’s direction is affected by the growing influence of demographics, especially with respect to societal and cultural trends.
It is important that the Agri-Park positions itself to take advantage of such trends by meeting the demands of society through the processing of relevant products. The following, vegetable specific, cultural and societal trends have been identified and described.
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The trend in rising incomes within South Africa has provided the local consumer with increased purchasing power and, therefore, the ability to increase demand for food. Increased purchasing power has also allowed the consumer increased access to a variety of food, including processed, packaged and frozen vegetables (or convenience foods as described below).
Convenience foods or also known as time-saving foods as they are partially, or completely prepared, are increasing in demand as consumers spending power increases and more value is given to time-saving. Vegetable specific convenience foods include microwave meals and chopped, frozen vegetables.
9.13 Barriers to Entry
Barriers to entry are obstacles that make entry into a given market difficult such as regulations, high infrastructure costs or competition in the given area. This section will discuss the barriers to entry of the vegetable industry.
Table 9.10: Barriers to entry: Vegetables & Fruit CONSTRAINT DESCRIPTION LEVEL OF INFLUENCE HORTICULTURE BARRIERS TO ENTRY
CAPITAL, RAW MATERIALS AND PRODUCTION ISSUES
Climatic conditions The prevailing climatic conditions determine where - horticultural products can be grown. This limits production to certain parts the district, such as the coastal regions for fruit production. Capital intensive The establishment of new high volume producing - vegetable farms is capital intensive. This could prevent small scale and emerging farmers from entering the industry. Farming in hydroponic tunnels is also extremely capital intensive and could prevent entry into the market. Irrigation required Vegetables & fruit are water intensive crops that National require access to consistent water supply. A good irrigation system is required to optimise production.
Long Lead times Fruit trees need to grow for three to five years - before they can start producing, and profits can be obtained.
COMPETITION AND ACCESS TO MARKETS
Industry Concentration The Mpumalanga Province accounts for the vast District percentage of South Africa’s vegetable & fruit production. Accordingly support services, input
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suppliers, etc. are located in this province. They are however concentrated in Ehlanzeni District
Lack of post-harvest With the exception of a few industries, the majority District processing of processing for Gert Sibande District Municipality harvests is outside of the district, meaning that the profits associated with these value-adding activities are not captured by the district. INFRASTRUCTURE Roads Inadequate secondary road maintenance and Provincial development leads to high transportation costs, difficulties in accessing markets and long delivery times, which subsequently can affect all downstream activities. Land The availability of land to expand vegetable fields District is the largest infrastructural challenge facing the forestry in the district. Water A potential barrier to entry could be the distribution Provincial of water rights to new entrants into the industry. Source: Urban Econ, 2015
9.14 SWOT Analysis
The following table summarises the strengths, weaknesses, opportunities and threats for the vegetable industry within the district.
Table 9.11: SWOT analysis for Vegetables Strengths Weaknesses
Economic growth advantages Shortage of skilled workers (processing) Highly nutritive products Poor farming practices Contributor to food security Poor standard of products Proximity to major market Limited irrigation resources/capacity Availability of natural resources Lack of Good Agricultural Practice principles Optimal soil usage Short marketing window (perishable product) Wide variety of vegetables can be grown Small-scale production not competitive Lack of access to market Local emerging farmers are struggling produce quantity (economies of scale) Storage
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Opportunities Threats
Intensive production Increasing input costs Organic produce Market limitations Local labelling Competition Employment potential Extreme weather conditions (drought, hail, Shift in consumer preference (healthy living) frost) Growing preference for convenience Pest problems Increasing demand for fresh produce Disease globally (export market) Barriers to entry Cooperative farming (alliances – economy of Food safety issues/quality control scale) Reduction of local farmer population Technological advancement Regional competition Agro-processing opportunities Retailer consolidation
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10 Agroforestry
The Association of Temperate Agroforestry defines agroforestry as “an intensive land management system that optimises the benefits from the biological interactions created when trees and/or shrubs are deliberately combined with crops and/or livestock”. In Gert Sibande District, agroforestry can be used for the production of wood (along with typical forestry) for timber, energy sources and craft markets. The production of honey and medicinal plants can also occur.
10.1 Forestry Sector
The Table below indicates the total hectares used for plantations in each of the Provinces for 2012 and 2013.
Map 10.1: Forestry Areas
Source: Forestry SA, 2015
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Table 10.1: Provincial Afforested Areas Province 2013 2012 Hectares % Hectares % Limpopo 47 953 3.8 48 338 3.8 Mpumalanga 519 210 41.0 519 058 40.9 North West 304 0.0 304 0.0 Free State 0 0 0 0 KwaZulu-Natal 501 808 39.6 502 692 39.6 Eastern Cape 142 175 11.2 142 458 11.2 Western Cape 54 361 4.3 55 594 4.4
Total 1 265 811 100.0 1 268 443 100.0 Source: DAFF, Report on Commercial Timber Resources and Primary Roundwood Processing In South Africa
From Table 10.1 it is evident that the major forestry areas include Mpumalanga (519 210 hectares) and KwaZulu-Natal (501 808 hectares). In Mpumalanga there are two forestry zone: Zone 1 is the areas of Barberton, Mashishing, Mbombela, Pilgrim’s Rest, White River and Mapulaneng (all in Ehlazeni District) while Zone 2 is the areas of Carolina, eMkhondo, Eerstehoek, Wakkerstroom, Ermelo and Emgwenya (all in Gert Sibande District).
10.2 Market Assessment
The forest resources in Mpumalanga can be classified in 3 broad categories: Natural forests: In the vicinity of Knysna and George, which is in the Western Cape Province, in the Amatola Mountains of the Eastern Cape Province, and in isolated patches some other provinces including Mpumalanga indigenous forests are used for timber. However, South Africa’s indigenous forests are very limited and under ecological pressure. Harvesting of indigenous forest patches in Mpumalanga holds little if any significant potential and should not be the focus of the Agri-Park system. Woodlands (dry, low forests and savannah trees): The most extensive tree resources in South Africa as a whole and in Mpumalanga (especially in Ehlanzeni DM) are the woodlands, originally about 42 million hectares of open savannah, of which as little as half now remains. The major constraints to successful livestock raising in the summer rainfall areas of South Africa, are the shortage of fodder available to livestock during winter. Fodder from woodland trees can provide valuable fodder during the winter, but also during the summer and cause an overall rise in carrying capacity in case planting density and tree species choice are carefully done. Also, due to low rainfall and poor soils, trees may be associated with higher levels of bio-production than a
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grassed landscape. In Mpumalanga, Gert Sibande and especially Ehlanzeni districts do have significant potential for indigenous tree agroforestry in woodland/savannah areas. Community forestry: Small scale industrial or planted forests (afforestation) at small scale or community level: There are about 1.49 million hectares of industrial forest plantations (1.3 percent of national land). These plantations support a multi-billion rand industry, employing over a hundred thousand people, which is managed for sustainable production. In Mpumalanga, extensive parts of Gert Sibande as well as some parts of Ehlanzeni districts do have significant industrial afforestation potential.
10.2.1 Agroforestry
Agroforestry is a land use system where woody perennial trees are deliberately used on the same land-management unit as agricultural crops or animals. There are limited projects of various kinds of trials of species which has been done in the Eastern Cape and Limpopo Province in the past years. Non-governmental Organizations has also done trials for new species throughout the country since 1985.
South Africa has extensive and valuable tree resources. They are valued for their biological diversity, for medicinal and local uses, and for their aesthetic and spiritual values. i. Production
There are no reliable data on the location or extent of broad agroforestry (including woodland agroforestry and related products) in Mpumalanga or South Africa as a whole.
Woodland agro-forestry in South Africa is mainly practiced in the tree-rich savannah veld, such as parts of the Eastern Cape, northern Natal, the lowveld or bushveldt parts of Mpumalanga and Limpopo and the Kalahari where livestock farming is practiced. In these areas trees are protected for the production of additional fodder for drought season, as a source of fencing material and firewood, for stabilizing soil, for providing shade to livestock and for general environment conservation purposes. There are large scope to use agroforestry best practices to enhance these services and to produce a variety of products for the market to directly generate cash.
Biomass initiative: The Biomass Initiative was launched in 1992 to address the growing fuel wood problem in rural South Africa, as part of a holistic approach to rural development. The
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Potential avenues of intervention were identified including: agroforestry and social forestry systems focusing mainly on individual households; community woodlots and small plantations; control of invader bush in game, commercial farming and water catchment areas; utilisation of forestry waste from the commercial forestry industry.
The production component of Biomass Initiative involved: tree planting communal or individual woodlots, or agroforestry; nurseries owned by individuals or communities; training people in social forestry extension; fencing certain areas to protect scarce indigenous species and allow natural regeneration; installing biogas plants to assess their acceptability.
This component showed that although there is no general tree-planting ethic in rural areas, rural people are amenable to tree planting and veld management for their own benefit (Plant for Life, 1996). ii. Tree species recommended for woodland type agroforestry in Mpumalanga
Trees recommended for woodland agroforestry in Mpumalanga are listed in Table 10.2. Note the distinction for species suitability for the different districts.
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Table 10.2: Trees for Agroforestry
cooler area suitability area cooler
s growing potentials growing
Tree name Tree Ehlanzeni's suitability warmer area Ehlanzeni's warmer area suitability Sibande's Gert coolersuitability Sibande's Gert area 5=very to slow (1=very growth of Speed fast) value livestock Fodder for Honey bee potential Timber potential potential Fuel wood potential Fruit bird Game Medicinal uses potential Other economic Common X X 4 Game only No Excellent for Good, long No No Yes Leather tanning, basket hook-thorn furniture, high burning weaving. quality, attractive Sweet thorn X X X X 5 Excellent for Excellent Fair to low Excellent No Yes Yes Sweets can be made livestock and from the sap. Rope from game bark.
Paper- X X 5 Moderate to No Fair as Poor No No Yes Sap of excellent quality. barked thorn good, but general livestock eat timber. only the pods, and is poisonous in large quantities.
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Therefore good for occasional feeding but not primary fodder.
Umbrella X 3 Good No Fair Good No No No Sap edible thorn
Shepherd X 4 Excellent No No Poor No No Yes Root can be used to tree produce coffee replacement.
Matumi X X 4 No No Excellent Fair No No No None
Sagewood X X 4 No Excellent No Fair No Good Yes Can be planted as a hedgerow or natural fence.
Lemon thorn X X X 3 Fair for cattle No No Fair No Good No Can be planted as a and game hedgerow or natural fence.
Bushman's tea X X 4 No No Excellent for Good No No Yes None timber, crafts and wood pulp for high quality paper.
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White stinkwood X X X 5 Fair No Good, Good No No No None especially for furniture
Red bush- X X X 2 Excellent for Fair Fair, well Excellent No Good Yes None willow livestock and suited for game fence posts.
Common x x x 4 Excellent for livestock and No Poor No No Yes None cabbage game tree
Bladder-nut x x x 3 Good No Poor, only Fair No No Yes Coffee replacement househod from seed. articles
Wild pear x x x 5 Good for Excellent Excellent for Fair No Poor Yes Very strong rope from livestock and furniture, bark. game general woodwork and fence posts.
Puzzle bush x x x 3 Fair for No No Poor Fair Excellent Noi None livestock and game
Cape ash x x 4 Fair No Good for Fair No No Yes Leather tanning agents furniture and from bark general woodwork
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Ana tree x 5 Excellent No No Poor No No Yes Food from pods and seed.
Giant raisin x 2 Fair for No No No Excellent Excellent No None livestock and for fruit game wine or beer, fair to eat. High sugar content.
Silver raisin x x x 3 Good for No No No Good for Excellent No Rope from bark and a ivestock and eating poor quality tea from game leaves. Cross-berry x x x x 4 Good for No No No Excellent Poor No None livestock and for fruit game wine or beer, excellent to eat, excellent to make a milk beverage. High sugar content.
Tree fuchsia x x x 4 Fair for Good No No Fair to eat No No None livestock and game
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Bead-bean x 2 Excellent for No No No No No Yes None tree livestock and game
Forest elder x 4 Fair for Excellent Excellent for No No No No None livestock and furniture and game general woodwork Wild olive x x x x 4 Excellent for No Excellent for No No No No Stabilisation of eroded livestock and furniture, land, wind breaks. game carving and fence posts (last 100 years).
Jacket-plum x x 3 Excellent for No No No Good for No Yes High viscosity oil with livestock and preserves, industrial applications. game poor to eat, fair to produce vinigar.
African x x 4 Good for Very good Good for No No No Yes None wattle livestock and furniture game
Apple-leaf x 3 Excellent for Excellent Fair for No No No Yes None livestock and carving game
Sneezewood x x 3 No No Excellent for Excellent No No Yes None timber,
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furniture, construction, fence posts (very long lasting) etc. Can be harvested after 30 year but an excellent investment.
Source: Manstrat, 2015
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The woodlands are a valuable source of fuel, building material, craft timber and a variety of non-timber products. These include fruit, fodder, medicinal compounds, honey, meat and mushrooms. They form the backbone of the livelihoods of millions of people. The annual marula-fruit (Sclerocarya birrea) harvest, for example, is worth some R1.1 billion a year to rural communities. Many agroforestry products do have economic value to the local communities but are not traded on formal or markets. The same applies to ecosystem services including increased carrying capacity of the veldt. iv. Local Markets Local markets and their associated marketing channels for agro-forestry products are as follows: Timber and wood for woodwork ranging from conventional commercial timber products to small piece hardwood for furniture, carving etc. Fuel wood, including various hardwood species that produce excellent copier wood. Craft wood to produce various craft items for household purposes. Fodder which can increase carrying capacity and serve as very valuable feed during winter and drought periods. Honey and other bee products which represents an ideal opportunity for easy cash generation. Wild fruits including various fruits that could have potential for commercialisation. Game birds including Guinea fouls and various other indigenous and wild poultry or large birds for export or niche poultry meat markets. Medicinal plant parts which could supply a multi-million rand local and export industry. There are two major marketing channels: informal traders (mainly local and regional) and formal export (supplying large global pharmaceutical industries with crude plant parts for further processing). Other food including gums, resin derived sugars and gelling agents (very large and expanding market) etc. Beverages including fruit juices, beers and wines, and some other speciality beverages. Industrial products including fine chemicals mainly for the export market. v. Export Markets Of the agro-forestry products listed above, the following have export potential: Timber Craft wood: Wood as well as final craft products. Honey and other bee products.
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Wild fruits: Value added products for fruit wines, spirits and specialty beverages, preserves and dried fruit etc. Game birds: Value added products including frozen and canned game birds. Medicinal plant parts: Value added products ranging from tinctures, powders, frozen or dried plant parts etc. Other food and beverage products including gums, extenders, specialty sugars etc. Industrial products including fine chemicals.
10.2.2 Community Forestry (Afforestation)
Community forestry is an evolving branch of forestry whereby local community plays a significant role in forest management and land use decision making by themselves in the facilitating support of government as well as change agents. Community forestry was established to cover fuel wood, job creation and food security in rural areas. Community forestry is designed to meet social and economic needs in rural areas. Honey is another type of food which one can get from the forest. The honey industry in South Africa has an average turnover of R3.2 billion and produces 2000 tonnes a year.
South Africa has extensive and valuable forest resources. They are valued for their biological diversity, for medicinal and local uses, and for their aesthetic and spiritual values. In the vicinity of Knysna and George, which is in the Western Cape Province, and in the Amatola Mountains of the Eastern Cape Province, plantation forests are used for timber. The most extensive resources are the woodlands, originally about 42 million hectares of open savannah, of which as little as half now remains. However, there are about 1.49 million hectares of industrial forest plantations (1.3 percent of national land). These plantations support a multi-billion Rand industry, employing over a hundred thousand people, which is managed for sustainable production.
Forestry and wood products provides a range of wood and non-wood products, as well as social and environmental services, such as the conservation of soil, water and biological diversity. Wood and wood products as the main commercial products of forests include fuel wood and charcoal (particularly important in developing countries.
Forestry and wood based products are categorized according to the harmonized system (HS), an international method for classifying products for trade purposes. Categories are as follows: plantation forestry, wood chip, sawmilling, wood charcoal, timber board, mining timber, paper (Newsprint) paper (kraft liner) and poles and treated poles.
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i. Production
The Figure below indicates the distribution of timber in terms of area planted under softwood, eucalyptus, wattle and other hardwood timbers. It is evident that softwood (pines) and eucalyptus is the prominent varietals used in the forestry industry.
Figure 10.1: Distribution of Timber, 2003-2013
800
700
600
500
400
1,000ha 300
200
100
- 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
Softwood Eucalyptus Wattle Other
Source: DAFF, 2015
Table 10.2 indicates the distribution of timber (2012/2013) in Mpumalanga. Gert Sibande District Municipality falls within the Mpumalanga South region. The main tree species in plantations are pine and eucalyptus.
Table 10.2: Distribution of Timber, Hectares (2012/2013) Area Pines and other Eucalyptus Wattle Other hardwood softwood (ha) species (ha) (ha) species (ha) Mpumalanga North 163 117 73 571 27 103 Mpumalanga South 125 199 116 231 13 501 2 634 South Africa 642 408 527 291 91 194 4 919
Mpumalanga % of 45% 36% 15% 56% South Africa Source: DAFF, Report on Commercial Timber Resources and Primary Roundwood Processing In South Africa
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Figure 10.2: Production of Timber Products, 2003-2013
25,000,000
20,000,000
15,000,000 m3 10,000,000
5,000,000
0 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
Source: DAFF, 2015
Since 2005/06 there has been a steady decline in the production of timber products in South Africa by an estimated average annual rate of 1%. In 2013, there was 143 processors of timber in South Africa.
Figure 10.3: Intake of Roundwood into Processing Plants, 2013
Mining Other, According to the Figure, the majority of Timber 4.10% Mills, Roundwood in South Africa for 2013 3.80% was processed at pulp, paper and Sawmills, board mills (such as Sappi) followed by 20.40% sawmills. Only 4.1% of Roundwood is processed at veneer mills, match factories and charcoal plants.
Pulp, paper and board mills, 71.70% Source: Forestry SA, 2015
The Table below indicates the sales of roundwood by types of products. Mpumalanga is a prominent producer of mining timber.
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Table 10.3: Roundwood Sales by Product, 2012/13 Area Sawlogs Poles and Mining Pulpwood Charcoal & Other and Veneer Droppers Timber Firewood m3 m3 Tons Tons Tons Tons Mpumalanga 1 190 018 45 809 299 465 696 997 5 073 11 727 North Mpumalanga 783 067 14 413 61 913 1 464 101 20 813 12 935 South South Africa 4 459 650 361 222 439 346 9 587 262 201 236 90 517 Mpumalanga % 20% 17% 82% 24% 13% 27% of South Africa Source: DAFF, Report on Commercial Timber Resources and Primary Roundwood Processing In South Africa ii. Tree species recommended for commercial plantation type community forestry in Mpumalanga
Trees recommended for commercial plantation type community forestry in Mpumalanga are listed in the following table. Note the distinction for species suitability for the different districts.
