The agro-processing industry is among the sectors identified by the Industrial Policy Action Plan (IPAP), the New Growth Path and the National Development Plan for its potential to spur growth and create jobs because of its strong backward linkage with the primary agricultural sector. The Department of Agriculture, Forestry and Fisheries (DAFF) has established a Directorate: Agro-processing Support to complement the interventions undertaken by several governmental departments, notably, the Department of Trade and Industry, by focusing on supporting the establishment and growth of Small and Medium Enterprises (SMEs) for agro-processing.
What is agro-processing?
According to FAO (1997), “Agro-processing industry is a subset of manufacturing that processes raw materials and intermediate products derived from the agricultural sector. Agro-processing thus means transforming products that originate from agriculture, forestry and fisheries.” The Standard Industrial Classification also categorises the following eleven divisions under the agro-processing industry: food, beverages, paper and paper products, wood and wood products, textiles, wearing apparel, furniture, tobacco, rubber products, footwear and leather and leather products.
Facts about agro-processing in South Africa
During 2014, the contribution of the agro-processing industry to the real value added (GDP) by the manufacturing sector and the economy accounted to 31.5% and 4.3% respectively. Furthermore, the contribution of the agro-processing industry to the real output of the manufacturing sector and the economy was 31.2% and 7.8% respectively. The industries’ share of real domestic fixed investment in the manufacturing sector and the economy was 18.4% and 3.2% respectively. Additionally, the total agro-processing exports relative to manufacturing sector and the economy was 16.6% and 9.7%, respectively, whilst the total imports relative to the manufacturing sector and the economy was 15.2% and 10.1% respectively. Lastly, the agro-processing industry accounted for 39.5% and 3.5% of the total employment in the manufacturing sector and the economy respectively (Quantec, 2014).
POTENTIAL OF START-UP AGRO-PROCESSORS
Potential to create jobs
Whilst large enterprises in the agro-processing industry contributed a significant share of the income and employment, the relative share of small and medium agro-processing enterprises to the total employment is higher compared to their share of total income in the industry (Quantec, 2014). Accordingly, small and medium agro-processing enterprises have a great potential of generating sustainable jobs.
Considering the forward & backward linkages and the spill over effect, the potential to create jobs is even greater within the agriculture, forestry & fisheries and the manufacturing sectors (NDP, 2010).
Enhance food security
Smallholder producers experience high post-harvest losses which negatively affects the financial sustainability of operations. According to Africa Post Harvest Loss Index (2014) loses for roots and tubers were at 10-40%, fruits and vegetables at 15-44%, whilst fish and sea food at 10-40%. Inherently, food security amongst rural communities is threatened.
However, agro-processing development endeavours have a potential reverse loses either through indigenous knowledge (drying, salting, crushing, pre-cooking) or modern technology based methods (extraction, canning, bottling, concentration). Therefore, agro-processing activities have a potential to positively contribute towards food security.
CHALLENGES EXPERIENCED BY START-UP AGRO-PROCESSORS
The following are some of the barriers of entry by small and medium agro-processors to penetrate and participate in the mainstream economy:
- High post-harvest loses;
- Inadequate funding instruments suitable to start-up agribusinesses;
- Lack of appropriate agro-processing technologies suited to start-up agro processors;
- None compliance to stringent agro-processing norms, standards and regulations; and
- Intermittent supply of raw material
To mitigate these barriers to entry, DAFF has developed policy, strategy and programmes which inform the mandate of the Directorate in terms of aims and functions.
To develop and implement policies and strategies intended to improve competitiveness of agribusinesses through the processing of agriculture, forestry and fisheries products.
Implementation of the DAFF strategy on support and development of agro-processing enterprises:
- Facilitate the implementation of enterprise and supplier development initiatives;
- Identify and encourage the use of novel and user friendly agro-processing technologies with idiosyncratic features compatible to start-up agribusinesses;
- Facilitate and ensure compliance of start-up agro processing enterprises to norms and standards (SABS) for processing facilities and processed products;
- Interact, liaise and collaborate with government departments, government agencies / entities and the private sector to systematically align and integrate agro-processing development initiatives to achieve rural industrialisation;
- Monitor and analyse the industry for provision of timeous and relevant agro-processing economic information; and
- Partner and collaborate with like-minded institutions to undertake applied research on pertinent technological, financial and economic determinants affecting the agro-processing industry.
Director: Agro-processing Support
Department of Agriculture, Forestry and Fisheries
2nd floor Sefala Building
503 Belvedere Street, Arcadia, South Africa
Private Bag X 416,
Tel: +27 (12) 319 8458/8457
Fax: +27 (12) 319 8093