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July to September 2014

Volume 1, number 3

2014

DIRECTORATE: AGRO-PROCESSING SUPPORT

agriculture,forestry & fisheriesDepartment:Agriculture, Forestry and FisheriesREPUBLIC OF SOUTH AFRICA

Quarterly Economic Review

of the Food and Beverages

industry in South Africa

Quarterly Economic Review

of the Food and Beverages

industry in South Africa

Volume 1, number 3

2014

Directorate: Agro-processing Support

July to September 2014

DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES

2015

Published by Department of Agriculture, Forestry and Fisheries

Design and layout by Directorate: Communication Services

Obtainable from the Department of Agriculture, Forestry and Fisheries Directorate: Agro-processing Support Private Bag X416 Pretoria 0001

iii

Preface

This publication: Quarterly Economic Review of the Food and Beverages Industry in South Africa: April to June 2014 is the third quarterly review by the Directorate: Agro-processing Support. It provides an overview of the economic perfor-mance of the food and beverages industry in South Africa. This is one of the subsectors of agro-processing industry that plays a dominant role in terms of output and employment in the agro-processing sector. Through backward integration, the industry stimulates output and job creation in the primary sector and contributes directly to the food security of the country. In addition, it plays a pivotal role in supplying inputs to the food and beverages service industry and wholesale and retail sectors through forward linkages.

One of the core businesses of the Directorate: Agro-processing Support is to provide timely and relevant economic infor-mation regarding the food and beverages industry to monitor its performance and provide insight into the effects of economic policies and exogenous factors on the industry. The main economic indicators reviewed are the changes in prices, production, value of sales, capacity utilisation, formal employment and trade. An outlook of the industry for the next quarter is also presented. In addition, some indicators of the food and beverages service industry and wholesale and retail sectors are reviewed to evaluate the forward linkages of the food and beverages industry.

Any comments and suggestions on the content of the publication are most welcome.

Victor Mahlogedi Thindisa

Director: Agro-processing Support

Pretoria

Disclaimer: The Department of Agriculture, Forestry and Fisheries did everything to ensure the accuracy of the information reported in this

publication. The department will, however, not be liable for the results of action based on this publication.

v

Contents

1. Introduction .......................................................................................................................................................... 1

2. Food products ..................................................................................................................................................... 1

2.1 Price ................................................................................................................................................................... 1

2.2 Production .......................................................................................................................................................... 3

2.3 Value of sales ..................................................................................................................................................... 4

2.4 Income from food sales in the service industry .................................................................................................. 5

2.5 Trade .................................................................................................................................................................. 5

2.6 Employment ...................................................................................................................................................... 9

2.7 Outlook .............................................................................................................................................................. 10

3. Beverages ............................................................................................................................................................ 10

3.1 Price ................................................................................................................................................................... 10

3.2 Production .......................................................................................................................................................... 11

3.3 Value of sales ..................................................................................................................................................... 12

3.4 Income from bar sales in the service industry .................................................................................................... 12

3.5 Trade .................................................................................................................................................................. 12

3.6 Employment ...................................................................................................................................................... 16

3.7 Outlook .............................................................................................................................................................. 16

4. Conclusion ........................................................................................................................................................... 16

References ............................................................................................................................................................... 17

Compiled by Dr Yemane Gebrehiwet with inputs from:

Deborah Makola, Josephine Rapapa and Sally Kodibona

Sefala Building Office 233

503 Belvedere Street, Arcadia, South Africa

All correspondence can be addressed to:

The Director: Agro-processing Support

Private bag X416, Pretoria 0001, South Africa

Tel. +27 (12) 319 8457

Fax +27 (12) 319 8093

E-mail [email protected]

This publication is also available on the internet at: http://www.daff.gov.za

vi

Highlights of the food and beverages industry during the third quarter of 2014

•

Prices: The total consumer price index moderated from 6,5% in the previous quarter to 5,3% year-on-year dur-ing the third quarter of 2014. During the same period, the CPI of food products moderated to 8,6% year-on-year from 8,8% in the previous quarter and the producer price inflation for non-alcoholic and alcoholic beverages increased by 4,7% and 5,2%, respectively.

• Production: The seasonally adjusted total volume of production for food and beverages increased by 1,5% year-on-year compared to the 1,4% growth recorded during the same quarter of the previous year. Quarter-to-quarter volume of production growth for food and beverages contracted marginally by 0,5%.

• Value of sales: The year-on-year seasonally adjusted total value of sales for food and beverages moderated to 8,2% from a growth of 9,6% in the previous quarter. The total value of sales also increased by 0,4% compared to the previous quarter. Hence, the value of sales increased to R71,7 billion during the period.

• Wholesale and retail sales: Wholesale trade sales of food, beverages and tobacco increased by 3,3% while retail trade sales contracted by 2,1%. Compared to the previous quarter, wholesale and retail trade sales in-creased by 2,2% and 1,9%, respectively. Hence, income for wholesale and retail sales reached R62,9 million and R14,5 million, respectively during the third quarter of 2014.

• Total income of food and beverage services: Total income of food and beverages services from food, bar sales and other income increased by 4,5% year-on-year and by 2,6% compared with the previous quarter. As a result total income of the food and beverages service industry (restaurants and coffee shops, takeaway/fast food and catering services) reached R11,1 billion during the period under review.