Table 10.4: Tree Species Recommended for Commercial Plantations in Mpumalanga Tree name No of years Wood Water requirement Uses
until harvest type/quality (rainfall requirement as indication of degree to which the trees will withdraw water from the watershed which is a major consideration in afforestation in Mpumalanga) Pine (Pinus 7-12 (yrs) Softwoods - P.elliottii - 850 mm - Timber from thinning is elliottii, Pinus thinning - P.patula - 950 mm used for pulping, boxes patula, Pinus Main harvest 20 - P.taeda - 950 mm and crates taeda) – 30 years - Logs from matured (20 to 30 yrs old) are used for building and constructing timber. - High quality logs are used for veneer and furniture.
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Eucalyptus First harvest Hardwoods - 900 mm to 1000 mm -Timber from (7-10 yrs grandis 7-10 years old) is used for pulp, (gum,blue Second mining timber and gum) harvest telephone transmission 12-30 years poles. -Timber from older trees (12-30 years) is used to produce fine furniture. NB* The plantation forests in South Africa uses just 3% of the country’s total water resource. Irrigation which is the norm in the country growing of agriculture crops is never utilised in forest plantation management. Therefore the rainfall needs to be higher than 750 mm per annum to sustain commercial forestry.
Table 10.5: Conventional timber tree species (afforestation-type agroforestry) for Gert Sibande Tree name No of years Wood Water requirement Uses
until harvest type/quality (rainfall requirement as indication of degree to which the trees will withdraw water from the watershed which is a major consideration in afforestation in Mpumalanga) Pine (Pinus 7-12 (yrs) Softwoods - P.elliottii - 850 mm - Timber from thinning is elliottii, Pinus thinning - P.patula - 950 mm used for pulping, boxes patula, Pinus Main harvest - P.taeda - 950 mm and crates taeda) 20 – 30 years - Logs from matured (20 to 30 yrs old) are used for building and constructing timber. - High quality logs are used for veneer and furniture. Eucalyptus First harvest Hardwoods - 900 mm to 1000 mm -Timber from (7-10 yrs grandis 7-10 years old) is used for pulp, (gum,blue Second mining timber and gum) harvest telephone transmission 12-30 years poles.
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-Timber from older trees (12-30 years) is used to produce fine furniture. High potential Hardwood - 750 to 850 mm -Tanning process areas- 9 yrs -Fuelwood/charcoal Black wattle Poor potential Cheap building areas- 11 years material. ( Acacia Average mearnsii) potential areas- 10 years
NB* The plantation forests in South Africa uses just 3% of the country’s total water resource. Irrigation which is the norm in the country growing of agriculture crops is never utilised in forest plantation management. Therefore the rainfall needs to be higher than 750 mm per annum to sustain commercial forestry. iii. Local Markets The woodlands are a valuable source of fuel, building material, craft timber and a variety of non-timber products. These include fruit, fodder, medicinal compounds, honey, meat and mushrooms. They form the backbone of the livelihoods of millions of people. The annual marula-fruit (Sclerocarya birrea) harvest, for example, is worth some R1, 1 billion a year to rural communities. iv. Global markets The forestry industry was a nett exporter of over R2, 2 billion worth of goods in 2012, of which more than 99% took the form of converted value-added products. The forest products industry ranks among the top exporting industries in the country, having contributed 1, 92% to total exports and 1, 4% to total imports in 2012. Capital investment in the industry amounted to an estimated R45 billion in 2011. The value of forest product exports grew by 23% over the past decade, from R11, 2 billion in 2002 to R13, 8 billion in 2012. In real terms, however (taking inflation into account), this growth was -28% over the period in question. Consequently, the nett trade balance in foreign trade in forest products decreased from 2002 by -62% in nominal terms (- 78% in real terms) to R2, 2 billion in 2012. In 2012, pulp products were the most important exports (R5 890 billion or 43% of the total), followed by paper (R4 707 billion or 34%), solid wood products (R2 680 billion or 19%) and other products (R555 million or 4%). Woodchip exports, mainly to Japan, accounted for 52% (R1 407 billion) of total solid-wood product exports.
As with other export-based industries, the continuing unfavorable economic environment has had a negative impact on demand, particularly in Japan, which is still recovering from the damage caused to some of its pulp and paper mills by the tsunami that occurred in March
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2012. As a result of this, exports of forest products from South Africa decreased in value by R1, 2 billion or 7, 7% from R15 billion in 2011 to R13, 8 billion in 2012.
10.3 Forestry Value Chain
Forestry Value Chain
Input Supply Collecting Processing Value addition End Market & Distribution
Arable Harvesting Land
Value Builders Lumber Site Wood Added Product Preparati Grading Producer
s on Retailers Transport Sawmills sumer Plantation Trees
Cultivation Distribution
By Panel Printing Produce Fire Products
rs UserEnd Con and Fighting
Wood/Mill Paper Paper Publishing Pulp Mill Produce High Development Potential r
Source: Department of Agriculture, 2010
10.3.1 Agro-Processing Potential for Forestry There is a large range of products that could be manufactured from forestry plantations to supply timber logs, processing timber, producing paper, wood chips, timber boards, mining timber, charcoal to designer furniture. The main challenge in forestry processing is the continued supply of timber from plantation forests. Primary forestry processing includes sawmills, pulp and paper, treated and dried timber, chipboard manufacturing, floorboards and mouldings. Secondary forestry processing includes furniture production and construction of products such as wooden doors and windows. Construction and manufacturing of wood products is an important market for local SMME as employment opportunities can be created in this sector.
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10.4 Agroforestry Value Chain
Input resources
Fodder: Local livestock
Production in community forests and woodlands enterprise
Food Processors (game bird meat, Firewood, wild fruits, alcoholic beverage, Lumber and charcoal and coffee substitute, tea and other paper mills carving wood beverages)
Furniture Medicinal plant
manufacturers, craft traders Restaurants and
and woodworkers hospitality industry
Pharmaceutical
industry
Export
Wholesalers
High Development Potential
Retailers
Consumers
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10.4.1 Agroforestry Potential
Potential avenues of intervention were identified including: agroforestry and social forestry systems focusing mainly on individual households; community woodlots and small plantations; control of invader bush in game, commercial farming and water catchment areas; utilisation of forestry waste from the commercial forestry industry.
The production component of Biomass Initiative involved: tree planting communal or individual woodlots, or agroforestry; nurseries owned by individuals or communities; training people in social forestry extension; fencing certain areas to protect scarce indigenous species and allow natural regeneration; installing biogas plants to assess their acceptability.
10.5 Stakeholders
There are a number of forestry stakeholders in the Gert Sibande District as illustrated by Table 10.6.
Table 10.6: Forestry – Stakeholders Name Type SAPPI Producer and Processor Mondi Producer and Processor York Timbers Producer and Processor TWK Producer and Processor Komatiland Forests Producer Ngwenya Forestry Contractors Imvelo Forests Producer and Processor Buhle Betfu Carriers Timber Transport Timber 24 Timber Transport and Logistics Hlatini Forest and Garden Input Supplier Nukor Forestry Input Supplier NCT Tree Farming Input Supplier and Nursery Wood SA Industry Information and Marketing Forestry SA Association
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10.6 Technology
Technology is an important aspect to consider in the Agri-Park, it is important to strike a balance of mechanisation and job creation which improves skills and creates meaningful jobs.
The list of equipment needed for this component of the Agri-Park will be detailed in the subsequent report. The basic forestry equipment includes chainsaws and loaders, while large- scale production requires heavy industrialised equipment, such as harvesters, trimmers, skidders, and feller bunchers. Various scales of production will require differing levels of technologies.
Isolating any single technological advance for application within the Gert Sibande District Municipality is difficult; due to the differing scales of production. Small-scale production, that the Agri-Park would oversee does not require as extensive capital investment as the large- scale initiatives. As such, small-scale producers can be efficient with several chainsaws and a loader. Commercial operations are more highly sophisticated and will be detailed in the next report.
10.6.1 ICT ICT is possibly the biggest development in the agricultural sector for emerging and commercial harvesters alike. The emergence of the internet and mobile phones has led to an exorbitant amount of data at the fingertips of the producers. If they require information then it can be obtained immediately and problems solved sooner than before (e-Agriculture, 2015). ICT has allowed the emergence of training software and applications (Apps) which people can use for the benefit of the staff who work for them and for themselves. Training can be done outside of training centres and content directly displayed on smartphones. Smartphones have also allowed for greater access to market prices and market related news as it happens and sooner than what used to occur (e-Agriculture, 2015). This can allow producers to make adjustments before they impacted negatively. This has also allowed access to online and cell phone banking and various finance facilities (e-Agriculture, 2015). This means that producers have access to their finances from their phones and do not have to leave the farm to bank. Online banking has also made farming safer as large amounts of cash is no longer used to pay staff and instead can be paid into bank accounts or cell phone numbers. ICT has allowed for the effective design of farms around the land that is available to producers and has allowed for producers to be more efficient and handle finance and information related queries over a long distance instead of being at a physical location in person. This has also allowed for the effective management and understanding changing markets as they occur which allow producers to react in a timely manner (e-Agriculture, 2015).
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Numerous smartphone apps also exist for the convenience of the farmer. Pantheon Farming from App Lab allows producers to enter all data directly on location, which is synchronized with a main database. This reduces the possibility of errors and eliminates duplicate data entries. eFarmer is a simple app designed for the agricultural industry that allows users to construct an electronic map of fields to create a database of various crops in the fields. The app also allows users to take notes on the fields as points of interest, keep the location of specific objects on the farm and keep a diary of the operations for each field users own.
10.6.2 Logistics In order for the Agri-Park to be successful there needs to be and effective and well run logistics system. Logistics is an extremely important part of forestry as it relies on transport of goods to and from the production site to the processing facilities and to markets. Trucks and other large freight vehicles which transport goods are vitally important in any industry and is also important in the vegetable industry. Goods need to be transported in such a manner that they are not damaged. If goods need preservation, then it is important to consider using refrigerated trucks to transport of produce. The second aspect of logistics is the medium of transport itself. Roads or the rail system need to be in good order and should be well connected in order to reduce the loss of produce and damage to trucks which can add on unnecessary costs to the producers.
10.7 Job Creation
Labour input is a key element of the production process and one of the main production factors in any economy. The table below displays the Sectoral labour multipliers applicable to the timber industry, i.e. the number of the job opportunities created at different levels for every additional R1-million production.
Table 10.7: Sectoral labour multipliers applicable to the timber industry
The total multiplier is disaggregated into direct, indirect and induced components.
Direct Multipliers The direct multiplier measures the direct impact emanating from a particular sector on itself. For instance, the direct multiplier will measure how an increase in the production of a particular sector will affect employment within the same sector. These direct impacts are very closely
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Indirect Multipliers Indirect multipliers reflect the impacts that a particular sector will have on all other industries that supply inputs (materials) for the operations taking place in the relevant sector. These ‘backward linkages’ are important as they measure the broader impact that changes in the direct sector will have on the economy. Frequently, these indirect impacts are significant, and may even exceed the direct impacts themselves.
Induced Multipliers Economic impacts will result from the paying out of salaries and wages to people who are employed in a particular sector, as well as the salaries and wages paid by businesses operating in the sectors indirectly linked to this sector due to the supply of inputs. These additional salaries and wages lead to an increased demand for various consumable goods that need to be supplied by various economic sectors throughout the broader economy. Clearly, these induced impacts can be considerable and are measured by using induced multipliers.
10.8 Regulatory Requirements
The table below indicates policies that affect the forestry industry.
Table 10.8: Policies affecting the forestry industry Regulation Description Agricultural Product Regulations relating to the grading, packing and marking of maize products intended for sale in the Republic of South Africa. Standards Act, 1990 (ACT Maize quality is determined by official grading regulations No. 119 OF 1990) promulgated under the Agricultural Products Standards Act, which governs the classification and grading of maize based on several qualitative factors. The quality of the maize destined for export is confirmed with an export certificate issued by the Perishable Products Export Control Board (PPECB) as the official assignee of DAFF. National Forests Act (Act No Outlines the procedure for licenses for the establishment and manage of plantations; use of land, structures or building for 84 of 1998) agricultural, domestic, residential, industrial, or commercial purposes; use of roads in state forests; and the grazing or herding of animals. Outlines the legislation for the protection of trees and forests. National Water Act, 1998 This act encompasses laws relating to water resources and the use thereof. (Act No.36 of 1998)
Conservation of Agricultural Control over utilisation of natural agricultural resources Promote conservation of soil Resources Act No. 43 OF Promote conservation of water sources 1983 Promote conservation of vegetation Combating of weeds and invader plants
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Plant Breeders Rights Act Plant breeder’s rights are granted for certain kinds of plants. Establish rights to be complied with to grant the rights. For the protection of rights and exercise thereof. Plant Improvement Act To provide for the registration of premises from which the sale of certain plants or the cleansing, packing and sale of certain propagating material may be undertaken. To prescribe the conditions for such plants, or propagation material to be sold. To provide recognition for such plants. To provide for a system of certification with the objective of maintaining quality. Control of imports and exports Occupational Health and Aims to provide for the health and safety of persons at work and the health and safety of persons in connection with the activities Safety Act, 1993 (Act No.85 of persons at work and of 1993) To establish an advisory council for occupational health and safety.
Basic Conditions of Encompasses those regulations associated with fair labour practices. Employment Act, 1983 (Act No. 3 of 1983) Marketing Act, 1968 (Act No. The Act has authorised an establishment and enforcement of regulatory measures to intervene in the marketing of agricultural 59 of 1968) products, including the introduction of levies on agricultural products.
The operations of the Agri-park would have to take cognisance of the above mentioned policies.
10.9 Substitute Products
Forestry products serve as building, construction, warmth, shelter, furniture, and tools. Substitution for these various outputs are sourced to varying degrees from other products. For example, construction scaffolding can be replaced with metal, as a source of fuel by electricity, and as a building material with clay or cement bricks, furniture with plastic and tools with metal.
10.10 SWOT Analysis
The following table summarises the strengths, weaknesses, opportunities and threats for the forestry and agroforestry industry within the district:
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Table 10.9: SWOT analysis for Forestry and Agroforestry Strengths Weaknesses
Medium and large-scale operations are Shortage of skilled workers (processing) suitable to the district There is a water tariff/water licences for new The forestry market is well established with forestry plantation major processors located near existing There are long lead times in production forestry production zones There are high capital costs associated with Timber production is labour intensive in small- felling trees scale operating environments Large suppliers with vertical integration with Proximity to major market value-adding facilities existing within the Availability of natural resources district Mpumalanga has the largest forestry plantations in South Africa Opportunities Threats
Biomass from by-product Environmental conditions, drought Production of food in woodlands and Fire Risk plantations There entrenched market participants within Cultivating medicinal plants the district Honey production There are difficulties in obtaining the Fodder and local livestock enterprises necessary infrastructure or applying the Extensive opportunities for wood chipping correct beneficiation to the areas with the and charcoal manufacturing best potential Establishment of micro-mills Crime and vandalism, as well as unsupervised Processing operations that cater for the semi- fires processed timber market
Technological advancement
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11 Maize
Maize is one of the most important grain crops in South Africa and is the staple food of a large portion of the population. The South African maize industry was deregulated in 1997 and is operating in a free-market environment where producers sell to whomever they wish and the prices are determined by supply and demand. Maize is produced across South Africa, and production has increased considerably over the last ten years. The Figures below illustrates the total production (1000 tons) as well as the total area planted (ha) within South Africa. From the Figure it is evident that although the area planted has decreased somewhat, the yield per hectare has almost doubled over the past ten years. This can be a result of increased usage of GMO seeds and farms under irrigation.
Figure 11.1: Area Planted (Ha) Figure 11.2: Total Production 4,000 6 16,000
3,500 14,000 5 3,000 12,000 4 2,500 10,000
2,000 3 8,000 1,000t
1,000ha 6,000 1,500 2 Ton/Hectare 4,000 1,000 1 2,000 500 -
- 0
2011
2013
2007
2012
2010
2014 2003
2003 2005 2007 2009 2011 2013 2005
2008
2004
2006 2009
Area planted (1,000 ha) Yield (ton/ha) Total production Mpumalanga Production
Source: DAFF, 2015 Source: DAFF, 2015
Figure 11.3: Provincial Production, 2014 The provinces that produces the most Western Eastern Northern maize include the Free State (40%), Cape, 0% Cape, 1% Cape, 6% Mpumalanga (22%) and North West (16%). North West, The North West and Free State plant mostly Gauteng, 16% 5% white maize while Mpumalanga plants mostly yellow maize. White maize is mostly Free used for human consumption while yellow Mpumala State, nga, 22% 40% maize is predominantly used for animal feed. Consumption of maize has increased over the last 10 years as seen in Limpopo, KwaZulu- 3% Natal, 5% the Figure below.
Source: DAFF, 2015
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South Africa has seen a steady increase in the amount of maize consumed with an average increase of 2.9% per annum between 2003 and 2014. In 2014, a total of 9,659,000 tons of maize was consumed. Consumption per capita was recorded at 82 kg per annum in 2014.
Figure 11.4: Maize Consumption, 2003-2014 10,000 82.13 100 9,000 90 8,000 80 7,000 70 6,000 60 5,000 50
1,000T 4,000 40 Kg per Kg per Year 3,000 30 2,000 20 1,000 10 - 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Commercial consumption(1,000 t) Consumption kg per year
Source: DAFF, 2015
Not only did the production and consumption of maize increase since 2003, the price of maize also increased considerably over the last 10 years as seen in the Figure below.
Figure 11.5: Price Index for Maize Figure 11.6: Gross Producer Prices, 2003- (2009/10 = 100) 2014 250 2,500
200 2,000
1,500 150
1,000 100
500 50 -
0
2011
2013
2007
2012
2010
2014
2003
2005
2008
2004
2006 2009
Producer price - Gross White (R/t) Producer price - Gross Yellow (R/t) Source: DAFF, 2015 Source: DAFF, 2015
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11.1 Market Assessment
The South African maize market has matured considerably since deregulation of agricultural marketing. Producers, traders and other intermediaries interact freely in the marketing of maize. Most of the maize produced in South Africa is consumed locally and as a result, the domestic market is very important to the industry. Before deregulation the maize price was set by the marketing boards. The price was set lower at around R300/ton. Since the implementation of deregulation policy the price of maize increased gradually because of the adoption of perfect competition in the maize marketing environment in which the prices are determined by market forces i.e. supply and demand factors.
