Agro-processing

Introduction

The “Adding value” section of the Agribook website (of which this page is a part) deals with, well, adding value to the primary agricultural product. This finished product is what the consumer wants and pays money for. Because of this, farmers are often advised to be more involved in the activities that happen beyond the farm gate.

The agro-processing industry consists of various sub-sectors, which include:

• meat processing
• dairy products
• fruit and vegetables processing
• grain mill products
• sugar mills and refineries
• wine fruit juices
• beer
• cocoa, chocolate and sugar confectionery
• bakery products
• prepared animal feeds

Other food products/ingredients include starch and starch products, baby food, chips, baking powder, yeast, condiments, flavours and fragrances, mustard, vinegar, edible salt refining, tea and coffee processing and packing. Non-food products include tobacco, essential oils, biofuels, biopolymers, bioplastics, paper and paper products, wood and wood products, textiles, wearing apparel, rubber products, footwear and leather and leather products.

Government views agro-processing as a sector to be strengthened as it delivers on vital areas like job creation, exports and “raising overall economic productivity” (see “National strategy and government contact” heading).

International business environment
Local business environment
For the newcomer
National strategy and government contact
Role players
Websites and publications

International business environment

• Find Food & Agriculture Organisation (FAO) documents like Agro-Industries for Development and Agroprocessing Industry and Economic Development, at www.fao.org.
• www.ifama.org – International Food and Agribusiness Management Association
• International Union of Food Science and Technology (IUFoST) – http://iufost.org/
• International Society of Food Engineering (ISFE) – www.iufost.org/isfe
• The United States Department of Agriculture’s Foreign Agricultural Service (FAS) puts out a “Food Processing Ingredients” report on what is happening in other countries. Find these at www.fas.usda.gov.
• The Africa Agriculture Status Report 2022 “focuses on accelerating African food systems”. Find it at https://agra.org/resource-library/africa-agriculture-status-report/.
• The SADC Secretariat and German Development Corporation’s Profiling of the Regional Agro-Processing Value Chains in the SADC Region (2019) included a look at individual commodities and processing hindrances and opportunities.

Local business environment

The agro-processing industry is a crucial cog in the South African economy linking the farmer to processors, and processors to the farmer; processors are also linked to other processors, as well as to the consumer (BFAP, 2023).

Total sales from agro-processing in South Africa were around R263 billion in 2022. Output from the agro-processing sector can be divided into 46% for household consumption, 24% as inputs to other agro-processors, 13% as inputs used in agriculture and 15% exported.

In 2019-2022 food and beverage manufacturing made up around 24% of total manufacturing sales. The meat, fish, fruit and oils subsectors made the largest contribution to agro-processing at around 30%.

The sector has not yet regained the momentum that it had before Covid-19. Agro-processors have outperformed other manufacturers though.

Around 263 000 workers were employed by the agro-processing sector in 2022.

Factors affecting the profitability of the agro-processing industries in the immediate future are:

1. large commodity price fluctuations due to both international price and exchange rate volatility
2. reduced demand from income-constrained consumers;
3. a dwindling national economy;
4. supply chains disrupted by industrial action; and
5. energy shortages [The BFAP Baseline examines the effect of loadshedding on agro-processing – ed.]

Source: Bureau for Food & Agricultural Policy (BFAP) 2023-2032 Baseline

Further reference:

• The Bureau for Food & Agricultural Policy (BFAP) Baseline Agricultural Outlook 2023-2032, which has a chapter “Prospects for Agro-processing”.
• The United States Department of Agriculture’s Foreign Agricultural Service (FAS) puts out a “Food Processing Ingredients” report on what is happening in South Africa. Find the latest one on the Internet.
• A very useful pre-Covid diagnoses of the country’s agro-processing investment needs, constraints and opportunities was given in what was to be the last of government’s Industrial Action Policy Programme (IPAPs), 2018/19-2020/21.
• The “Websites and publications” heading has several sources which will be of interest to the reader.