• Trade: Macadamia nuts and fish fillets are the major exported food products worth R426 million and R296 mil-lion, respectively. The EU accounted for the highest share of 24,2%. The main imported food products were sunflower seed and chickens (cut and offal) which accounted for R1 145 million and R532 million respectively. SA‘s main source of food imports were Asia and Europe, which accounted for 40,5% and 31,4% of the total food import, respectively. The trade deficit of the food industry increased to R 2 346 million during the period under review.

• Rum and tafia and grape wines where the major exports of beverages, worth R83,8 million and 75,4 million, respectively. The United Kingdom (13,1%) accounted for the largest export share of beverages. South Africa’s largest beverage imports were rum and tafia and whiskies amounting R1 038,4 million and R129,2 million, re-spectively. Europe accounts for 82% of the total share of sources of imports. the trade surplus of the beverage industry decreased fom R1 720,6 million in the previous quarter to R1 410,0 million during the third quarter of 2014.

• Employment: Total formal employment of the food and beverages industries declined from R175 120 million and R39 872 million in the previous quarter to R171 488 million and R39 468 million, respectively, during the period under review. Hence, the total formal employment in the food and beverages industry was 386 076.

1

1 Introduction

Following an improved economic growth of advanced economies, the global economy grew by 3,6% in the third quarter of 2014. Having recorded a 0,5% growth in the second quarter of 2014, the South African economy also grew by 1,4% in the third quarter of 2014. This moderate acceleration in growth is prompted mainly by the increase in the real value added of both the primary and tertiary sectors. Conversely, the real value added by the secondary sector con-tracted further during the quarter under review (SARB, 2014).

During 2013, the South African agricultural and manufacturing sector accounted for 2,4% and 16,8% of the total GDP of the economy, respectively. Among the agro-processing industry , food and beverages contributed to 18,3% and 16,8% of the total employment and output of the manufacturing sector, respectively. In addition, it contributed 8,8% of the total export of the sector. During the same period, the total jobs in the food and beverages industry was 250 357 (208 412 formal and 41 945 informal employment). This quarterly review assesses the economic performance of the food and beverages industry, given a moderate global economic growth and a contraction of domestic economic activities re-corded during the third quarter of 2014.

2Food products

According to the Standard Industrial Classification, the food industry incorporates groups of products which are categorised into the following four codes:

• Code 301 refers to manufacturing, processing and preservation of meat, fish, vegetables, fruits, oils, and fats• Code 302 refers to manufacturing, processing and preservation of dairy products• Code 303 refers to manufacturing of grain mill products, starch products and prepared animal feeds• Code 304 refers to the manufacturing of other food products like bread, sugar, chocolate, pasta, coffee, nuts, and

spices.

Therefore, food products refer to those primary agricultural and fisheries products that have undergone some form of change through manufacturing and processing or performed some value-addition activities such as preservation.

2.1 Price

Consumer Price Index (CPI)2

The total Consumer Price Index moderated from 6,5% in the previous quarter to 5,3% year-on-year during the third quar-ter of 2014. During the same period, the CPI of food products moderated slightly to 8,6% year-on-year from 8,8% in the previous quarter. While the year-on-year consumer price inflation for the processed food products moderated to 6,8% during the period from 7,7% in the previous quarter, it slightly accelerated for the unprocessed food groups from 10% to 10,4%. Among the food products that showed a price rise, compared with the previous quarter, are meat (from 7,9% to 9,0%), vegetables (from 11,8% to 12,8%) and sugar, sweets and desserts (from 6,2% to 6,7%). The rest of the food prod-ucts showed a moderation in the third quarter of 2014. In general, price inflation for most of food products increased more than the overall consumer price inflation except for fruit, oils and fats, non-alcoholic beverages and cold bever-ages. The quarter-to-quarter consumer price inflation for food was 0,3% and all food products showed a inflation rate less than 1% except hot beverages (1,5%) and milk, eggs and cheese (1,3%). (See Table 2.1)

TABLE 2.1: Consumer Price Index of food products

Food products

Indices % change

Weight 2013: Q3 2014: Q2 2014: Q3 2013: Q3 and2014: Q3

2014: Q2 and2014: Q3

All items (CPI Headline)Food and non-alcoholic beveragesFoodProcessed

10015,414,2

6,8

104,4101,3101,2104,1

109,4109,3109,5110,6

109,9109,7109,8111,1

5,38,38,66,8

0,40,30,30,5

1 According to the Standard Industrial Classification, the agro-processing industry comprises the following eleven divisions: food products, bev-erages, tobacco, textiles, wearing apparel, leather and leather products, footwear, paper and paper products, wood and wood products, rubber and furniture.

2 Stats SA defines CPI as a current social and economic indicator that is constructed to measure changes over time in the general level of prices of consumer goods and services that households acquire, use, or pay for.

