s a fruit & vegetable canning...
TRANSCRIPT
Presentation:
Parliamentary Portfolio Committee:Trade & Industry
- Revised IPAP: 2010/11 to 2012/13 -
S A Fruit & Vegetable Canning Industry
05 March 2010
Introduction:
Opening & Welcome
Industry Delegation:Rudi Richards : SAFVCA / “PPP”RepresentativeJill Atwood-Palm : SAFVCA / “PPP”RepresentativeGafieldien Benjamin : FAWU / “PPP” RepresentativeNassos Martalas : Langeberg & Ashton FoodsGerhard Kotze : Rhodes Foods
Open to QuestionsRequest to reserve these to end of presentation
- Rurally-based
- Agro-Processing
National Body
Pineapples
Vegetables
Tomatoes
Other Fruit
Industry: General Profile
Geographically spread, but
mostly up North
Deciduous
Industry SizeSize of Industry: R 5.0 bn
Fruit: Export Value: R 1.5 bn
Strongly export-driven:Especially fruit, 85% of SA production exportedSA accounts for approx. 7% of World Export Fruit
Our Competitive Advantage
• Well-established Industry
• Reliable Supply & Quality of Fruit & Vegetables
• Strong Manufacturing Capability/World Class Standards
• Experienced Exporters with proven track record
• Premium Quality Products
• Highly Nutritional Products (fully backed by scientific research)
• Partnership with Stakeholders across Value Chain
“PPP” Fruit Canning Initiative
… to create a sustainable platform for the long-term growth and competitiveness of
the industry
… to create a sustainable platform for the long-term growth and competitiveness of
the industry
“PPP” Fruit Canning InitiativeOrigin:
DTI commissioned independent Value Chain Study (NPI)
Recommendations to address hardships in industry
Formed basis of “PPP” Business Plan
Under the guidance of Minister Dr Rob Davies & DTI Officials, evolved into “PPP” Fruit Canning Initiative
Trans-formation Marketing
Market Access Competitive-
ness
Fruit Canning Initiative Business
Plan
“PPP” Main Pillars ….
Address the shaping for appropriate Industrial Policy
Our Basis for IPAP InclusionResearch Basis: UCT Study: Prof. Don Ross +On-going interaction between DTI/Industry Inclusion on initial & revised IPAP:
Key Research Findings:
Worthy recipient for industrial policy intervention
Concrete basis with sound proposals: Viewed as a good starting point to addressing Agro- Processing as a whole within IPAP
Our Basis for IPAP InclusionBUT “trapped in a timing accident” by major temporarymacro-economic challenges
Unfavourable market conditions as a result of global crisisExport-unfriendly Exchange Rate: Strong & VolatileUneven Playing fields: Inequitable market access / unfair subsidiesAdverse Input Cost pressures
Impact: “Waiting-to-Build” climate Under-investmentShort-Term “trap” could result in negative long-term effects
NEED: Industrial Policy interventionPositive signal to stakeholders & potential investors = Growth indicator
Government:- the dti- Provincial
Government:- the dti- Provincial
Business:- Canners- Growers- Can Makers
Business:- Canners- Growers- Can Makers
Labour:- FAWU
Labour:- FAWU
Community-Formal Structures-Informal Structures
Community-Formal Structures-Informal Structures
Leadership Group
Leadership Group
SAFVCA
The Industry Partnership …
Representative of all key stakeholders within the Value
Chain
Role of Labour and Community within “PPP” and IPAP
Socio-Economic ProfileKey Indicators:
11,000 factory workers (with a wage Bill of close to R 500m)
> 500 administrative employees
Employed at more than 30 factories situated in rural areas
17,000 farm workers
Employed at more than 1,500 farms supplying the industry
Supports more than 120,000 dependants
Socio-Economic ProfileRole of the Industry in the Socio-Economic context:
Main employer in most rural areas (in small towns/surrounds)
Labour intensive environmentCreating Jobs & Employment OpportunitiesUplifting Skills: Higher Skills level required within factories
Beneficiated Agriculture
Providing Value-Added Products in Agro-ProcessingSector
Providing Food Security
Contributing significantly to Rural Development
Providing Community Upliftment
Contributing to Transformation Objectives
Socio-Economic ProfileImpact:
Absence of an enabling environment could result in job losses & impact adversely on the already flailing agricultural sector and struggling rural communities
NEED: Industrial Policy intervention:Stimulate job creation and uplift ruralcommunities (including interim relief to protect jobs in the short term)
Role of Labour:Avoid impact & support industry’s drive for Industrial Policy Intervention
Enabling Environment …
Geared to create an Enabling
Environme nt
Benefit of IPAP to the
Industry
Sustainable Platform
GROWTH
Current State: Disabling
Environment– Under serious
threat
Short Term
Long Term
IPAP Interventions … Critical!!!
