The Agribusiness Export Awareness Workshop

at St Georges Hotel, Pretoria, 23 February 2012

Doing Agribusiness in African CountriesOpportunities and Practicalities to Consider

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Lawrence McCrystal : Director, Agrifica (Pty) Ltd

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ABOUT AGRIFICA Established : 2001, based in Pretoria

Vision To see agriculture play a leading role in Africa’s economic development.

Values Integrity, Honesty, High Ethical and Moral Standards; Service Orientated, Hardworking, no Shoddy work.

Mission To promote Agriculture and Agricultural / Agribusiness activities in Africa with SA as the springboard and

involving SA Agricultural / Agribusiness Technology, Management, know-how and practical experience and skills.

Activities • Quarterly magazine, TheFarmAfrica• Networking Opportunities: Organizing agricultural / agribusiness conferences, seminars and workshops • Agri Tours – Prioritizing African farmers / business people /civil servants / academic to see what we do

in SA; taking SA Trade, Farmers and Agribusiness people into Africa.• Projects - Promoting, raising finance for/and implementing projects & trade with African countries.• Market Research

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ASPECTS TO CONSIDER

“ Follow the man who has walked the way before you. “ (Learn from the experienced one)

- An Old Zulu Proverb

“ Ex Africa aliquid semper novi “ (Out of Africa always something new)

- Comment by Roman General Scipio Africanus

• One cannot generalise about Africa no more than one can generalise about Europe. Each country has unique characteristics. Statutory and administrative environments vary. That’s the first lesson.

• SA is the leading agricultural and agribusiness country in sub-Saharan Africa. Should be main supplier to these countries, Agribusiness sectors.

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• In respect of most businesses the presence of governments is pervasive throughout sub-Saharan Africa! Permits, Payment of Forex, (sometimes African Governments run out of Forex and the exporter cannot get paid), product approval are examples.

• Exporters deciding to do business in a country, should be advised to check out all

Governmental requirements.

TIP :-Advise exporters to consult an international firm of accountants or lawyers

• Port and border post congestion and clearance procedures / documentation also can cause problems. Corruption is rife at border posts and ports. (In some countries the SA exporter’s goods just don’t get cleared at the Port or Border post, until the relevant officials is bribed. Senior officials seem to turn a blind eye to this.) Vehicles loaded with goods can be held up for days at border posts.

TIP:-Exporters would be well advised to consult a shipping / logistics company.

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FINANCE

• Trade Finance-Banks• Insurance facilitates trade – Credit Guarantee• Investment – DBSA, IDC, other sources of longer term funding.

MARKETS • Research markets carefully / reduces risk of making mistakes.• Carefully assess competitive environment.• Presentation of products

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OPPORTUNITIES

• Main opportunities lie in the skills of our farmers who have established and managed to build the best agricultural sector in Africa. See what they are already doing in Mozambique. SA Farmers can establish and manage farms anywhere Sub-Saharan Africa, given the opportunity. Good for SA if farmers don’t sell their farms here but regard new farms in Africa as extensions of their businesses.

• Consulting services: Farm Planning; Civil Engineering including dam building & irrigation; Agronomy, Horticulture; Soil Surveys & Analyses; etc.

• Niche markets for certain specialist or high-end products (general farm equipment SA not competitive;) seeds combined with advisory services.

Grain storage systems and marketing/ selling.

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LIMITATIONS TO OUR AGRIBUSINESS

• GOVERNMENT SUPPORT (or lack thereof) • SA Agribusiness exporters are at a huge disadvantage compared to Chinese,

Indian, Brazilian and Israeli exporters because their countries governments work closely with their exporters whereas the SA Government does not.

• EXAMPLES • Lack of follow-through after presidential & ministerial statements.• Lack of coherent trade policies. There’s no lack of grand statements but little

practical implementation. Having trade pavilions or exhibitions not nearly enough

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/ Government Support: Examples ….. / Continue

• Lack of government support at Inter-Governmental policy and trade implementation levels. (Attended inter-governmental meetings e.g.. SA/Nigeria & SA/DRC- gave many suggestions. No follow through).

• Lack of on-the-ground support e.g. phoning Department of Trade and Industry is an exercise in frustration, phones just not answered.

• Press reports stating SA Government wants to follow Chinese model at trade level- that means helping Agribusiness to export.

• Experience proves successful exporting is based on a strong home market. If home market is eroded e.g. by dumping of agricultural products in the SA market (chickens and/or pieces from Brazil and France are examples) undermines exports. SA used to have strong home market development policies. No longer. So home market economies of scale not possible. Therefore exporting is more difficult.

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/ Examples …./ Continue

• Other support by Chinese government - Investing in infrastructure in African countries. Quid pro quo is African countries open up home markets to Chinese products (often manufactured with government subsidies). SA Exporters cannot compete without a coherent export, promotion policy by government.

• Trade Policy Must include an exchange rate policy and a private enterprise friendly attitude by SA Government and its Officials. Often we in Private Sector experience receive no feed-back and sometimes encounter almost a hostile attitude from Government officials.

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PRICES AND SERVICES • Prices of SA produced products cannot compete with Chinese, Indian and Brazilian

prices.• CAUSES

• Poor labour productivity • Wages too high relative to productivity.• Rand exchange rate too strong relative to our productivity – makes SA prices

uncompetitive. At R7.50 – R8.00 / US $1 we cannot compete in Africa. • High quality not rewarded in Africa.• Little effective government support in assisting private sector to access

markets as in case of China, India, Brazil and Israel. Too much talk, too little done.

• Lack of economies of scale in SA market because on one hand government allows imports too freely and on other hand with labour and other restrictive policies limit private sector’s attempts to improve productivity.

• SA Agribusiness mostly small and limited in vision.

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/ Prices and Services/ Causes ..Continue

• Have to compete by offering better service. Generally African buyers/distributors not prepared to price this in. Buy mainly on price.

• Consequence – we are being beaten to the punch in most agribusiness markets in what should be our main export market, by China, India, Brazil, Argentina, Spain, Italy. We’ve allowed these countries to become entrenched because of our poor performance.

• South Africa increasingly not regarded as logical portal to Africa because of our perceived poor image. Example – SA only 4th in Africa in terms of attracting direct foreign investment.

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SOLUTIONS • Sense of urgency by both Government and Private Sectors to regain our Agribusiness

Leadership role in Africa.

• Government and Private Sector to promote export orientation.

• Joint Private Sector / Government working groups to address practical issues :- 1. How to improve our competiveness 2. What Government can do to facilitate Agribusiness Trade and Investment into

Africa 3. Logistics and duty problems

o Work with African countries to improve border post & port efficiency to reduce congestion and eliminate corruption.

o Import dutieso Infrastructure issues

4. Negotiate with African counties to facilitate SA Agribusiness Trade and Investment without giving the impression that we have hidden agendas.

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CONCLUSION

WITH EFFECTIVE POLICIES AND THE RIGHT ATTITUDE TO PROMOTE SA-AGRIBUSINESS TRADE AND INVESTMENT IN AFRICAN MARKETS,

WE CAN STILL REGAIN THE LEADING POSITION WE SHOULD HAVE HAD.

BUT URGENCY IS NEEDED.IT’s GETTING MORE DIFFICULT BY THE DAY !

THANK YOU

Agrifica (Pty) Ltd Tel : +27 0 12 804 9729

Email : agrifica@agrifica.co.za Web; www.agrifica.co.za