2

Food products

Indices % change

Weight 2013: Q3 2014: Q2 2014: Q3 2013: Q3 and2014: Q3

2014: Q2 and2014: Q3

UnprocessedBread and cerealsMeatFishMilk, eggs and cheeseOils and fatsFruitVegetablesSugar, sweets and dessertsOther foodNon-alcoholic beveragesHot beveragesCold beverages

7,43,54,60,41,70,50,21,60,60,91,20,30,9

98,4102,6

97,2105,1105,5101,8

93,7101,5106,0102,1102,8104,2102,3

108,6110,8105,6112,7114,1105,1

99,5114,3112,4108,3106,8108,9105,9

108,6110,8105,9113,1115,6104,0

97,5114,5113,0111,4107,7110,6106,6

10,48,09,07,59,52,24,1

12,86,79,14,76,14,2

0,10,00,30,31,3

-1,0-2,00,20,62,90,81,50,6

Source: (Statistics SA, 2014a)

Producer price index (PPI) 3

The PPI of food products moderated from 9,0% in the previous quarter to 7,5%, mainly because the producer price infla-tion for most of foods slowed during the period. However, the producer price inflation for most food products was above overall producer price inflation except for fruit and vegetables (6,4%), other foods (5,6%), sugar (5,5%) and bakery prod-ucts (5,1%). The quarter-to-quarter food price inflation moderated marginally by 0,3%, all food products maintained a producer price inflation less than 1% (see Table 2.2).

TABLE 2.2: Producer price index of food products

Food productsIndices % change

Weight 2013: Q3 2014: Q2 2014: Q3 2013: Q3 and2014: Q3

2014: Q2 and2014: Q3

Final manufactured goods (headline PPI)Food productsMeat and meat productsFish and fish productsFruit and vegetablesOils and fatsDairy productsGrain mill productsStarch and starch products, animal feedsOther food productsBakery productsSugar

10026,3

4,51,62,40,53,31,81,60,96,91,9

107,1107,4104,8111,6104,7107,5108,9104,2108,5108,5113,3

99,2

114,0115,1114,0126,7111,2111,2119,1114,5116,6113,9118,5104,5

114,4115,5113,8127,6111,4109,4120,6113,8116,1114,6119,2104,7

6,87,58,7

14,46,41,8

10,89,27,05,65,15,5

0,30,3

–0,10,70,2

–1,61,2

–0,6–0,50,60,60,3

Source: (Statistics SA, 2014b)

Import unit value index4

Import unit values of selected food products are given in Table 2.3.

TABLE 2.1: Consumer price index of food products (cont.)

3 OECD defines the Producer Price Index (PPI) as a measure of the change in the prices of goods either as they leave their place of production or as they enter the production process. The PPI can be used as an economic indicator of inflation, as an escalator in contracts and as a deflator in the calculation of the national accounts.

4 IMF defines export and import unit value index as a measure the overall change in the prices of transactions in goods and services between the residents of an economic territory and residents of the rest of the world. The average unit value is obtained by dividing the value of ex-ported/imported goods in monetary terms with the respective volume/weight of the goods.

3

TABLE 2.3: Import unit value index of food products

Food productsIndices % change

2013: Q3 2014: Q2 2014: Q3 2013: Q3 and2014: Q3

2014: Q2 and2014: Q3

Food (total)Fats and oilsGrain mill products

108,296,9

122,2

113,9105,3124,8

114,3106,0124,9

5,79,42,2

0,30,60,1

Source: (Statistics SA, 2014c)

2.2 Production

A physical volume of production by the food products division is presented in Figure 2.1. The quarter-to-quarter physical volume of produc-tion of meat, fish, fruit, etc., increased margin-ally by 0,4% following a 1,4% growth in the pre ceding quarter, while for dairy products it rebounded by 0,5% from a contraction of 2,2% in the previous quarter. On the other hand, for grain and for “other food products” it contracted by 1,1% and 2,5%, respectively. The year-on-year volume of production for meat, fish, fruit, etc., increased by 5,8% and for dairy it rebounded by 0,5%. It, however, re-mained stagnant for grain and it decreased by 1,9% for “other foods products”.

Production capacity

TABLE 2.4: Utilisation and reasons for underutilisation of production capacity by large enterprises: Food products (percentage)5

Period Utilisation

Reasons for underutilisation

Total under-utilisation

Shortage of

Insufficient demand

OtherRaw materials

Labour

Skilled Semi and unskilled

2013: Q32014: Q22014: Q3

85,380,082,9

14,720,017,1

2,22,42,9

1,31,21,2

0,20,10,1

9,711,5

9,9

1,54,83,2

Source: Statistics SA (2014e)

The utilisation of production capacity by large enterprises of food products showed a moderate decline year-on-year and a marginal increase compared to the previous quarter (see Table 2.4). Insufficient demand, other reasons such as down-time because of maintenance, seasonal factors and lower productivity and shortage of raw materials are the three main reasons for underutilisation during the period under review.

Source: Statistics SA (2014d)

5 Large enterprises included in the survey are those with a turnover greater than R100 million per annum

4

2.3 Value of sales

During the third quarter of 2014, the season-ally adjusted value of sales of food products moderated from 10,6% in the previous quar-ter to 10,2% year-on-year (see Figure 2.2).

The year-on-year growth rate of seasonally ad-justed value of sales for meat and meat prod-ucts, dairy, “other food products” and grain mill products increased by 13,7%, 11%, 7,3% and 7,8%, respectively. Similarly the quarter-to-quarter value of sales for meat and meat products and dairy increased by 1,0% and 0,9%, respectively, while it decreased by 1,3% for grain mill products. Production volume of other food product also rebounded by 0,2% (see Figure 2.3). As a result, the value of sales for food products moderated by 0,2% com-pared with the previous quarter.

