quarterly economic review of the food and beverages ... · i preface this publication quarterly...

Quarterly Economic Review of the Food and

Beverages Industry in South Africa

April – June 2017

Volume 4, number 1

DIRECTORATE: AGRO-PROCESSING SUPPORT

agriculture,forestry & fisheries

i

PREFACE

This publication Quarterly Economic Review of the food and beverage Industry in South

Africa: April to June 2017 by the Directorate: Agro-processing Support serves to provide an

overview of the economic performance of the food and beverage industry in South Africa.

The food and beverages industry in South Africa is one of the sub-sectors of agro-processing

that plays a dominant role in terms of output and employment in the agro-processing sector.

By adding value to the primary agriculture and fisheries production, the food and beverages

industry stimulates output and job creation in the primary sector and contributes directly to

the food security of the country. In addition, it played a pivotal role in supplying inputs to the

food and beverage service industry, wholesale and retail sectors.

One of the core businesses of the Directorate: Agro-processing Support is to provide timely

and updated economic information regarding the food and beverages industry to monitor

its performance and provide insight into the effects of economic policies and exogenous

factors on the industry. The main economic indicators reviewed are the changes in prices,

production, capacity utilisation, value of sales, formal employment and trade. An outlook of

the industry for the next quarter is also presented. In addition, some indicators of the food

and beverages service industry, wholesale and retail sectors are reviewed to evaluate the

forward linkages of the food and beverages industry.

Any comments and suggestions on the content of the publication are most welcome.

Victor Thindisa

Director: Agro-processing Support

Pretoria

Disclaimer: The Department of Agriculture, Forestry and Fisheries did everything to ensure the

accuracy of the information reported in this publication. The department will, however, not

be liable for the results of action based on this publication.

ii

CONTENTS

PREFACE ................................................................................................................................................ i

1. INTRODUCTION ........................................................................................................................... 1

2. FOOD PRODUCTS ....................................................................................................................... 1

2.1 PRICE ..................................................................................................................................... 2

2.2 PRODUCTION ...................................................................................................................... 4

2.3 VALUE OF SALES .................................................................................................................. 5

2.4 INCOME FROM FOOD SALES IN THE SERVICE INDUSTRY .......................................... 7

2.5 TRADE .................................................................................................................................... 8

2.6 EMPLOYMENT .................................................................................................................... 15

2.7 OUTLOOK ............................................................................................................................ 16

3. BEVERAGES ................................................................................................................................ 17

3.1 PRICE ................................................................................................................................... 18

3.2 PRODUCTION .................................................................................................................... 19

3.3 VALUE OF SALES ................................................................................................................ 20

3.4 INCOME FROM BAR SALES IN THE SERVICE INDUSTRY ............................................ 20

3.5 TRADE .................................................................................................................................. 22

3.6 EMPLOYMENT .................................................................................................................... 29

3.7 OUTLOOK ............................................................................................................................ 29

4. CONCLUSION ............................................................................................................................ 30

5. REFERENCES ............................................................................................................................... 32

NOTES: ................................................................................................................................................. 33

Compiled by Directorate: Agro-processing Support

Department of Agriculture, Forestry and Fisheries

Sefala Building

503 Belvedere Street, Arcadia, South Africa

All correspondence can be addressed to:

Director: Agro-processing Support

Private Bag X416, Pretoria 0001, South Africa

Tel.: +27 (12) 319 8457

Fax: +27 (12) 319 8093

E-mail: [email protected]

This publication is also available on the internet at: http://www.daff.gov.za

mailto:[email protected]

http://www.daff.gov.za/

1

1. INTRODUCTION

The global economic growth is projected to increase from 3,2% in 2016 to 3,6 % in 2017 and

3,7% in 2018, an upward revision of 0,1 percentage point for 2017 and 2018 relative to April.

Economic activity is projected to pick up speed in all country groups except for the Middle

East and forecasts of the strength of the outlook by region have changed only modestly (IMF,

2017).

Growth is forecast to increase strongly in emerging market and developing economies, from

an upwardly revised 4,3% in 2016 to 4.6% in 2017 and 4,9% in 2018, a 0,1 percentage point

increase for 2017 and 2018 relative to the April forecast. The upward revisions to the growth

forecast primarily reflect stronger projected activity in China and in emerging Europe for 2017

and 2018 (IMF, 2017).

In South Africa, the real gross domestic product (GDP) rebounded in 2017: Q2, advancing at

an annualised rate of 2.5%, following two successive quarters of contraction. The recovery in

2017: Q2 reflected a turnaround in the real output of both the secondary and the tertiary

sectors. The real gross value added (GVA) by the primary sector advanced at a slightly

slower pace as output growth in the mining sector slowed notably. By contrast, real

agricultural output increased at a brisk pace; largely on account of the record domestic

maize crop (Reserve Bank, 2017).

During 2017: Q2, the quarter-to-quarter seasonally adjusted physical volume of production

for food and beverages increased by 3,2% from a 0,9% growth in the last quarter, while it

rebounded year-on-year by 2,0% from a contraction of 0,4% in the last quarter. The quarter-

to-quarter seasonally adjusted value of sale for food and beverages rebounded by 2,3%

from 0,7% contraction in the previous quarter, while it moderated year-on-year by 3,8% from

a 5,2% growth in the previous quarter. As result, the nominal value of food and beverages

increased from R41 915 million in the last quarter to R42 886 million in the current quarter.

