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WHEATMARKET VALUE CHAIN PROFILE 2010-2011

WHEAT

1. DESCRIPTION OF THE INDUSTRY

Wheat is the second most important grain crop produced in South Africa. Most of wheat produced in South Africa is bread wheat, with small quantities of durum wheat being produced in certain areas and is used to produce pasta. In South Africa, wheat is mainly used for human consumption (bread, biscuits, breakfast cereals, rusks, etc) and the remaining is used as seed and animal feed. There are other non-food uses such as production of alcohol for ethanol, absorbing agents for disposable diapers, adhesives and industrial uses as starch on coatings.

Producers of wheat are estimated to be approximately between 3 800 to 4000.

Figure 1: Wheat: Gross Value of Production

02000000400000060000008000000

100000001200000014000000160000001800000020000000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Years

R 0

00

Source: Agricultural Statistics

The contribution of the wheat industry to the gross value of agricultural production as shown in Figure 1 above remained below 4 million rands between the years 2000 and 2003 until a peak was attained in 2004. There has been a substantial decline in the industry’s contribution to the gross value during 2003 mainly due to unfavorable weather conditions that resulted in decreased crop yields domestically. The wheat industry’s contribution to the gross value of agricultural production increased dramatically during the year 2004 contributing more than 18 million rands but dropped again to levels experienced before 2004 when this industry experienced a surge in imports between 2005 and 2009.

1.1 PRODUCTION AREAS

Wheat is planted between mid – April and mid – June in the winter rainfall areas and between mid – May and end of July in the summer rainfall areas. It is produced throughout South Africa with the Western Cape, Northern Cape and Free State provinces being the largest producers accounting for 82% of total wheat production during the 2009 season as shown in Figure 2. Approximately 20% of the total area planted to wheat is cultivated under irrigation and 80% under dry land conditions.

234 wHeAT MArKeT VAlue CHAIn ProfIle 2010-2011

Figure 2: Wheat production by provinces 2009

Western Cape36%

Northern Cape14%

Free State32%

Limpopo5%

Kwazulu Natal2%

Mpumalanga2%

Gauteng1%

North West7%

Eastern Cape1%

Western Cape Eastern Cape Northern Cape Free State Kw azulu Natal

Limpopo Mpumalanga Gauteng North West


Smaller quantities of wheat are also produced in other provinces such as Kwazulu-Natal, Eastern Cape, Mpumalanga and Limpopo. Wheat in South Africa is produced mainly for human consumption, although small quantities of poorer quality wheat are marketed as stock feed. Approximately 60 percent of the total quantity of wheat flour and meal is used for the production of bread.

Table 1: Wheat production by provinces

PROVINCEProduction

(tons) 2004

Production (tons) 2005





Western Cape 520 000 645 000 730 000 813 000 823 000 701 000

Eastern Cape 14 000 14 000 8 000 15 000 22 000 20 000

Northern Cape 300 000 306 000 250 000 260 000 315 000 277 000

Free State 510 000 580 000 780 000 484 000 532 000 623 000

Kwazulu-Natal 34 000 42 000 31 000 29 000 35 000 35 000

Limpopo 63 000 50 000 81 000 58 000 110 000 99 000

Mpumalanga 80 000 92 000 77 000 26 000 42 000 41 000

Gauteng 14 000 14 000 10 000 10 000 12 000 13 000

North West 145 000 162 000 138 000 117 000 131 000 137 000


Table 1 indicates that wheat is produced in all the nine provinces of the republic with the Western Cape Province being the major producer during the past six years. Greater quantities of wheat are

235wHeAT MArKeT VAlue CHAIn ProfIle 2010-2011

also produced in the Free State and Northern Cape Provinces. The quantity of wheat produced in the Western Cape Province has shown a continuous increase between the years 2004 and 2008 while the Northern Cape Province has experienced a slight decline in the volumes of wheat produced between 2006 and 2007. The volumes of wheat produced in the Free State Province have experienced fluctuations while the North West province has declined substantially between 2006 and 2007, followed by an increase in 2009.