As maize is an internationally traded commodity, it is also subjected to the international market conditions. The demand and supply conditions of maize in the international market influence domestic prices directly. Another important factor that impacts on the domestic market is the import tariff, which is used to protect domestic producers from lowly priced maize imports. Whilst prices have generally been on an increasing trend over the past decade, it has also fluctuated substantially in aligned to supply and demand issues. The lowest average maize producers price was recorded in 2004/05 (R513/ton) and the highest was recorded in 2015/16 (R4995/ton).
11.1.1 Specific local marketing channels
There are a number of marketing channels to which farmers can sell maize, including: Silos and large regional service cooperatives and farmer support businesses (often originally started as cooperatives e.g. Senwes, Afgri etc.) Grain, oilseed, milling by-product and other commodity crop traders Futures and options contracts (SAFEX) Grain millers Animal feed manufacturers incl. larger animal farmers who produce their own feed formulations
Not all of the above mentioned marketing channels are suitable for the Agri-Park due to high risks being associated with certain channels (such as futures and options contracts) or barriers to entry (such as grain millers do not buy directly from farmers).
The Table below lists the marketing channels with the most opportunities for maize farmers in Gert Sibande District.
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Table 11.1: Opportunities – Maize Marketing channel Priority & gaps/opportunities Silos and large regional service cooperatives Very high priority because of ease of access and and farmer support businesses (often originally low barriers of entry. Throughout the district a silo is started as cooperatives e.g. Senwes, Afgri etc.) within reasonable distance. Animal feed manufacturers incl. larger animal Very high priority because there are a number of farmers who produce their own feed potential buyers in or nearby the district, and this formulations channel may be a means to reduce transport costs.
11.1.2 Global Markets
As record harvests continue to materialise in key production regions, global maize production is set to reach record levels for the 2nd consecutive year in 2014/15, despite a reduction in area planted. Having already plummeted by more than 30%from 2013 highs, maize prices are projected marginally lower again in 2015, inducing a further consolidation of maize area in 2016. Despite the projected lower plantings and a return to more normal yields, prevailing stock levels remain high and consequently, lower prices will be sustained in the short term. A gradual recovery is expected towards 2020, as global maize demand, driven largely by the animal feed market, rises above production levels. Barring extreme weather conditions, world production is projected to overtake the growth in demand again towards the end of the baseline period, which may result in marginal decline in international prices.
11.1.3 Exports
The above global market perspective is very important since the maize industry is an important earner of foreign exchange through the export of maize and maize products. In 2013 we exported approximately 2 million tons at a value of R 4 billion rand. The South African maize industry exports maize mostly to African countries particularly BLNS (Botswana, Lesotho, Namibia and Swaziland) countries, Zimbabwe, Kenya, Mozambique, Zambia, and Mauritius. In recent years there has also been substantial export to Asia (especially Japan) and to Europe.
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11.2 Value Chain Assessment
Diagram 11.1: Maize Value Chain
Input Resources Plant Material
Production
Harvesting
Handling
Storage Traders
Transport & Distribution
Export Animal Feed Co-operatives Maize Milling Other Processors
General Wholesale Other Private
Retailers Small Shops Tuck Shops
Consumers
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11.3 Agro-Processing
In light of the fact that South Africa has remained a net exporter of maize for several seasons and is projected to remain in a net exporting position over the coming decade, BFAP recently undertook a study for the Maize Trust related to the potential of the domestic value chain to grow and diversify the production of value added goods. Traditionally, leading maize consumers such as the United States exhibit greater diversity in the consumption structure, whereas in South Africa, the bulk of maize is utilised as animal feed (38.4%) and food (36.1%) products. Exports accounted for 17.3% of the 2013/14 maize crop in South Africa, with the balance of 4.6% being utilised in the production of starch and glucose (Figure 4.5).
In the United States, biofuel production (38.2%) and animal feed (37.5%) accounts for the bulk of the domestic market, with exports accounting for 14.3%of domestic production. The remainder of the stock is used to produce products such as: starch, glucose and dextrose (3.9%); high-fructose corn syrup (3.6%); food and cereal products (2%) and alcohol for beverages and manufacturing (1%). Although the United States is a highly developed economy, the diversified nature of U.S. maize consumption raises the question of whether the South African maize value chain is optimally developed.
South Africa’s potential to add value to the currently exported surplus maize through the expansion of the food, animal feed, ethanol, maize starch and glucose-fructose syrup markets reveal the potential tonnage that could be added to the various marketing channels as follows: Exports: BFAP projects that maize exports will decline from 2.23 million tons to 1.96 million tons between 2013/14 and2023/24. The main driver of this reduction is that growth in domestic demand for maize (especially yellow maize) will marginally outpace production growth. Feed consumption: Rising demand for animal based products is projected to drive feed demand growth by 2.3 million tons from its current level of 4.8 million tons to just over 7 million tons between 2014/15 and 2023/24. Assuming that 370 thousand tons of dark poultry meat imports could be substituted by 370 thousand tons of white poultry meat exports, a further 410 thousand tons7 of maize could potentially be consumed by the South African poultry industry. Food: Due to the limited growth in the demand for maize-based food products, BFAP estimates that food consumption will continue to trend sideways over the next decade, only expanding by 90 thousand tons by 2023/24. Starch and glucose: Assuming the country utilizes the available 20% wet-milling capacity, a further 150 thousand tons of maize can be used in the production of starch
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and glucose products. Glucose-Fructose Syrup (GFS): Industry sources indicated that between 350-400 thousand tons of sugar is consumed by the South African beverage industry. Under the following assumptions, BFAP estimates that 581 thousand tons of maize can be consumed should GFS replace 350 thousand tons of sugar in the domestic beverage industry: - 1 ton of GFS replaces 1 ton of raw sugar, based on the perfect rate of substitution observed in the US between 1977 and 1988 (USDA ERS, 2015), - 1.66 tons of maize is required to produce 1 ton of GFS (Gray, 1991). Ethanol: Maize is currently excluded as a feed stock within the South African Biofuels Industrial Strategy (BIS) due to food security concerns. Until such time that maize is included as a production crop in the BIS, it is not possible to legitimately produce maize- based ethanol in South Africa and the potential market space is therefore nought.
Total Potential: In light of the above, the total additional space in the domestic market for maize in 2023/24 is estimated at 3.46 million tons (excluding the potential 410 thousand tons that could be consumed under a poultry export scenario).
The following are possible value adding opportunities that may be considered: Milling and maize meal Corn steep liquor Packaged popcorn Glucose and Glucose-Fructose Syrup (GFS) Popped maize cakes Fermented beverages Reconstructed maize chips Ethanol Starch Animal feed
11.4 Main Input Suppliers
Seed suppliers include: Monsanto Sensako Pannar Pioneer Hybrid International
11.5 Competitors
The major national role players in maize processing for human consumption includes: Pioneer Food Group (Pty) Ltd Premier Foods Ltd Pride Milling Company (Pty) Ltd
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Ruto Mills (Pty) Ltd Tiger Brands Ltd
In terms of the animal feed industry, role players include: AFGRI Meadow Feeds Bokomo Voere Noordwes Voere Epol Senwesco Voere KK Animal Nutrition
11.6 Stakeholders
The Table below lists the stakeholders in the maize industry in Gert Sibande District.
Table 11.2: Maize Stakeholders Name Type Afgri Cooperatives SA Feed and Grain Cooperatives Department of Agriculture (Ermelo) Department of Agriculture Mkhondo Service Office Department of Agriculture Standerton Department of Agriculture Department of Agriculture Volksrust Department of Agriculture Department of Agriculture Alfa Voere Feed Manufacturers TWK (Piet Retief) Feed Manufacturers Nutribasics CC Feed Manufacturers KK Animal Nutrition (PTY) Ltd Feed Manufacturers SIS Farming Feedlots Highveld Milling (Standerton) Millers Rollermeule (Carolina) Millers Tiger Milling (Ermelo) Millers Pride Milling (Ermelo) Millers Bekker Roller Mills (Bethal) Millers Standerton Mills Millers Savoy Milling (Ermelo) Millers Piet Retief Grain and Malt Millers Afgri Silo (Balfour, Greylingstad, Grootvlei) Silos Afgri Silo (Holmdene, Standerton, Val) Silos Afgri Silo (Amersfoort, Carolina, Badplaas) Silos Afgri Silo (Davel, Ermelo, Lothair, Devon) Silos Afgri Silo (Morgenzon, Bethal, Leandra) Silos TWK Silo (Mkhondo, Panbult) Silos
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11.7 Technology
Technology plays a vital role in the development of the agricultural industry and today farmers use technology to assist in producing food for a growing world. High tech advances have been assist in making farming life easier and more profitable. Smaller farmers can hold their own by moulding the technology to fit their management techniques and needs.
The Table below indicates the various technologies that the Agri-Park can use within Gert Sibande District. By utilising the various technologies, the small scale and emerging farmers can improve on the production of the variety of livestock farmed and ultimately increase their profit.
The technologies were rated on a scale of 0 (not at all) to 3 (highly applicable), for the purpose of identifying the most suitable only those rated 2 and 3 are provided in the Table.
Table 11.3: Technologies – Maize Farming Technology & Description Function/Benefit to Farmer Skill Level Required Mechanisation New generation small hand tools Many farming activities, especially Low repetitive day-to-day work, can be greatly enhanced by hand tools designed for the particular task, speeding up production and reduce health and safety risk (e.g. back strain, wearing of joints and skin, etc.). Small-scale implements and tractors: New Farmers benefit from modern Medium generation of farming implements and mechanisation and large leaps in tractors tailored for small-scale farming. productivity even though they farm at small scale, and at a much lower cost compared to conventional implements used by large commercial farmers. Precision farming, integrated farm management systems and software Precision farming: Gaining real-time or Optimising and tailoring production levels at High exact information within particular parts of precise and small-area level so that yield is a single field e.g. moisture and nutrient maximised and inputs are minimised. levels, soil type and depth etc, to determine the most appropriate rate of application of water, fertilizer and to adjust implement settings automatically and
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Technology & Description Function/Benefit to Farmer Skill Level Required instantly. Precision farming can also be applied to animal production, aquaculture and agroforestry systems. Integrated farm management software: Maximise profitability and efficiency High Combines information and management automate some management and systems from various on- and off-farms administrative tasks. Coordinate and sources to coordinate farming activities in simplify management processes. a highly efficient manner. Includes a variety of technologies e.g. farm asset tracking systems, cloud computing, record keeping, accounting, mapping, water and soil management, weather forecasting etc. Plan-A-Head Grain Management Software Integrates with other Plan-A-Head farming Medium Program with Grain Management System: software to allow for whole-farm enterprise Software that allows for total management management. Widely adopted therefore of a grain farming enterprise, from most software bugs has already been fixed. production to finance and human Particular strong features include the resource management. program's mapping, payroll and financial management capabilities. SimJunior: Basic financial management Easy to use. Ideal for the small-scale farmer Low and accounting software for the small- scale farmer. Accord: Complete human resource Particular strong features of the system Medium management system for farmers, including include its simplicity and coverage of basic payroll, HR record keeping and employment legislation. administration. Saaiplan: Software that facilitates Could serve as a base for precision Medium comprehensive planning, monitoring and agriculture. record keeping at field level for field crop enterprises. Groundwater access via wells or boreholes Manual well digging or borehole drilling: Gain access to groundwater resources Low to Although mechanical drilling can reach much more cheaply compared to medium depths of 150 meters, it is generally too conventional mechanical drilling. expensive for small-scale farmers. In case the groundwater table are less than 45 meter deep and the subsoil material are
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Technology & Description Function/Benefit to Farmer Skill Level Required soft, manual drilling or well digging are a cost efficient option. Irrigation Systems Pre-punched drip tape: tubes comes with Low water pressure requirement. Very Very low holes already provided, therefore easy to simple and low cost. install. Button emitter irrigation: button emitters Low water pressure requirement. High are fitted to irrigation lines, which transport water directly to the root zone. Baffle pre-punched drip irrigation: Plastic Low water pressure requirement. Use 50 - 70 Very low sleeves/baffles localize water flow from percent less water compared to pre-punched holes in the drip line. conventional drip irrigation. Mini sprinkler irrigation: Low flow system Can irrigate flat and sloping land. Ideal for Very low that require less pressure and is more water hilly or sloping terrain or soils prone to water efficient than impact sprinklers and erosion, or areas planted with closely conventional sprinkler irrigation. spaced crops but water are too scarce for higher flow irrigation systems such as impact sprinklers. Impact sprinkler irrigation: higher flow Can irrigate flat, sloping and hilly terrain. Very low system that requires more pressure and Ideal for closely spaced crops on larger water compared to mini sprinkler systems. fields where water scarcity prohibits flood irrigation. Veldt Management Land rehabilitation techniques: May differ Stabelise soil, control or reverse erosion Low to in technological complexity from as simple damage and restore degraded land so that medium as brush packing to as complex as it can again be utilised for agricultural biodegradable or long lasting soil cloths purposes. and mesh materials. Soil improvement and prevention of soil erosion In-field rainwater harvesting: Small basins Enable the soil to absorb much more water Low (that can be made with a shovel) capture that would have run off the field. rainwater, preventing it from immediately Depending on the type of soil, the running off the field during a rain event. additional moisture may benefit the crop for Apart from cultivated fields, micro-basins several months and may increase yield can also be established on pastures to significantly. increase carrying capacity of animals. Farm Energy Wind energy: Wind energy has been used Wind is a renewable form of energy and High for a long time in South Africa in the form of some areas in South Africa do have
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Technology & Description Function/Benefit to Farmer Skill Level Required wind pumps. New generation wind sufficient wind development potential, technology allows for uses beyond wind especially when micro-climatic and small- pumping, including electricity generation area topographic factors are considered at micro or farm level scale. which is appropriate for very small-scale operations. Less vulnerable to theft compared to solar panels. Solar technology incl. photovoltaic and Solar is a renewable form of energy and Low thermal panels and solar drying and most areas in South Africa do have sufficient cooking: There are two main forms of solar wind development potential. In fact, some energy harvesting, i.e. photovoltaic panels parts of the southern and western Free that produces electricity, and thermal solar State, western Limpopo, Gauteng and panels or tubes that heat water. Solar especially the Northern Cape and North energy is also widely used on farms for solar West have excellent solar power potential drying and solar cooling. even at global standards. Biodiesel: Biodiesel can be generated Enable the farmer to become independent High from a variety of on-farm produced of imported and increasingly expensive sources including oil crops and rendered mineral diesel. animal fat. It can be used in the same way as conventional fossil or mineral oil derived diesel. Biogas fermenters: Biogas can be Enable the farmer to become independent Medium produced from a variety of on-farm of imported and increasingly expensive sources, especially animal dung of animals mineral or natural gas. Especially suitable for kept in confined areas. Can be used in the intensive livestock, pig and poultry farmers same way as conventional petroleum which produce large quantities of animal derived or natural gas. waste. New techniques enable even small farmers with just a few animals to produce gas in a viable manner. Farm protection, security and visual monitoring Video and photographical technology: Valuable to monitor veldt condition, effects Medium Fixed point photography, security camera of grazing or fire control regime, systems and remote sensor-triggered rehabilitation efforts, and to monitor animal photography. or criminal activity in remote parts of the farm. Some systems notify the farmer by SMS of sensed activity and immediately send the footage by MMS or video clips to the farmer's mobile device (in additional to conventional recording and storage of images or video).
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Technology & Description Function/Benefit to Farmer Skill Level Required
Apps for mobile phones and tablets AgriApp: Farmer information tool for crop Useful general overview from a production Low production. perspective. Online and mobile information portals AgriSuite Online: Internet based The system can be accessed on a PC or Low agricultural information system developed Mac, on tablets and smartphones, in the and maintained for farmers. Provide a office or on the farm. Contains the most variety of general agricultural information essential, useful and concise information in directly to farmers. a very simple and user-friendly format. FAO Ecocrop: Provide detailed crop Enable the farmer to select suitable crops to Medium requirement information for almost any farm with, and to diversify the farm's crop that are cultivated throughout the enterprises. world, including its uses and requirements for temperature, rainfall/water, soil type, soil depth, soil pH, salinity, altitude etc. It also includes hundreds of forage crop species for extensive animal farmers. Other Recombinant DNA technology and Large gains in traits such as drought, salt, Low genetic modified varieties: The process of pest, pathogen or herbicide tolerance, (from the natural selection by traditional breeders superior yields, nitrogen uptake ability, taste farmer's can be accelerated by deliberate and texture etc. Particularly important to perspecti insertion of genes that code for a particular sustain future expanding populations and to ve) trait into the host organism, thereby it is compensate for climate change effects are possible to develop crop varieties that drought and salt tolerance, nitrogen have more desirable traits. metabolism and even fixation, herbicide tolerance (to facilitate weeding, a major agricultural problem) and general yield improvements. Drones: Un-manned aircraft capable of Very useful for general inspections, High exploring the farm and taking photos from monitoring and mapping. Advanced the air. models can even perform some remote sensing functions. In-field soil and crop sensors: Measure a Know exactly when to irrigate or provide Moderat variety of soil factors, most importantly additional fertilizer, and how much e to high moisture, pH, organic matter, salinity and water/fertilizer to apply. It may also indicate temperature levels. Crop sensors can the best time to harvest.
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Technology & Description Function/Benefit to Farmer Skill Level Required sensor water stress, nitrogen and other nutrient levels. No-till or conservation tillage: Land Significant cost savings in terms of diesel Low to preparation for crop production without (very energy intensive to lift the soil of an moderat tilling the land at all, or just partially entire field, especially in case of deep e breaking up of the soil. tillage). Increased moisture retention. Reduced soil erosion. Remote sensing: Interpreting satellite Enable the farmer to make well informed High images to make farming decisions. Satellite decisions based on information that images provide valuable information on otherwise would have been too difficult or biomass production, soil and air mass expensive to obtain. Provides complete temperature, soil moisture, plant stress information of the entire farm. Some levels, fire warnings etc. information is provided daily or instantly. Integrated weed and pest management Usually much more effective and Medium incl. biological control agents: Pests and sustainable than chemical control on its to high weeds are major threats to farmers and own. food security. Chemical control has been effective for some pests and diseases but it is expensive and causes harm to human health and the environment. Consumers and governments locally and to export markets place increasing pressure on farmers to adopt integrated management practices to reduce reliance on only chemical control. Especially important is biological control where the natural enemy of the weed or pest are released locally to control population levels. It is not only applicable to crop farmers but to all extensive and semi-intensive animal farmers as well (pasture or veldt management).
11.8 Demand and Needs Analysis
The most appropriate channel for farmers that market collectively will eventually be to let the hub become a cooperative silo business itself (very much like the traditional “cooperatives” that evolved today into large agribusinesses such as TWK, Afgri etc.), or to acquire a silo, which then trade in grain like any other grain trading entity.
