Compared to the rest of Africa, South Africa has by far the most modern, productive and diverse agricultural economy. It is the largest exporter of agricultural products in Africa. Corn is the largest and most locally produced field crop, a dietary staple, a source of livestock feed, and an export crop. Production of grain in 2021 expected to reach a near-record high, owing to excellent weather conditions and large plantings.
South Africa is a middle-income emerging market, with a population of 59 million people. It is one of the most advanced and diverse economies on the African continent. It has a well-developed business market and is a gateway to Sub-Saharan African markets. The economy of South Africa is the second-largest in Africa, after Nigeria. South Africa’s GDP was valued at US $358 billion in 2020.
South Africa has made considerable strides to improve the wellbeing of its citizens since its transition to democracy in the mid-1990s, but progress has stagnated in the last decade. COVID-19 is having a major impact on the economy. The World Bank estimates that the economy contracted by 7% in 2020, as the pandemic weighed heavily on both external demand and domestic activity as the government implemented containment measures. This severe contraction is estimated to increase poverty by 2 million people. Forecasts show that the country’s economic growth will remain under pressure, as consumers continue to tighten their belts because of a contracted economy and higher inflation over the last year.
South Africa’s agricultural sector is one of the world’s most diverse, consisting of corporate and private intensive and extensive crop farming systems, including vegetable, fruit, nuts and grain production. The well-developed commercial farming in South Africa is the backbone to the country’s agricultural economy.
South Africa is one of the most geographically varied countries on the African continent, comprising territory that ranges from the rolling, fertile plains of the highveld and the wide-open savannah of Mpumalanga to the Kalahari desert and the peaks of the Drakensberg Mountains. It has 14 million hectares of arable land available (13% of total land area) of which about 1.5 million hectares or 10% is under irrigation. South African climate ranges from subtropical to the Mediterranean, allowing for a multitude of farming opportunities. The country’s biodiversity ensures that products such as grains, fruit and wine are exported and preferred for its exceptional quality.
Compared to the rest of Africa, South Africa has by far the most modern, productive and diverse agricultural economy. There are approximately 32,000 commercial farmers in South Africa, of which between 5,000 and 7,000 produce approximately 80% of agricultural output. Investment in agriculture is widely recognized as a key precondition in achieving goals related to improving food security, creating jobs, creating wealth, and thereby reducing poverty.
DIVERSIFIED AGRICULTURAL SECTOR
South Africa, with its well-developed infrastructure, is a major producer and exporter of agricultural produce in Sub-Saharan Africa. The South African commercial agricultural sector is highly diversified it produces nearly all primary food goods to be self-sufficient with the exception of wheat, rice, oilseeds, pork, and poultry products. South Africa is the largest exporter of agricultural products in Africa, primarily citrus, wine, fruits, and corn.
South Africa is a net importer of food preparations and ingredients. In 2020, imports of agricultural products were valued at US$6.0 billion compared to US$6.4 in 2019, a slight decrease due to COVID-19 trade disruptions. South Africa’s agro-processing was impacted by a national lockdown in response to the pandemic which decreased all manufacturing’s total value, as jobs were lost and gains in poverty eradication decreased.
In South Africa, grains are consumed as cereals and also used to feed livestock and to manufacture some cooking oils, fuels, cosmetics, alcohols, as staple foods such as mieli corn and flour. The grain and cereal industry is one of the largest in South African agriculture, producing about 30% of the total gross value of agricultural production and contributing significantly to labor force of the country.
NET EXPORTER OF CORN
The grain industry in South Africa is comparatively advanced than in other African countries. Corn is the largest and most locally produced field crop, a dietary staple, a source of livestock feed, and an export crop. Production of grain in 2021 expected to reach a near-record high, owing to excellent weather conditions and large plantings.
South Africa is a net exporter of corn compared to other African countries. The 2021 corn production from both commercial and non-commercial sectors is forecast at 16.8 million tonnes, about 25 percent above the five year average and less than 1 million tonnes below the record output of 2017.
The commercial consumption of corn (white and yellow corn) in South Africa increased, on average, by more than two percent per annum over the past ten years, driven by the increased food demand for corn as well as an increased animal feed demand. White corn, in the form of a meal, is the staple food for many South African households, especially for lower-income consumers, as it is a relatively inexpensive source of carbohydrates. On the other hand, yellow corn is used as the primary ingredient for animal feed, especially in the broiler industry. With South Africa’s downward trend in economic growth over the past 10 years and increasing unemployment rate, many consumers, especially lower-income consumers, are shifting more to white cornmeal, as relatively inexpensive source of carbohydrates. With the expansion in the local broiler industry to serve the local market, the demand for yellow corn as feed source also increased.