The trade deficit of food and beverages narrowed from R3 048,3 million in the previous

quarter to R25,9 million in the current quarter. The employment in the food, beverages and

tobacco industry contracted quarter-to-quarter by 1,4% from 0,9% growth, resulting in 3 502

jobs being shed in the current quarter as compared to 2 338 jobs created in the previous.

However, it increased modestly year-on-year by 2,8% from 1,7% previously.

This quarterly review assesses the economic performance of the food and beverages

industry, at a time of a moderate global economic growth and a rebound of domestic

economic activities recorded during 2017: Q2.

2. FOOD PRODUCTS

According to the Standard Industrial Classification, the food industry incorporates groups of

products which are categorised into the following four codes:

Code 301 refers to manufacturing, processing and preservation of meat, fish,

vegetables, fruits, oils and fats

Code 302 refers to manufacturing, processing and preservation of dairy products

Code 303 refers to manufacture of grain mill products, starch products and prepared

animal feeds

2

Code 304 refers to manufacture of other food products like bread, sugar, chocolate,

pasta, coffee, nuts and spices.

Hereafter, food products refer to those primary agricultural and fisheries products that have

undergone some form of change through manufacturing and processing or performed some

value addition activities such as preservation.

2.1 PRICE

Consumer Price Index (CPI)1

The quarter-to-quarter consumer price index of all items moderated by 1,1% in 2017: Q2,

following a marginal increase of 1,9% in the previous quarter. Some of the items that

registered a moderate growth under the period were: meat (3,4%), food and non-alcoholic

beverages (0,7%), fish (0,4%) and milk, cheese and eggs (0,4%). However, sugar, sweets and

deserts grew by 4,6%, while, fats and oils, fruits and (bread and cereal) contracted by 2,8%,

2,5% and 2,2%, respectively, while vegetables remained unchanged (see Table 2.1) Similarly,

the year-on-year consumer price index of all items moderated by 5,2% in 2017: Q2, following

a 6,5% growth recorded in the previous quarter. All food products moderated year-on-year,

except for a contraction in oils and fats (1,7%) and vegetables (3,4%), while meat increased

marginally by 12,2%.

Table 2.1: Consumer price Index of food products

Indices % change between

Food products

Weight 2016: Q2 2017: Q1 2017: Q2

2016: Q2

and

2017: Q2

2017: Q1

and

2017: Q2

All items (CPI

Headline) 100 97,5 101,5 102,6 5,2 1,1

Food and non-

alcoholic beverages 15,4 96,4 102,2 102,9 6,8 0,7

Food 14,2 96,5 102,2 102,9 6,7 0,7

Processed 6,8 94,9 101,4 102,2 7,7 0,8

Unprocessed 7,4 97,7 102,8 103,4 5,8 0,6

Bread and cereals 3,5 95,1 100,7 98,5 3,6 -2,2

Meat 4,6 96,2 104,4 108,0 12,2 3,4

Fish 0,4 95,8 101,9 102,3 6,8 0,4

Milk, eggs and

cheese 1,7 96,5 101,1 101,5 5,2 0,4

Oils and fats 0,5 99,7 100,7 97,9 -1,7 -2,8

Fruit 0,2 93,4 99,3 96,8 3,6 -2,5

1 Stats SA defines CPI as a current social and economic indicator that is constructed to measure changes over time

in the general level of prices of consumer goods and services that households acquire, use, or pay for.

3

Vegetables 1,6 105,4 101,7 101,7 -3,4 0,0

Sugar, sweets and

deserts 0,6 89,0 101,8 106,4 19,5 4,6

Other food 0,9 93,6 101,5 100,1 7,0 -1,3

Source: (Stats SA, 2017a)

Producer price index (PPI)2

The quarter-to-quarter and year-on-year producer price index for all final manufactured

goods moderated by 0,9% and 4,5%, following a growth of 1,4% and 5,6%, respectively in the

last quarter. The items that moderated quarter-to-quarter were: meat and meat products

(2,4%) and fruit and vegetables (1,3%), however, sugar, grain mill products and (starches and

starch products and animal feeds) decelerated by 7,6%, 5,8% and 5,5%, respectively. On the

other hand, grain mill products, and starches and starch animal feeds products contracted,

the year-on-year, by 10,7% and 3,4%, while bakery and dairy products moderated by 4,4%

and 6,6% respectively, oils and fats decelerated by 4,0%.