For the newcomer

Introduction to the General Principles of Agro-Processing:

Faced with the current economic realities, farmers worldwide are searching for new options of surviving, as well as expanding their business. One of the many opportunities to grow markets, turnover and profits, is by adding value to farm produce through further processing. Most value-added food products available to consumers have been processed in some way or other, even if the processing is as simple as cleaning produce before it is packed in plastic-or net bags. Two types of processing methods may be performed on raw materials:

• Primary Processing: this type of processing includes the simplest of processes such as washing, peeling, chopping, ageing, the milling of wheat for flour production, and the processing of sugarcane;
• Secondary Processing: this type of processing involves the conversion of primary processed products into more complex food products and includes procedures such as mixing, depositing, layering, extruding, drying, fortifying, fermentation, pasteurisation, clarification, heating etc

Source: Theresa Siebert in the introduction to the ARC manuals on agro-processing.

Find a list of the ARC manuals on agro-processing, crucial documents, under the “Websites & publications” heading.

The agro-processing industry consists of various sub-sectors, which include:

• meat processing
• dairy products
• fruit and vegetables processing
• grain mill products
• sugar mills and refineries
• wine
• fruit juices
• beer
• cocoa, chocolate and sugar confectionery
• bakery products
• prepared animal feeds

Other food products/ingredients include starch and starch products, baby food, chips, baking powder, yeast, condiments, flavours and fragrances, mustard, vinegar, edible salt refining, tea and coffee processing and packing. Non-food products include tobacco, essential oils, biofuels, biopolymers, bioplastics, paper and paper products, wood and wood products, textiles, wearing apparel, rubber products, footwear and leather and leather products.

Government views agro-processing as a sector to be strengthened as it delivers on vital areas like job creation, exports and “raising overall economic productivity” (see “National strategy and government contact” heading). Business views agro-processing as “a high skilled, capital intensive and scale of economy business”. It welcomes government attention but lists concerns as being that interventions should not crowd out private sector investment or undermine the competitiveness of current players.

National strategy and government contact

Government has firmly identified agro-processing and its upstream sector, agriculture, as a critical driver of inclusive growth in South African economy, with very significant job creation potential. Agro-processing flies high in the Agriculture and Agroprocessing Master Plan (AAMP) “as a critical extension of the agricultural value chain to assist in driving development and growth” (BFAP, 2021). Previously it has featured in the National Development Plan (NDP), which postulated a million possible new job opportunities, and in other strategies and policy documents like the Industrial Action Policy Programmes (IPAPs) and the Agricultural Policy Action Plan (APAP). Find these document on www.gov.za.

Department of Trade, Industry and Competition (the dtic) Chief Directorate: Agro processing and Forestry Based Industries www.thedtic.gov.za

• Agro-processing has enjoyed support under initiatives such as the Agro-processing support scheme (APSS), Enterprise Investment Programme (EIP), the Co-operative Incentive Scheme and the Manufacturing Investment Programme and the Enterprise Investment Programme (MCEP). The dtic has funded agro-processing facilities and projects through entities like the Coega Development Corporation (CDC).

Find details of Government incentives at https://industrialfinancing.co.za.

Competition Commission www.compcom.co.za  The Competition Amendment Act holds major implications for directors and senior management. The Act introduces provisions to hold personally accountable, and criminally liable, individuals who cause firms to engage in cartel activity.

Department of Agriculture, Land Reform and Rural Development (DALRRD) www.dalrrd.gov.za

Details of all DALRRD directorates can be found on the website. Included amongst the important ones for this page are:

• (i) Agro-processing Support Read about this DALRRD offering on the website. Key among its interests is supporting SMEs in agro-processing.
• (ii) Directorate: Food Safety and Quality Assurance Food Business Operators (i.e. producers, packers, processors, transporters, etc.) of regulated agricultural products of plant origin for export and local market can register their food business online. The electronic facility of registering Food Business Operators online will enable a process of tracing and tracking of the product in the supply chain. Find “Food Business Operator Codes” under the Food Safety and Quality Assurance pages at www.dalrrd.gov.za .
• (iii) Directorate: Marketing
• (iv) Directorate: Inspection Services

Read about requirements for Food Business Operators (FBOs) on the website. This is a prerequisite for packhouses, processing plants, exporters, grain storage facilities, retailers and municipal markets.