Wholesale and retail sales6

The current value of wholesale and retail sales of food and beverages are given in Figure 2.4. Wholesale sales increased by 3,3% in the third quarter of 2014, while retail sales further de-creased by 2,1% during the same period, fol-lowing a contraction of 0,5% in 2014: Q2. Compared with the previous quarter both wholesale and retail sales increased by 2,7% and 2,8%, respectively. Hence, the current value of income from wholesale and retail sales of food and beverages increased from R61,2 billion and R14,0 billion in the previous quarter to R62,9 billion and R14,5 billion, re-spectively during the third quarter of 2014.

6 Stats SA conducts a monthly survey covering enterprises in the wholesale and retail trade industry. The results of the monthly wholesale and retail trade sales survey are used to compile estimates of the gross domestic product (GDP) and its components, which are used in monitor-ing the state of the economy and formulation of economic policy. These statistics are also used in the analysis of comparative business and industry performance.

7 The data include tobacco sales.




5

2.4 Income from food sales in the service industry8

Income from food sales9 in the service industry includes food sales in restaurants and coffee shops10, takeaway and fast food outlets11 and catering services12. The current income from food sales in the service industry increased by 4,7% year-on-year in the third quarter of 2014. Com pared with the previous quarter it acceler-ated by 3,1%, following a growth of 1,4% quar-ter-to-quarter growth in the second quarter of 2014 (see Figure 2.5). Hence, the current value of income from food sales in the service indus-try increased marginally from R9,3 billion in the previous quarter to R9,6 billion during the third quarter of 2014.

The year-on-year growth of current income from food sales in takeaway/fast food outlets increas-ed from 4,4% in the previous quarter to 6,0% and food sales in restaurants and coffee shops it moderated from 6,5% in the previous quarter to 5,8%. The year-on-year Income growth from food sales in catering services, however, con-tracted by 2,5%. Compared to the previous quarter, income from food sales in restaurants and coffee shops and takeaway/fast food out-lets increased by 3,0% and 4,5%, respectively, however, for catering services it contracted by 2,5% (see Figure 2.6). As a result, the total in-come from the restaurants and coffee shops and takeaway/fast food outlets increased from R4,1 billion and R3,9 billion to R4,2 billion and

R4,1 billion, respectively, while for catering services it moderated from R1,3 billion to R1,2 billion, during the third quarter of 2014.

2.5 Trade

Main food export products and destinations

Table 2.5 presents the major exported food products during the third quarter of 2014. Macadamia nuts: shelled, fish fillets, cuttle fish, yoghurt and rock lobster and other sea crayfish are the top five food products exported during the third quarter of 2014. The high and low export performers of food products during the third quarter of 2014 are presented in Table 2.6 by comparing the export values of the present quarter with the same quarter of the previous year (year-on-year). While macadamia nuts and refined sugar showed a remarkable growth, dried grapes showed a significant contraction during the quarter.

8 Stats SA collects data from a sample of about 900 enterprises from a population of about 8 100 enterprises using stratified simple random sampling. The survey covers a sample of public and private enterprises involved in the preparation of meals and drinks for immediate con-sumption in South Africa. The purpose of the survey is to monitor trends in the food and beverages service industry. The results of the food and beverage survey are used to compile estimates of the tourism satellite accounts (TSA) and the gross domestic product (GDP) and its compo-nents, which are used to develop and monitor government policy.

9 Income from food sales in the service industry refers to income from the sale of meals and non-alcoholic drinks.10 Restaurants and coffee shops refers to enterprises involved in the sale and provision of meals and drinks, ordered from a menu, prepared on

the premises for immediate consumption and with provided seating.11 Take-away and fast food outlet refers to eenterprises involved in the sale and provision of meals and drinks, ordered from a menu, prepared

on the premises for takeaway purposes in a packaged format, at a stand or in a location, with or without provided seating.12 Catering services refers to eenterprises involved in the sale and supply of meals and drinks prepared on the premises on a contract basis and

brought to other premises chosen by the person ordering them, to be served for immediate consumption to guests or customers. Catering services also include bars, taverns, other drinking places, ice-cream parlours, etc.

Source: Statistics SA (2014h)

Source: Statistics SA (2014h)

6

TABLE 2.5: Major exported food products in 2014: Q3

HS Code Food product Total amount (R million)

080262030474030749040310030611200860200870180690190500

200919210390

Macadamia nuts: shelledFish fillets, fish meat, mince except liver, roeCuttlefish, squid, frozen, dried, salted or in brineYoghurtRock lobster and other sea crawfish, frozenCherries, otherwise prepared or preservedPeaches, otherwise prepared or preservedChocolate/cocoa food preparationsBread, pastry, cakes, biscuits and other bakers’ wares, whether or not containing cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar productsOrange juice, not fermented, spirited, or frozenSauces nes, mixed condiments, mixed seasoning

426296126118

9277494645

3310

Source: Quantec EasyData (2014)

TABLE 2.6: Export performance of food products in 2014: Q3

HS Code Food product Changes compared to a year ago(R million)

High performers

H080261H080262H170191H030749H030474H200200H180690H020130H040310H121410H020230H020220

Macadamia nuts: in shellMacadamia nuts: shelledRefined sugar, in solid form, flavoured or colouredCuttlefish, squid, frozen, dried, salted or in brineFish fillets, fish meat, mince except liver, roeTomatoes prepared or preserved otherwise than by vinegar or acetic acidChocolate/cocoa food preparationsBovine cuts boneless, fresh or chilledYoghurtLucerne (alfalfa) meal and pelletsBovine cuts boneless, frozenBovine cuts bone in, frozen