Table 2.2: Producer price index of food products


Food products Weight 2016: Q2 2017: Q1 2017: Q2

2016: Q2

and

2017: Q2

2017: Q1

and

2017: Q2

Final manufactured

goods (Headline PPI) 100 97,5 100,9 101,8 4,5 0,9

Food products 26,3 95,1 100,4 100,4 5,6 0,0

Meat and meat

products 4,5 91,7 103,3 105,8 15,4 2,4

Fish and fish product 1,6 94,4 97,8 98,3 4,1 0,5

Fruit and vegetables 2,4 94,8 100,3 101,6 7,2 1,3

Oil and fats 0,5 100,5 99,5 96,4 -4,0 -3,0

Dairy products 3,3 96,8 100,0 101,1 4,4 1,1

Grain mill products 1,8 103,1 97,7 92,0 -10,7 -5,8

Starch and starch

products, animal

feeds

1,6 96,5 98,7 93,3 -3,4 -5,5

Other food products 0,9 94,8 100,3 100,6 6,1 0,3

Bakery products 6,9 95,3 100,1 101,6 6,6 1,5

Sugar 1,9 91,4 100,3 92,7 1,5 -7,6

2 OECD defines the Producer Price Index (PPI) as a measure of the change in the prices of goods either as they leave their

place of production or as they enter the production process. The PPI can be used as an economic indicator of inflation, as an escalator in contracts and as a deflator in the calculation of the national accounts.

4

Source: Stats SA (2017b)

Import unit value index3

Table 2.3 presents the import unit value of selected food products. During the period under

review, the import unit value of food products registered a positive growth of 1,5% quarter-to-

quarter and negative growth of 8,9% year-on-year. The fats and oils and grain mill products

registered a negative growth of 18,2% and 1,5% year-on-year; however, fats and oils

stagnated quarter-to-quarter while grain mill products grew by 3,9%.

Table 2.3: import unit value index of food products

Source: Stats SA (2017c)

2.2 PRODUCTION

Source: Statistics SA (2017d)

Figure 2.1: presents a physical volume of production by the food products division. The

quarter-to-quarter physical volume of production of meat, fish, fruit etc. moderated by 0,4%,

3 IMF defines export and import unit value index as a measure the overall change in the prices of transactions in goods and

services between the residents of an economic territory and residents of the rest of the world. The average unit value is obtained by dividing the value of exported/imported goods in monetary terms with the respective volume/weight of the goods.

Food products


2016: Q2 2017: Q1 2017: Q2 2016: Q2

and

2017: Q2

2017: Q1

and

2017: Q2

Food (total) 109,3 98,1 99,6 -8,9 1,5

Fats and oils 101,5 100,0 100,0 -1,5 0,0

Grain mill products 121,0 95,3 99,0 -18,2 3,9

5

while other food products increased by 4,6%. Moreover, dairy products increased marginally

by 2,8% and grain mill products bounced back by 0,2% in 2017: Q2. On the other hand, the

year-on-year physical volume of production of ‘’other food products’’ and dairy products

bounced back by 7,3% and 2,4%, respectively; however, physical volume of production of

grain mill products moderated by 1,1% and meat, fish, fruit, etc. contracted by 0,7%.

Production capacity

Table 2.4: Utilisation and reasons for underutilisation of production capacity by large

enterprises: Food products (percentage)

Period Utilisation Reasons for underutilisation

Total

under-

utilisation

Shortage of Insufficient

demand

Other

Raw

materials

Labour

Skilled Semi and

unskilled

2016: Q2 81,3 18,7 2,2 1,4 0,2 10,3 4,7

2017: Q1 80,6 19,4 2,3 1,4 0,3 11,0 4,4

2017: Q2 81,8 18,2 2,1 1,2 0,2 11,2 3,4

Source: Statistics SA (2017e)

The utilisation of production capacity by large enterprises of food products showed a

marginal growth year-on-year and quarter-to-quarter (see Table 2.4). Insufficient demand

and other reasons such as low productivity and shortage of raw materials are the main

reasons of underutilisation during the period.

2.3 VALUE OF SALES


6

During 2017: Q2, the quarter-to-quarter seasonally adjusted value of sales of food products

bounced back by 0,5%, following a 0,7% contraction in the previous quarter. On the other

hand, the year-on-year seasonally adjusted value of sales moderated by 2,4%, following a

growth of 5,4% in the previous quarter (see Figure 2.2).

Figure 2.3 shows the performance of food items under the food product division during the

current period. Dairy and (meat, fish, fruit, etc.) products moderated by 1,9% and 1,1% as

compared to growth of 2,6% and 1,8%, respectively, in the last quarter.


Wholesale and retail sales4

The current value of wholesale and retail sales of food, beverages and tobacco are given in

Figure 2.4. The quarter-to-quarter wholesale and retail of food, beverages and tobacco

rebounded by 5,4% and 6,4% in the current quarter, following a contraction of 13,2% and

18,3%, respectively, in the previous quarter. However, it grew by 8,6% and 14,9% year-on-year

following a growth of 3,8% and 12,9%, respectively as recorded in the previous quarter. As a

result of the positive growths, the current value of income from wholesale and retail sales of

food, beverages and tobacco increased from R24,8 billion and R6,4 billion in the previous

quarter to R26,2 billion and R6,8 billion, respectively in 2017: Q2.

4 Statistics South Africa (Stats SA) conducts a monthly survey covering enterprises in the wholesale and retail trade industry. The results of

the monthly wholesale and retail trade sales survey are used to compile estimates of the gross domestic product (GDP) and its components, which are used in monitoring the state of the economy and formulation of economic policy. These statistics are also used in the analysis of comparative business and industry performance.

7

Source: Statistics SA (2017f, 2017g)

2.4 INCOME FROM FOOD SALES IN THE SERVICE INDUSTRY6

Table 2.5 below shows the income from food sales in the service industry which includes food

sales in restaurants and coffee shops, take-away and fast food outlet and catering services.