Economic growth in South Africa is expected to remain sluggish in the next couple of years, due to the impact of the COVID-19 pandemic and structural and policy constraints. As a result, USDA foresees that the abovementioned trends in the demand for corn will continue in the 2020/21 and 2021/22 seasons, with South Africa’s commercial corn consumption increasing by about two percent per year to 11.7 million tons and 12.0 million tons, respectively.
“Under normal climatic conditions, assuming average yields and taking into account the subsistence farming sector, South Africa’s corn crop for the 2021/22 marketing year could reach 15.0 million tons, which is a drop of nine percent from the 2020/21 season expected corn crop. However, South Africa should remain a net exporter of corn in 2021/22 marketing year, as corn supplies will still exceed local demand,” USDA said in its last report on South Africa. “South Africa should be able to increase corn exports by 40 percent in 2020/21 MY, after the production of a second consecutive bumper crop that will increase the availability of corn for exports. South Africa should be able to export around 3.5 million tons of corn in 2020/21 MY.” The bulk of corn exports are expected to be delivered to countries outside of Southern Africa, as neighboring countries are also anticipated to gather large harvests in 2021, reducing their import needs.
WHEAT PRODUCTION
Wheat is the second most important grain commodity consumed in South Africa after corn. The annual per capita consumption of corn, in the form of a meal, is the highest at 96kg/person, followed by wheat (55kg/person) and then rice (15kg/person). Consumers can substitute rice, wheat, and corn products based on price and taste preferences. However, the demand for corn and wheat products is relatively price inelastic, diminishing major shifts in consumption due to price movements.
South Africa’s wheat area has stagnated at around 500,000 hectares per annum with an average yield of 3.3 tons per hectare. However, USDA foresees a 10 percent increase in the area planted with wheat to 560,000 hectares in 2021/22 season. “Under normal climatic conditions and an assumed 5-year average yield of 3.5 tons per hectare, a wheat area of 560,000 hectares could realize a crop of about 2.0 million tons, seven percent less than the previous marketing year”.
South Africa’s annual wheat consumption increased on average by about one percent per annum over the past ten years. Due to slow economic growth and a second consecutive bumper corn crop, major increases in the consumption of wheat products are not foreseen in 2020/21 season. Wheat demand in the 2020/21 season is expected to be around 3.5 million tons.
Due to a stay-home policy to reduce the spread of COVID-19, many people shift to home baking, increasing the demand for cake and bread flour. According to the South African Grain Information Service (SAGIS), the usage of cake flour and bread flour increased by seven percent and four percent, respectively, in 2019/20 marketing year. However, USDA believes wheat demand should return to the trend line in the 2020/21MY as more people resume normal economic activities.
USDA forecasts South Africa’s imports of wheat and wheaten products for 2021/22 MY at 1.7 million tons, five percent more than in 2020/21 season, mainly due to an estimated seven percent drop in local production.
DEPENDENT ON RICE IMPORTS
South Africa is dependent on rice imports to meet the local demand as rice production is insignificant in the country, due to the high-water requirements of the crop. As a result, rice imports are duty-free and local consumption is derived from publicly available import data.
Over the past 10 years, South Africa’s demand for rice has increased marginally. Poor economic growth and an increased in the demand of relatively cheaper cornmeal, hindered a substantial increase in the demand for rice. With economic growth in South Africa expected to continue to be sluggish, due to the COVID-19 pandemic and structural and policy constraints, USDA foresees that the marginal increase in the demand for rice will continue in 2020/21 and 2021/22 to 900,000 tons and 925,000 tons, respectively. In 2019/20 season South Africa consumed 875,000 tons of rice.
South Africa’s rice imports are dominated by two countries, namely Thailand and India. Together, Thailand and India supplied around 95 percent of South Africa’s rice demand, with Thailand’s contribution around 75 percent. In 2021/22 marketing year, South Africa’s rice imports are expected to increase by only one percent to 1.06 million tons on a marginal increase in demand.
FOOD PROCESSING INDUSTRY
There are over 1,000 food production companies in South Africa. The top ten companies are responsible for more than 80 percent of the industry’s production revenue. The industry employs approximately 400,000 people, a decrease from the previous year due to the pandemic, in the subsectors of meat, fish, fruit, dairy products, grain mill products, and beverages. As a major producer and exporter of finished processed food products in Africa, South Africa’s appetite for ingredients drives demand for a wide range of products.