1.2 PRODUCTION TRENDS

Figure 3: Area Planted to Wheat and Total Production

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a Pl

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l Pro

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Area Planted (1000 ha) Total Production (1000 tons)


According to FAO, South Africa is the largest producer of wheat in the SADC region and the fourth largest producer on the African continent. Globally, South Africa is ranked number 37 in terms of wheat production, with China being the world’s leader in production. Areas planted to wheat in South Africa have been relatively stable at an average of 800 000 hectares as from 2000 to 2005 as can be seen from Figure 3 above. The area planted to wheat declined significantly during 2007 leading to a decrease in production volumes during the same period. The area planted increased from 2000 until 2002 and this led to a massive increase in production volumes over the same period. However, wheat production showed a decline during the year 2003 due to unfavorable climatic conditions in the country that resulted in lower crop yields and this was followed by slight increases in production volumes from 2004 until 2006. Both production volume and area planted to wheat declined substantially during the 2007 year in spite of increasing producer prices. The wheat production volumes increased slightly in 2008 followed by a decline during the year 2009.

1.3 EMPLOYMENT

Wheat farmers provide work opportunities to about 28 000 people. From 1992 to 1998 employment has decreased by 25% in the milling industry as a result of improved efficiency and some milling units being closed. The new small entrants into the market are creating new employment opportunities, but on a low basis and not fast enough to counter the negative impacts of the losses at the large mills. The total capital investment in the milling industry is approximately R3 billion and it is estimated to employ around 3 800 people.


2. MARKET STRUCTURE

2.1 DOMESTIC MARKET

The major product of the baking industry is bread and 70 to 80 percent of all wheat flour produced is used for bread baking. The industry is a second major supplier of energy in the national diet after maize meal. Annual consumer expenditure on bread was estimated at R6 700 million in 2000 compared to an expenditure of R6 200 million for maize products.

National bread consumption is estimated at 2 800 million loaves per annum or approximately 62 loaves per person per annum. There are, however, considerable differences between the provinces in terms of total consumption and preference for white or brown bread. For example, the per capita consumption in Gauteng is 86 loaves per annum compared to 44 loaves in Limpopo. In the Western Cape 76% of all bread eaten is white bread. In Limpopo however, 25% of the bread eaten is white while the balance is brown bread.

Figure 4: Total Wheat Production vs Consumption

0

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3500

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2009

Years

1000

tons

Production (1000 tons) Consumption (1000 tons)


Figure 4 indicates that the total annual production of wheat is generally less than the domestic consumption requirements. Between 2000 and 2002 marketing year (except the year 2001) there has been a shortage of wheat in the country, which had to be met by imports from other countries. In 2003 the production volume was at the lowest level which created a considerable deficit at that time. This situation intensified even further between the years 2003 and 2009 when a substantial decrease in wheat production occurred relative to the domestic consumption requirements. The consumption of wheat as shown by Figure 4 has been experiencing continual marginal increases between 2003 and 2009 while the production quantities fluctuated considerably.


Figure 5: Average Wheat Producer Prices

0

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2009

Period (Years)

Rand

s/To

n


Wheat producer prices experienced a steady increase between the period 2000 and 2002 in response to a steady increase in the demand for wheat and wheat products. From 2003 producer prices declined until the lowest level was attained in 2005 owing to unfavorable weather conditions that prevailed during 2003 and necessitated a reduction in areas planted to wheat and consequently production. Producer prices recovered again and increased substantially between 2006 and 2007 when domestic demand also experienced a sharp increase. The average producer prices for wheat experienced a marginal decline below R2 500/ton during 2008 and declined further in 2009 to about R1 600/ton.

2.2 WHEAT ExPORTS

South African wheat flour exports into the SACU and the SADC regions have shown a slow increase, particularly from the year 2000, due to low priced imported flour from the West and East either in the form of subsidized imports or donations. This situation was further aggravated by wheat imported from outside the SACU region subject to a rebate on import duty.

Figure 6 indicates that South Africa was not competitive in exporting wheat between the years 2001 and 2007. During this period South Africa exported more wheat and wheat products for less.


