Is Food and Drink the Key to Future Economic Growth in South Africa?

South Africa’s food and beverage market is the most refined and advanced in the African continent, ideally placed to see a great increase in investment opportunities for investors both inside and outside Africa. There are many reasons why there is an estimated 4% to 7% increase expected in the sector by 2020.

THE FOOD AND DRINK INDUSTRY

Rich in the natural resources, South Africa has large areas of fertile land available for farming, grazing and rearing of livestock. This singlehandedly contributes to 48% of the country’s output, while the agro-processing industry (the industry that transforms the products of the forestry, fisheries and agricultural sectors into value-added goods) and its products account for 21% of the GDP(Gross Domestic Product). The majority of the agro-processing industries’ output is made with locally sourced raw materials, creating a vertically integrated market (when the supply chain of the company is owned by the same company) with monetary and organisational benefits for future economic activity.

FUTURE OPPORTUNITIES FOR GROWTH

A rise in the production of value-added goods (a good manufactured to increase its value, like organic products) such as energy drinks has opened up export opportunities with growing Middle Eastern and Asian markets. Local and international demand for alcoholic beverages has also provided a lucrative opportunity for the industry in South Africa.

Additionally, with Europe’s beverage industry outsourcing supplies of deciduous (a tree or shrub that sheds its leaves annually) fruit, South Africa has the benefit of its favorable seasons and high quality products. Economic opportunities are rare because there is lots of global competition, so Africa needs to take these calculated chances.

HOW SUSTAINABLE CAN THIS BE?

The sustainability of projects like this depends on the total recovery of economic and agricultural production, aided by agricultural education programs and policy reforms from the government. Strong trade ties, quality control and value-added production are an age-old formula for national recovery. But with increasing political uncertainty and technical recession, investors do not seem very convinced.  

HAKIM FAIZ

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