Thoughts based on my last trip in South Africa (February 2017)
South Africa differs from other African markets which may not seem like most stable terrain for agriculture, as they are characterized by politically manipulated markets, weak legal systems and low pre capital income.
South Africa is a middle-income, emerging market with an abundant supply of natural resources; well-developed financial, legal, communications, energy, transport sectors and modern infrastructure supporting a relatively efficient distribution of goods to major urban centres throughout the region. Growth was robust from 2004 to 2007 as South Africa reaped the benefits of macroeconomic stability and a global commodities boom but began to slow in the second half of 2007 due to an electricity crisis and the subsequent global financial crisis; impact on commodity prices and demand. GDP fell nearly 2% in 2009 but recovered in 2010–12. Unemployment remains high, at nearly one-quarter of the work force, and outdated infrastructure has constrained growth.
Daunting economic problems remain from the apartheid era — especially poverty, lack of economic empowerment among the disadvantaged groups. South Africa’s economic policy focuses on controlling inflation — however, the country has had significant budget deficits that hamper its ability to deal with pressing economic problems.
Status of agriculture
Main agricultural products in order of importance are: maize, wheat, sugarcane, fruits, vegetables, beef, poultry, mutton, wool, dairy products.
Agriculture in South Africa contributes around 10% of formal employment, relatively low compared to other parts of Africa, as well as providing work for casual laborers and contributing around 2.6% of GDP. According to FAOSTAT, South Africa is one of world’s largest producers of chicory roots (4th); grapefruit (4th); cereals (5th); green maize and maize (7th); castor oil seed (9th); pears (9th); sisal (10th); and fibre crops (10th).
The South African administration has set a target of transferring 30% of productive farmland from whites to ‘previously disadvantaged’ blacks. Land reform has been criticized both by farmers’ groups and by landless workers, the latter alleging that the pace of change has not been fast enough, and the former alleging ‘racist’ treatment and expressing further concerns for the intentions and speediness of the efforts for the project.
To reverse the damage caused by land mismanagement, the administration has supported a scheme which promotes sustainable development and the use of natural resources. Maize production, which contributes to a 36% majority of the gross value of South Africa’s field crops, has also experienced negative effects due to climate change.
Opportunities for and obstacles to agricultural development in South Africa and COMPO presence
While South Africa has an economic and business environment favorable to the development of new agribusiness enterprises, it lacks the fertile land and climate advantages of other countries in sub-Saharan Africa. The land is generally arid and climatic conditions are not ideal for large scale commercial crop production. Only 13.5% of the land area is farmable and only 3% is considered to be fertile.
Foreign players that target the right sectors with the right strategies will prosper. The ‘key’ in my opinion is for all players to “MAP” their strategy before enter.
COMPO EXPERT SOUTH AFRICA entity is a ‘new child’ in Compo world and ready to take its first business’s steps.
Imagine that “you are a general taking your troops into foreign territory. Obviously you would need detailed maps and without such info you couldn’t — of course- communicate your strategy to your field officers and the rest of your troops”. Similarly we have to map our strategy and we need to adapt and leverage existing capabilities, to adjust our distribution strategy to reflect local conditions and constraints for having opportunities to thrive.
Making our best in serving customers with low margins but potential for huge volume is one of our challenges and we need to be fast, resourceful and effective.
Our first priority is to be shifted from a local player to a recognized local competitor and then to establish a business hub for neighborhood Eastern economies in order to enjoy higher profits for larger period.
But… building an enduring company is a marathon not a sprint!