Figure 6: Wheat Exports

0

50000

100000

150000

200000

250000

300000

2000

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2009

Marketing Years

Qua

ntity

of E

xpor

ts (T

ons)

0

200000000

400000000

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800000000

1000000000

1200000000

Valu

e of

Exp

orts

(Ran

ds)

Exports (tons) Value of Exports (Rands)

Source: Quantec Easy Data Wheat exports from South Africa to the rest of the world fluctuated considerably over the period under analysis. The period under review opened with relatively higher wheat exports, especially in 2000 and 2001. The exports declined dramatically between the years 2002 and 2006 mainly as a result of declining levels of local production and increasing local consumption of wheat products. During the same period greater volumes of wheat and wheat products were exported at lower values. The value of wheat exports regained during 2008 when about 150 thousand tons of wheat were exported to the world at higher values.

South Africa’s wheat flour exports are mainly to SACU and SADC countries such as the Democratic Republic of Congo, Malawi, Zambia, Zimbabwe, Angola and Mozambique. The greatest share of South Africa’s wheat flour exports are to Democratic Republic of Congo, Malawi and Zimbabwe.


Figure 7: Value of wheat exports by province

0

200000000

400000000

600000000

800000000

1000000000

1200000000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Period (years)

Expo

rts

Valu

e (R

ands

)

Western Cape Free State Kwazulu-Natal North WestGauteng Mpumalanga Limpopo

Source: Quantec Easy data

Exports of wheat are mainly from the Gauteng, Kwazulu-Natal and Western Cape Provinces; with the Gauteng Province commanding the greatest share in the value of wheat exports between 2000 and 2009. The value of wheat exports from the Gauteng Province increased steadily between 2000 and 2001. Wheat export values from the Gauteng Province then experienced a drastic decline until 2006. On average the value of wheat exports from the other three provinces have been below 100 million rands during the entire period under review. Exporters who are mainly situated in the Gauteng Province source out wheat from the major wheat producing provinces such as the Western Cape, Northern Cape and the Free State provinces. Furthermore, the presence of the Randfontein grain market also accounts for the greatest share in Gauteng’s wheat exports.


Figure 8: Value of wheat exports from the Western Cape Province

0

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25000000

30000000

35000000

40000000

45000000

50000000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Period (Years)

Expo

rts V

alue

(Ran

ds)

City of Cape Town Metropolitan Municipality Cape Winelands District MunicipalityOverberg District Municipality


In the Western Cape Province, the wheat exported is mainly through the City of Cape Town Metropolitan Municipality precisely due to the use of the Cape Town Harbor as an exit point for the export of wheat. The Cape Wine-lands district only recorded exports of wheat between the years 2007 and 2008 while very menial export value was recorded from the Overberg district during 2006. From the Western Cape it is clear from Figure 9 that there were no wheat exports from the Cape Wine-lands and Overberg Districts between the periods 2000 and 2005. The highest value of wheat exports from the Western Cape Province was recorded from City of Cape Town District during the year 2009.

Figure 9: Value of wheat exports from Kwazulu-Natal Province

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

45000000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Period (Years)

Expo

rts V

alue

(Ran

ds)

UMgungundlovu District municipality Umzinyathi District municipalityAmajuba District municipality eThekwini Metropolitan Municipality



The value of wheat exports originating from the KwaZulu-Natal Province are mainly through the eThekwini Metropolitan District with intermittent exports recorded from UMgungundlovu, UMzinyathi and Amajuba districts. The value of wheat exports through the eThekwini Metropolitan district has fluctuated considerably during the period under review and reached a peak in 2009.

Figure 10: Value of Wheat Exports from Gauteng Province

0

200000000

400000000

600000000

800000000

1000000000

1200000000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Period (Years)

Expo

rts

Valu

e (R

ands

)

Sedibeng District municipality West Rand District MunicipalityEkurhuleni Metropolitan Municipality City of Johannesburg Metropolitan MunicipalityCity of Tshwane Metropolitan Municipality


Figures 9 and 10 further confirm an earlier observation about the role played by the Randfontein grain market and the Durban harbor in the trading of grain products. The City of Johannesburg Metropolitan district commanded the greatest shares of wheat exports in Gauteng between the periods 2000 and 2009 exhibiting a similar trend shown in Figure 8. The values of wheat exports from the other four districts within the Gauteng Province have been very low during the same period under review.