National Agricultural Marketing Council (NAMC) www.namc.co.za

Perishable Products Export Control Board (PPECB) www.ppecb.com

Department of Health www.health.gov.za

• Food premises are regulated by R962 (dated Nov 2012) of the Foodstuffs, Cosmetics and Disinfectants Act, 1972 (Act 54 of 1972) under the mandate of the Department of Health. Regulations relating to the labelling and advertising of foodstuffs, R146 (dated Mar 2010) of the Foodstuffs, Cosmetics and Disinfectants Act, 1972 are also under the mandate of the Department of Health and enforced by local and municipal authorities.

Further reference:

Associations involved

• Find other associations, NGOs and Non-profit organisations on the relevant pages of Agribook.Digital.

Training and research

• Systems improvements and value-add was identified as a priority area in the National Agricultural Research and Development Strategy document. That was ten years ago, and the priority remains the same.

Companies involved

• Find the details of the various associations and companies involved on the relevant agro-processing pages on Agribook.Digital. In addition, also see “Grain storage and handling” and “Consultants”. Be aware too that role players like the ARC, CSIR and Eskom also help in value added activities.
• Add For cold storage, see the “Packaging and handling systems” page.
• Refer to the SAAFoST website where details of a number of consultants are given. Visit www.saafost.org.za.
• Also find role players at www.supermarket.co.za and www.thebuyersguide.co.za.
• Other companies listed on the JSE, not specifically agro-processing but nonetheless relevant to this publication include Kaap Agri, Omnia, SASOL, Barloworld, Bell Equipment and the banks. Also relevant here are the many former co-ops, now companies, like AFGRI, GWK etc. (GWK has its own “GWK Farm Foods” division. See www.gwk.co.za/Farm-foods). Find their details on the “Agribusinesses” page.

Websites and publications

Visit the websites and documents listed earlier in this chapter. Contact the ARC-AE at 012 842 4000 / 17 for the many publications dealing with on-farm processing. These include:

• Agro-processing of Field Crops (chilli, bell peppers, tomatoes)
• Agro-processing of Marine Foods
• Agro-processing of Poultry (chicken and turkey)
• Oil processing in South Africa
• Oil seed processing using the ram press
• The extraction of essential oils from herbaceous materials by steam distillation
• Agro-processing of Citrus Fruit (grapefruit, lemons, oranges)
• Agro-processing of Dairy (butter, cream, buttermilk, cheese, yoghurt, milk and milk powder)
• Agro-processing of Meat Products (Russians, tongue, hamburger patties, polony, frankfurters, bacon, ham, sausages)
• Agro-processing of Berries, Volume 1 (blackberries, blackcurrant, blueberries, Cape gooseberries, cherries)
• Agro-processing of Berries, Volume 2 (gooseberries, raspberries, redcurrants, strawberries)
• Agro-processing of Cereal Crops Volume 1 (maize, oats, rice)
• Agro-processing of Cereal Crops Volume 2 (sorghum, wheat)
• Agro-processing of Cereal Crops Volume 3 (barley, sesame, poppy seed, rye)
• Agro-processing of Cucurbits (butternut, cucumber, pumpkin, sweet melon, watermelon, baby marrow)
• Agro-processing of Deciduous Fruit (apples, apricots, grapes, pears, plums, peaches, figs)
• Agro-processing of Olives and Legumes (green peas, green beans, cowpeas, lentils, olives, peanuts, mushrooms)
• Agro-processing subtropical fruit (avocado, bananas, figs, guava, kiwifruit, litchi, papaya, passion fruit, pineapple)
• Agro-processing of Oil Seeds (soy beans, sunflower)
• Agro-processing of Root Crops (asparagus, beetroot, carrots, garlic, onions, potatoes, sweet potato)
• Agro-processing of Textile Crops (cotton, flax, hemp, sisal)
• Agro-processing of Industrial Crops (chicory, coffee, sugar cane, tea)
• Agro-processing of Herbs and Spices (cinnamon, paprika, jojoba, parsley)
• Agro-processing of Legumes (cowpeas, beans, green beans, lentils, green peas, peanuts)
• General food processing methods
• Agro-processing of snack foods and confectionary
• Manual on small-scale food processing (achar, jam, etc).

The Bureau for Food & Agricultural Policy (BFAP) annual outlook includes processing in its baseline. Find the latest document at www.bfap.co.za.