The quarter-to-quarter income from food sales registered an improved negative growth of

1,0%, following a contraction of 10,9% in the previous quarter. However, the year-on-year

income from food sales moderated by 5,9% from a 7,5% growth registered previously. As a

result, the current value of income from food sales in the service industry moderated from

R4,33 billion in the previous quarter to R4,29 billion in the current quarter.

Source: Statistics SA (2017)

The current income from food sales in the service industry registered an improved negative

growth of 1,0%, following a contraction of 10,9% in the preceding quarter. The quarter-to-

8

quarter increase can be attributed to the growth in take-away/fast food which rebounded

by 5,7% from a 16,2% contraction in the previous quarter. However, the income from

restaurants and coffee shops and catering services registered a negative growth of 5,8% and

1,0%, respectively in the current quarter. On the other hand, the year-on-year income from

food sales moderated by 5,9% following a 7,5% growth in the previous year. The moderate

growth can be the result of the following: a modest growth in take-away/fast food by 8,5%

and the moderate growth in restaurant and coffee shop of 5,9%, however, catering services

registered an improved negative growth of 1,7% in 2017: Q2. During the quarter under

review, the total income from restaurant and coffee shop, take-away/fast food and catering

services stand at R2,0 billion, R1,6 billion and R0,5 billion, respectively.

Source: Statistics SA (2017h)

2.5 TRADE

Main food export destinations and products

Figure 2.7 shows food export destination share of the continents. Africa was the main export

destination during 2017: Q2. it accounted for more than half of exports (69%), followed by

Asia and Europe, which accounted 13% and 12%, respectively, of the total share of food

export.. The Americas and Oceania altogether accounted for 5% of the total food export

share. The trend during the past five years shows Africa has the largest share of the total food

export, which is above 50%.

9

Source: Quantec EasyData (2017)


Figure 2.9 shows the food export destinations’ share of the main regions5 in 2017: Q2. Among

the main regions, SACU (Excluding RSA) accounted the highest share of food export (35%)

followed by SADC (Excluding SACU) (27%), EU (11%), Eastern Asia (7,0%), Western Asia (5,0%)

and Western Africa and NAFTA with 3,0% each.

5 The main regions which are included in the analysis are the top eight regions: SADC, Western Africa, EU; NAFTA (North

Atlantic Free Trade Area consists of USA, Canada and Mexico); Eastern Asia (includes China, Japan, North Korea, South Korea); Western Asia (mostly middle east countries); South Central Asia (include India, Pakistan and Bangladesh) and Australia and New Zealand.

10



Figure 2.10 shows that the eight countries that accounted for food export share during 2017:

Q2 were from Africa: Botswana (12,1%), Namibia (11,6%), Mozambique (8,0%), Zimbabwe

(6,7%), Lesotho (6,7%), Zambia (5,4%), Swaziland (4,7%) and Angola (2,9%). Of the European

countries, only Germany accounted for 2,3% share of total food exports during 2017: Q2. Of

the Asian countries, its only China that accounted for a share 3,0% of the total food export.

Table 2.5 presents the major exported food products during 2017: Q2 and Table 2.6 shows the

year-on-year high and low export performers of food products during the current quarter

under review by comparing the export values of the present quarter to the same quarter of

the previous year (year-on-year).

11

Table 2.5: Major exported food products in 2017: Q2

HS Code Food product

Total amount

(R million)

HST230120 Flours, meals and pellets, of fish or of crustaceans,

molluscs or other aquatic invertebrates 351,7

HST200990 Mixtures of juices 240,7

HST030629 Other, including flours, meals and pellets of crustaceans,

fit for human consumption 218,0

HST210410 Soups and broths and preparations therefore 186,5

HST151710 Margarine, excluding liquid margarine 139,5

HST190531: Sweet biscuits 133,4

HST100630 Semi-milled or wholly milled rice, whether or not polished

or glazed 131,7

HST040310 Yogurt 121,0

HST190410 Prepared foods obtained by the swelling or roasting of

cereals or cereal products 118,4

HST110100 Wheat or meslin flour. 103,4


Table 2.6: Export performance of food products

HS Code Food product

% Change

compared to

a year ago

High performers

HST030629

Other, including flours, meals and pellets of crustaceans, fit

for human consumption 152254,4

HST120730 Castor oil seeds 70708,4

HST230500 Oil-cake and other solid residues 19588,1

HST041000 Edible products of animal origin 602,1

HST170240 Glucose and glucose syrup 511,6

HST110430 Germ of cereals, whole, rolled, flaked or ground 413,3

HST151530 Castor oil and its fractions 386,7

HST170310 Cane molasses 344,5

HST110900 Wheat gluten, whether or not dried 250,8

HST230240 Of other cereals 219,9

Low performers

12


Main source of food imports and imported food products

South Africa’s main source of food import during 2017: Q2 is presented in Figure 2.11. South

Africa imported approximately 60% of its food from Asia and Europe. The share of Africa

(23%) and the Americas (16%) is also significant, while share of Oceania was marginal at

about 1%. Figure 2.12 indicates that during the past five years, Europe and Asia have been

the largest sources of food imports, while Africa and Americas have been the least, with

Africa showing improvement overtime.