2.2.1 SHARE ANALYSIS

Table 2: Share of provincial wheat exports to the total RSA wheat exports (%)

Years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Province

Western Cape 0.02 0.04 0.14 0.85 0.00 0.00 10.43 56.33 5.76 20.16

Kwazulu-Natal 6.47 2.45 2.11 12.51 32.19 6.05 0.02 1.19 0.83 16.77

Gauteng 93.50 97.50 59.25 50.83 67.80 93.93 89.54 42.46 93.39 60.81

Mpumalanga 0.00 0.00 38.48 35.79 0.00 0.00 0.00 0.00 0.00 0.00

Limpopo 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.41

Source: Calculated from Quantec Easy data

Table 2 above indicates that between the periods 2000 and 2009, the Gauteng province commanded the greatest share of wheat exports with the exception of the 2007 year when the Western Cape


Province commanded 56% of wheat exports from South Africa. Smaller wheat export values were also recorded from the Kwazulu-Natal province during the same period with irregular intermittent exports occurring through the Mpumalanga province. This observation is in contrast to the trends in wheat production domestically, since wheat is produced mainly from the Western Cape, Free State, and Northern Cape and North West provinces of the country. It stands to reason that wheat produced in these provinces is moved to the Gauteng Province where the major exporters are situated and due to the trading of grain that occurs through the Randfontein grain market, the greatest percentage of wheat is recorded as originating from the Gauteng Province.

Table 3: Share of district wheat exports to the total Kwazulu-Natal provincial wheat exports (%)

Years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

District

UMgungundlovu 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.00 0.00

UMzinyathi 0.00 0.00 0.00 0.00 0.00 0.00 100 0.00 0.00 0.00

Amajuba 0.00 0.00 10.62 0.00 0.00 0.00 0.00 0.00 0.00 0.00

EThekwini 100 100 89.37 100 100 100 0.00 99.98 99.99 100


During the period under review the eThekwini Metropolitan Municipality commanded the greatest share of wheat exports from the KZN Province with the exception of the 2006 year when all wheat exports occurred through the UMzinyathi district of the province.

Table 4: Share of district wheat exports to the total Gauteng provincial wheat exports (%)

Years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

District

West Rand 0.00 0.00 0.08 0.14 8.53 0.00 5.46 1.51 0.01 0.00

Ekurhuleni 0.00 0.00 2.06 0.00 0.02 0.00 0.66 0.00 2.22 0.28

City of Johannesburg

100 100 95.64 55.25 90.02 99.95 93.86 98.49 97.76 42.41

City of Tshwane 0.00 0.00 4.27 44.60 1.41 0.05 0.00 0.00 0.00 57.30


In the Gauteng province, the City of Johannesburg Metropolitan Municipality commanded the greatest share of wheat exports between the years 2000 and 2009. Menial and irregular export values for wheat were also recorded in the West Rand, Ekurhuleni and City of Tshwane districts. As mentioned earlier on, that the Gauteng province commands the greatest share of wheat exports primarily because of the presence of the majority of exporters in the province, the role played by the Randfontein grain market and the comparative advantages Gauteng has over other provinces in terms of the availability of marketing infrastructure and logistics support services.


Table 5: Share of district wheat exports to the total Western Cape provincial wheat exports (%)

Years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

District

City of Cape Town 100 100 100 100 100 100 99.99 86.78 56.49 99.99

Cape Wine-lands 0.00 0.00 0.00 0.00 0.02 0.00 0.00 13.21 43.50 0.003

Overberg 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.004


Between the years 2000 and 2009 the City of Cape Town Metropolitan Municipality commanded the greatest share of wheat exports originating from the Western Cape Province with the Cape Wine-lands district recording smaller export values during 2007 and increasing its share during 2008. In 2009 Overberg and Cape Winelands Districts contributed less than 0.1% to the Western Cape’s total wheat exports while the City of Cape Town commanded the greatest share with about 99.99%.

