What is agro-processing?
According to the Standard Industrial Classification (SIC) the agro-processing industry is categorised as a subset of the manufacturing sector. Further, the agro-processing industry is demarcated into the following 11 divisions: food; beverages; paper and paper products; wood and wood products; textiles; wearing apparel; furniture; tobacco; rubber products; footwear; and leather and leather products. While agro-processing activity refers to the value chain actions that may either be nutritional, technological and/or economic that primary agriculture products undergo for alterations into usable items such as food, fibre, fuel and industrial raw material.
A critical review of the literature indicates various ways to categorise agro-processing activities. Classification may be determined as follows:
- The type of products being manufactured (Esterhuizen & van Rooyen, 2006; Louw et al., 2013; Masuku et al., 2007);
- The intensity of technology utilisation in the manufacture of specific products (Thindisa & Urban, 2013);
- The level of upstream and downstream activities, where the former relates to the initial activities of processing raw agricultural commodities while the later refers to complex processing of intermediate products (Chisoro-Dube et al., 2018; FAO, 1997; Owoo & Lambon-Quayefio, 2017);
- Primary, secondary and tertiary processing activities (FAO, 2017; Thindisa & Urban, 2014);
- On-farm and off-farm activities—otherwise known as domestic and factory activities, respectively (Owoo & Lambon-Quayefio, 2017); and
- The number of people employed by the firm.
The benefits that are likely to accrue for agribusinesses from participation in agro-processing activities are facilitation of easier handling of bulk products and increased shelf-life of perishable products in response to market demands. Consequently, enhance the competitiveness of agribusinesses, industries and subsequently, the sector.
The Department of Agriculture, Land Reform and Rural Development (DALRRD) solicits its mandate from the Bill of Rights in Chapter 2, Section 27 (1) (b) of the Constitution of the Republic of South Africa, Act No.108 of 1996 as amended. It states that “everyone has the right to have access to sufficient food and water”. Further, the National Development Plan (NDP, 2011), Chapter 6 titled “Rural Economy” articulates the latent potential of agro-processing activities to improve household food insecurity. Food processing activities are noted for the latent potential to mitigate high post-harvest losses experienced by farmers and the subsequent negative impact on household food security (Food and Nutrition Security Strategy, 2013). Post-harvest losses relate to a collective food loss along the agro/food value chain, from harvest and handling, to storage, processing, packing and transportation. A study by the Council for Scientific and Industrial Research (CSIR) indicates that 9 to10 million tons of food are wasted per annum, which translates to roughly 2% of the gross domestic product (GDP).
Competitive performance of the agriculture and agro-processing industries is likely to contribute to inclusive economic growth and sustained development through back-forward linkages. Initially, by providing various opportunities for earning income in the primary food production, then in processing and value-add and distribution, and finally, in the retailing phases of the agro/food value chain. The growth of the agro-processing industry has the potential to stimulate and spur demand for raw material from the agricultural industry and thereby create novel output markets that increase the income of farmers, which in turn enables investment in capital equipment to improve productivity. The growth and development of the agro-processing industry is intertwined with the agricultural industry. Therefore, the latent potential of agro-processing activities is noted as capable to contribute towards the reduction of unemployment, inequality and poverty levels through backward and forward linkages.
The DALRRD, through the Directorate: Agro-processing Support, is geared to complement interventions undertaken by several governmental departments, notably, the Department of Trade, Industry and Competition (the dtic), by focusing on catalysing and encouraging farmers to undertake agro-processing and value-add activities. Further, support and develop small and medium agro-processing agribusinesses.
Statistical description of the agro-processing industry in South Africa
During the third quarter of 2020, South Africa recorded employment of approximately 9,6 million, which is a decline of about 6,1% compared to the same quarter of the previous year. The decline is mainly because of restriction in economic activities due to negative impact of COVID-19. The manufacturing sector accounted for 11,7% of South Africa’s total employment. Similarly, the agro-processing industry had a share of 4%. However, in relation to the employment in manufacturing sector, about 38,1% is accounted for by the agro-processing industry (Statistics South Africa, 2021).
SYSTEMS LEVEL CONSTRAINS FACING AGRO-PROCESSORS
The following are some of the barriers of entry for small and medium agro-processors to penetrate and participate in the mainstream economy:
- Inadequate infrastructure (on and off-farm);
- Non-compliance to mandatory and private food manufacturing standards;
- Inadequate value chain funding instruments suitable to agro-processing agribusinesses;
- Insufficient investment in research and development—innovation is a source of competitive advantage;
- Lack of appropriate agro-processing technologies suited to small and medium agro-processing agribusinesses;
- Slow pace of implementing the 30% set-aside on food procurement by the state;
- Instability and intermittent supply of raw material.
To mitigate these barriers to entry, DALRRD has developed policies, strategies and programmes, which inform the mandate of the directorate in terms of aims and functions.
To develop and implement policies and strategies intended to enhance competitive performance of agro-processing agribusinesses.
Implementation of the Strategy on the Support and Development of Small and Medium Agro-processing Agribusinesses
- Identification of the emergent sector opportunities for dissemination to value chain actors;
- Participate in various credit adjudication committees to influence the funding of feasible and viable agro-processing business cases;
- Facilitate the implementation of enterprise and supplier development initiatives;
- Oversee the implementation of the agro-processing certification programme;
- Identify and encourage the use of novel and user friendly agro-processing technologies;
- Implement the systematic alignment programme through the National Agro-processing Forum;
- Monitor and analyse the industry for provision of timeous and relevant agro-processing economic information;
- Collaborate with like-minded institutions to undertake applied research on pertinent technological, financial and economic determinants affecting the agro-processing industry.
credit adjudication committees
National Agro-processing Forum
Director: Agro-processing Support
Department of Agriculture, Land Reform and Rural Development
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