Agribusiness is a broad concept that covers input suppliers, agro-processors, traders, exporters and retailers. Agribusiness provides inputs to farmers and connects them to consumers through the financing, handling, processing, storage, transportation, marketing and distribution of agro-industry products and can be decomposed further into four main groups:
- Agricultural input industry for increasing agricultural productivity such as agricultural machinery, equipment and tools, fertilisers, pesticides, insecticides, irrigation systems and related equipment.
- Agro-industry: food and beverages, tobacco products, leather and leather products, textile, footwear and garment, wood and wood products, rubber products, as well as construction industry products based on agricultural materials.
- Equipment for processing agricultural raw materials, including machinery, tools, storage facilities, cooling technology and spare parts.
- Various services, financing, marketing and distribution firms, including storage, transport, ICTs, packaging materials and design for better marketing and distribution
Source: The United Nations Industrial Development Organization (UNIDO), as found at http://agbiz.co.za/about-us/what-is-agribusiness
The changes in South Africa reflect the UNIDO definition. A look at the membership of Agbiz (see heading 6) shows a wide spectrum of companies in addition to the former co-operatives, now operating as companies.
2. International business environment
Over the past four years The World Bank has published two publications, viz. “Agribusiness and Innovation Systems in Africa”, and “Growing Africa: Unlocking the potential of Agribusiness”, emphasizing the critically important role that agribusiness needs to play in Africa’s development.
Agriculture and agribusiness together are projected to be a US$ 1,0 trillion industry in Sub-Sahara Africa by 2030, compared to US$ 313 billion in 2010 , and they should thus be at the top of the agenda for economic transformation and development. Agribusiness can play a critical role in jump-starting economic transformation through the development of agro-based industries that provide much-needed jobs and incomes. Successful agribusiness investments in turn stimulate agricultural growth through the provision of new and expanded markets, and the development of a vibrant input sector.
Source: Dr John Purchase
3. Local business environment
South Africa has a relatively well-developed agribusiness sector, constituted by a:
- Strong input sector: seed, fertilizer, crop protection and veterinary chemicals, animal feed, packaging, agricultural machinery, fuel, etc. and generally strongly technology-based.
- Strong financial sector: major banks, DFI’s, insurance companies, auditors, agribusinesses, etc.
- Storage, trade and agro-logistics companies: well developed and competitive sub-sector.
- Agro-processing and packaging sub-sector
- Retail Sector, comprising primarily four major supermarkets.
These sub-sectors all play a major role in ensuring that most South African agro-food value chains are, generally speaking, globally competitive, thus ensuring a positive agricultural trade balance and a relatively good level of national food security. As is the practice internationally, South Africa has also embarked on an exercise of mapping value chains, primarily to achieve greater efficiencies, but also to identify specific constraints and to ascertain fair value capture in the value chain by role players.
It is critical that agribusinesses:
- Know their consumers/clients, since major shifts in food demand are taking place
- Provide major value contribution in the respective value chains
- Develop talent/skills of personnel
- Introduce cutting edge technology for productivity and efficiency gains
- Know the rules of the game, and realise these are continuously changing
- Implement cutting-edge management to manage risks, but also to seize the many opportunities at hand
Source: Dr John Purchase, presentation to FertASA 2014
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