2.3 WHEAT IMPORTS

South Africa is not a major producer of wheat in the world; it imports wheat to supplement domestic production. We are a net importer of wheat with a self-sufficiency index of around 80% to 85%. The major producers of wheat in the world are: China, EU Countries, USA, India, Canada, and Eastern European countries, Turkey, Australia and Argentina. These countries produce almost 90% of the world production. The top countries where South Africa imports wheat from are Argentina, Australia, France, UK and the USA.

Figure 11: Wheat Imports

0

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600000

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1000000

1200000

1400000

1600000

Period (Years)

Qua

ntity

(ton

s)

Series2 624000 308000 407000 747000 1042000 1227000 569000 1098444 1396000 1315506

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Agricultural Statistics & Quantec Easy Data

Figure 12 indicates that wheat imports fluctuated considerably in volume over the past decade. The quantities of wheat imported during the years before 2003 were lower than 800 thousand tons mainly due to the larger production volumes that were experienced locally during the past seasons. Due to a shortage of wheat in the country from 2004 that was caused by a decline in production volumes that occurred while the consumption remained relatively stable during that period, wheat


imports increased considerably by volume. Imports of wheat have increased by approximately 60% between 2003 and 2005. The increase is due to unfavorable production seasons experienced by domestic producers. Rainfall was erratic and below normal in many areas of the main producing regions, which resulted in lower yields. During the year 2006 imports of wheat declined substantially in volume terms owing to a slight recovery in production but increased again between 2007 and 2008, followed by a slight decline in 2009.

Figure 12: Volume of wheat imports from various regions

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Period (Years)

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rts V

olum

e (T

on)

Africa Americas Asia Europe Oceania

Source: Quantec Easy Data

South Africa imports wheat mainly from the Americas and Oceania and on a smaller scale from some Asian and African countries. Figure 13 indicates that during the period under review South Africa has imported wheat mainly from the Americas with a substantial decline in the volume of the wheat imports originating from the Americas between 2006 and 2009.


Figure 13: Volume of wheat imports from the Americas

0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Period (Years)

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rts

Volu

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(Ran

ds)

South America NAFTA


In the Americas wheat imports originated mainly from South America and NAFTA (North American Free Trade Area). The value of wheat imports originating from NAFTA into South Africa experienced a continual increase from the year 2003 until a peak was reached in 2005, followed by a decline until 2009.

Figure 14: Volume of wheat imports from NAFTA

0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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rts

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(Ton

)

Canada Mexico United States


In the North American Free Trade Area (NAFTA), imports of wheat into South Africa originate mainly from the USA and Canada while Mexico recorded menial exports during 2006 and 2008.


The USA has been a consistent supplier of wheat to South Africa between the period 2003 and 2005 having shown increases in the volume of wheat exports to South Africa over the same period. The USA and Canada are amongst the world’s largest producers of wheat and this can be one of the reasons for lager amounts of wheat imports from these countries.

Figure 15: Volume of wheat imports from South America

0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Period (Years)

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(Ton

)

Argentina Brazil


Argentina in South America has been a consistent sole supplier of wheat imports into the RSA between 2000 and 2009. The volume of wheat imports from Argentina increased from the lowest levels in 2000 to attain a peak in 2001 but later declined until 2003. A marginal increase in the volume of wheat imports from Argentina then occurred between 2004 and 2007 with substantial increase recorded during 2008. During the year 2009, volume of wheat imports from Argentina declined while those from Brazil increased marginally.


Figure 16: Volume of wheat imports from Oceania

0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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Volu

me

(Ton

s)

Australia


Imports of wheat from Oceania originate mainly from Australia and, the volume of wheat imports from this country into South Africa has undergone tremendous fluctuations during the entire period under review with a peak attained during the year 2001. A substantial decline in imports originating from Australia was recorded between the years 2002 and 2004 owing mainly to increased imports originating from the Americas. Only minimum amounts of wheat were imported from Oceania, particularly Australia, between the years 2005 and 2009.