Find An easy guide for food entrepreneurs on the Western Cape Department of Agriculture website, www.elsenburg.com. It is also available in Afrikaans and isiXhosa.

TradeProbe 86 (August 2021) includes the feature “South Africa’s export opportunities for prepared food”. Find the document at www.namc.co.za/wp-content/uploads/2021/09/Trade-Probe-Issue-85.pdf

The Embassy of the Kingdom of the Netherlands study The Current State of Fruit & Vegetable Agro-Processing in South Africa (February 2019) can be found at https://agbiz.co.za/uploads/AgbizNews19/190215_Current-state-of-agro-processing-in%20SA.pdf

Find the WWF SA report “Agri-Food Systems: Facts and Futures” (February 2019) at www.wwf.org.za.

Neves, M.F. 2017. Future of The Food Business: The FACTS The IMPACTS The ACTS. 2nd Edition. New Jersey: World Scientific.

On the internet, find “Structural transformation in agriculture and agro-processing value chains” (April 2018) – done by the then Department of Trade and Industry, Centre for Competition, Regulation and Economic Development (CCRED), and the University of Johannesburg – which looks at agro-processing with specific reference to the fruit, sugar and dairy value chains. An earlier report (September 2016) by CCRED is the excellent “Competition, barriers to entry and inclusive growth: Agro-processing”. That report focused on poultry, dairy and milling.

Paremoer,T. 2016. POLICY BRIEF: Barriers to entry and inclusive growth: policy recommendations for agro-processing. The paper’s conclusion is: “Focusing on facilitating entry at one discrete level of the value chain will likely fail as it will miss the binding competition bottlenecks elsewhere. Ultimately, addressing barriers to entry requires complementary measures across industrial policies, development finance and competition”.

Mkhathini, K & Zuu, S. 2015. Postharvest food drying technique using a solar tunnel dryer. Research & Technology Bulletin. KZNDARD. Find the document on www.kzndard.gov.za.

The Buyer’s Guide is an annual directory listing the providers of all processing aids, flavours, ingredients, antimicrobial agents, colorants, curing agents etc, food and beverage processing equipment – and more. Visit www.thebuyersguide.co.za.

Companies which sell processing equipment often have manuals and publications explaining the technology and/ or business opportunities involved.

Find the Buyers Guide at www.supermarket.co.za.

www.foodfocus.co.za – “Providing guidance & information for the food industry”.

Evans, J.A. 2008. Frozen Food Science & Technology. Indianapolis, USA: Wiley-Blackwell.

Some articles

• Read the blogs “The Agriculture and Agro-processing Master Plan needs a clear implementation plan” (2023, June) and “The dtic Relaunches Agro-Processing Scheme to Increase Uptake” (2022, December) at www.agribook.co.za/blog.
• Ludolph N. 2021, July 26. “Agripreneur 101: A look into the jam-making industry”. Food for Mzansi. Available at www.foodformzansi.co.za/agripreneurship-101-a-look-into-the-jam-making-industry/
• Reporter. 2020, August 28. “CSIR helps SMME develop food products”. SA News. Available at www.sanews.gov.za/south-africa/csir-helps-smme-develop-food-products
• Siebert T. 2020, July. “Vegetable products and processing: An overview”. Farmlink. Available at www.arc.agric.za/Agricultural%20Sector%20News/Vegetable%20products%20and%20processing.pdf
• Dean S. 2020, March 2. “Consistent quality ensures success for popcorn exporter”. Farmer’s Weekly. Available at www.farmersweekly.co.za/agri-business/agribusinesses/consistent-quality-ensures-success-for-popcorn-exporter/
• Sadiki R. 2019, October 29. “Changing women’s lives the cherry on top for co-op”. Sowetan Live. Available at www.sowetanlive.co.za/business/2019-10-29-changing-womens-lives-the-cherry-on-top-for-co-op/
• Van der Walt J. 2019, March 22. “Swartland jam factory turns rejected fruit into profit”. Farmer’s Weekly. Available at www.farmersweekly.co.za/agri-business/agribusinesses/swartland-jam-factory-turns-rejected-fruit-into-profit/

Food & Beverage Reporter subscribers have access to agro-processing articles and an online, searchable directory. Visit www.fbreporter.com.