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In the short-term the most promising channels will be to supply to existing silos and/or to sign forward contracts with large feedlots, piggeries and poultry producers that are situated as near as possible to the production areas. Regarding agro-processing, industrial milling and production of simple snacks may be viable. As production issues are streamlined and strong relationships are built with value chain partners, more complex snacks may be considered, especially health snacks, as well as food products that contain hominy chop (“full-grain” version of maize).
It is possible to provide an estimate for demand based on historical consumption figures and populations. Table 11.4 provides a summary on estimated demand on a national and provincial level.
Table 11.4: Estimated Demand for Maize Area of Demand Estimated Demand (tons) South Africa 4 513 578 Mpumalanga 352 809 Nkangala DM 89 817 Ehlanzeni DM 112 878 Gert Sibande DM 150 115
At an average per capita consumption of maize at 82.13kg, there is a clear demand for maize and maize products in South Africa. Demand for maize on a national level, is approximately 4.5 million tons.
11.9 Socio-Economic (Job Creation)
Maize is considered a non-labour intensive field crop that is has an estimated employment multiplier, per hectare of production, of 0.01 and an indirect employment (upstream and downstream linkages) multiplier of 0.005, suggesting that 100 ha of maize would need to come into production to create a single permanent job opportunity, while 200 ha would be necessary to create an indirect opportunity.
11.10 Contribution to Food Security
Maize is highly important for food security in South Africa, especially since it is part of the group of the most crucial staple foods. What makes maize an important staple food is not only the high amount that is produced, but as well as mealie meal being a significant part of South Africa’s diet.
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11.11 Regulatory Requirements
Table 11.5: Regulatory Requirements Regulation Description Agricultural Regulations relating to the grading, packing and marking of maize products Product intended for sale in the Republic of South Africa. Standards Act, Maize quality is determined by official grading regulations promulgated under the 1990 (Act No. Agricultural Products Standards Act, which governs the classification and grading of 119 Of 1990) maize based on several qualitative factors. The quality of the maize destined for export is confirmed with an export certificate issued by the Perishable Products Export Control Board (PPECB) as the official assignee of DAFF. Implication: Food and food products will go through various agro-processing activities before being a marketable product. To maintain quality assurance it is recommended that the Agri-Park establishes a team that will be responsible for carrying out activities that will meet the requirements of the Act. Fertilisers, Farm The act provides for the appointment of a Registrar of Fertilizers, Farm Feeds, Feeds, Agricultural Remedies and Stock Remedies; Agricultural for the registration of fertilizers, farm feeds, agricultural remedies, stock remedies, Remedies And sterilizing plants and pest control operators; Stock to regulate or prohibit the importation, sale, acquisition, disposal or use of Remedies Act, fertilizers, farm feeds, agricultural remedies and stock remedies; 1947 (Act No. To provide for the designation of technical advisers and analysts. 36 Of 1947) Implication: The Agri-Park, specifically through the farmer support units will need to have a programme in place that will monitor the acquisition, sale and disposal of various agricultural inputs. The programme will be necessary to ensure compliance with National Water This act encompasses laws relating to water resources and the use thereof. Act, 1998 (Act Implication: Water use, being a valued input into agricultural production, will have No.36 Of 1998) to be monitored in order to ensure its sustainable use. It is recommended that the Agri-Parks management appoint a representative body that will act as an intermediary between the Agri-Park stakeholders and various water governing bodies. This will streamline the application procedure for water use and sustainable use thereof. Conservation The Act promotes the conservation of soil, water sources, vegetation and Of Agricultural combating weeds and invader plants. Resources Act, Implication: The Agri-Park will be required to implement policies that will maintain 1983 (Act No. and monitor best agricultural practices to ensure the conservation of soil and 43 Of 1983) vegetation, and also combat invader plant species
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Regulation Description Genetically The act serves to: Modified Promote the responsible development, production, use and application of Organisms Act, genetically modified organisms. 1997 (Act No. Limit possible harmful consequences to the environment. 15 Of 1997) Give attention to the prevention of accidents and the effective management of waste. Limit, evaluate and reduce potential risks. Establish a council for GMO’s Ensure GMO’s do not present a hazard to the environment. Establish appropriate procedures for the notification of specific activities involving the use of GMO’s. Implication: GMO maize may be used within the production systems of the Agri-Park and it is, therefore, the responsibility of the Agri-Parks management to ensure that GMO’s are used conservatively and sustainably Marketing Of The Act aims to establish and enforce regulatory measures to intervene in the Agricultural marketing of agricultural products, including the introduction of levies. It also Products Act, establishes a National Agricultural Marketing Council. 1996 (Act No. Implication: Given the system of control over marketing of products, it is 47 Of 1996) recommended that the Agri-Park establishes programmes that will manage the marketing of its own products that meet the requirements of the Act. Plant Breeders' The purpose of the Act is to grant rights to breeders of certain kinds of plants. Right Act, 1976 Implication: The Agri-Park will not be able to use seed that is harvested from the (Act No. 15 Of crops. The Agri-Park may consider breeding programmes for the development of its 1976) own maize, in which case rights may be granted. The Agri-Park should respect the rights granted to plant breeders from who they purchase seed from Plant The Act provides for the registration of premises from which the sale of certain plants Improvement or the cleansing, packing and sale of certain propagating material may be Act, 1976 (Act undertaken. It also prescribes the conditions for such plants, or propagation material No. 53 Of 1976) to be sold and provides for a system of certification with the objective of maintaining quality. Implication: In the event that the Agri-Park breeds its own specific maize cultivars, it will need to comply with regulations as set out by the Act. Agricultural The Act provides measures by which agricultural pests may be prevented and Pests Act, 1983 combated. (Act No. 36 Of Implication: Best agricultural practices will be necessary to maintain control over 1983) pests. Agri-Parks management should develop programmes/schedules to ensure the control of pests.
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Regulation Description Occupational The Act aims to provide for the health and safety of persons at work and the health Health And and safety of persons in connection with the activities of persons at work and to Safety Act, establish an advisory council for occupational health and safety. 1993 (Act Implication: It is recommended that the Agri-Parks management appoints an No.85 Of 1993) operational task team that deals specifically with health and safety issues within the programme in order to comply with the regulations as set out in the Act Basic Encompasses regulations associated with fair labour practices. Conditions Of Implication: The Agri-Park will be expected to meet the regulations set out in the Act. Employment As such the Agri-Park will need to appoint a Human Resources team that will Act, 1983 (Act manage compliance No. 3 Of 1983) Marketing Act, The Act has authorised an establishment and enforcement of regulatory measures 1968 (Act No. to intervene in the marketing of agricultural products, including the introduction of 59 Of 1968) levies on agricultural products. Implication: Given the system of control over marketing of products, it is recommended that the Agri-Park establishes programmes that will manage the marketing of its own products that meet the requirements of the Act HACCP HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Implication: By ensuring that food safety requirements are met the Agri-Park is taking into account the needs of both the producer and consumer as well as enabling a safe and hazard free work environment ISO Standards ISO certifies standard requirements, specifications, guidelines or characteristics that can be used consistently to ensure that materials, products, processes and services are fit for their purpose. Implication: The onus is upon the Agri-Park to attain ISO standards in order to meet the requirements of international standards. These standards should be applied throughout the value chain.
11.12 Substitute Products and Services
Substitute goods/products are goods which, as a result of changed conditions, may replace each other in use, or consumption. The Table below lists and describes potential substitutes for maize and maize products.
Maize, in many cases, is a staple household item and consumed on a daily basis, particularly in low income households. As such, maize is not easily substituted with other staples for various reasons including the price of alternatives and nutritive quality. As household income
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Table 11.6: Substitutes for Maize Meal Substitute Product Description Vegetables Potatoes, amadumbes and sweet potatoes, in particular, are alternatives to maize meal. Other grains & Lentils and various other grains such as rice have great potential to be cereals/beans substitutes for maize meal depending on price and nutritive quality.
Depending on the availability of a consumer’s disposable income, the substitution effect may differ. A high income consumer, for example, will base their purchase decision of taste and preference, while a lower income consumer may base their decision to purchase based on price. As a result, a low income consumer may substitute for cheaper staples, rather than more expensive staples.
A producer of maize would be able to change production given that land has the capacity to produce a variety of products. As such, producers should be aware of market conditions and change production plans accordingly.
11.13 Societal and Cultural Trends
Societal and cultural trends are trends that relate to the social and cultural values and practices within a society, or culture. These are long term trends (at least two to five years) that explain why people behave the way they do.
The South African food industry’s direction is the growing influence of demographics, especially with respect to societal and cultural trends. As such, it is important that the Agri-Park positions itself to take advantage of such trends by meeting the demands of society through the processing of relevant products. The following, vegetable specific, cultural and societal trends have been identified and described.
Rising incomes: The trend in rising incomes within South Africa has provided the local consumer with increased purchasing power and, therefore, the ability to increase demand for food. Increased purchasing power has also allowed the consumer increased access to a variety of food, including processed, packaged maize products (or convenience foods as described below).
Staple household item: Maize meal (the major ingredient for what is popularly known as pap in South Africa) is one of South Africa’s main staple food items, as is the case within many
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Organic Products: A new-age trend for organic products has resulted in the increased production of organic foods. The increasing demand for organic foods is a result of consumer perception that organic is healthier, more sustainable and less chemical residue is left on the product.
GMO: Most consumers are uninformed with respect to genetically modified foods and are often not aware that they may be eating GMO’s. In many cases consumer attitudes and perceptions of GM food products are fears, concern for, and avoidance of the new technology as a result of the negative connotations attached to the foods.
Maize beer (Umqombothi): The traditional South African beer used as a celebratory drink is made of several ingredients including maize. There are large quantities of the beer being produced by artisans in in an unregulated fashion which raises health concerns. As, such there is an opportunity to produce the traditional beer under regulated conditions, producing a safer product, on a potentially commercial scale that will satisfy consumer demand.
There is a growing influence of demographics, especially with respect to societal and cultural trends, on the local food industry in South Africa. As such, social and cultural trends as listed and described above should be taken into consideration when considering products that should be produced for local markets. A marketing team that possesses the necessary skills to understand the local market is integral to the Agri-Parks success in accessing local and international markets.
11.14 SWOT Analysis
The SWOT Analysis for maize is contained in the Table below.
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Table 11.7: SWOT Analysis MAIZE Well-established commercial farmers. A number of informal and small farmers Well-developed infrastructure such as well-placed silos in the province
It is an important source of energy in the form of starch and fat. It is a staple food and a source of cheap energy for a large sector of the population.
Strengths The production of the grain crops provides direct employment to thousands and indirectly through related industries. It is an irreplaceable source of stock feed Low level of skills development amongst the informal sector and small farmers. The availability of production capital by small and emerging farmers. Grain production is a once a year activity, meaning all the grain produced and harvested
by the end of the summer season needs to be stored in silos until utilised. This adds to the cost of the price of grain for the consumer, millers and the industry. The availability of silos and storage facilities in all the production areas. The silos, owned by Weaknesses Afgri in the Mpumalanga area are distributed in areas where the commercial farmers are located. The small and emerging farmers in the former homelands have limited access to storage facilities. A well-established animal production sector in Mpumalanga allows for the opportunity to
produce animal feed for this sector. Crop production is an available asset in mixed farming systems where animal husbandry is part of the farming enterprise. Agro-processing
Opportunities Organic, non GMO production Fluctuation in prices
Environmental conditions Cost of finance
Threats Theft and vandalism
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12 Agri-Park Concept Development
In the Agri-Park Concept Development Section, the concept of how the Agri-Park will be organised and function is developed. The information gathered and analysed in earlier sections of the Business Plan will be applied in the concept development. Each of the commodities that were selected for production in the initial phase of the Agri-Parks programme have a specific concept developed, which addresses specific activities that take place in the production of each commodity. Ultimately, an overall concept is developed, as well, which refers to the organisation and functioning of the Agri-Park in general.
12.1 Introduction of the Agri-Park Concept
The Agri-Park concept that has been developed and presented in the following sub-sections is based on the Agri-Park Model that is developed by the DRDLR (refer to Section 2). The three basic units of the Agri-Park Model: the FPSU, AH, and RUMC are the basis of the Agri-Park concept along with the smallholder and emerging farmers. Using the above components as the foundation for the concept development ensures that the concept is aligned with the Agri-Parks model. Smallholder and emerging farmers: The main beneficiaries of the Agri-Parks programme are the smallholder and emerging farmers. Smallholder and emerging farmers are encouraged to use the Agri-Park programme, thereby receiving the support needed to successfully produce and market their products. The Agri-Park concept begins the product flow with the farmers, who produce the goods to be processed and sold to various markets. Commercial farmers are also encouraged to use the Agri-Parks process, although it is most likely that the AH will be their main point of entry. FPSU: Support for the primary production by smallholder farmers is facilitated by the FPSU, through a variety of services. Therefore, the concept explores the activities and services that will be required from the FPSUs in each commodities production flow. AH: Processing of the primary products is the main service of the AH, as well as other production activities such as storage and packaging. The AH’s functions and services and related aspects are specified as part of the concept, according to each commodity. RUMC: Market intelligence and distribution of products is managed by the RUMC and the concept addresses different aspects of the RUMC in the production of the selected commodities.
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The Agri-Parks concept developed below also considers the requirements of the location and coverage of the FPSU, AH, and the RUMC. The concept is developed by the defining the following aspects: Roles and functions Location Key products/services Infrastructure and equipment Logistics Human Resources (HR) Training
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12.2 Proposed Development Concept of Red Meat
The development concept for the production of red meat has been developed according to the Agri-Parks Model, as stated in the introduction. The process begins with the production of livestock by the farmer who produces weaned calves/lambs and is supported by the FPSU by providing services such as supplying feed, veterinary assistance, and auctions and sales. Livestock that is not is not intended for processing is sold at the FPSU to the local market, while livestock for further processing is transported to the AH. At the AH, the abattoir will be responsible for slaughtering and performing other production function through other facilities in the AH. From the AH, the red meat products can be sold, transported to various retail and distribution markets or the RUMC. The Mpumalanga International Fresh Produce Market in Mbombela will be one of the main markets for red meat. The RUMC can further transport products to local and international market, while providing information on demand and market trends to the other components. Table 12.1 explores the development for red meat production.
Table 12.1: Proposed Development Concept for Red Meat
Product flow Smallholder and emerging FPSU AH RUMC farmers Key Role and Function Produce livestock. Provides facilities for primary Processing of livestock. Links the livestock producers Rearing of new calves to and initial processing Intensive feeding/ to local and international weaners. activities. livestock finishing. markets. Rearing of lambs Supplying and collection Access to abattoir Provision of market of feed. Provides facilities for intelligence in the red Provision of veterinary processing, packaging meat and related services. and labelling industries. Provision of extension Inspection and quality Identification of red meat services. control. markets. Weighing Distribution and Interact and negotiate Feedlot equipment hire transportation of red meat with buyers in the various Facilitation of farmer products to the market market channels. organisation and Local market sales Undertakes contractual association administrative agreements operations.
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Local market livestock sales. Training of emerging farmers and agriculture students Location Existing and emerging small The local municipalities that The AH will be located in the There will be only one RUMC scale farms will show significant town of eMkhondo (Piet in the province and will be accommodate primary development of livestock Retief). located in Mbombela, production functions farming and therefore can Ehlanzeni DM. throughout the District. be considered for the development of FPSUs are the following Chief Albert Luthuli Dr Pixley Isaka Ka Seme Dipaleseng Msukaligwa Govan Mbeki Production products/services New calves and weaners are The weaners once at the The AH will facilitate the In linking the products to the produced (8 Months at FPSU will undergo the following activities market, the RUMC will approximately 200kg) following: Slaughtering undertake the following Feeding (for Cutting and removal of activities: Approximately 90 – 100 skin and hides Sales and distribution days) Packaging and branding Transportation to markets Auction and sales of cattle Freezing Market segmentation Quantity and quality Drying Storage control of cattle Leather tanning Quality and quantity Vaccination of cattle Use of waste from beef control Weighing of cattle processing Sales and distribution of The core activities of the FPSU beef products are: Transportation of beef Assisting farmers to products transport livestock to AH Storing of beef products (abattoir)
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Assist with disease and parasite control Assist with feed- and herd management Other veternary services Infrastructure/equipment The smallholder farmers The FPSU would require to put The AH would require to put in The RUMC would require to would require the following in place the following place the following put in place the following equipment: equipments/ infrastructure: equipments/infrastructure: equipments/ infrastructure: Neck clamp Transport Administrative facilities Large warehouses/ Feeders Auction facility Rental facilities holding facilities Water troughs Pens and other cattle Abattoir facilities Cold storage facilities Pens/ feedlot handling equipment Packaging facilities Administrative facilities/ Crush pen and squeeze Quality control facilities information centre chute Agricultural input Trailers for transporting distribution and sales cattle centre Dehorn equipment Retail facility Training centre Student and staff housing Logistics and transport facility Logistics Farmer organisations and The FPSU will require the The AH will require the Transportation to the different coops need to be arranged following logistical following logistical markets from the AH, in using the FPSU services and arrangements: arrangements: especially international facilities such as The quantity of cattle Transportation from FPSU markets can also be communicating information enters, remains and leaves to the abattoirs and arranged through the RUMC. on when calves are ready to the facility and progress in processing units. The products that are stored be transported to the FPSU. their growth. Transportation back to the at the RUMC holding facilities Transportation of cattle to the Sales and auctions FPSU for local sales will also be transported to the FPSU will also have to take Transportation from Transportation to identified markets. place. primary producers, and to butcheries, distribution AH. centres and other markets as advised by the RUMC
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Technology and ICT The following technology and The following technology and The following technology and Economic and marketing ICT opportunities can be ICT opportunities can be ICT opportunities can be computer applications and used: used: used: programmes can be used by Modern rearing tools Modern farming tools the RUMC. Castration of bulls that are Planning tools and With time, the processing not meant for breeding, to computer programmes. machinery used will have to prevent inbreeding and Tracking devices on be updated as new uncontrolled mating of farming machinery and technologies are introduced. animals, transport. Oestrous synchronisation Computer programmes of female animals to related to track keeping of reduce cost of doing cattle production artificial insemination and activities. other cost related to Internet access for farmers raising of young calves. and trainees Artificial insemination, to introduce certain desirable traits into the herds. Mobile devices for subscription to Apps. , to enable them receive information from the RUMC on weather forecast, disease control etc. Human Resources The core HR personnel that The core HR personnel that The core HR personnel that The core HR personnel that the SHF would require are: the FPSU would require are: the ah would require are: the RUMC would require are: Farm manager (1) Extension officers (1) Administrative manager Administrative manager Administrative Managers (1) (1) Addition staff would include (1 per FPSU) Abattoir manager (1) Marketing manager (1) the following: Animal health specialist (1) Feedlot manager (1) Farm labourers (feeding, Logistics operation Additional staff would vaccinating) Addition staff would include manager (1) include the following: Herders the following: Administration officers
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Administration staff Meat processing operator Marketing personnel Security Guards supervisors (2) Economic advisors Drivers Food Science Specialists Training personnel Operators (1) IT assistance Cleaners Quality control manager Training personnel (1) An estimated range of IT assistants Hygiene manager (1) between 20 to 35 jobs can be expected to be created by An estimated range of the RUMC. between 20 to 30 jobs can be Additional staff would include expected to be created by the following: the FPSUs. Administration officers Processing operators Abattoir operators Feeders Security guards Cleaners Drivers Mechanical operators
An estimated range of between 50 to 70 jobs can be expected to be created by the AH. Training Continuous training for The following training The following training The following training farmers on recent opportunities can be made opportunities can be made opportunities can be made technology. available: available: available: Extension services training Machine operation Market analysis skills Other training opportunities Regulatory standards and training Supply chain and logistics that can take place for requirements training Processing skills skills smallholder farms are for the Health and safety training Health and safety training Trading (local and following skills: Management skills Management skills international) Breeding Techniques Training for emerging Agriculture computer Business skills farmers programme training. Finance skills
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Agriculture computer programme skills Computer literacy
Catalytic Project An abattoir in Bethal to take advantage of the livestock production in the immediate vicinity as well as surrounding regions in Balfour and Lekwa. The abattoir should be integrated with the proposed Farmer Production Support Unit in the Bethal area of Govan Mbeki Local Municipality.