Figure 17: Volume of wheat imports from Asia

0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Period (Years)

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rts V

olum

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ons)

Eastern Asia South-central Asia South-eastern Asia Western Asia



In Asia, South Africa has imported wheat from South-Central-Asia between 2002 and 2004 with a peak during 2002 and thereafter declined substantially until 2009. Intermittent import volumes for wheat have also been recorded as originating from Eastern, South-eastern and Western Asia.

2.4 MARKET VALUE CHAIN

The local market for South African wheat industry includes the milling industry, the baking industry and the retail sector.

Figure 18: The Wheat Market Value Chain

Input Suppliers Wheat

farming Storage

Baking

Imported Wheat

Wheat based Goods Manufacture

Milling Imported Wheat

Animal Feed Manufacture

Imported Flour

Wholesalers Poultry & Meat Farming

Retailers

Consumers

Input suppliers provide seeds, fertilizer, pesticides fuel, etc to farmers who the grow wheat. The wheat is harvested and stored in numerous storage facilities, including imported wheat. This is then delivered to milling companies who mill the wheat into wheat flour, meal and bran that are used in three different ways. The wheat flour can be used in the baking industry to manufacture perishable products such as pan loaves, rolls, buns, confectionery products and other products such as frozen dough and par baked products. Wheat based goods products such as biscuits, pasta, crackers and breakfast cereals can also be manufactured from the wheat flour. The animal feed manufacturing industry also uses the wheat meal and bran to manufacture farm feeds and pet foods.

2.4.1 BAKING INDUSTRY

According to the South African Chamber of Baking there are five different types of baking units namely: plant, wholesale, industrial, in-store and other bakeries. There are a large number of informal bakers. The bakers produce mainly bread and other products like biscuits, pies, pizza’s etc. The plant bakeries are still popular although there is a significant number of retail baking which may impact negatively on the plant bakeries. According to the HSRC survey (2002) the baking units in South Africa are estimated at 7 905, providing approximately 45 500 job opportunities. The Food Price Monitoring Committee report also indicates that there are approximately 52 200 informal bakers who operate in non – licensed premises. Growth in this industry took place through the


establishment of franchises and in- store bakeries. The major companies are Albany, Blue Ribbon, Sasko, Sunbake and BB Cereals.

2.4.2 WHEAT VALUE CHAIN TREE

With the exception of the milling process explained earlier on, that produces wheat flour, bran and meal wheat is also suitable for other products. The fact that it contains gluten

Figure 19: Wheat Value Chain Tree

Wheat

Wheat Protein

Wheat Stubble Wheat

Gluten

Wheat Starch

Wheat flour Wheat

meal & bran

Wheat beer

Other Confectionery products

Bread

Fat replacement in desserts

Blasting/ Paint stripping

Cereal products

Meat substitutes

Strawboards for furniture, floors and kitchen cabinets

Cosmetics such as shampoos & conditioners

Ethanol

Adhesives

Paper

Biodegradable Plastics

Animal Feeds, Pet food

(Protein) and starch also make it functional in non-food and industrial applications. Wheat gluten has the ability to be elastic, bind water and form films that can be stabilized with heat. These properties render wheat useful for the preparations of adhesives, coatings, polymers and resins. Wheat is being utilized in many other products as shown in Figure 22.

3. MARKET INTELLIGENCE

The following tariffs are applied by the various export markets to wheat originating from South Africa:


Table 6

COUNTRYPRODUCT

DECRIPTIONTRADE REGIMEDESCRIPTION

APPLIED TARIFFS

ESTIMATED TOTAL AD VALOREM EQUIVALENT TARIFF

PERIOD 2010

Zimbabwe

Durum Wheat (10011000)

MFN duties (Applied) 0.00% 0.00%

Wheat and Meslin: excl. durum wheat (10019000)


