Agro-Processing and Agri-Tech

The Gauteng Province is highly urbanised, comprising of three large metropolitan areas with high population densities. As such, agriculture is critical in supplying food to the population. Although the Province is largely urban in nature, the outer regions of Gauteng are involved in a variety of agricultural activities, with urban agriculture also emerging as activities that contribute to agricultural production. However, the land available for agriculture in Gauteng is limited and is constantly under pressure from further urbanisation and population growth, therefore making the province dependent on other provinces for its food requirements. It is estimated that only some 20% of land in Gauteng is covered by irrigated and rain fed commercial agriculture, contributing to the relatively low levels of agricultural production and limited contribution to the economy of the province.

Agro-processing forms a sub-set of the manufacturing sector and involves the processing/changing of form of raw materials from the agricultural, forestry and fisheries sector and includes a wide range of edible and non-edible agricultural products.

Gauteng Is an Import Player in the Agro-Processing Industry in South Africa

There are approximately 1,192 commercial farms dedicated to animal production in Gauteng. However, Gauteng farmers produce less than 2% of South Africa’s game, cattle, sheep and goats, but approximately 6% of chickens and 12% of pigs. Across the Province animal farming is located primarily in rural areas with adequate land availability. These areas include Cullinan and Bronkhorstspruit to the North East of Tshwane; Heidelberg and Vereeniging in the Sedibeng District Municipality; and the Krugersdorp area in the West Rand District Municipality.

Although the vast majority of production in Gauteng occurs on large-scale commercial farms, there are a growing number of small-scale black farmers that are entering the formal industry. These small-scale farmers tend to sell their products to low-value markets (abattoirs, local auctions, local butcheries and local residents). The limited access to high-value markets (commercial processors and supermarkets) is attributed not to the quality of product, but rather their low volume of output.

In terms of agro-processing, there are 70 registered feedlots in South Africa in 2014, approximately 10 of which operate in the Gauteng Province. These feedlots are primarily in the regions where primary production occurs, although some facilities are also located in the more industrial region of Ekurhuleni. An estimated 86 red meat and poultry abattoirs are operating in Gauteng, which are often owned or affiliated with cattle feedlots.

Opportunities and Challenges

Small-scale livestock/poultry farmers often have limited access to formal markets, due to poor marketing infrastructure, inadequate access to market information and extension services, insufficient herd size and high transportation and transaction costs. The meat processing industry is very well-established in Gauteng owing to the proximity to agriculture areas and markets. Although this creates substantial opportunities for farmers, butchers and retailers, the potential for new entrants into the feedlot and abattoir industries are limited. The situation is further exacerbated by the high-capital cost, strong economies of scale, fluctuating prices and strict health regulations associated with meat processing.
In spite of these challenges, there is however substantial opportunity for meat producers in niche markets such as the production of premium cuts, prepared meats and uniquely African products destined for export (i.e.: ostrich meat). The Gauteng Provincial Government can support these producers by providing technical services, market information and other support to emerging farmers, and bolstering export programs and incentives.
There are also opportunities at either end of the value chain. Emerging and small-hold farmers can be better integrated into the value-chain by linking them to commercial feedlots and abattoirs, ensuring they understand and can comply with standards and regulations, and facilitating greater access to transport and other necessary services. There is also an opportunity for greater value-addition not only through the manufacture of niche products, but also the development of auxiliary industries such as packaging, canned meats, and marketing.

Outlook

Analysts believe that the red meat production sector faces enormous challenges in managing herd rebuilding and maintaining production levels due to the ongoing drought and the lingering effects of drought, high input costs, increased labour costs, and cash flow constraints. In the short term the Bureau for Food and Agricultural Policy forecasts that slaughter volumes will increase by 5% in 2018 and that up to 2026 South Africa will produce sufficient meat products to remain a net beef exporter although prices are expected to decline in real terms as prices increase below inflation. Value-added meat cuts are an identified target market although stiff competition from global industry leaders, the USA and Brazil, will be faced in existing and targeted export markets. In the processed meat products sub-sector increasing competition from imports and alternative protein is expected and new entrants in the agro-processing arena are likely to impact all industry players, particularly marginal players. As a result, contraction and concentration in the red meat industry appear set to continue.

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If you want to get advice regarding the expansion of your business or new investment to Gauteng, please fill out the contact form below. This service is provided by the Gauteng Industrial Development Zone (GIDZ).

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