12.3 Proposed Development Concept for Vegetables
The development concept for vegetables will focus on the primary production of vegetables in the district. The produce will then be transported to the FPSU for further processing, collection and distribution to the hub. Some of the produce will be sold as fresh produce which will not need further processing, these products can go directly to the market, Mpumalanga IFPM or RUMC. Futher processing can take place at the FPSU and/or the AH. Packaging and storage of products will take place at the AH, this includes cold storage.
Table 12.2: Proposed Development Concept – Vegetables Production Flow Smallholder farmers (SHF) FPSU AH RUMC
Key Role & The core role of the smallhoder Input supplies (such as seed, fertlizer, Some training, logistics, Market intelligence, assist Function farmers would be the primary pesticides, herbicides, e.t.c.), training Agro-Processing, farmers, and processors in production of vegetables and extension support, mechanisation storage/warehousing managing a nexus of support, local logistics support, some facilities, packaging contracts and large storage, and processing for local facilities; logistics. warehousing. markets, through-put of excess products to Agri-hubs. Location All smallholder farmers involved in All vegetable farmers will be As proposed by the There will be only one vegetable production in the Gert supported by all the FPSU(s) that would province, the Agri-Hub is to RUMC in the province and Sibande District be situated in the District, Vegetables be located in eMkhondo. will be located in are produces in all of the Mbombela, Ehlanzeni DM. municipalities in the district.
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Human Resources The core HR personnel that the SHF The FPSU will provide the following The AH will provide the The RUMC will provide the would require from the FPSU are: HR/HR facilities; following HR; following HR; Extension officers Agricultural extension officier (2) Administrative IT expert/personnel (1) Agronomist / support office; manager (2) Administrative Reseachers Machine operators (2) / Local Quality control manager (1) Seasonal staffs (harvest labour) mechanisation centre and personnel (2) Training personnel Some permanent staff to workshops; Staffs to manage the Marketing agents (to manage day to day farm Agronomist ( for soil testing e.t.c.) Agro-Processing Facilate market operations. (2) facilities linkages, facilitate Researchers (2) Research and contracts with Voluntary/Established Demonstration wholesalers and major commercial farmers to mentor the personnel retail outlets and also small scale farmers (as many as Training personnel (1) to garther informatio possible). on prices at fresh An estimated range of produce market that An estimated range of between 20 to between 60 to 90 jobs can would be 30 jobs can be expected to be be expected to be created communicated to created by the FPSUs. by the AH. the AH and FPSU).
An estimated range of between 15 to 30 jobs can be expected to be created by the RUMC. Training Small holder farmers would require One of the key function of the FPSU Some training would also be Training of training training on: best farm practices, use would be to provide training and required at the hub e.g. personnels on how to of tools and equipments, training on extension support on various farm Training of processing disseminate information to how to interpret market information practices, to the SHF. staffs on how to handle the SHF, AH and the FPSU. and ICT. The extension officiers that and operate various are conversant with vegetable processing equipment. production are well posiitioned to Training on best render this type of training. Also, practices, based on training can be provided by the well- changing demand and established commercial potato supply. farmers through a mentorship programme. Extension officiers
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through the DAFF can also organise Training on new Agri-shows, where farmers can innovations as they express their concerns, and where surface. training can be provided. Key The core activities of the small holder The core activities of the FPSU are: The core activities of the AH The core activities of the product/activities farmers are: Collection of vegetables are: RUMC are: Land preparation from SHF Receiving of maize Collection of final vegetable farming (planting, Transportion of vegetables to from FPSU products from the fertlization, disease control, the storerooms/cold storage Further Quality control; AH irrigation e.t.c.) within the FPSU premises Processing of Maketing and Harvesting Some quality control vegetables: peeling, distribution of final Loading onto truks Weighing, sampling and chopping, packaging, products to different testing of maize etc. wholesalers and Drying, cleaning grading and Storage of products ; major retail outlets sorting maize Some marketing; Exporting of final Transportation maize Transportion of products destined for processing products to the RUMC. Bulk storage of final directly from the farm to the products AH
Infrastructure/ The smallholder farmer would require The FPSU would require to put in place The AH would require to put The RUMC would require Equipment the following equipments, which can the following in place the following to put in place the be hired from the FPSU: equipments/infrastructure: equipments/infrastructur: following Tractor Transport ( e.g Bakkie or pick- Administrative facilities equipments/infrastructure Tilliing equipment up vehicles) Rental facilities : Bed former Small scale processing Agro-Processing Large warehouses/ Trailers and bins. facilities for local market facilities (peeler, slicer, holding facilities/ cold Solid set irrigation Sorting facility etc.) storage equipment Storage facility/ cold storage Packaging facilities Administrative Planter/fertiliser applicator All equipments listed to be Quality control facilities facilities/ information Fertiliser equipment required by the small holder Agricultural input centre (spreader) farmers. distribution and sales Spray equipment centre Retail facility Training centre
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Student and staff *Only small holder farmers with more housing than 2ha of land would be fully Logistics and transport mechanised. facility Logistics Smallholder farmers should be The FPSU should organise primary The same transport will be Trucks will be required for organised into groups. Each group logistics collection centre in the form used to collect vegetables the distribution of final should have a group head that of pack houses where trucks with from the FPSU to the AH for products to wholesales would communicate information trailers would pick up vegetables from processing. Indictating that and major retail outlets. from the farmers to the FPSU and also various farms and convey it to these the transport facilities would arrange for delivery of inputs with the storage facilities serve multiple purposes. FPSU. It is suggested that there should be input collection centres which *It should be noted that some of these would serve as small officies for the transport facilities will be used to group heads. This group heads deliver farm inputs to the collection would work closely with the centres, after which it can be Packhouses and the FPSU. distributed to individual farmers. Harvesting : Certain days of the week should be assigned for harvesting of vegetables during the harvest seasons. Farmers intending to harvest on certain days would notify the FPSU for necessary arragements. Technology/ICT In order to boost their production Tracking devices on all vehicles to In order to remain The RMUC will provide efficiency, the SHF would require: prevent hijack and also to monitor the conversant with the current Information Data base Mordern tools, movements and locations of the prices fetched on the that all the various basic mobile devices for subscription drivers. global, national and local units of the Agri-Park can to Apps. , to enble them receive Also, the FPSU would require market, so as to be able to subscribe to. information from the RUMC on subscription to certain Apps from the strategically supply weather forecast, disease RMUC to remain conversant with the vegetables/ vegetable control e.t.c. current prices fetched on the global, products to the markets, the national and local market, so as to be RUMC would also require able to strategically supply maize/ subscription to certain Apps maize products to the markets. from the RMUC. This will enable the AH to remain informed.
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*It should be noted the same transport facilitities would be used to service all the basic units of the Agri-Park, therefore, all the Transportation facilities would have these tracking devices.
Catalytic Project Vegetable pack house and processing facility at Volksrust to sort, store and process vegetables and fruits (apple and berries). The packhouse and processing facility should be integrated with the proposed Farmer Production Support Unit planned for the Volksrust area of Dr Pixley Ka Isaka Seme Local Municipality.
12.4 Proposed Development Concept for Agroforestry
Agroforestry will focus on agroforestry and secondary processing of the forestry sector goods. Agroforestry will deal with the use of existing forests and plantations for the production of honey, mushrooms and medicinal plants. Agroforestry will also deal with the establishment of tree nurseries for indigenous trees and plantations saplings. The goods produced like honey, etc. will be distributed from the FPSUs to the AH. The tree nurseries will deal directly with plantation owners and markets for indigenous trees. The secondary processing of forestry sector goods will deal with adding value to primary processing goods, in this district the focus will be on furniture manufacturing, coffin making and charcoal manufacturing. These secondary processing of forestry sector goods will take place at the FPSUs. The finished products will then be transported to the AH for distribution to the markets.
Table 12.3: Proposed Development Concept – Agroforestry Production Flow SHF FPSU AH RUMC
Key Role & The core role of the farmers Input supplies (such as seed, bee Some training, storage/warehousing Market intelligence, assist Function would be to utilise existing boxes, protective clothing, etc.), facilities; logistics. farmers, and processors in commercial forestry training and extension support, managing a nexus of
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plantations for the production mechanisation support, local contracts and large of products such as honey, logistics support, some storage, warehousing. medicinal plants, mushrooms and processing for local markets, or truffles (niche market). through-put of excess products to A second function of farmers Agri-hubs. would to farm seedling trees to be used as inputs for the commercial forestry sector. Location The majority of forestry The main FPSU supporting As proposed by die Province, the AH There will be only one RUMC activities occur in Mkhondo agroforestry should be situated in will be situated in eMkhondo (Piet in the province and will be LM around Driefontein, Sulpha Driefontein (phase 1 Retief), Mkhondo LM located in Mbombela, Springs, Amsterdam, and development), followed by an Ehlanzeni DM. Commondale. Some forestry FPSU in Carolina, Suplha Springs also occurs in Chief Albert and Amsterdam (phase 2) and Luthuli LM (Carolina) lastly a FPSU can be developed in Comondale (phase 3) Human The core HR personnel that the The FPSU will provide the following The AH will provide the following HR; The RUMC will provide the Resources SHF would require from the HR/HR facilities; following HR; FPSU are: Agricultural extension officier Administrative manager (2) IT expert/personnel (1) Extension officers (2) / support office; Quality control personnel (2) Administrative manager Reseachers Machine operators (2) / Local Staffs to manage the processing (1) Some permanent staff to mechanisation centre and facilities Training personnel manage day to day farm workshops; Research and Demonstration Marketing agents( to operations Researchers (2) personnel Facilate market linkages, Voluntary/Established Training personnel (1) facilitate contracts with commercial forestry entities to wholesalers and major mentor the small scale farmers retail outlets and also to (as many as possible). garther informatio on prices that would be communicated to the AH and FPSU). Training Small holder farmers would One of the key function of the FPSU Some training would also be required Training of training personnels require training on: best farm would be to provide training and at the hub e.g. on how to disseminate practices, use of tools and extension support on various farm Training of processing staffs on information to the SHF, AH equipments, training on how practices, to the SHF. how to handle and operate and the FPSU.
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to interpret market information various processing equipment. and ICT. Training can be Training on best practices, provided by the well- based on changing demand established commercial and supply. forestry experts through a Training on new innovations as mentorship programme. they surface. Extension officiers through the DAFF can also organise Agri- shows, where farmers can express their concerns, and where training can be provided. Key product/ Farming of: The core activities of the FPSU are: The core activities of the AH in terms The core activities of the activities Mushrooms Transport services of agroforestry is to service as a RUMC are: Honey Training transport/logistics hub. Maketing and distribution Medicial plants Secondary processing: of final products to Truffles (niche market) o Furniture different wholesalers and Seedlings (for manufacturing major retail outlets commerical forestry o Charcoal (from waste Exporting of final industry) of primary processing) products Primary processing will occur at existing commercial sawmills Infrastructure/ The smallholder farmers would The FPSU would require to put in The AH would require to put in place The RUMC would require to Equipment require the following place the following equipments/ the following put in place the following equipment, some of which infrastructure: equipments/infrastructure: equipments/ infrastructure: can be rented from the FPSU: Transport Administrative facilities Large warehouses/ Bee boxes Charcoal manufacturing Rental facilities holding facilities Bee keeping tools equipment Quality control facilities Administrative facilities/ (smokers, grips, hive tools, Furniture manufacturing Agricultural input distribution information centre feeders, brushes, equipment and sales centre protective clothing Honey making equipment Retail facility Harvesting tools (honey extractor, filters, Training centre strainers, containers, etc) Student and staff housing Logistics and transport facility
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Logistics Smallholder farmers should be The FPSU should organise primary The same transport will be used to organised into groups. Each logistics collection where trucks ( collect produce from the FPSU to the group should have a group bakkie/pick up vehicles) with AH for processing. Indictating that head that would trailers would pick up medicinal the transport facilities would serve communicate information plants, bee boxes etc. from multiple purposes. from the farmers to the FPSU various farms and convey it to and also arrange for delivery these storage facilities. of inputs with the FPSU. It is Sapplings can be collected and suggested that there should taken directly to commercial be input collection centres forrersters. which would serve as small officies for the group heads. Technology/ICT In order to boost their Tracking devices on all vehicles to In order to remain conversant with The RMUC will provide production efficiency, the SHF prevent hijack and also to monitor the current prices fetched on the Information Data base that would require: the movements and locations of global, national and local market, so all the various basic units of Mordern equipmemt, the drivers. as to be able to strategically supply the Agri-Park can subscribe mobile devices for Also, the FPSU would require beef products to the markets, the to. subscription to Apps. , to subscription to certain Apps from RUMC would also require enble them receive the RMUC to remain conversant subscription to certain Apps from the information from the with the current prices fetched on RMUC. This will enable the AH to RUMC on weather the global, national and local remain informed. forecast, disease control market, so as to be able to etc. strategically supply potatoes/ potato products to the markets. *It should be noted the same transport facilitities would be used to service all the basic units of the Agri-Park, therefore, all the Transportation facilities would have these tracking devices.
Catalytic Project Medicinal plant project in Amsterdam for the cultivation, harvesting and development of medical products from medicinal plants.
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12.5 Proposed Development Concept – Maize
The development concept for maize will focus on the primary production of maize in Gert Sibande District. Maize will be transported to the FPSU for further processing, collection and distribution to the Hub. Some of the produce will be sold as fresh produce which will not need further processing, these products can go directly to the market, Mpumalanga IFPM or RUMC. Further processing can take place at the FPSU and/or the AH. Packaging and storage of products will take place at the AH, this includes cold storage.
Table 12.4: Proposed Development Concept – Maize Production Flow Smallholder farmers (SHF) FPSU AH RUMC
Key Role & The core role of the smallhoder farmers Input supplies (such as maize seed, Some training, logistics, Market intelligence, assist Function would be the primary production fertlizer, pesticides, herbicides, e.t.c.), Agro-Processing, farmers, and processors in maize training and extension support, storage/warehousing managing a nexus of mechanisation support, local logistics facilities, packaging contracts and large support, some storage, and facilities; logistics. warehousing. processing for local markets, through- put of excess products to Agri-hubs.
Location All smallholder farmers involved in Although, maize farmers will be As proposed by the There will be only one maize production in the Nkangal supported by all the FPSU(s) that would province, the Agri-Hub is to RUMC in the province and District, especially, those in Dipaleseng be situated in the District, it is proposed be located in Mkhondo will be located in LM, Lekwa LM and Msukaligwa LM that the major FPSU for maize be LM. Mbombela, Ehlanzeni DM. where production is more sitauted around Staderton, in Steve concentrated. Lekwa LM, since majority of the maize farmers are concentrated in this area.
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Human The core HR personnel that the SHF The FPSU will provide the following The AH will provide the The RUMC will provide the Resources would require from the FPSU are: HR/HR facilities; following HR; following HR; Extension officers Agricultural extension officier (2) Administrative IT expert/personnel (1) Agronomist / support office; manager (2) Administrative Reseachers Machine operators (2) / Local Quality control manager (1) Seasonal staffs (harvest labour) mechanisation centre and personnel (2) Training personnel Some permanent staff to manage workshops; Staffs to manage the Marketing agents (to day to day farm operations. Agronomist ( for soil testing e.t.c.) Agro-Processing Facilate market (2) facilities linkages, facilitate Researchers (2) Research and contracts with Voluntary/Established Demonstration wholesalers and major commercial farmers to mentor the personnel retail outlets and also to small scale farmers (as many as Training personnel (1) garther informatio on possible). prices at fresh produce market that would be communicated to the AH and FPSU). Training Small holder farmers would require One of the key function of the FPSU Some training would also Training of training training on: best farm practices, use of would be to provide training and be required at the hub e.g. personnels on how to tools and equipments, training on how extension support on various farm Training of processing disseminate information to to interpret market information and practices, to the SHF. staffs on how to handle the SHF, AH and the FPSU. ICT. The extension officiers that are and operate various conversant with maize production are processing equipment. well posiitioned to render this type of Training on best training. Also, training can be provided practices, based on by the well-established commercial changing demand potato farmers through a mentorship and supply.