Zambia




Preferential Tariff for South Africa 0.00% 0.00%





Malawi





Mozambique





Kenya





DRC




Source: ITC Market Access Map

Taking into account the tariff levels, it is evident from Table 6 that the potential markets for the export of wheat originating from South Africa are Malawi, Mozambique, Zambia and Zimbabwe mainly because they do not charge tariffs on the wheat originating from South Africa. Although countries such as Zambia and Mozambique charge tariffs on wheat imports, South Africa benefits


from the SADC Free Trade Agreement and does not have to pay any tariff to export wheat to these countries. Zimbabwe and Malawi do not levy any duties on wheat imports. The DRC applies a 5% ad valorem on wheat imports originating from the rest of the world including South Africa.

As far as import tariffs are concerned, South Africa levies a tariff of R260.90/ton on imports of wheat originating from the rest of the world except member states of SADC. Due to the SADC Free Trade Agreement SADC member states can export wheat to South Africa free of duty. A tariff charged by South Africa on imports of wheat or meslin flour is R391.30/ton.


Source: ITC Trade Map


4. PERFORMANCE

Figure 20

Betw

een 2005 and 2009 South A

frica has experienced

a massive increase in the value of w

heat im

ports from

the rest of the world

. South Africa’s total w

heat imp

orts from the w

orld increased

by

21% in value b

etween the years 2005 and

2009. Figure 20 and

Table 7 ind

icate that South Africa

experienced

a decline in im

ports of w

heat from A

ustralia, Ukraine, Italy and

USA

. Imp

orts from

Germ

any and A

rgentina increased

by 48%

and 8%

respectively in value b

etween the years 2005

and 2009.

Table 7: List o

f supp

lying m

arkets for the w

heat imp

orted

by So

uth Africa in 2009

Exporters

Imported Value in 2009 (US $ thousand)

Share in South Africa’s Imports (%)

Imported Quantity in 2009 (tons)

Unit Value (US $/ton)

Importedgrowth in Value between 2005-2009, % p.a.

Imported growth in quantity between 2005 and 2009, % p.a.

Imported growth in value between 2008-2009, % p.a.

World

274 841

1001315856

20921

5-37

Germ

any157 744

57.4788 919

20048

27125

Arg

entina50 122

18.2197 252

2548

-13-79

Australia

24 6379

100 102246

-55-9

-

Canad

a10 481

3.847 979

21858

37-74

USA

10 1643.7

56 033181

-2-11

-89

Brazil

8 8363.2

50 146176

Ukraine

7 9812.9

50 308159

-56-6

Poland4 819

1.825 016

193

India

310

42738

2680

Source: ITC Trad

e Map

Figure 21 and

Table 7 also ind

icate that Germ

any and A

rgentina are the b

igg

est supp

liers of wheat

to South Africa having

contributed

57.4% and

18.2% to South A

frica’s total wheat im

ports. Fig

ure 21 also ind

icates that grow

th of these countries’ wheat exp

orts to South Africa is faster than the

grow

th in their wheat exp

orts to the rest of the world

. The figure and

the Table also show

that South A

frica also imp

orted w

heat from countries such as A

ustralia, Canad

a, USA

and B

razil. As ind

icated

in Figure 21, should

South Africa w

ish to diversify its im

ports of w

heat and m

eslin, big

markets exist

in France, Canad

a and M

alawi.

254w

He

AT M

Ar

Ke

T VAlu

e C

HA

In Pr

ofIle

2010-2011



Figure 21

The list of imp

orting m

arkets for the wheat exp

orted b

y South Africa is show

n in the following

table

(Table 8)

Table 8: List o

f imp

orting

markets fo

r wheat exp

orted

by So

uth Africa in 2009

Importers

Exported Value in 2009 (US $ thousand)

Share in South Africa’s Exports (%)

Exported Quantity in 2009 (tons)

Unit Value (US $/ton)

Exported Growth in Value between 2005 -2009 (% p.a.)

Exported Growth in quantity between 2005 and 2009 (% p.a.)

Exported Growth in Value between 2008and 2009(% p.a.)