474190105

787830211918141310

Low performers

H080620H220421H040221H200971

H170114H200919H160100H040299

Grapes, driedGrape wines nes, fortified wine or must, pack < 2lMilk and cream powder unsweetened < 1.5% fatFruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter—apple juiceRaw sugar not containing added flavouring or colouring matter: other cane sugarOrange juice, not fermented, spirited, or frozenSausages, similar meat products of meat, meat offal and bloodMilk and cream nes, sweetened or concentrated

–916–44–22–21

–19–15–10–10


Figure 2.7 shows the share of continents as export destinations for South African food products. Asia, was the main export destination during the third quarter of 2014, followed by Americas, Africa and Europe, which contributed to 27,5%, 19,0% and 10,3%, respectively, of the total food export.


7

Oceania accounts for 1,2% of the total food export during the third quarter of 2014. The trend during the past five years shows that Africa was the main export destination for South African products, followed by Europe and Asia. However, during the quarter under re-view Asia followed by Europe were the two main desti-nation continents followed by Africa (see Figure 2.8).

Figure 2.9 shows the food export destinations’ share of the main regions in the third quarter of 2014. Among the main regions, the EU accounted for the highest share of 24,2%, followed by the Eastern Asia (21,2%). The SADC, NAFTA and South Central Asia comprised 14,7%, 8,7% and 6,1%, respectively of the total food export share. Western Asia, Western Africa, South-East Asia and Australia and New Zealand account for 4,5%, 4,5%, 3,4% and 1,1%, respectively, of the total food export share during the period under review.

Figure 2.10 shows that the top four food export destina-tion countries during the third quarter of 2014 are China, US, Germany and Japan which contributed 9,0%, 7,6%, 6,2% and 6,0%, respectively, of the total food export share. The top four countries are followed by the UK, Belgium, Mozambique, The Netherlands, Zambia and Zimbabwe with shares of 4,3%, 4,0%, 3,9%, 3,9%, 3,2% and 2,9%, respectively.

Main imported food products and source of import

Table 2.7 presents the major imported food products during the third quarter of 2014. Sunflower-seed, chickens (cuts and not cut), tuna and food preparations not elsewhere specified (nes) are the top five products imported by South Africa during the third quarter of 2014.

TABLE 2.7: Top imported food products in 2014: Q3


H151211H020714H020712H160414H230990

Sunflower-seed or safflower oil, crudeChicken, cuts and offal, froChicken, domestic, not cutTuna, skipjack, bonito, prepared/preserved, not mincedFood preparations, nes

1 145532 231185155



13 The main regions which are included in the analysis are the top eight regions: SADC, Western Africa, EU; NAFTA (North Atlantic Free Trade Area consists of USA, Canada and Mexico); Eastern Asia (China, Japan, North Korea, South Korea); Western Asia (mostly middle east countries); South Central Asia (India, Pakistan and Bangladesh) and Australia and New Zealand


8



H110720H090112H020727H020329H150790H180690H210690H090121

Malt, roastedCoffee, not roasted, decaffeinatedTurkey cuts and offal frozPork cuts, frozen nesRefined soya-bean oil, not chemically modifiedChocolate/cocoa food preparations, nesFood preparations, nesCoffee, roasted, not decaffeinated

141134119

7937372413


South Africa’s main source of food import during the third quarter of 2014 is presented in Figure 2.11. Asia and Europe accounted for 40,5% and 31,4%, re-spectively of the total food import by South Africa. While the Americas share is substantial (21,6%), im-ports from Africa (3,5%) and Oceania (3%) were marginal during the period.

Figure 2.12 indicates that during the past five years, while Asia is the main source of food import, Europe has become the second major source of food im-port exceeding the Americas.

As the main trading region, the EU accounts for 29,8% of the total food import, followed by South-East Asia (27%), South Central Asia (8,2%), NAFTA (4,6%) and Eastern Asia (4,4%). The SADC accounts for 1,9% of the total food import and Australia and New Zealand accounts for 3% of the total food im-port during the third quarter of 2014 (see Figure 2.13).



TABLE 2.7: Top imported food products in 2014: Q3 (cont.)

9

Figure 2.14 shows that the significant share of food import was sourced from Indonesia (11,%) and Thai-land (10,7%), followed by Argentina, India and Brazil with shares of 9,7%, 7,8% and 6,4% respectively. The Netherlands, Spain, Germany, China and US altogeth-er comprise 21% of the total food import during the period under review.

Figure 2.15 shows the quarterly trade balance of pro-cessed food products. The year-on-year export of food products dropped significantly from 23,7% in 2014: Q2 to 8,4% in 2014: Q3, while import of food products further decreased by 8,4% in 2014: Q3 after a contraction of 3,9% in the preceding quarter. Com pared to the previous quarter, the export of food products accelerated by 6,8% and import of food products rebounded by 9,7% after a contraction of 5,9%. As a result, the trade deficit increased from R1 935,3 million in the previous quarter to R2 346,0 mil-lion during the third quarter of 2014.

2.6 Employment

As depicted by Figure 2.16 the number of formal jobs in the food industry increased by 0,5% year-on-year during the third quarter of 2014. As compared to the previous quarter formal employment in the industry contracted by 2,1% following a growth of 0,3% during 2014: Q2. In addition, the number of formal jobs in the food division increased by 0,6% compared with the previous quarter.

