Dynamics within Agribusiness

Standard Bank Roadshow John Purchase 5 February 2014

For today…….

- Balancing food security and global trade

- Advantages of scale, supply chain efficiencies

- Changing consumer demands, restoring

consumer confidence

- Corporate farming as a driver of growth in the Agric sector

- Africa: At the Tipping Point?

How should SA Agribusiness be positioned?

FAO Food Price Index

Source: FAO, 2014

Food Security Imperative

Many definitions to food security, but the one we will use

is the FAO definition (World Food Summit 1996):

“A situation that exists when all people, at all times,

have physical and economic access to sufficient,

safe and nutritious food to meet their dietary

needs and food preferences for an active and

healthy life”.

Components of Food Security

FOOD UTILISATION • Nutritional Value • Social value • Food safety

FOOD ACCESS • Affordability • Allocation • Preference

FOOD AVAILABILITY • Production • Distribution

• Exchange/trade

Complex concept:

Difficult to measure

and evaluate.

Stability over TIME

Food Security

Purchasing power

key to access

Score 0-100, 100=best environment

Best performance

Good performance

Moderate performance

Needs improvement

Global Food Security Index

Source: Economist Intelligence Unit/Du Pont

http://foodsecurityindex.eiu.com.

Affordability Food consumption as a share of household expenditure Proportion of population under global poverty line Gross domestic product per capita Agricultural import tariffs Presence of food safety net programs Access to farmer financing

Availability • Sufficiency of supply • Public expenditure on agricultural R&D • Agricultural infrastructure • Volatility of agricultural production • Political instability • Corruption • Urban absorption capacity

Quality and safety

• Diet diversification

• Nutritional standards

• Micronutrient availability

• Protein quality

• Food safety

Index measures risks and factors that drive food security

National Develop-

ment Plan (NDP)

MTSF (2014-2019) of Outcomes

Outcome 4 –

Decent Employment through inclusive

growth

6 Job Drivers

Outcome 7 - Comprehensive

rural development and food security

NDP: Chapter 6

Outcome 10 - Environmental

assets and natural resources protected

and continually enhanced

New Growth

Path (NGP)

Agriculture Productive

Sector Forum

Infrastr. Pres. Infra. Co. Comm.

(PICC)

Agric Policy Action Plan

(APAP 5 yr iterative plan)

IGDP (Policy

Framework)

Mining (Mining Policy Action Plan) Manufacturing Industrial Policy Action Plan (IPAP) Tourism Green Economy

SIP 11

Source: DAFF,2013

Global food jungle: Survival of the smartest

SA Agribusiness •Strong input sector: Seed, fertilizer, crop protection and

veterinary chemicals, animal feed, packaging, agricultural machinery, fuel, etc. (Technology-based)

•Financial sector: Major banks, DFI’s, insurance companies, auditors, agribusinesses, etc.,

•Storage, trade and agro-logistics

•Agro-processing and packaging

•Retail Sector

Graph: Agbiz .

Agricultural trade

Graph: Agbiz

Graph: Agbiz

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Ra

nd

mil

lio

n

SA's Agricultural Export Destinations

Africa Asia America EU 27 Oceania Other BRIC

Source: BFAP, 2013

-15000

-10000

-5000

0

5000

10000

15000

20000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Ra

nd

mil

lio

n

Africa Asia America EU (27) Oceania Other BRIC

Agricultural Trade Balance

Source: BFAP, 2013

Source: BFAP, 2013

Africa’s Imports and Exports of Agricultural Products (current values)

Africa’s net Imports of Food Groups (current values)

National Development Plan: Chapter 6

“In this regard, the national food security goal should

be to maintain a positive trade balance for primary

and processed agricultural products, and not to

achieve food self-sufficiency in staple foods at all

costs”

Balancing Food Security and Global Trade

For today…….

- Balancing food security and global trade

- Advantages of scale, supply chain efficiencies

- Changing consumer demands, restoring

consumer confidence

- Corporate farming as a driver of growth in the Agric sector

- Africa: At the Tipping Point?

How should SA Agribusiness be positioned?

• Scale of economy not a silver bullet, but important………

• Productivity and intelligence management just as important • Retailers the giants in the value chains:

- Powerful as they ‘own’ the information on consumers - Private versus retailers labels/brands - Neighbourhood concept: proximity & convenience - Supply chains incredibly important: Internationalisation - Move to ‘Green Economy’, Fair Trade, Smallholder procurement, increased convenience, tasting areas, etc. - Shopping experience: ‘Lock-in’ customers • Compete on procurement and their supply chain efficiency

Advantages of scale & supply chain efficiencies

Agribusiness as ‘Hub’

Source: Marcos Fava Neves

Efficiency Driven Producer and Agribusiness

Efficiency Driven

Agribusiness

1. Plant Production

2. Animal Production

3. Land Use and Management

4. Risk Management

5. Waste Management

6. Diffusion and knowledge tansfer

7. Logistics

8. Government

9. Storage and movement

10. Research and Innovation

Marcos Fava Neves: The Future of Food Business . World Scientific, 2011

For today…….

- Balancing food security and global trade

- Advantages of scale, supply chain efficiencies

- Changing consumer demands, restoring

consumer confidence

- Corporate farming as a driver of growth in the Agric sector

- Africa: At the Tipping Point?

How should SA Agribusiness be positioned?

Changing consumer demands, restoring consumer confidence

Global demographics

Absa, 2013

For today…….

- Balancing food security and global trade

- Advantages of scale, supply chain efficiencies

- Changing consumer demands, restoring

consumer confidence

- Corporate farming as a driver of growth in the

Agric sector

- Africa: At the Tipping Point?

How should SA Agribusiness be positioned?

Corporate farms, family farms and smallholders?

• Impact of land reform – uncertainty

•Scale of economy and risk management/ mitigation leading to bigger farming units

•Corporate farming making significant inroads into SA’s agricultural production

•Social sustainability – how to incorporate smallholders?

Projects for Including the Networks of Smallholders (PINS)

1. Introduction and research problem

One of the most important challenges currently facing agribusiness is how to include smallholders in modern integrated food chains in a sustainable way.

2. Objective and method

Government and development agencies, together with private sector, need to implement sustainable and integrated agribusiness projects in order to promote the inclusion of smallholders into mainstream agriculture.

For today…….

- Balancing food security and global trade

- Advantages of scale, supply chain efficiencies

- Changing consumer demands, restoring

consumer confidence

- Corporate farming as a driver of growth in the Agric sector

- Africa: At the Tipping Point?

How should SA Agribusiness be positioned?

Agribusiness & Value Chains Hot Topic McKinsey & Company Lions on the Move: The Progress & Potential of African economies + Others

•Know your consumer/client

•Major value contribution in the respective value chains

•Develop talent/skills

• Introduce cutting edge technology

•Know the rules of the game, and they are changing

•Cutting-edge management

To Conclude: How should agribusiness be positioned?

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