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 Purchasing power key to access Food Security FOOD AVAILABILITY Production Distribution Exchange/trade Stability over TIME Complex concept: Difficult to measure and evaluate.
Global Food Security Index Score 0-100, 100=best environment Best performance Good performance Moderate performance Needs improvement http://foodsecurityindex.eiu.com. Source: Economist Intelligence Unit/Du Pont
Index measures risks and factors that drive food security 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
New Growth Path (NGP) 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 National Development Plan (NDP) IGDP (Policy Framework) Agriculture Productive Sector Forum Agric Policy Action Plan (APAP 5 yr iterative plan) Infrastr. Pres. Infra. Co. Comm. (PICC) SIP 11 Mining (Mining Policy Action Plan) Manufacturing Industrial Policy Action Plan (IPAP) Tourism Green Economy 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
Agricultural trade Graph:. Agbiz
Graph: Agbiz
Graph: Agbiz
Rand million 20000 SA's Agricultural Export Destinations 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Africa Asia America EU 27 Oceania Other BRIC Source: BFAP, 2013
Rand million Agricultural Trade Balance 20000 15000 10000 5000 0-5000 Source: BFAP, 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-10000 -15000 Africa Asia America EU (27) Oceania Other BRIC Source: BFAP, 2013
Africa s Imports and Exports of Agricultural Products (current values)
Africa s net Imports of Food Groups (current values)
Balancing Food Security and Global Trade 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
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?
Advantages of scale & supply chain efficiencies 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
Agribusiness as Hub Source: Marcos Fava Neves
Efficiency Driven Producer and Agribusiness 10. Research and Innovation 1. Plant Production 2. Animal Production 9. Storage and movement 8. Government Efficiency Driven Agribusiness 3. Land Use and Management 4. Risk Management 7. Logistics 6. Diffusion and knowledge tansfer 5. Waste Management 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
To Conclude: How should agribusiness be positioned? 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
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