As a result, employment in the food industry increased from173 618 in the previous quarter to 174 696 during the period under review (see Figure 2.17).



Source: Statistics SA (2014i)

Source: Statistics SA (2014f)

10

2.7 Outlook

TABLE 2.8: Net balance14 of BER manufacturing survey: Food products

2014: Q1 2014: Q2 2014: Q3 2014: Q4*

Domestic sales volumes

Export sales volumes

Production volumes

Domestic order volumes received

Export order volumes received

General business conditions

Number of factory workers

Fixed investment

Business confidence

Expected volume of goods imported in 12 months’ time

Expected volume of goods exported in 12 months’ time

Expected investment in machinery and equipment in 12

months’ time

Expected business conditions in 12 months’ time

–20

46

1

–18

34

–43

–16

5

–31

51

32

–24

39

25

57

18

25

55

15

40

52

19

47

1

–17

39

15

20

18

20

7

9

–15

19

39

–5

19

35

29

45

9

32

54

10

17

–22

51

*Expected

Source: BER (2014)

A survey of food manufacturing by the Bureau for Economic Research (BER) presented in Table 2.8 shows that the year-on-year outlook for the fourth quarter of 2014 is positive for all the variables, except for employment.

3 Beverages

Beverages according to SIC classification is code 305 and it comprises the following beverages products:

• Distilling, rectifying and blending of spirits; ethyl alcohol production from fermented materials; production on wine

• Production on beer and other malt liquors and malt

• Breweries, except sorghum beer breweries

• Sorghum beer breweries

• Production on malt

• Production on soft drinks; mineral waters.

3.1 Price

Table 3.1 shows the consumer and producer price inflation of beverages. In addition, it indicates the export unit value of beverages, which increased by 16,6% year-on-year and by 8,1% compared to the previous quarter. The price inflation for most beverage categories increased below the overall inflation, except for spirits (8,0%). The non-alcoholic bever-ages consumer price inflation increased by 4,7% year-on-year directed by the increase in the hot and cold beverages by 6,6% and 4,0%, respectively. The producer price inflation for beverages accelerated by 5,3% in the previous quarter (5,1% during the third quarter of 2014). The export unit value of beverages also accelerated from 10,3% in the previous quarter to 16,6% during the period under review.

14 BER calculates the net balance statistics by subtracting the % of the respondents replying “down” from the % replying “up” to a particular ques-tion. Respondents are asked to compare the current quarter’s experience to that of a year ago. A positive net balance implies an improve-ment (i.e. positive year-on-year growth) and vice versa. Therefore, the net balance varies from –100 to 100 where –100 is the most negative response; 0 is a situation of no change and 100 is the most positive response.

15 BER calculates the business confidence index by asking respondents to rate current business conditions as “satisfactory” or “unsatisfactory”. Then the index is derived as a gross percentage of the respondents replying “satisfactory”. A value of 50 is indicative of neutrality, 100 indica-tive of extreme confidence and 0 of extreme lack of confidence. An index greater than 50 shows the majority of respondents are satisfied with the prevailing economic conditions.

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TABLE 3.1: Price indices of beverages

Beverage productsIndices % change

Weight 2013: Q3 2014: Q2 2014: Q3 2013: Q3 and 2014: Q3

2014: Q2 and2014: Q3

Consumer price indices

All items (CPI Headline) 100 104,4 109,4 109,9 4,9 0,5

Alcoholic beveragesSpiritsWineBeerNon-alcoholic beveragesHot beveragesCold beverages

3,90,80,72,51,20,30,9

106,8107,4105,3107,1102,8104,2102,3

112,1115,3109,4111,8106,8108,9105,9

112,4116,1109,3112,1107,7110,6106,6

5,28,13,84,74,76,14,2

0,20,7

-0,10,31,21,60,7

Producer price indices

Beverages 8,5 105,8 111,1 111,2 5,1 0,1

Export unit value

Beverages 112,1 125,3 126,6 13,0 1,1

Source: Statisticss SA (2014a)

3.2 Production

Figure 3.1 presents the seasonally adjusted physi-cal volume of production for beverages. During the second quarter of 2014, the volume of prod-uction for beverages rebounded both year-on-year and quarter-to-quarter by 3,4% and 4,3% from 1,9% and 2,8% contractions respect ively in the previous quarter.

Production capacity

TABLE 3.2: Utilisation and reasons for underutilisation of production capacity by large enterprises: Beverages division (percentage)

Period Utilisation

Reasons for underutilisation

Total under-utilisation

Shortage of

Insufficient demand

OtherRaw materials

Labour

Skilled Semi and unskilled

2013: Q32014: Q22014: Q3

83,282,685,6

16,817,414,4

2,42,72,1

2,11,11,2

0,10,20,2

8,49,47,6

3,93,93,3


Table 3.2 shows that the year-on-year and quarter-to-quarter utilisation capacity by large enterprises increased moder-ately in 2014: Q3. Insufficient demand followed by other reasons such as downtime because of maintenance, seasonal factors and lower productivity and shortage of raw materials remained the prime reasons for underutilisation during the period under review.


