When examining the potential for a new business or product, a SWOT analysis can help determine the most likely risks and rewards.
Related: The agricultural sector in South Africa – What to know when starting out
KPMG’s study of the agriculture sector in South Africa for the Small Enterprise Development Agency (Seda), “Research on the Performance of the Agricultural Sector”, includes a SWOT analysis of three main products:
- field crops
- horticultural products
- animals/animal products
These results contained in the report are helpful for developing a strong business strategy as they point out the most prominent strengths and weaknesses, as well as the opportunities and threats in the marketplace, when it comes to each agricultural sub-sector.
1. The field crop sub-sector
- Maize is the primary food of 80% of the country’s population and will maintain strong growth
- South Africa is one of a few countries that produces white maize with significant potential for export
- Significant maize-yield improvements have resulted from stable production on irrigated land
- Demand for maize is linked to rising demand in livestock as yellow maize is the main feed-stock
- Tobacco continues to be in demand in international countries
- Steady decline in planted area of maize
- Farmers are financially constrained in the period between planting and harvesting
- Input costs for farmers are rising
- Maize prices are volatile
- Farmers are not cost competitive when compared to other sugar producing countries
- Preferential trade agreements and high export tariffs for sugar farmers
- Declining cotton prices and the perception that the industry is not profitable
- Increased smoking laws, high tax rates and high input costs are slowing the demand for tobacco
- Creation of biodiesels will improve demand for oil seeds
- Biodiesels have the potential to lower farmer’s input costs by using it to meet their energy requirements
- Sugarcane-based renewable energy could assist Eskom with cogeneration of power
- Cotton farming can create numerous jobs as it is labour intensive
- South African cotton is one of the world’s finest, giving the country a distinct advantage
- Tobacco sector and government partnership is helping emerging farmers to enter the commercial space
- Rising prices of yellow maize places added pressure on the animal feed sector
- Maize exports need to be monitored to ensure that domestic demand is met
- Reducing profit margins for farmers may result in a reduction in production to remain profitable
- Competition from cheaper imports may hurt the domestic production market
- Major sugar producing nations subsidise the production of sugar with the overproduction eroding the global price of sugar
- Crop diseases can severely affect farmers’ production levels and profitability
2. The horticulture sub-sector
- The climatic diversity of the country is suitable for the cultivation of a wide variety of fruits and vegetables
- Citrus industry is export-orientated and SA is firmly established as one of the leading citrus producers in the world. Infrastructure and climate is suited to maintaining this position
- Off-season production suits the European market and ensures demand for South African fruit
- Small-scale fruit and vegetable farmers do not have sufficient access to credit, transport and storage infrastructure and markets and experience difficulty participating in commercial agriculture
- Small-scale farmers lack access to advanced farming technologies thus reducing their global competitiveness
- The subtropical fruit industry is cost-intensive and requires high levels of investment required during non-bearing seasons
- Asia and the Middle East are forecast to become major markets for South African table grapes
- Niche markets for rooibos and honeybush tea as well as for essential oils set to increase especially as people get more health-conscious
- Increasing demand for organically grown fruits and vegetables
- Growing market for ornamental and cut flowers
- Training of emerging and communal farmers to combat crop-related diseases
- Rising input costs
- Fruit and vegetable farmers are particularly prone to crops being affected by pests and diseases
- The citrus industry does face serious international competition and farmers will need to become increasingly cost-competitive
3. The livestock and animal product sub-sector
- Livestock farming comprises 40% of the country’s agricultural output and is a major component of the sector
- Approximately 80% of agricultural farm land can be used for the farming of livestock and as such farmers combine livestock and crop farming
- Poultry is a fast growing convenience food and has healthy future demand
- Help is available for small-scale farmers with financing issues
- Weak demand due to the effects of the global financial crisis
- South Africa is an importer of red meat and with potential rise in demand
- Small-scale farmers do not have the research and market information needed to commercialise their products
- There are many financing backlogs
- Financing options for small-scale farmers have high interest rates and repayments
- Communal farming has the potential to help local producers meet domestic demand
- Access to viable and affordable financing options
- Providing small-scale farmers with the technical skills and information to tap into commercial markets
- Influx of cheap poultry will reduce production levels for local producers
- Rising feed prices are likely to affect local producer costs
- Avian flu’ could deter growth in the industry and would affect both poultry and ostriches
- Foot and mouth disease is a major concern
Thinking about an agricultural business in terms of these unique “SWOTs” will help to put business owners on the right track from the start, and prevent many headaches later on.
Department of Agriculture, Forestry and Fisheries
South Africa’s agricultural sector is overseen by the Department of Agriculture, Forestry and Fisheries, which also has the responsibility of ensuring access to sufficient, safe and nutritious food by the country's population.
The Department’s core mandate is contained in Section 37(ii) of the Constitution. It is currently responsible for more than 30 pieces of legislation.
Underpinning the scope of the Department’s mandate is the understanding of agriculture, as being inclusive of all economic activities related to farming.
Because the agricultural sector is continuously subjected to changes in the production and marketing environment, the policy and legislative environment changes regularly through amendments and sometimes replacement of legislation.
For more information on the legislation, visit: www.daff.gov.za/daffweb3/Resource-Centre
African Farmers' Association of South Africa (AFASA)
AFASA is a body of African farmers that aims to commercialise the developing agricultural sector and ensure meaningful participation of black people in the mainstream commercial agribusiness sector. For more information, visit www.afasa.za.org
The Agricultural Research Council
The Agricultural Research Council is a public entity that conducts research with partners, develops human capital and fosters innovation to support and develop the agricultural sector. It was established in 1990 and is the principal agricultural research institution in South Africa. Its core mandate is to conduct research, drive research and development, drive technology development and the transfer of information to promote agriculture, contribute to a better quality of life, ensure natural resource conservation and alleviate poverty.
For more information, visit www.arc.agric.za
A federation of agricultural organisations, Agri SA was established in 1904 as the South African Agricultural Union and consists of several provincial and commodity organisations. Through its affiliated membership, it represents a diverse grouping of farmers. Agri SA’s policy advocacy includes work on trade negotiations, industrial policy, taxation, financing, land reform, labour laws, training, farmer development, environmental affairs, water rights and water pricing, other input-related issues, farm safety, law and order, infrastructure, technology development and transfer, statistical information and local government.
For more information, visit: www.agrisa.co.za
Institute for Poverty, Land and Agrarian Studies (PLAAS)
PLAAS undertakes research on land and agrarian reform, poverty and natural resource management in South Africa and the southern African region.
For more information, visit www.plaas.org.za
Farmer’s Weekly magazine
Farmer’s Weekly is aimed at the South African farming community and the advancement of the interests of farmers and their industry.
For more information, visit www.farmersweekly.co.za
Harvest SA magazine
Harvest SA aims to inform, and create a platform for farmers, the government and the corporate sector to work together to provide solutions to food security. It covers environmental concerns, employment/job creation, skills development, the role women play in farming in South Africa, economic concerns and more.
Stock Farm magazine
This is a magazine for farmers of cattle, sheep, goats, game and ostrich.
For more information, visit www.stockfarmafrica.co.za