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programme. Extension officiers Training on new through the DAFF can also organise innovations as they Agri-shows, where farmers can express surface. their concerns, and where training can be provided. Key product/ The core activities of the small holder The core activities of the FPSU are: The core activities of the The core activities of the activities farmers are: Collection of maize from SHF AH are: RUMC are: Land preparation Transportion of maize to the Receiving of maize Collection of final Maize farming (planting, silos within the FPSU premises from FPSU products from the AH fertlization, disease control, Some quality control Further Quality Maketing and irrigation e.t.c.) Weighing, sampling and control; distribution of final Harvesting testing of maize Processing of maize products to different Loading onto truks Drying, cleaning grading and into products such as: wholesalers and major sorting maize mielie meal retail outlets Transportation maize Storage of products ; Exporting of final destined for processing Some marketing; products directly from the farm to the Transportion of Bulk storage of final AH products to the RUMC. products Infrastructure/ The smallholder farmer would require The FPSU would require to put in place The AH would require to The RUMC would require to Equipment the following equipments, which can the following put in place the following put in place the following be hired from the FPSU: equipments/infrastructure: equipments/infrastructur: equipments/infrastructure: Tractor Transport ( e.g Bakkie or pick- Administrative Large warehouses/ Tillage implements up vehicles) facilities holding facilities Harvesters Silo equipment (bins, Rental facilities Administrative facilities/ Planters convayer belts, drying Agro-Processing information centre Trailers and bins. equipment, etc.) facilities (peeler,
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Solid set irrigation equipment Small scale processing slicer, fryer e.t.c.) Planter/fertiliser applicator facilities for local market Packaging facilities Fertiliser equipment (spreader) Sorting facility Quality control Spray equipment Storage facility facilities All equipments listed to be Agricultural input *Only small holder farmers with more required by the small holder distribution and sales than 2ha of land would be fully farmers. centre mechanised. Retail facility Training centre Student and staff housing Logistics and transport facility
Logistics Smallholder farmers should be The FPSU should organise Primary The same transport will be Trucks will be required for organised into groups. Each group logistics collection centre in the form used to collect maizefrom the distribution of final should have a group head that would of silos where trucks with trailers would the FPSU to the AH for products to wholesales and communicate information from the pick up maize from various farms and processing. Indictating major retail outlets. farmers to the FPSU and also arrange convey it to these silos. that the transport facilities for delivery of inputs with the FPSU. It is would serve multiple suggested that there should be input *It should be noted that some of these purposes. collection centres which would serve transport facilities will be used to as small officies for the group heads. deliver farm inputs to the collection This group heads would work closely centres, after which it can be with the Packhouses and the FPSU. distributed to individual farmers. Harvesting : Certain days of the week should be assigned for harvesting of
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potatoes during the harvest seasons. Farmers intending to harvest on certain days would notify the FPSU for necessary arragements. Technology/ICT In order to boost their production Tracking devices on all vehicles to In order to remain The RMUC will provide efficiency, the SHF would require: prevent hijack and also to monitor the conversant with the Information Data base that Mordern tools, movements and locations of the current prices fetched on all the various basic units of mobile devices for subscription to drivers. the global, national and the Agri-Park can subscribe Apps. , to enble them receive Also, the FPSU would require local market, so as to be to. information from the RUMC on subscription to certain Apps from the able to strategically supply weather forecast, disease control RMUC to remain conversant with the maize/ maize products to e.t.c. current prices fetched on the global, the markets, the RUMC national and local market, so as to be would also require able to strategically supply maize/ subscription to certain maize products to the markets. Apps from the RMUC. This will enable the AH to *It should be noted the same transport remain informed. facilitities would be used to service all the basic units of the Agri-Park, therefore, all the Transportation facilities would have these tracking devices.
Catalytic Project A maize mill in Dundonald, expanding existing storage capacity and adding additional silos for grading and sorting of maize.
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12.6 Combined Agri-Park Concept
As the programmes continues to develop and other commodities are included, a concept similar to the ones above will be implemented. Table 12.5 provides a combined concept that refers to the Agri-Park programme overall.
Table 12.5: Combined Agri-Park concept Production Flow Small-Scale/Emerging Farmer Production Support Unit Agri-Hub Rural-Urban Marketing Centre Farmers Key Role & Production of the Provides facilities for primary and Processes primary products Links the producers of the Function commodity, including: initial processing activities. through: commodity to local and Management of the farm Supplying and collection of Access to processing facilities international markets through: and farming processes inputs. Provides facilities for processing, Provision of market intelligence Maintenance of resources Provision of veterinary packaging and labelling in the beef and related and infrastructure services. Inspection and quality control. industries. Provision of extension Distribution and transportation Identification of beef markets. services. of beef products to the market Interact and negotiate with Weighing of products. Local market sales buyers in the various market Equipment assistance channels. Facilitation of farmer Undertakes contractual organisation and association agreements administrative operations. Local market sales. Training of emerging farmers and agriculture students
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Location Distributed in various areas According to the location of The district will have one Agri-Hub There will be only one RUMC in the of the district. various farms in the district and that is linked to the FPSUs and the province and will be located in related infrastructure, the FPSUs RUMC. eMkondo has been Mbombela, Ehlanzeni DM. are proposed to be placed in proposed as the location for the the following municipalities: Agri-Hub. Chief Albert Luthuli - 3 Dipaleseng - 2 Dr Pixley - 2 Govan Mbeki – 2 Lekwa – 2 Mkhondo – 3 Msukaligwa - 2
Therefore 14 FPSUs will be distributed through-out the district. All farmers will be supported by the FPSUs. Farmers are encouraged to use FPSU’s closest to the farm locations. FPSU’s will not be exclusive to one commodity but where possible services and infrastructure may be shared. FPSUs will be centrally located where there is a concentration of farms. Human Resources The following human The following human resources The following human resources will The following human resources will resources will be needed by will be needed by the FPSUs: be needed by the FPSUs: be needed by the FPSUs: the primary production: Administrative manager IT expert/personnel Extension officers Quality control personnel Administrative manager Farm manager Machine operators Staffs to manage the Agro- Assistant administrative Farm labourers Processing facilities manager
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Machinery operators Agronomist (for soil testing Research and Demonstration Training personnel (planting, fertilisation and etc.) personnel Marketing agents (to Facilitate harvesting) Researchers Training personnel market linkages, facilitate Administrative Managers Mechanical superintendent contracts with wholesalers and Assistant administrative Skilled/unskilled workers for major retail outlets and also to manager processing operations gather information on prices at Quality-control technician Unskilled workers for fresh produce market that Mechanical supervisor maintenance and would be communicated to Skilled workers for local transportation the AH and FPSU). processing and packaging Office clerks Skilled workers (drivers, Foremen for processing shifts Itis estimated that the RUMC will mechanical and electrical Foremen for maintenance and have the potential to create maintenance) transport between 20 – 30 direct job Unskilled workers for local Cleaning staffs opportunities per commodity. processing and packaging Indirect labour (numerous). Unskilled workers for maintenance and It is estimated that the AH will have transportation the potential to create between Indirect labour (numerous). 50-70 direct job opportunities. Voluntary Animal health expert/ Veterinary doctor Animal/plant nutritionist Established commercial farmers who are willing to form partnership with the FPSU in mentoring the small scale farmers (as many as possible).
It iis estimated that the each FPSU will have the potential to create between 20 to 30 direct job opportunities.
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Training Smallholder Farmers will The following training The following training opportunities The following training require the following training opportunities can be made can be made available: opportunities can be made opportunities: available: Machine operation training available: Best farm practices Extension services training Processing skills Market analysis skills Use of tools and Regulatory standards and Health and safety training Supply chain and logistics skills equipment. requirements training Management skills Trading (local and Training on how to Health and safety training Training on new innovations international) interpret market Management skills Agriculture computer information and ICT Training for emerging farmers programme training. Breeding Techniques Agriculture computer Business skills programme skills Finance skills Computer literacy
Commercial farms can assist with training and mentoring towards smaller farmers. Key The core activities of the The core activities of the FPSU The core activities of the AH are: In linking the products to the Products/services farmers are: are: Receiving of farm produce from market, the RUMC will undertake Farming Provision of faming inputs the AH or directly from the the following activities: Maintenance of farm Auction and sales facilities farms. Sales and distribution infrastructure Quantity and quality control Cleaning, sorting and grading Transportation to markets Production, growth and Collection and where applicable Market segmentation collection of agricultural transportation of products. Further Quality control; Storage of products produce. Training Processing and value- addition depending on trends Packaging Quality and quantity control Small scale/ emerging will Branding (if applicable) be supported by the FPSU in Storage of products; carrying out these core Marketing and distribution; activities. Transportion of products to the RUMC where and when necessary. Infrastructure & The smallholder/ emerging The following infrastructure and The following infrastructure and The following infrastructure and Equipment farmer would require the to equipment will be used at the equipment will be used at the FPSU: equipment will be used at the hire some equipment from FPSU: Processing facilities and RUMC: the FPSU. The Commmercial Farming machinery equipment. farmers that are willing to Weighing equipment Storage facilities Transport vehicles)
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participate can also hire or Transport vehicles Waste management facilities Storage facilities rent equipment from the Auction and sales centre Transport vehicles Administration offices FPSU. Training facilities and Transport parking Training facilities and equipment Freezing Facilities equipment Some of the major Administration offices Administrative offices ICT equipment will be : Storage facility Retail and distribution facility Water systems Retail facility Distribution Storage facilities Farming machinery Other equipment and Other equipment and infrastructure that is specific to infrastructure that is specific to the Other equipment and the agricultural produce is agricultural produce is specified in infrastructure that is specific specified in the commodity the commodity development to the agricultural produce development concepts concepts. is specified in the commodity development concepts. Logistics Plan The focus of the logistics plan is to develop a strategy to move farm produce to market as smallholder and emerging farmers seek to become important players in the emerging food supply chain in South Africa. The logistics plan draws on challenges and opportunities faced by the farmers that are likely to participate within the Agri-Parks programme, while the focus remains on recognising the importance that transport plays in the emerging farmer value chains.
Understanding the logistics chain It is important that the transport segments in the emerging agricultural sector are understood. The segments include the primary, intermediate and final transport route segments, described in further detail below:
1. The primary transport segment, also known figuratively as the first mile, is the segment in which product moves from farm to a consolidation/collection point that are found on primary roads where collection is typically easier. The key role-players in this segment are the farmers who move the produce from their farm to the consolidation/collection point. 2. The intermediate transport segment realises the movement of produce from the primary consolidation, or collection point to an intermediate point, or in this case an Agri-Hub. The key role-players at this point are larger, commercial farmers, or transporters. 3. The final transport segment will move product from the intermediate point to the final market, or destination.
These segments are exemplified in the following figure:
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Primary Intermediate Final transport transport transport segment segment segment Market (Export and Farm Collection points Processing international)
The above figure is a generic emerging, or small-scale farmer’s logistics chain that contains the farm, consolidation/collection points, intermediate processing points and the final markets for the product. The first mile, in general, is the most important segment since it can be the most expensive segment of the logistics chain. It is often the case that product quality is compromised through bruising and ageing in this segment.
Recommended logistics strategy: Unlike commercial, large-scale farming, small-scale and emerging farmers produce smaller quantities and farms are spread over a wide spatial territory. As such, it is of high importance that consolidation points are developed in order to collect produce in viable volumes, while coordination with intermediaries and transporters is crucial so that the farmers jointly are able to create economies of scale. Consolidation points should therefore be developed at strategic locations on easy access roads and a well-structured approach is required in order to assist the farmers in produce consolidation. This is exemplified in the following logistics plan:
In order to do this, appropriate infrastructure is required at the consolidation points along with organised transport coordination (exploiting ICT) that will reduce value deterioration at the farm gate and consolidation/collection points. The following recommendations can be used in order to develop the logistics plan for the Agri-Park:
1. Locate and demarcate specific areas of production that will participate in the Agri-Parks programme. 2. Develop an inventory of what will be produced in the given demarcated areas. 3. Determine quantities to be produced in the demarcated areas. 4. Determine the total value of production that will be produced my small-scale farmers. 5. Determine and map the spatial location and spread of farms that will be producing within the programme. 6. Determine the location of the consolidation/collection points and what facilities should be made available. 7. Assess the potential perishability of the produce/value of the post-harvest losses. 8. Plan for the availability and reliability of transport services to collect produce. 9. Assess the quality of transport infrastructure in the location. 10. Determine the key market locations/destinations in the given area. 11. Develop, or enhance farmers’ organisations and support groups.
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The above process will assist in providing a better understanding of how to move produce from farm to market, while a comprehensive and integrated logistics management system can be employed to improve the efficiency in which produce can be moved to market taking into account rural infrastructure, consolidation management and collection services. The ability to understand the product movement will provide a foundation from which a logistics plan can be developed.
The following steps provide a broad outline toward the logistics plan, in which all elements of the Agri-Park including the farmers, FPSU, Agri-Hub and RUMC are integrated: 1. Demarcate farmer groups within a given production area. 2. Determine a central location of the consolidation/collection point for the produce in each of the demarcated areas. 3. Implement a logistics management system and programme through the FPSU and RUMC that will assist in moving farmers produce to the consolidation points. 4. Implement a logistics management system and programme through the FPSU and RUMC that will move product from the consolidation points to the Agri-Hub. 5. Implement a logistics management system and programme through the RUMC that will move product from the Agri-Hub to the market/final product destination. The FPSU will be responsible for the movement/transportation of the product. The RUMC will provide the market intelligence and therefore the timing of the movement of the product. Technology/ICT The following technology is The following technology is The following technology is The following technology is available for smallholder available through the FPSU: available for the AH: available for the RUMC: farmers: Modern farming equipment Modern production and Computer programmes related to Modern farming and machinery. processing techniques. economic and market analysis equipment and Modern and improved Computerised monitoring Information systems machinery. farming techniques. programmes. Information programmes that will Modern and improved Computer and internet Internet access. link to other components of the farming techniques access. Tracking devices for transport Agri-Park to provide and recive Programmes and Programmes and vehicles information. applications providing applications providing Modern security systems Tracking devices on transport. information on weather information on weather conditions, market trends, conditions, market trends, farm management and farm management and recent agricultural recent agricultural developments. developments.
The FPSU will also have technology and ICT
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opportunities available for its services. Interactive training programmes Tracking devices for transport vehicles and machinery. Information systems to provide updates. Potential Not only will the Agri-Parks project contribute to overall economic growth and formal employment in the agriculture, manufacturing, retail Economic Benefit and transport sector, but it will also contribute to local skills development and temporary employment during the construction of the necessary infrastructure.
Estimated targeted hectares – 16,700 ha Number of small holder farmers – between 350 and 550 Estimated number of jobs – between 5,000 and 7,000 jobs1
Securing funding to implement all the components of the Agri-Park is essential to the successful implementation. If all the components are not implemented correctly the Agri-Park will not be successful. Partnerships will therefore be crucial to the viability of the project.
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12.7 Farmer Production Support Units
As indicated in the agri-park development concept, there will be a number of Farmer Production Support Units (FPSU) in the district. Table 12.6 illustrates the location, main commodities in the area as well as the priority of the FPSU. Due to the number of FPSUs in the district they need to be prioritised and implemented over 10 years to accommodate budget and resource restrictions.
Table 12.6: Farmer Production Support Units (Prioritisation)
Municipality Location of FPSU Main Commodities Priority Dipaleseng LM Balfour Vegetables Phase 2 Livestock Grains/Soya Sunflower Greylingstad Vegetables Phase 3 Livestock Grains/Soya Sunflower Grootvlei Vegetables Phase 4 Grains Livestock Chief Albert Luthuli Mayflower Vegetables Phase 1 LM Maize Dry beans
Elukwatini Vegetables Phase 2 Livestock Carolina Livestock Phase 2 Vegetables Grains Forestry Steynsdorp Vegetables Phase 4 Livestock Grains Badplaas Livestock Phase 5 Vegetables Dr Pixley Isaka Ka Volksrust Livestock Phase 1 Seme LM Grains Fruits (apples, berries) Vegetables Daggakraal Livestock Phase 2 Vegetables Soya Perdekop Livestock Phase 5 Vegetables Soya
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Grains Govan Mbeki LM Bethal Livestock Phase 2 Poultry Vegetables Leandra Vegetables Phase 3 Livestock Secunda Vegetables Phase 4 Livestock Poultry Charl Cilliers Vegetables Phase 5 Livestock Lekwa Standerton Maize Phase 1 Vegetables Livestock Fruit (apple, pears) Morgenzon Poultry Phase 2 Vegetables Livestock Soya Holmdaly Livestock Phase 4 Grains Thuthukani Vegetables Phase 5 Livestock Mkhondo LM Driefontein Maize Phase 1 Vegetables Livestock Forestry Fruits Sulpha Springs Forestry Phase 2 Maize Poultry Livestock Fruits Amsterdam Forestry Phase 2 Livestock Vegetables Commondale Forestry Phase 3 Livestock Vegetables Dirkiesdorp Livestock Phase 4 Maize Vegetables Dairy Msukaligwa LM Sheepmore Vegetables Phase 1 Livestock Grains Chrisiesmeer Livestock Phase 2 Grains
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Vegetables Ermelo Livestock Phase 3 Fruit (apples, berries) Vegetables Breyten Livestock Phase 4 Vegetables Dry beans Grains
It is estimates that phase 1 of implementation should focus on FPSU with the highest priority with regards to locations of existing emerging and small scale farmers. Phase 1 should be implemented within the first three financial years while phase 2 needs to be implemented next 4 financial years. Phase 3 to 5 needs to be implemented over the next 10 years as the budget allows.
12.8 Estimated Capital Expenditure (CAPEX)
The Tables below indicates the capital needed for the Farmer Production Support Units, the Agri-Hub as well as for the Rural Urban Market Centre. Annexure A contains more detail regarding the specific capital requirements for each unit of the Agri-Park Model.
Table 12.7: CAPEX – FPSU Category Amount (R) Consolidation/Collection Point 7 722 750.00 Buildings 3 912 960.00 Infrastructure 4 287 400.00 Equipment – Red Meat 4 755 026.00 Equipment – Vegetables 7 013 311.00 Equipment – Agroforestry 784 913.00 Total 27 976 360.00 *The Table indicates the capital needed for one FPSU, and the District will have at least 14 FPSUs.
Table 12.8: CAPEX – Agri-Hub Category Amount (R)
Buildings 22 993 200.00 Infrastructure 17 635 000.00 Transport Vehicles 5 000 000.00 Equipment – Red Meat 28 000 000.00 Equipment – Vegetables 5 000 000.00
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Equipment – Agroforestry 15 000 000.00 Total 93 628 200.00
Table 12.9: CAPEX – Total Unit Quantity Amount (R) FPSU 14 391 669 040.00 Agri-Hub 1 93 628 200.00 Total 485 297 240.00
12.9 Conclusion
The Diagram below provides a brief summary of the proposed development concept for the Agri-Park in Gert Sibande as well as the capital requirements for each component of the model. In order to have a successful Agri-Park in Gert Sibande District it is important that all participating farmers receive the necessary training, support and equipment to enable them to provide good quality and sufficient amounts of produce to sustain all processing activities.
Diagram 122.1: Proposed Development Concept Summary
Farmers FPSU (x14) Agri-Hub RUMC
•Agroforestry •Equipment and •Processing and •Admin •Vegetables support storage •Storage •Beef •Sorting, storage •Support •Retail etc. •Capital required: •One per province •Capital required: R93 628 200.00 (to be located in R391 669 040.00 Mbombela)
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13 Organisational Structure
13.1 Introduction
The organizational structure for the Agri-Park in Gert Sibande DM can be summarised in the Diagram below.
Diagram 13.1: Agri-Park Organisational Structure
The organizational structure for the Agri-Park can be subdivided into three broad categories: 1. Advisory Structures 2. Approval Structures 3. Implementation and Monitoring Structures
Each of the abovementioned structured will be discusses in detail in this section.