HST150430 Fats and oils and their fractions, of marine mammals -100,0

HST230610 cotton seeds -100,0

HST151550 Sesame oil and its fractions. -89,4

HST040640 Blue-veined cheese and other cheese -86,1

HST021020 Meat of bovine animals -85,2

HST160231 Of turkeys -85,0

HST170260 Other fructose and fructose syrup -83,9

HST040510 Butter -72,9

HST230400 Oil-cake and other solid residues -71,6

HST230800 Vegetable materials and vegetable waste, vegetable

residues and by-products -71,4

13


Regarding South Africa’s main trading region, the EU accounts 30% of the total South African

food imports, followed by SACU (Excluding RSA) (20%), South-east Asia (18%), South-central

Asia (9%), Western Asia (7%), South America (6%), NAFTA and SADC (Excluding SACU) (5%)

each during 2017: Q2 (see Figure 2.13).


05

10152025303540

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2: Q

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%

Figure 2.12: The share of continents as a source of food

import

(2012-2017)

Asia Europe Americas Africa

14


Among the top ten countries as sources of South African food imports, the highest was

Swaziland with a share of 15,3% , followed by Thailand (9,8%), India (7,1%), Brazil (4,6%), the

Netherlands (4,5%), USA (3,9%), Germany (3,8%), China (3,3%), France (2,7%) and Italy with

2,6%, see Figure 2.14). Table 2.6 presents the major imported food products during 2017: Q2.

Table 2.7: Top 10 imported food products in 2017: Q2

HS Code Food product Total amount

(R million)

HST151800 Animal or vegetable fats and oils and their fractions 230,2

HST190120 Mixes and doughs for the preparation of bakers' wares of

heading 226,3

HST230310 Residues of starch manufacture and similar residues 175,1

HST170111 Cane sugar 137,8

HST190531 Sweet biscuits 111,9

HST190510 Crispbread 89,4

HST110230 Rice flour 73,9

HST190530 Sweet biscuits; waffles and wafers 73,9

HST230400 Oil-cake and other solid residues 59,7

HST200960 Grape juice (including grape must) 53,8


15


Figure 2.15 shows the quarterly trade balance of food products. The quarter-to-quarter food

imports decelerated by 8,0%, following a 4,7% contraction registered in the preceding

quarter, however, the year-on-year food imports registered a moderate growth of 4,4%,

following an acceleration growth of 18,4% previously. On the other hand, the quarter-to-

quarter food exports rebounded by 9,7% as compared to a contraction of 17,0% in the

preceding quarter, however, the year-on-year food exports decelerated by 10,1%. As a

result, the trade deficit narrowed from R5 061,1 million in the previous quarter to R2 804,3

million during 2017: Q2.

2.6 EMPLOYMENT

Source: Statistics SA (2017i)

Figure 2.16 shows the total number of formal employment in the food products division. The

quarter-to-quarter food products contracted by 0,1% as compared to a growth of 0,8%

16

registered in the previous quarter. As a result of decline in growth, the employment in the

division decreased from 207 199 in the previous quarter to 206 949 in 2017: Q2.

Source: Statistics SA (2017i)

Figure 2.17 shows the number of formal employment of food products division items. The

quarter-to-quarter formal employment of meat, fish, fruit etc. decelerated by 3,5% from a

2,3% contraction in the preceding quarter, dairy products rebounded by 4,6% from a 1,7%

contraction in the preceding quarter and grain mill products contracted by 1,7% from 1,3%

growth in the preceding quarter. Furthermore, other food products moderated by 1,5% from

3,6% growth in the preceding quarter. In addition, 1 115 and 1 333 jobs were created in dairy

products and other food products divisions, respectively during 2017: Q2.

2.7 OUTLOOK

Table 2.7: Net balance6 of BER manufacturing survey: food products

2016: Q4 2017: Q1 2017: Q2 2017: Q3*

Domestic sales volumes 24 -21 -3 44

Export sales volumes 24 13 3 38

Production volumes 19 -33 9 61

6 BER calculates the net balance statistics by subtracting the % of the respondents replying “down” from the %

replying “up” to a particular question. Respondents are asked to compare the current quarter’s experience to that

of a year ago. A positive net balance implies an improvement (i.e. positive year-on-year growth) and vice versa.

Therefore, the net balance varies from -100 to 100 where -100 is the most negative response; 0 is a situation of no

change and 100 is the most positive response.

17

2016: Q4 2017: Q1 2017: Q2 2017: Q3*

Domestic order volumes received 11 -26 -3 30

Export order volumes received 7 -8 0 42

General business conditions -28 -29 -44 -7

Number of factory workers 2 -15 -45 -22

Fixed investment -30 -27 -27 27

Business confidence7 40 64 29

Expected volume of goods imported in

12 months’ time -13 11 -35

Expected volume of goods exported in

12 months’ time 28 11 17

Expected real investment in machinery

and equipment in 12 months’ time -41 -26 -15

Expected business conditions in 12

months’ time -28 9 -31

*Expected Source: BER (2017)

A survey of food manufacturing by the Bureau for Economic Research (BER) is presented in

Table 2.7. The survey shows that the year-on-year outlook for 2017: Q3 is positive for all the

variables except for general business conditions and employment.