Market Access
Uneven Playing FieldsImprovement of access into key established markets i.e. EU (TDCA / EPA) – SA product into EUNon-reciprocal treatment – EU products duty-free into SAImprovement of access ito EFTA (Mid-Term Review)Urgency & action of competitors (e.g. Chile) into major trading blocs & key markets
Unfair PracticesElimination of subsidies of competitors
IPAP Interventions … Critical!!!
Market Access
Other OpportunitiesPreferential access into emerging geographies i.e. China / IndiaOther key geographies e.g. Japan, Korea, AGOA, Mercusor, SADC
Protection of Domestic MarketBlock uncontrolled, illegal and subsidised imports from entering the domestic marketImproved import controls and inspections
Exchange Rate:Strength & Volatility: Uncompetitive exportsForex levels does not reflect the inflation differentialNEED: Appropriate Rate of Exchange Policy to support the growth of exports for existing and new exporters
IPAP Interventions … Critical!!!
Improving the Regulatory Framework
Establishment of National Food Control AgencyOvercome “fragmented” structure (including obsolete regulations)Improve controls over both exports and importsConsolidation of Food Safety, Ethical and Quality Audits
Zero-Rating of VAT on Canned Fruit & Vegetable ProductsEliminate unfair treatment of canned fruit & vegetablesFresh produce (incl. Frozen Vegetables) currently zero-ratedSpecial case for Baked Beans: Highly nutritional product; Rich source of protein; Purchased largely by lower income groupsSame argument for “Canned Pilchards” – currently zero-rated
Sugar IndustrySugar Act: Unintended consequences on downstream usersUncompetitive disadvantage to industry
IPAP Interventions … Other
IPAP Interventions … OtherTinplate / Can Manufacturing Industry
Structure of Industry: Negative Impact on downstream usersTinplate = Monopolistic (100%); Can Maker = Super-Dominant Player (88%)Unfair pricing structure : DTI referral to Competitions Commission
10.54
6.386.78 7.06
8.36 8.317.55
8.46 8.65
9.83
11.211.64
17.47
6.46
8.61
6.056.61
7.58 8.46
7.366.96
6.056.6
8.46
5
7
9
11
13
15
17
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
ROE Can Inflation
Improving Competitiveness / Reducing Costs
Cost of ServicesReliable supply & competitively priced services e.g. electricity, water, effluent disposal
Improved Logistics & InfrastructureReduction of costs: Land / Rail
Appropriate Industrial Upgrading Assistance Scheme
Improve factory efficiencies, competitiveness & technologies
“Tree Pull & Plant” SchemePlanting of more profitable fruit varieties with better yields &volumes
IPAP Interventions … Other
Support Measures
Support for Agri-Research:R&D for new Varieties suitable for processingMore profitable with better yields / volumes
Capital Investment Support ProgrammesResumption of Pine Canning in EC; Upgrading of Vegetable manufacturing
Constraints of Working Capital:Seasonal Relief Scheme to overcome the impact of the constraint of Working Capital on Growth
National Feeding SchemesPromote & increase consumption of productsBenefits of highly nutritional productInclusion of products on Government Feeding Schemes i.e. Schools, hospitals, etc
IPAP Interventions … Other
Scenarios: High & Low Road …No
Intervention
LOW ROAD
Long Term
Negative Impact
•Factory Closures•De-industrialization•Job Losses•Impact on Rural Communities
•Supply Chain knock- on
Industrial Policy
SupportHIGH ROAD
Long Term
GROWTH•Job Creation/Employment Opportunities / Skills Upgrading
•Industrial Upgrading•Rural Development•Community Upliftment•Protect & Grow Markets•Increase Exports, esp. new markets
•Accelerate Transformation•Protect Supply Chain•Increase Govt. Fiscal Coffers
Bridging: Interim Support
• Protect employment levels & supply chain
• Urgent Stabilisation
• Possible Interventions:• Minimum Pricing to
Farmers• Surplus Removal
Scheme• Working Capital Support
Short-Term Crisis AVOID Long Term negative Impact
Industry is a worthy recipient for Industrial Policy support (Based on sound, well-researched economic & consumer studies)
Presented concrete proposals for intervention
Our expectations are THUS:Inclusion of proposals for future Industrial Policy actionWith a Sense of Urgency and a Focus on Delivery
Appropriate Industrial Policy (including interim support to address short term crisis Sustainable platform for long-term growth
Conclusion
THANK YOU
QUESTIONS ???