World

27 412100

79 337346

9648

-79

Zimb

abw

e19 792

72.262 026

319190

14857

Zamb

ia6 823

24.915 244

44862

9-94

Mozam

biq

ue694

2.51 904

36473

1019814

Malaw

i73

0.3146

500-

--

Kenya

150.1

53 000

--

-

DRC

60

0-

-32-

-

Source: ITC Trad

e Map

The major exp

ort markets for w

heat originating

from South A

frica are Zimb

abw

e, Zamb

ia, M

ozamb

ique and

Malaw

i. Table 8 and

Figure 22 ind

icate that Zimb

abw

e is the big

gest im

porter

of wheat from

South Africa follow

ed b

y Zamb

ia, Mozam

biq

ue and M

alawi. In 2009 Zim

bab

we

absorb

ed 72.2%

of South Africa’s total w

heat exports follow

ed b

y Zamb

ia and M

ozamb

ique w

ith 24.9 and

2.5% resp

ectively. Table 8 further ind

icates that volume exp

orts of wheat from

South Africa

to Zimb

abw

e increased b

y 148% w

hile those to Zamb

ia and M

ozamb

ique increased

by 9%

and

101% resp

ectively.

256w

He

AT M

Ar

Ke

T VAlu

e C

HA

In Pr

ofIle

2010-2011



Figure 21

5. ORGANIZATIONAL ANALYSIS OF THE INDUSTRY

5.1 STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS

5.1.1 WHEAT PRODUCERS

Strengths Weaknesses

Production knowledge has been acquired over many years

Expensive crop insurance and limited insurance capacity

The industry is well supported by a strong producers’ organization and sound cultivar base for production

Slow adoption of hedging mechanisms to reduce price risk

Is an important contributor to the economy of the rural areas and the total agricultural GDP

Climatic variability resulting in variable production patterns, particularly in summer rainfall areas

Limited number of new entrants from the developing sector

Inadequate extension services

Opportunities Threats

There are possibilities to increase supply to satisfy the local and regional demand and possibly satisfy niche export markets

Subsidies imports / dumping

Can lead to increases in employment in rural areas

Slow administrative processes to adjust tariffs

Incorporate developing commercial farmers to expand capacity

Deterioration of rail networks servicing the silos

Significant productive capacity is available High transport costs resulting in low farm gate prices

There are possibilities of producing durum wheat

Non-tariff barriers affect South African wheat exports negatively

5.1.2 MILLERS


Well organized industry associations High input costs

There are sound infrastructure and training standards

Lack of innovation for new products

Developed telecommunication network Low export orientation

Availability of labor force Highly distorted international market

There is a strong Export Committee and highly skilled professionals and institutions for research

Inadequate protection against unfair competition



Beneficiation of raw material Unfair competition from cheap subsidized imports

There is available production capacity Non-tariff barriers by SACU and SADC members

There is domestic and regional demand Changes in consumer preferences

There exist preferential export markets (in terms of African Growth and Opportunities Act, European Union, Southern African Development Community)

Changes in regional dynamics and multi-lateral arrangements

Shift in consumer demand from maize meal to bread

Lack of customized incentives

Poor domestic/regional market economic conditions

5.1.3 BAKERS


Stable market particularly for bread Uninformed and inexperienced entrants into the baking industry

Market growth particularly for confectionery products

Non-compliance with bread mass regulations

A diversified product market with a wide range of baked products that can be marketed

Limited commitment to training and BEE and women empowerment

Strong domestic market Overall poor legislative control and patchy quality control

Use of first world baking technology, processes and equipment

A strong core of dynamic entrepreneurs and baking specialists



Growth potential for bread as household incomes increase

High cost of inputs

Market opportunities for a wide range of value added baked products

Market saturation

Promotional opportunities as a result of the introduction of fortified bread

Imported baked products particularly biscuits

Opportunities for bakers and baking stakeholders in Africa

Health ‘scare stories’ related to baked products

Development of HACCP systems for the industry

Unavailability of suitable trained personnel in the industry

Development of products with health enhancing properties

Development of financing packages tailored to the needs of small entrepreneurs and BEE entrants to the industry


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