3. BEVERAGES

Beverages according to SIC classification is code 305 and comprises of the following

beverage products:

Distilling, rectifying and blending of spirits; ethyl alcohol production from fermented

materials;

Manufacture of wine

Manufacture of beer and other malt liquors and malt

Breweries, except sorghum beer breweries

Sorghum beer breweries

7 BER calculates the business confidence index by asking respondents to rate current business conditions as “satisfactory” or

“unsatisfactory”. Then the index is derived as a gross percentage of the respondents replying “satisfactory.” A value of 50 is

indicative of neutrality, 100 indicative of extreme confidence and 0 of extreme lack of confidence. An index greater than 50

shows the majority of respondents are satisfied with the prevailing economic conditions.

18

Manufacture of malt

Manufacture of soft drinks; production of mineral waters.

3.1 PRICE

Table 3.1 below shows the consumer price indices, producer price indices and export unit

value of beverages. The year-on-year and quarter-to-quarter consumer price inflation for

alcoholic beverages moderated by 2,2% and 1,2%, respectively. The items that moderated

quarter-to-quarter were: hot beverages (1,8%) and cold beverages (0,7%); beer and spirits

registered a modest growth of (3,2%) each, while wine rebounded by 0,6%. On the other

hand, the producer price index for beverages increased marginally by 0,4%, while exports

unit value for beverages registered a negative growth of 3,3%. Hot beverages (11,3%), cold

beverages (5,4%) and wine (0,4%) moderated year-on-year.

Table 3.1: Price indices of beverages


Beverages products

Weight 2016:

Q2

2017:

Q1

2017:

Q2

2016: Q2

and2017:

Q2

2017: Q1

and2017:

Q2

Consumer price indices

All items (CPI

Headline) 100 97,5 101,5 101,6 5,2 1,1

Alcoholic beverages 3,9 99,2 100,2 101,4 2,2 1,2

Spirits 0,8 99,2 101,2 104,4 5,3 3,2

Wine 0,7 99,6 99,4 100,0 0,4 0,6

Beer 2,5 98,8 100,6 103,8 5,1 3,2

Non-alcoholic

beverages 1,2 96,0 101,9 103,1 7,4 1,1

Hot beverages 0,3 94,3 103,1 104,9 11,3 1,8

Cold beverages 0,9 96,8 101,4 102,1 5,4 0,7

Producer price index

Beverages 8,5 94,8 100,2 100,6 6,1 0,4

Export Unit value

Beverages 135,2 107,5 95,1 91,9 -14,5 -3,3

Source: Stats SA (2017a, 2017b, 2017)

19

3.2 PRODUCTION


Figure 3.1 presents the seasonally adjusted physical volume of production for beverages.

During 2017: Q2, the quarter-to-quarter seasonally adjusted physical volume of production

for beverages registered a modest growth of 5,6%, following a 1,9% growth registered in the

previously. However, the year-on-year seasonally adjusted physical volume of production for

beverages moderated by 2,0% in the current quarter as compared to a 2,8% growth in the

last quarter.

Production capacity

Table 3.2: Utilisation and reasons for underutilisation of production capacity by large

enterprises: Beverages division (percentage)

Period Utilisation Reasons for underutilisation

Total

under-

utilisation

Shortage of Insufficient

demand

Other

Raw

materials

Labour

Skilled Semi and

unskilled

2016: Q2 85,5 14,5 2,0 1,0 0,2 7,7 3,6

2017: Q1 82,8 17,2 4,6 1,0 0,3 8,7 2,8

2017: Q2 84,5 15,5 3,6 0,9 0,2 8,2 2,6

Source: Statistics SA (2017e)

20

Table 3.2 shows that the year-on-year utilisation capacity moderated during 2017: Q2.

However, it increased marginally as compared to the previous quarter. Insufficient demand,

shortage of raw materials and other reasons such as seasonal factors remain the main

causes for underutilisation during the period.

3.3 VALUE OF SALES


During 2017: Q2. The quarter-to-quarter seasonally adjusted value of sales for beverages

rebounded by 7,6% in the current quarter, following a 0,7% contraction in the previous

quarter. However, the year-on-year seasonally adjusted value of sales for beverages grew

modestly by 7,7% in the current quarter, following 4,5% growth recorded previously (see figure

3.2).

3.4 INCOME FROM BAR SALES IN THE SERVICE INDUSTRY8

Figure 3.3 below shows the income from bar sales in the food and beverages service industry

in 2017: Q2. The income from bar sales in the food and beverages service industry registered

a negative growth of 8,6% in the current quarter. The total income during the period under

review stood at R353,3 million.

8 Income from bar sales refers to income from liquor sales.

21


Figure 3.4 below shows the performance of the bar sales in the service industry, which

include restaurants and coffee shops, take-away/fast food outlets and catering services.

During the period under review, take-away/fast food outlets and catering services

rebounded by 11,5% and 8,9%, following a contraction of 13,6% and 11,9%, respectively in

the previous quarter. However, restaurant and coffee shops decelerated by 11,5% from a

10,9% shrink previously. The year-on-year income from the restaurant and coffee shops

moderated by 3,9%, income from catering services increased modestly by 13,8% and

income from take-away/fast food outlets rebounded by 17,2% in the current quarter.