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3.3 Value of sales

During the third quarter of 2013, the seasonally ad-justed value of sales of beverages moderated both quarter-to-quarter and year-on-year to 1,4% and 8,2%, following a 5,7% and an 11,2% growth, respectively in the second quarter of 2014 (see Figure 3.2).

3.4 Income from bar sales in the service industry16

Following a rebound of 3,7% in the second quarter of 2014, the year-on-year income from bar sales in the service industry moderated marginally by 2,3% during the third quarter of 2014. Compared to the previous quarter income from bar sales contract-ed by 0,5% from an increase of 0,6% in the previ-ous quarter. Consequently, total income from bar sales declined from R1 307,7 million in the previous quarter to R1 301,1 million during the period under review (see Figure 3.3).

Restaurants and coffee shops are responsible for the largest share of income from bar sales, fol-lowed by catering services and takeaway/fast food outlets. Year-on-year income from restau-rants and coffee shops increased by 3,3% while for catering services it rebounded by 1,5%, follow-ing a contraction of 4,0%. Income from bar sales in takeaway/fast food outlets contracted signifi-cantly by 5,6%, following an increase of 17,6% during the third quarter of 2014. Compared to the previous quarter, income from restaurants and coffee shops increased by 0,5%. On the other hand, income from catering services contracted by 1,9% in and income from takeaway/ fast food outlets rebounded by 2,6%, following a contrac-tion of 4,6% in the previous quarter (see Figure 3.4)

3.5 Trade

Main exported beverages products and export destinations

Table 3.3 presents the major exported beverage products during the third quarter of 2014. The high and low export per-formers during the period are also given in Table 3.4 by comparing the values of export in a quarter to the same quarter of the previous year (year-on-year). Rum, grape wines, beer and gin followed by alcoholic liqueurs nes were the most exported beverage products during the third quarter of 2014. Table 3.4 shows that while beer, liquers and gin showed a positive export growth during the period, grape wine export dropped significantly during the period.


16 Large enterprises included in the survey are those with a turnover greater than R100 million per annum



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TABLE 3.3: Major exported beverages products in 2014: Q3

HS Code Beverage Total amount (R million)

H220840H220421H220300H220850]H220890H220870H220860

Rum and tafiaGrape wines nes, fortified wine or must, pack < 2lBeer made from maltGin and genevaAlcoholic liqueurs, nesLiqueurs and cordialsVodka

83,875,448,315,310,2

6,12,8


TABLE 3.4: Export performance of beverages in 2014: Q3

HS Code Beverage Changes compared to a year ago(R million)

High performers

H220300H220870H220850H220860

Beer made from maltLiqueurs and cordialsGin and genevaVodka

7,64,22,40,3

Low performers

H220421H220890H220600

Grape wines, nes, fortified wine or must, pack < 2lAlcohol liqueurs, nesFermented beverages, nes (e.g. cider, perry, mead, etc.)

–43,6–0,8–0,2


Figure 3.5 presents the beverage export destina-tions’ share of continents during the third quarter of 2014. Europe was the largest export destination for South African beverages accounting for 47% of the total export, followed by Africa (29%), Asia (12%) and the Americas (11%). Oceania plays a little role as an export destination for South African beverages.

The trend of the export destination’s share during the past 5 years shows that while Europe dominate the other continents, followed by Africa, the exports to Asia grew over the 5 years, overtaking the Americas from the last quarter of 2013 to date (see Figure 3.6).



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Figure 3.7 shows the share of top beverages export des-tination regions during the third quarter of 2014. The European Union (EU) accounted for 43% of the total share, followed by the SADC (20%) and NAFTA (10%). Asian regions accounted for 12% while Australia and New Zealand only accounted for 1% of the total export share.

Among the top ten countries that South Africa exported beverages to during the third quarter of 2014, five coun-tries are from the European Union (EU). The United Kingdom accounted for the largest share of the exports (13,1%) followed by Germany (9,3%), and the Netherlands (5,6%). The US and Canada were the main countries from the Ameri cas that accounted for 5.1% and 4,6%, re-spectively of the total share of beverage exports. Mozam- bique, Angola and Zambia were the only African countries included in the top ten countries and they accounted for 6,2%, 4,8% and 3,5%, respectively, of the total export share of beverages.

Main imported beverage products and the sources of import

Table 3.5 illustrates the main imported beverages during the third quarter of 2014 in descending order. Rum and tafia, whiskies and non-alcoholic beverages, nes, except fruit, vegetable juices were the most exported beverage products, followed by grape wines, nes, fortified wines or must, pack <2l and alcoholic liqueurs, nes.

TABLE 3.5: Main imported beverages in 2014: Q3

HS Code Beverage Total amount (R million)

H220840H220830H220290H220421H220890H220720H220870H220429H220399H220860

Rum and tafiaWhiskiesNon-alcoholic beverages, nes, except fruit, vegetable juicesGrape wines, nes, fortified wine or must, pack <2lAlcoholic liqueurs, nesEthyl alcohol and other spirits, denaturedLiqueurs and cordialsGrape wines, alcoholic grape must, nesBeer made from maltVodka

1038,4129,2118,1

62,051,749,235,823,423,310,4


Figure 3.9 presents the share of continents as a source of beverages import during the third quarter of 2014. Europe accounted for 82% of the total share of source of import, followed by the Americas (8%), Oceania (7%), Africa (2%) and Asia (1%) during the third quarter of 2014.