13.2 Advisory Structures
The main functions of the advisory structures within the Agri-Parks organisational structure are to give advice to the approval structures. The advisory structures that are currently identified are the National Agri-Parks Advisory Council (NAAC) and District Agri-Parks Management
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Council (DAMC). It is important to note that the advisory structures’ member primarily comprise of stakeholders and interested parties.
13.2.1 The NAAC This council reports directly to the minister and consists of elected representatives of various organisations. Functions of the NAAC may include (as stipulated in Circular 9 of 2016): To solicit, co-ordinate and advise the Executive, on issues and concerns of the implementation of the Agri-parks Programme; To encourage public awareness and education of the Agri-parks Programme; To review studies, plans and proposals as may be referred by the Executive and District Agri-parks Management Councils (DAMCs) and the National Agri-parks Operational Task Team, and to provide comments and advice thereon; To provide advice on policies, legislation and programmes from the Department of Rural Development and Land Reform (DRDLR) that impact on the Agri-parks Programme; To initiate advice on the Agri-parks Programme and implementation of the business plans as referred to by the DAMCs; To liaise with the Executive, the Management of the DRDLR, the DAMCs and any other stakeholder involved in the Agri-parks Programme as required; and To mediate disputes arising from the DAMCs concerning its operation and/or advice provided to the Department or other bodies that are implementing the Agri-parks programme in Ehlanzeni DM.
13.2.2 The DAMC The District Agri-Parks Management Council, also referred to as the “voice” of the stakeholders/interested parties in Agri-Parks. The DAMC, like the NAAC consist of representatives from various organisations within Gert Sibande District. The DAMC’s main function is to communicate advice from the council members to the NAAC as well as DAPOTT (District Agri-Parks Operational Task Team). Further functions of the DAMC include, but are not limited to the following: Assist in identifying new business opportunities within an Agri-park; Provide advice on the implementation of the business plans; To advise on regulatory compliance with applicable policies and legislation; To advise on the alignment with the National Development Plan, Agricultural Policy Action Plan, Provincial Growth and Development Strategies and other development frameworks; and To assist in the identification, evaluation and monitoring of risks related to projects.
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13.3 Approval Structures
These structures are responsible for approvals, feedback, information sharing, monitoring and evaluation regarding land reform activities and Agri-Park project approval. To explain the functioning of the approval structure it essential to understand that in terms of the Agri-Parks organisation the project approval process is started on the district level.
The approval structures that form part of the Agri-Parks include the DAPOTT, District Land Reform Committee, Provincial CRDP (Comprehensive Rural Development Programme) Committee, National Development Approvals Committee (NDAC) and the National Land Allocation and Recapitalisation Control Committee (NLARCC).
Note: It is understood that both the DLRCs and DAMCs can recommend projects/producers to be considered to be part of Agri-Parks.
13.3.1 DAPOTT The DAPOTT as part of the Agri-Parks Approval Structure receives advice from the DAMC as well as information from PAPOTT and NAPOTT. DAPOTT have the role to interpret all the information and acting as a monitoring agent to advise on projects and land reform beneficiaries to be included in the Agri-Parks. The management of the Agri-Park as well as the Agri-Hub Manager will also need to report directly to DAPOTT. Some of the functions of the DAPOTT include but are not limited to: To provide technical support and guidance for implementation; To provide oversight of the implementation of the district Agri-parks business plan; To monitor expenditure against the district Agri-parks business plan; To identify all district projects that contribute to the district Agri-parks business plan and to compile a district project register (all DRDLR branches); To monitor project implementation against the approved project plan and district Agri- parks business plan; To participate in the identification and packaging of local development projects in support of the mandate of the Department of Rural Development and Land Reform; To advise on proposals that should be submitted to the Provincial CRDP Committee; and To provide an oversight function and monitor the implementation of the Government’s Rural Development Programmes.
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The Agri-Hub Operational Manager The main function of the Agri-Hub Operational Manager is to oversee the implementation of the Agri-Hub. Such person is to be appointed at the district level and should report directly to the district operational task team.
The FPSU Operational Manager The main function of the FPSU Operational Manager is to oversee the implementation of the FPSU. Such person is to be appointed at the district level and should report directly to the district operational task team.
13.3.2 DLRC The District Land Reform Committees (DLRCs), are primarily concerned with land reform in general. However, the DLRCs have additional functions linked to Agri-Parks: To identify the district projects contributing to Agri-Parks business plans; and To align projects and beneficiaries with the identified sites for Agri-Parks.
The abovementioned functions are however secondary to the following main functions: Identify farms suitable for acquisition by Government (the target is 20% of agricultural land per district); Identify and interview potential candidates for farm allocation; Advise the Minister on the strategic support needs of identified farms and support needs of recommended candidates; and Advise the Minister on resolving land rights conflicts, as might be referred to a DLRC by him/her.
Note: Projects and or beneficiaries identified by the DLRCs and DAPOTT, are subjected to technical compliance checks before being passed onto the PCRDP.
13.3.3 PCRDP The PCRDP functions as the provincial approval structure that passes projects/beneficiaries identified by the DLRCs and DAPOTTs onto the National Government structures. Regarding this specific structure within the Agri-Parks organisational structure the name of this structure may have changed to the PJSC (unknown) as suggested in a different schematic (see below). The projects/beneficiaries identified are then catalogued into a Provincial Project Register that contributes to the formulation of a provincial spatial target plan. The functions of the PCRDP include: To provide inputs to assist in the compilation of the provincial spatial targeting plan, as
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provided by the districts; To recommend all development, land acquisition and tenure projects in line with a Delegation of Authority Framework to the NLARCC and NDAC through its technical committees; and To provide an oversight function in relation to the work of the Provincial Technical Committees and District CRDP Committees, to eliminate disjuncture and to ensure alignment of projects and funding at a provincial level. To provide an oversight function in relation to the work done by the District Operational Task Team. The Task Team is the link between the PCRDP, the DAMC and the Provincial Operational Task Team. The Agri-Hub Operational Manager as well as the FPSU Operational Manager will also report to the Task Team.
The PCRDP can also include specialists if specialist skills are required to inform decisions to be made regarding project selection. Projects and or beneficiaries chosen by the PCRDP are subjected to technical compliance checks before being passed onto the NLARCC and the NDAC.
13.3.4 The NLARCC The function of the NLARCC is to recommend land acquisition and recapitalisation projects to the MCM (Ministerial Coordinating Management committee). The full list of functions of the NLARCC is as follows: To provide inputs to assist in the compilation of the national spatial targeting plan as provided by the provinces; To identify all national projects as per operational plans and compile a national project register To approve land acquisition, tenure and recapitalisation and development projects in line with a delegation of authority framework; and To provide an oversight function in relation to the work of the National Technical Committee and Provincial Committees, to eliminate disjuncture and to ensure alignment of projects and funding at a national level.
Looking at the above function, the NLARCC and PCRDP have the same functions but only on different levels within the government.
13.3.5 The NDAC The main function of the NDAC is to approve all the national development projects and to give oversight to the PCRDP committees and the National Technical Committees (NTCs part
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AGRI-PARKS MASTER BUSINESS PLAN of the land reform approval process). The functions of the NDAC are almost the same as the functions of the NLARCC, but the NDAC does not play a role in the identification of projects or the approval land acquisition, tenure recapitalisation and development projects.
13.4 Implementation and Monitoring Structures
Currently there are only two structures within the Agri-Parks organisational structure that are solely dedicated to implementation and monitoring, the PAPOTT (provincial Agri-Parks Operation Task Team). PAPOTT and NAPOTT are however not exclusively dedicated to Agri- Parks, these two structures also play a role in the monitoring and implementation of other programmes that can influence the Agri-Parks programme.
Diagram 13.2: Ministerial Management Committee
13.4.1 NAPOTT The NAPOTT has various functions that are focussed towards on the operation of Agri-Parks both in terms of implementation and on-going operation. These functions include but are not limited to: Developing the National Agri-Parks Plan; Contributing to the development guidelines of Agri-Parks; Monitoring provincial business plans against the abovementioned guidelines; Monitoring budget alignment as set out in the business plans; Giving inputs to assist in the compilations of provincial Agri-Park business plans; and Managing project roll out of Agri-Parks in line with approved project plans nationwide.
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13.4.2 PAPOTT The main functions of the PAPOTT is to coordinate and facilitate integrated implementation of Agri-Parks by providing technical support regarding planning and implementation, giving inputs to the compilations of Agri-Parks Business plans etc.
Note: PAPOTT will only remain operational until the Agri-Parks programme has reached a sustainable level, then PAPOTT will be integrated with the PCRDP.
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14 Implementation Guidelines
14.1 Introduction
The following section provides an overview of what should be achieved in order to successfully implement the APs programme within the GSDM. The implementation guidelines provide valuable information about: o Understanding the implementation process and what is required for the process; o How to align the implementation of the APs programme with various government initiatives in developing agriculture; o Recommendations that will streamline and assist the development of the APs programme; and o Steps to be taken in developing the AP in the form of a roll-out plan.
This final chapter lays out the implementation guidelines and planning required to implement the GSDM AP programme, starting with the implementation process.
14.2 Implementation Process
The above guidelines are used to develop the following implementation process for the rollout of the GSDM Agri-Park. The process follows the following 14 steps:
1. Agri-Parks 3. Agri-Hub 2. Selection of 4. Agri-Parks Model locations 44 districts business plans developed identified
8. Agri-Park 5. Establish 6. Define 7. Technical unit business governance funding model planning plans
10. 11. Training 9. Financing 12. Production Construction rollout
13. Agro- 14. Product Processing marketing
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Step Description
1. Agri-Park Model The Department of Rural Development and Land (DRDLR) reform developed the Agri-Park model in the first step. 2. Selection of the 44 District The DRDL proceeded to select the 44 Districts across South Municipalities Africa in which the model will be implemented over the next 10 years. 3. Agri-Hub location selection The locations of each hub was selected based on a set of criteria. The location for the Gert Sibande District Agri-Hub will be in eMkhondo (Piet Retief) in Mkhondo Local Municipality. 4 Master Agri-Park Business Plan A master Agri-Park business plan was developed for each of the 44 Districts. 5. Governance Strategies bodes and plans will be formed including the definition of ownership and management structures. 6. Funding model A financial gearing plan will be developed for each Agri-Park. 7. Technical planning The technical aspects of the Agri-Park will entail planning, mainly, the physical construction of the Agri-Park along with related infrastructure and technologies. 8. Detailed business plans The different units of the Agri-Park (FPSU, AH) as well as the farmers will have specific detailed business plans developed. 9. Financial close Funding will be sourced from various financial institutions, depending on the funding model. 10. Construction The construction of the Agri-Park’s units and other related infrastructure will start. 11. Farmer production FPSUs will be sup-up and run in order to make assistance available for farmers to start production through the Agri-Park 12. Training programmes roll-out Training programmes will commence through the FPSUs. 13. Agro-processing Once primary production has taken place, and products are ready, agro-processing activities will commence through the Agri-Park’s AH. 14. Market Completed products will be distributed and sold to relevant markets through assistance of the RUMC.
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14.3 Alignment with Government Programmes
The APs programme is required to align with various agricultural programmes, projects, or strategies that have been adopted and implemented by government and its various departments. Table 14.1 below provides an overview of the various programmes that are currently under progress and how the AP could potentially align.
Table 14.1: Government Programmes, Projects and Campaigns Programme Description Agri-Parks Alignment Agricultural Programmes Agricultural The implementation of AgriBEE is The AP will focus on the Broad-Based based on the commodity value development of the value Black Economic chain approach. The approach is chains for each of the Empowerment fundamental in creating identified commodities; (AgriBEE) partnerships, linkages, and In developing the value chain networks for balanced, mutually there needs to be a focus on benefiting results for all integration of all stakeholder concerned. The AgriBEE is to be involved; expected to ensure enhanced Integration of the value chain competitiveness and sustainable will create partnerships and development with expansion of linkages that will be mutually the existing businesses, beneficial for all stakeholder rehabilitation of agricultural involved and enhance the business that are performing competitiveness of the AP; poorly and expanded entry for and new businesses in the sector. Stakeholder engagement is required to encourage AgriBEE also encourages partnerships that are partnerships between established beneficial from farmers to agricultural enterprises and markets. emerging farmers and entrepreneurs. Comprehensive The programme provides The AP should work closely Agricultural agricultural support to land and with CASP projects to support Support agrarian reform projects, which the initiatives set out within Programme contributes towards food security, CASP; (CASP) job creation and poverty Policy alignment is key to alleviation. achieve a common set of goals;
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CASP is also involved in the The AP should focus on job development of a number of creation through various policies, strategies and projects initiatives, especially primary that are geared toward the agriculture where there is development of the agricultural potential for many job sector. These include: opportunities; The AP should investigate o Agricultural finance lending; initiatives to extend credit to o Co-operatives establishment; farmers; o Access to markets; The AP needs to encourage o Value chain development; and manage the o Improvement policies; establishment of co- o Production guidelines; operatives; o Agro-logistics planning; and Management practices need o Early warning climate systems. to be implemented at various stages of the value chain in order to ensure consistent production and product quality; and Information technology should inform all stakeholders within the value chain. Integrated Food This programme was initiated by A major objective of the AP is Security and the Food and Agricultural to improve food security; Nutrition Organisation (FAO). The core Primary production should be Programme goal of this initiative was to a key focus of the AP; and (IFSNP) reduce hunger and food The AP will therefore be insecurity. To take further steps required to improve access to toward achieving this objective, markets through engaging the Special Programme for Food the markets and meeting the Security (SPFS) will be expanded requirements of the market to all nine provinces (DAFF, 2016). procurement policies. The SPFS and CASP have collaborated, and as a result 10% of the total CASP budget will also be aligned to projects that
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contribute directly towards food security (DAFF, 2016). Research and The programme encourages Training forms part of the APs Development research and development within many roles; (R&D) the realm of agriculture and Training requires research and involves all stakeholders within the development initiatives that national agricultural research should align with R&D system. programmes set out by government; and R&D is required throughout the value chain and will be required to evolve as technologies do. National The increased trade in regulated The AP should implement Regulatory agricultural products has required policies that enforce Services (NRS) the development of the NRS that international standards on regulates and promotes production and processing international trade. This includes that will allow the programme inspections of agricultural access to international produce and bilateral markets. negotiations. In addition, the NRS promotes awareness with respect to agricultural produce health matters. Land and The objectives of LARP are the The AP forms part of the Agrarian Reform redistribution of land, increased market for farmers and will Project (LARP) black entrepreneurship, therefore encourage promoting access to agricultural production; support services, increased Models are to be developed agricultural production, and to distribute state own land increased agricultural trade. and ensure land tenure is in place for producers; and The programme builds on lessons Access to the market through that have been learnt from the AP will further encourage previous land reform projects, land that was previously not in reviews, the Land Summit and production to produce. implementation reforms.
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LandCare The LandCare programme was Access to the market through established to promote the AP will further encourage productivity through the land that was previously not in sustainable use of natural production to produce; and resources, to improve food The AP is to encourage the security and create employment, sustainable use of land and therefore encouraging South resources. Africans to use sustainable methods of cultivation, livestock grazing and harvesting of natural resources in order to limit land degradation. Small Holder The programme focuses on the The AP will manage and Farmer Evaluation integration of smallholder farmers encourage smallholder into the greater agricultural value production, a primary chain. The programme works in objective of the AP; and conjunction with other Logistics and management programmes and provides plans are key to the success strategic agricultural support. of integration of smallholder farmers. Rural Development Programmes Comprehensive The CRDP is in place to create The Agri-park encourage Rural decent work and sustainable primary production; Development livelihoods. The programme Will have support mechanisms Programme ensures sustainability, communal in place to ensure best (CRDP) ownership and effective production methods; contribution toward the Create jobs in primary objectives of developing rural agriculture; and areas. Ownership models encourage social cohesion, integration The overarching objective of the and participation from all CRDP is social cohesion and stakeholders. integrated development through participatory approaches and partnerships with all sectors of society.
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National Rural Narysec is a youth skills The APs programme will Youth Service development and employment encourage youth to Corps programme that also forms part of participate in agriculture by programme the CRDP. creating viable and attractive (Narysec) agricultural enterprises. The programme also provides character building programmes, soft and hard skills training and dispatches youth to rural areas for rural development projects. The programme further transforms the youth of rural areas, from being job seekers to being job creators. Rural Enterprise REID is in place to facilitate The AP encourage primary and Industrial poverty reduction, social production; Development organisation, youth development Will have support mechanisms (REID) and the development of in place to ensure best cooperatives, rural enterprises production methods; and industries. Create jobs in primary agriculture; and Ownership models encourage social cohesion. GDARD Agri-Hubs The GDARD seeks to develop Agri- Similarities in the programmes Development Hubs that will result in the growth are complementary and will of the local agricultural sector align accordingly. through integrated agricultural value chains.
14.4 Recommendations
The below table provides a list of recommendations that should be considered for the development of the AP in the GSDM.
14.4.1 Infrastructure o Roads should be developed and upgraded to accommodate transport vehicles that collect and distribute the commodities within a district. This will likely result in faster transport times, less bruising to produce, and have a lesser impact on vehicles. The
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district should investigate the potential of tapping into rail roads for the transportation of agricultural produce; o The district should capitalise on all already existing initiatives and infrastructure for the establishment of the AP. There should be upgrading and revitalisation of any existing infrastructure that can be used to support the development of the AP; o Establish infrastructure that will aid the recycling of waste water for use in agricultural activities. Significant amounts of waste water are discharged into natural river systems that should rather be used for agricultural production, especially since water is a scarce commodity. 14.4.2 Natural Resources o Considering that a large portion of the district is water scarce, more work should be done in determining water availability for agricultural production around the proposed location of the AH, FPSU(s) and around all the major areas where primary production potentials is huge as well as areas where the available water sources can be used to support primary production; o District should also look into water allocations and the existing irrigation schemes in the major production areas and maximise the use of this existing infrastructures; and o Small scale farmers should have rain harvesters (e.g. Water Tanks) on their farms. This would serve as water reservoirs in the absence of rain fall.
14.4.3 Agri-Park commodities o Best Practices in production and processing must be implemented to ensure a quality product that meet international standards. Efforts should be made to ensure that product that are processed and packaged comply with international standards, to enhance products’ suitability for the export markets; and o Although the initial phase of the project will support the development of the value- chain of the three pre-dominant commodities in the district, it is recommended that processing facilities should be expanded in subsequent phases to accommodate the production of other crops and livestock in subsequent phases. The AP should not be limited to the production of three commodities, but rather look to diversify production and spread risk. o The linkage with the Mpumalanga International Fresh Produce Market in Mbombela needs to be established as a main market for the district products. o Coordinate with agri-hub in Vryheid (KZN) not to duplicate resources as the two hubs overlap in terms of their radius. The DAPOTT and DAMC must be made aware of this.