22

3.5 TRADE

Main export destinations of beverages products

Figure 3.5 shows that during the quarter under review, Africa was the largest exports

destination for beverages. It accounted for 42% share of the South African total exports,

followed by Europe (36%), Americas and Asia accounting for 11% and 10%, respectively.

Oceania is the least with (1%). The trend of exports destination’s share for the past five years

shows that Africa has the larger share, followed by Europe, the Americas and Asia (see Figure

3.6).



23

Among the main trading regions, the European Union (34%) accounted for most of the total

beverages exports, followed by SADC (Excluding SACU) and SACU (Excluding RSA) which

accounted for 18% each, NAFTA, East Asia and Eastern Africa Rest which accounted 9%, 5%

and 3%, respectively. Western Asia, South-east Asia and Western Africa were the least, which

accounted for 2% each (see Figure 3.7).

Source: Quantec EasyData (2017))


24

Figure 3.8 above shows the share of top ten beverages exports destination during 2017: Q2.

The following are the main countries that accounted a huge share of beverages exported

during the quarter under review: Namibia (9,8%), the United Kingdom (8,9%), Germany

(6,7%), the United States of America (5,7%), and the Netherlands (5,4%). However, the

following countries have a significant share Mozambique (4,9%), Zambia (4,1%), Botswana

(3,8%), Angola (3,3%) and Canada (3,1%). Table 3.3 presents major exported beverages

during the current quarter of review, while Table 3.4 shows high and low exports performers of

beverages during 2016: Q2 by comparing the exports values of the present quarter to the

same quarter of the previous year (year-on-year).

Table 3.3: Major exported beverages products in 2017: Q2

HS Code Beverages products Total amount (R

million)

HST220710 Undenatured ethyl alcohol 358,2

HST220210 Waters, including mineral waters and aerated waters 260,3

HST220870 Liqueurs and cordials 225,4

HST220300 Beer made from malt 208,4

HST220600 Other fermented beverages 208,0

HST220820 Spirits obtained by distilling grape wine or grape marc 125,8

HST220720 Ethyl alcohol and other spirits, denatured, of any

strength 106,8

HST220830 Whiskies 102,9

HST220860 Vodka 98,5

HST220410 Sparkling wine 72,0


3.4: Export performance of beverages in 2017: Q2

HS Code Beverages

% Changes

compared to a

year ago

High performers

HST220860 Vodka 147,3



HST220820 Spirits obtained by distilling grape wine or grape marc. 40,5

HST220900 Vinegar and substitutes for vinegar obtained from

acetic acid. 35,5

25

HST220300 Beer made from malt. 30,8

HST220850 Gin and Geneva. 25,1

HST090240 Other black tea (fermented) and other partly

fermented tea. 23,1

HST220840 Rum and other spirits 14,6

HST090300 Maté. 9.3

Low performers

HST230700 Wine -100,0

HST090220 Other green tea (not fermented) -77,6

HST090210 Green tea (not fermented) in immediate packings of a

content. -39,9

HST220110 Mineral waters and aerated water. -18,7

HST220210

Waters, including mineral waters and aerated waters,

containing added sugar or other sweetening matter or

flavoured.

-14,5

HST220710 Undenatured ethyl alcohol -7,4

HST220600 Other fermented beverages -7,2

HST090230 Black tea (fermented) and partly fermented tea, in

immediate packings of content. 3,9

HST220410 Sparkling wine 6,9

HST220720 Ethyl alcohol and other spirits, denatured, of any

strength 7,6


Main imported beverage products and the source

Figure 3.9 illustrates the share of continents as a source of beverages imports in 2017: Q2.

Europe was the largest source of beverages imports, it accounted for 68% share, followed by

Africa (17%), while the Americas, Asia and Oceania accounted for 9%, 5% and 1%,

respectively, during the period under review. Figure 3.10 shows that during the past five

years, Europe, followed by Africa, accounted for a huge share of beverages imports,

followed by the Americas and Asia.

26



Among the top trading regions, the European Union (66%) still accounts for the largest share

as a source of imports, followed by SACU (Excluding RSA) with 15% and NAFTA (8%). Western

Asia and Western Europe Rest played a minor role as a source of imports for beverages; they

accounted for 5% altogether (see Figure 3.10).

27



Figure 3.12 above shows the share of the top ten countries as a source of beverages imports.

During 2017: Q2, the United Kingdom accounted a huge share of beverages imports (32,2%),

followed by Namibia (15,0%), France (14,8%), Belgium (6,2%), the United States and Austria

(4,7%).

28

Table 3.5: Main imported beverages in 2017: Q2

HS Code Beverages

Total

amount

(R million)

HST230700 Wine 471,9

HST220710 Undenatured ethyl alcohol 25,3

HST220900 Vinegar and substitutes for vinegar 48,2

HST220810 Compound alcoholic preparations of a kind used for the

manufacture of beverages 29,3


HST200970 Apple juice 22,0

HST220820 Spirits obtained by distilling grape wine or grape marc 16,7


HST200940 Pineapple juice 10,2

HST220720 Ethyl alcohol and other spirits, denatured, of any strength 7,2



During 2017: Q2: The quarter-to-quarter beverages exports rebounded by 19,4%, following a

21,6% contraction previously. However, the year-on-year beverages exports registered an

improved negative growth of 0,8% from a 1,0% contraction in the previous quarter. On the

other hand, the quarter-to-quarter beverages imports registered an improved negative

growth of 6,6%, following a 25,2% contraction previously, while it contracted year-on-year by

29

14,5%, following a 12,2% growth in the preceding quarter. As a result, the trade deficit

widened to R2,7 billion in the current quarter from R2,0 billion in the previous quarter.