15

Figure 3.10 shows that over the past five years, Europe, followed by Americas, was the key source of beverage imports. Both continents contributed to an average of 90% of the total beverages im-ports from 2009 to 2014.

Among the top trading regions, the EU accounts for the largest share of 81%, followed by NAFTA and New Zealand, both with a shares of 7%. The SADC and other regions contributed 5% of the to-tal beverage imports during the period under re-view. (see Figure 3.11).

As shown in the Figure 3.12, eight of the top ten countries that exported beverages to South Africa during the third quarter of 2014 are from Europe and the other two countries are the United States and Australia. A significant number of beverages imports are sourced from the UK (49%), followed by France (11%), Belgium (7%), Australia (6%) and the US (6%).

The year-on-year export of beverages increased by 3,2% during the third quarter of 2014 while im-port dropped to 2,7%, following an 11,1% in-crease in the previous quarter. Compared to the previous quarter, beverage export increased by 8,9%, following a 17,2% quarter-to-quarter growth during the previous quarter. On the other hand, quarter-to-quarter import of beverages rose dra-matically by 44,3% following a 23,1% growth in the previous quarter. As a result, the trade surplus of the beverages industry decreased fom R1 720,6 million in the previous quarter to R1 410,0 million during the third quarter of 2014 (see Figure 3.13).





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3.6 Employment

Figure 3.14 shows the formal employment in the bev-erages and tobacco industries . The year-on-year growth of formal employment of the beverages and tobacco divisions moderated slightly from 6,3% to 5,8% during the period under review. Compared to the previous quarter, formal employment contracted by 2,1% following a 3,5% quarter-to-quarter growth in the previous quarter. As a result, the total formal num-ber of jobs in the industry decreased from 39 872 in the previous quarter to 39 468 during the third quarter of 2014.

3.7 Outlook

TABLE 3.6: Net balance of BER manufacturing survey: Beverages

2014: Q1 2014: Q2 2014: Q3 2014: Q4*

Domestic sales volumesExport sales volumesProduction volumesDomestic order volumes receivedExport order volumes receivedGeneral business conditionsNumber of factory workersFixed investmentBusiness confidenceExpected volume of goods imported in 12 months’ timeExpected volume of goods exported in 12 months’ timeExpected real investment in machinery and equipment in 12 months’ timeExpected business conditions in 12 months’ time

671445802658-770731375

28–8

7612687612–1–81686

310

–10–3

–510

01110

–77–718491

03

8671

99118795–7702

*Expected

Source: BER (2014)

A survey of the beverages division by the Bureau for Economic Research (BER) presented in Table 3.6 shows that the year-on-year outlook for the fourth quarter of 2014 is positive for all the variables except for export order volumes received

4 Conclusion

The gross domestic product of the economy rebounded by 1,4%, following a marginal growth in the previous quarter. The production volume of food and beverages, however, contracted by 0,5% compared to the previous quarter. The nominal value of sales of food and beverages increased marginally from R71,5 billion to R71,8 billion. The wholesale and retail trade sales of food and beverages increased from R61, 227 billion and R14,1 billion in the preceding quarter to R62,907 billion and R14 474 billion, respectively during the period under review.The food and beverages service in-come from food and beverage sales improved from R10,8 billion in the previous quarter to R11,1 billion during the period under review. While income from food sales picked up from R92,6 billion to R95,5 billion during the same period, income from bar sales decreased marginally from R13,07 billion to R13,01 billion in the third quarter 2014.

Exports of food and beverages moderated to 6,8% year-on-year following, a 16,2% growth recorded in the preceding quarter. Imports, on the other hand, contracted by 6,8% year-on-year following a 2,3% decrease in the previous quarter. Compared to the previous quarter, food and beverages export increased by 7,4%, while imports increased by 14%. Hence, the trade deficit of food and beverages increased to R935,9 million from the R214,7 million registered in the second quarter of 2014. During the period under review, the main food export destinations were EU (24,2%) and Eastern Asia (21,2%). For beverages, the main destinations were the EU (43,4%) and SADC (20,2%).


17 The data include employment in the tobacco industry

17

Following the contraction of production in the food and beverages industry, 4 036 formal jobs were lost during the period. Therefore, the total formal employment in the food and beverages industry decreased from 214 992 in the previous quarter to 210 956 during the period under review.

References

BER (2014), Manufacturing Survey. Bureau for Economic Research, University of Stellenbosch.

Quantec EasyData (2014), RSA International Trade. Accessed in September 2014.

Statistics SA (2014a), Consumer Price Index, various issues. Statistics South Africa.

Statistics SA (2014b), Producer Price Index, various issues. Statistics South Africa.

Statistics SA (2014c), Export and Import Unit Value Indices, various issues. Statistics South Africa.

Statistics SA (2014d), Manufacturing: Production and Sales, various issues. Statistics South Africa.

Statistics SA (2014e), Manufacturing: Utilisation of Production Capacity by Large Enterprises. Statistics South Africa.

Statistics SA (2014f), Wholesale Trade Sales, various issues. Statistics South Africa.

Statistics SA (2014g), Retail Trade Sales, various issues. Statistics South Africa.

Statistics SA (2014h), Food and Beverages, various issues. Statistics South Africa.

Statistics SA (2014i), Quarterly Employment Statistics, various issues. Statistics South Africa.

Reserve Bank (2014), Quarterly Bulletin, September 2014. South African Reserve Bank.

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