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14.4.4 Technology o Telecommunication services should be upgraded (e.g. erection of cell towers) in areas that are currently underserviced, particularly in the rural areas, since most of the farmers that would be targeted are located in these areas. This will allow farmers the access to information required for production, while also linking to information that is provided by the RUMC and AH. o Investigations should be made into government subsidising telecommunication services (e.g. provision of free Wi-Fi) in the district to enable producers to overcome the cost barrier associated with their low levels of connectedness. The ICT to be adopted or introduced to the farmers should be user friendly and not be too complex, since some of the users may have little or no form of education; and o Equipment and machinery used should be of a level that does not significantly replace labour, but still provide the competitive edge required to compete within the industry. Further to this a planning process is required to ensure machinery is distributed according to a production plan that each FPSU is to manage.
14.4.5 Training o The FPSU and AH should establish partnerships with certain research institutions for research and development, and also to facilitate training programmes. Established training and research institutions, like the CSIR and ARC, have the capacity to assist in human capital development and training. The partners would ideally have many years in the industry and have an impressive track record. Partnership should also be established with commercial farmers who are able to assist in production and skills development; o Practical manuals and information packages should be developed for the smallholder and emerging farmers to assist them in their production processes. These manuals and information packages should cover aspects relating to: regulatory requirements, information on support programmes, production guidelines, etc. Where possible, manuals should be developed in language of choice to enhance easy understanding; and o Training should be geared to agribusiness development and changing the perception that agriculture is for subsistence purposes and/or a sign of wealth (owning land, or herds of cattle is often viewed as a sign of wealth). Farmers need to be made aware of the economic advantages that lie within agricultural production and that businesses can be developed. As such, producers should be trained in business administration activities.
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14.4.6 Agri-Park Units o The RUMC should be strategically situated in Ermelo. The central location will allow the AP provide market access to the whole district, while it good access to major transportation routes in the province. Further investigations should be made to identify a site for the development of the RUMC; o The FPSU(s) should be strategically located around productive farm areas that have significant potential for primary production. Further investigations should be made to identify a sites for the development of the FPSUs; o Develop an inventory map for farmers that are earmarked for production within the AP. Production areas should be zoned and mapped and FPSUs should be centrally located to these production zones. Zoning in this manner will allow for streamlining of logistic activities that take place within the AP. Farmers are to be engaged and informed of the process and development of the AP – they will also be required to have a representative body for engagement with various stakeholders; and o Business Plans should be developed for each of the entities within the AP, including the farmers, FPSUs, the AH and the RUMC. The business plans are required to detail the operations of each of the entities, further detailing their role and responsibility within the AP.
14.4.7 Logistics o A comprehensive logistics plan should be developed to guide the implementation of the AP. The plan should investigate various methods of moving produce from farm to fork. This should be done to allow smallholder and emerging farmers ease of access to markets, a crucial area for the success of these farmers; o Smallholder farmers with small production capacities should be encouraged to work in joint ventures in order to participate in supplying the AP. Consolidating produce in order to create economies of scale is critical in gaining access to the market – this should be considered in depth within the logistics plan – consolidation points are of critical importance within the Agri-Parks model; and o The District APs Councils should engage with other departments and be responsible for the implementation of the APs. A representative body must take ownership of the AP and implement the project. This body should represent all stakeholders, public and private, within the AP. 14.4.8 Policies o Policy should be set in place to encourage cross-border relationships and partnerships with neighbouring districts, where infrastructure and resources can be shared, should the district be short of or have excess of certain resources – this will further develop
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economies of scale, distribute risk and encourage a fully integrated national APs programme; o It is also recommended that the district should develop a strategic plan that can be reviewed after a certain short term period, to allow for the normative context of the AP to be upheld, and also to allow for the evaluation of the AP development; o Policy around land ownership should be revised such that it provides security of tenure to farmers. Ownership of land encourages farmers to invest in their land and encourages borrowing for financing activities. Ownership of land encourages productivity and is therefore mutually beneficial for the farmer and the AP; o Monitoring and evaluation policies need to be set in place: The constant monitoring and evaluation of participants within the Agri-Park is a due diligence process that ensures that the participants are operating and effectively contributing to the programme. Under-performing participants should be assisted and continuous underperformance should result in replacement; and o Meet objectives: Producers should be educated on the objectives of the Agri-Park so that they are able to meet the expectations that are set out within the Agri-Parks business/operating policies. The ability for producers to cooperate within the system is important in meeting the objectives of the programme.
14.4.9 Funding /investment o Funding mechanisms/incentives need to be developed in order to encourage local investment and attract foreign investments. Investment is a key input to the development and implementation of the AP. Incentives, or mechanisms that encourage investment in the AP will have positive spin-offs for the project in faster development and potentially in technologies that have a positive impact on production activities.
14.4.10 Integrated Development o Tourism needs to be encouraged within the AP. Tourism remains a key contributor to local economies, especially through job creation. Agriculture has proven to be relatively successful in encouraging tourism. Efforts should be made to accommodate tourists within the AP through on-farm activities and tours of agro-processing activities. o Local Economic Development projects in the municipalities should assist with the development of infrastructure and economic projects that will benefit the agri-park as well as take advantage of the agri-park initiative.
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14.4.11 Market o Engage farmers and the market. The AP must engage the farmers and the market in order to provide farmers with access to the market. Engagement with farmers has indicated that it is difficult to access markets, while engagement with the market has indicated that accessing produce from small-holder farmers is difficult given the transaction costs in managing procurement from these farmers. o District should form partnership with some of the existing main players in the various industries to enable them penetrate local and international market. The management of the Agri-Park, or RUMC must be responsible for linking the farmers to the market. The RUMC must play a role as the representative body for all farmers participating in the agri-park programme and assist the farmer in access to the market. o Partnerships should be established with commercial and small scale farmers. Commercial and semi-commercial farmers often have a track record and understand the requirements of the market. As such, smallholder and emerging farmer would be able to learn from the more established farmers in order to gain the required skills needed to access the market.
14.4.12 Incentive programme o Incentive programmes and packages that would make agriculture more attractive as a business/enterprise, (especially to the youths) should be developed. For example, awarding scholarships that would encourage young individuals study in the field of agriculture, creating a youth centre within the AP, to help the underprivileged youth in a way such that they render services to the AP, while they get taken care of in return; o Farmer’s must apply to form part of the Agri-Parks programme: Farmers need to develop business plan and follow an application process that will allow them to form part of the Agri-Parks programme. This forms part of a due diligence process that is to be formulated by the relevant parties, including the DRDLR and GSDM. Agri-Parks requires that producers are able to produce and meet market expectations, while farmers need to operate viable enterprises – making the due diligence process important; and o Incentives need to be developed to encourage participation within the Agri-Parks projects: Tax breaks, access to markets, transport subsidies, guaranteed prices, land tenure, ownership, and subsidised inputs are all incentives that could be developed to encourage participation in the programme. Various incentives should be investigated to develop an environment of participation. The incentives should be such that participants are better off operating within the Agri-Park programme than if they were not.
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14.5 Roll-out plan
Implementation is a crucial element in any strategy and needs to be adhered to realistic timeframes and role-players. This subsection focusses on the implementation actions for the elements as discussed within this document. The implementation plan is structured in a way that it follows a phased approach in order to prioritise the necessary actions that will help in facilitating an enabling environment for the establishment of the Agri-businesses within the AP.
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Table 14.2: Agri-Park Roll-Out Plan
Project / Action Description / Plan Time Frame (Years) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 1. Development of policy framework for the Agri-Parks 2. Approval of policy framework for the Agri-Parks 3. Establishment of national Agri-Park project support facility to support and coordinate district base operational teams STEP 1: Agri-Park 4. Development of detailed plan and Model design of a prototypical Agri-Park that is adaptable, based on commodity types. 5. Selection of district municipalities and Status Quo analysis/report for the selected district municipalities 6. Establishment of NAPOTT, PAPOTT AND DAPOTT 7. Appointment of District Agri-parks Advisory Councils (DAAC's) 1. Development of a site selection methodology and location criteria 2. Initial site identification together with STEP 2: Agri-Hub the generation of site specific maps with Location district specific narratives and selection Selection criteria. 3. Property selection process
4. Sign-off of final Agri-Park sites by each district municipality 1. Appointment of service providers to STEP 3: Master develop Master Agri-park Business Plans Agri-Park for each district municipality Business Plan 2. Stakeholder consultations
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Project / Action Description / Plan Time Frame (Years) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 3. Commodity identification 4. Policy and strategy alignment 5. Identification of major role-players 6. Development of an industry report 7. Feasibility assessment of three prioritised commodities 8. Concept development 9. Development of an implementation plan 10. Economic advisory services 1. Establishment of Agri-Park Working - Group/ Implementation structure 2. Development of an ownership structure 3. Development of an institutional structures 4. Ongoing Policies and procedures: STEP 4: Establishes design and content of policy Governance manuals and associated procedures that will ensure frequency of reporting and communication on the progress of the programme. 5. Monitoring and evaluation: defines scorecards, measures, and metrics to track performance. 1. Development of a funding model for the establishment of Agri-Parks STEP 5: Funding programme Model 2. Identification and analysis of Development Financial Institutions in South Africa
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Project / Action Description / Plan Time Frame (Years) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 3. Identification and analysis of incentives
in South Africa 4. Identification and analysis of commercial funding organisations in South Africa 5. Run a financial model based on various
scenarios on project gearing 6. Conduct a sensitivity analysis 1. Design of Agri-park specific incentive schemes 2. Identification of potential Public Private Partnership's 3. Secure private investors / technical partners 4. FPSU - Role should be expanded and spin-off opportunities should be expanded towards these areas in order to STEP 6: Technical widen the scope and influence the agro- Planning processing activities; 5. Agri-Hub - core activities, production cycles and distribution functions of the Agri-Hub should be evaluated. 6. RUMC - Investigate market intelligence 7. Identification of land parcels related to farming areas (mapping) 8. Consultations with technical specialists 9. Development of the Agri-parks Monitoring and Evaluation Framework 1. Development of detailed business plans STEP 7: Detailed for each Farmer Production Support Unit Business Plans 2. Development of a detail business plan for the Agri -hubs
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Project / Action Description / Plan Time Frame (Years) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 3. Development of a detail business plan for the RUMC's 4. Development of a detail business plan for small holder farmers 5. Development of a detail business plan for the Agri-park logistics 1. Selected targeted financial institutions to apply for financing 2. Determine the minimum requirements of each financial institution STEP 8: Financing 3. Prepare application pack 4. Apply for financing 5. Project financial close 1. Finalise the project designs and drawings 2. Conduct a bill of quantities 3. Prepare tender documentation STEP 9: 5. Tender evaluation and selection Construction process 7. Site preparation 8. Construction Facilities & upgrade of existing infrastructure 9. Site handover 1. Identify emerging farmers and their capacity to supply the different agri- businesses, assess the capacity of the STEP 10: Primary farms to see what the capacity of the Production farms are for production. 2. Provide the emerging farmers with the necessary infrastructure, training, and
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Project / Action Description / Plan Time Frame (Years) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 livestock to be able to supply the adequate level of products. 3. Production of the identified commodities 4. Training of personnel at the FPSU that will assist farmers with various activities such as, for example, seeding, fertiliser spreading, and harvesting. 1. Training, if required, of small-scale and emerging farmers at the FPSU. 2. Training of personnel at the Agri-Hub that will participate in the processing and value-adding of commodities. 3. Training of personnel at the RUMC that will conduct market research and utilise various technologies. 4. Identify local skills capacity for each of STEP 11: Training the agri-businesses and sync training Programmes activities with the lack of skills or/ and Roll-Out capacitate local skills base. 5. Engage and develop partnerships with training institutions. 6. Expansion of emerging farmers’ capacity to produce adequate supply for agri-businesses, this should be incorporated with committed local mentors and continuous training programmes to increase the farmers and co-operative management skills. STEP 12: Agro- 1. Define the product idea, features, Processing availability and benefits to the consumers.
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Project / Action Description / Plan Time Frame (Years) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2. Product development, which includes all aspects such as packaging, labelling and branding. 3. Analyse processing volumes and capacity 4. Investigate prospective buyers, possible distribution and marketing channels, possible export destinations 5. Design processing facilities/ production lines, taking into consideration procedures to prevent contamination, proper food handling hygiene, sanitation system, pest management system etc. 6. Identify product (s) regulations and food safety requirement. 7. Develop a comprehensive logistic plan of how products will be received for processing. 8. Develop a quality control system 9. Purchase of :processing equipment, production materials, identification of suppliers location, 10. Recruit and train employees 11. Secondary processing of primary processed products, packaging, labelling, and storage. 1. Conduct market analysis to determine: opportunities, available market for the STEP 13: Product product, distribution channels, what price Marketing to set for the product depending, (RUMC) competitors, prospective buyers/consumers, industry analysis, etc.
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Project / Action Description / Plan Time Frame (Years) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2. Assess the market to determine local, national, regional and international trends, available market information, product market, market size, supply performance, market drivers and constraints, competitors, potential poverty reduction impacts, etc. 3. Set market price, depending on cost of production, competition, quality and the target market. 4. Engage off-take agreements based on future production in terms of quantity, quality etc. 5. Determine promotion and advertising channels that are best suitable to influencing consumers' decision to buy the products. 6. Distribute and market products 7. Continuous engagement with potential/future clients 8. Hosting of Road shows, Trade fair, industry summits, etc.
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14.5.1 Short-term: Agri-Parks start-up The pre-park formation process are the actions that are necessary as a foundation for the other phases to follow. These actions need to be conducted within the immediate short-term, and forms the foundation on which the agri-businesses within the AP will develop. This is the first phase in the eMkondo AH formation process. These actions are indicated as the steps that should be achieved within the first year. Clear communication with the DAMC responsible for the agri-hub in Vryheid is needed to ensure there are no duplication of resources and that a working agreement is reached between the two DAMCs.
14.5.2 Short- to Medium-Term: Emergence of the Agri-Park The next phase in the AP implementation/development process is that of the emerging park, a short- to medium-term goal. At this stage the required primary infrastructure and statutory requirement process should have been established, or in the process of implementation. The focus should be on implementing the actions required for the formation of the emerging park as the basis for the development of the hub which was laid out in the previous phase. During this phase the core AH businesses should be established and the focus should start shifting towards forming linkages with other agro-processing functions, such as private investors, emerging farmers and supporting services in the GSDM.
14.5.3 Medium-Term: Expanding the Agri-Hub The expanding hub is when the hub has reached a stage when it is starting to operate at full capacity and the potential for spin-off opportunities or expansion of existing practices are present within the hub. At this stage the agri-businesses within the Gert Sibande AP functions start operating at a profit and can start depending less on the help of government and more on solidifying operations, supply lines and target markets. Linkages should be starting to become established and the opportunities for new linkages and operations can be formed. This should be the focus from year five to seven, but continue into the evolution for the AP.
14.5.4 Long-Term: Agri-Hub Evolution This is a long-term phase when the eMkondo AH reaches maturity. The focus of this phase should be on improving and furthering efficiency within the AP and larger GSDM and the identification of areas for further improvements and development opportunities. The agri- businesses should begin to forming strong linkages, each exploiting economic advantages and the formation of linkages with smaller firms, functions and services is established, as well as taking on new opportunities.
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15 References
1. A profile of the South African forestry and wood products market value chains, www.nda.agric.za 2. Abstract of Agricultural Statistics 2015. Department of Agriculture, Forestry and Fisheries. Republic of South Africa. 3. A profile of the South African Mutton Market Value Chain 2014. Department of Agriculture, Forestry and Fisheries. Republic of South Africa. 4. BFAP Baseline. Agricultural Outlook 2015-2024. July 2015 5. DAFF, 2015a. Abstract of Agricultural Statistics, Pretoria: Directorate Statistics and Economic Analysis. 6. DAFF, 2015b. Newsletter: National Livestock Statistics, Pretoria: Department of Agriculture, Forestry and Fisheries. 7. DAFF, 2015C. Trends in the Agricultural Sector, 2014. Department of Agriculture, Forestry and Fisheries, Pretoria. 8. Department of Agriculture, Forestry and Fisheries (DAFF). 2014. Agricultural Policy Action Plan (APAP) 9. Department of Agriculture, Forestry and Fisheries (DAFF). 2011. Profile of the South African Forestry and Wood Products Market Value Chain. 10. Economic Outlook Report XV11. Agricultural Research Council (ARC). Agricultural Economics and Capacity Development Division. March 2015 11. Economic Outlook Report XV. Agricultural Research Council (ARC). Agricultural Economics and Capacity Development Division. September 2013 12. Economic profile of the agro-processing industry in South Africa: 1970-2010, www.nda.agric.za, Accessed: 24/11/2015 13. Kotler, P and Keller, K.L. 2012. A framework for marketing management. 5th ed. Pearson Education Limited. Harlow. 14. DAFF, 2015A. Abstract of Agricultural Statistics. Department of Agriculture, Forestry and Fisheries, Pretoria. 15. DAFF, 2015B. Trends in the Agricultural Sector, 2014. Department of Agriculture, Forestry and Fisheries, Pretoria. 16. DAFF, 2015. Crops and Markets, first quarter 2015. Vol 96, no. 963. Issued by the Directorate Statistics and Economic Analysis. Department of Agriculture, Forestry and Fisheries, Pretoria. 17. FOASTAT, 2015. Food and Agriculture Organization of the United Nations: Statistics Division. FOASTAT, Rome. Accessed: November 2015. Website: http://faostat.fao.org/
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18. Olivier, G. C. (2004). An Analysis of the Beef Supply Chain: From Farm to Fork. Johannesburg: Rand Afrikaans University. 19. Red Meat Levy Admin, 2015. Total Slaughters – Nov. 2013 to Oct. 2014. Red Meat Levy Admin, Pretoria. Accessed: November 2015.Website: www.levyadmin.co.za 20. Supply and demand study of softwood sawlog and sawn timber in South Africa, www.nda.agric.za, Accessed: 25/11/2015 21. Status of South African forestry, www.fao.org, Accessed: 23/11/2015 22. South African Tourism (SAT). 2014. 2013 Annual Tourism Report. 23. Statistics South Africa (Stats SA). 2002. Census 2001. Statistics South Africa: Pretoria. 24. Statistics South Africa (Stats SA). 2007. Census of Commercial Agriculture 2007 (Eastern Cape). Stats SA: Pretoria. 25. Statistics South Africa (Stats SA). 2012. Census 2011. Statistics South Africa: Pretoria. 26. Statistics South Africa (Stats SA). 2014. Quarterly Labour Force Survey, 4th Quarter 2013. Statistics South Africa: Pretoria. 27. Statistics South Africa (Stats SA).2014. Survey of Employers and the self-employed 2013. Statistics South Africa: Pretoria. 28. Van Der Hoff, G. 2006. Value Chain Report on Forestry Project. Thina Sinako.
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