3.6 EMPLOYMENT

Source: Quantec EasyData (2017i)

Figure 3.14 shows the number of formal employment in the beverages and tobacco

products division. The quarter-to-quarter and year-on-year formal employment in the

beverages division contracted by 7,3% and 2,3%, respectively, following a previous growth of

1,7% and 0,1% . As a result, the beverages division shed 3 252 jobs in 2017: Q2 as compared

to 755 jobs created in the previous quarter.

3.7 OUTLOOK

Table 3.6: Net balance of BER manufacturing survey: Beverages

2016: Q4 2017: Q1 2017: Q2 2017: Q3*

Domestic sales volumes 49 -73 -6 35

Export sales volumes -57 -7 -69 -23

Production volumes 16 -66 -17 30

Domestic order volumes received 40 -65 -12 -15

Export order volumes received -42 -9 -69 -71

General business conditions -43 -23 -51 -58

30

2016: Q4 2017: Q1 2017: Q2 2017: Q3*

Number of factory workers 15 4 3 -8

Fixed investment 40 61 -28 -31

Business confidence 44 1 7

Expected volume of goods imported in

12 months’ time 31 -62 21

Expected volume of goods exported in

12 months’ time 48 75 45

Expected real investment in machinery

and equipment in 12 months’ time 30 67 -24

Expected business conditions in 12

months’ time -69 46 -83

*Expected Source: BER (2017)

The survey of the beverages division by BER shows that the year-on-year outlook for 2017: Q3

is negative for many variables, except for domestic sales volumes and production volumes.

4. CONCLUSION

The global economy is projected to increase from 3,2% in 2016 to 3,6% in 2017. In the

emerging markets and developing economies the growth is forecast to increase strongly

from 4,3% in 2016 to 4,6% in 2017. This upward growth is in relation to the stronger projected

activity in China and in the emerging Europe for 2017 and 2018. The South African GDP

rebounded in 2017: Q2, advancing at an annualised rate of 2,5% after successive quarters of

contraction, this reflect turnaround in the real output of primary and secondary quarter.

During this period, Africa contributed a huge percentage share in terms of food exports

destination by continents, followed by Asia and Europe, while Americas and Oceania their

contribution was minimal. In terms of sources of food imports share by continents, Asia was

the main source of food imports, followed by Europe, Africa and the Americas, while

Oceania’s share was minimal.

When it comes to beverages, Africa and Europe accounted for a huge share of beverages

exports destination during the period, followed by Americas, Asia and Oceania which

accounted a minimum share by continents. In terms of beverages exports share, Europe

accounted for a huge share as a source of imports by continents, more than half of all

beverages imports were from Europe, followed by Africa and Americas, Asia and Oceania

contributed a minimum share.

During the quarter under review, the seasonally adjusted physical volume of production for

the food and beverages industry increased modestly by 3,2% quarter-to-quarter, as

compared to a growth of 0,9% in the previous quarter. The seasonally adjusted value of sales

31

of food and beverages rebounded during the quarter but moderated year-on-year. As a

result of the growth in both volumes of production and value of sale in the food and

beverages industry, the trade deficit in the food and beverages industry narrowed to R25,9

million from R3 048,3 million registered in the previous quarter.

The employment in the food, beverages and tobacco products division contracted by 1,4%

quarter-to-quarter following 0,9% growth in the previous quarter. However, it increased

marginally by 2,8% year-on-year following a 1,7% growth recorded previously. This has led to

3 502 jobs being shed in the current quarter as compared to 2 338 jobs created previously.

32

5. REFERENCES

BER (2017), Manufacturing Survey. Bureau for Economic Research, University of Stellenbosch.

Quantec EasyData (2017), RSA International Trade. Accessed in December 2017.

Statistics SA (2017a), Consumer Price Index, various issues. Statistics South Africa.

Statistics SA (2017b), Producer Price Index, various issues. Statistics South Africa.

Statistics SA (2017c), Export and Import Unit Value Indices, various issues. Statistics South

Africa.

Statistics SA (2017d), Manufacturing: Production and Sales, various issues. Statistics South

Africa.

Statistics SA (2017e), Manufacturing: Utilisation of Production Capacity by Large Enterprises.

Statistics South Africa.

Statistics SA (2017f), Wholesale Trade Sales, various issues, Statistics South Africa.

Statistics SA (2017g), Retail Trade Sales, various issues, Statistics South Africa.

Statistics SA (2017h), Food and Beverages, various issues, Statistics South Africa.

Statistics SA (2017i), Quarterly Employment Statistics, various issues. Statistics South Africa.

Reserve Bank (2017), Quarterly Bulletin, September 2017, South African Reserve Bank.

33

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quarterly economic review of the food and beverages ... · i preface this publication quarterly...

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