Economic and political state of the Western Cape agriculture sector
“Companies are looking to locate investments near to new consumer markets and to enter markets with higher GDP growth rates. If you look at SADC (Southern African Development Community), they show growth rates from between 4.5% and 6% GDP benchmarked against where the source destinations of where these investments are coming from – such as USA and Europe – growing around 2% to 3% GDP. The Western Cape, therefore, has a value proposition in place and that is the message that we take to the international market.”
From an economic perspective, Western Cape agriculture contributes 4.1% when looking at it from a sectorial composition. Although it may sound small, it's only deemed that small because the services sector has grown so significantly.
Kajie feels that agriculture is one of the cornerstone industries and contributors in the Western Cape and its economy. The sector has the ability to create a substantial amount of jobs against the backdrop of the fact that South Africa has roughly a 25% unemployment rate. “From an investment and industrial perspective,” Kajie says, “there are huge opportunities in this sector, particularly in the sectors that are using primary goods.”
Primary goods are exported in its raw form to countries where the beneficiation happens. However, there is an economical potential to be unlocked where instead of sending our goods internationally for production, we should find the expertise in South Africa or in the Western Cape in order for us to grow the industry base here.
Kajie says the Western Cape is reaching strategic markets in Europe, such as Germany, Netherlands and the UK. In Asia, our biggest export market is China. In Africa, exports reach high growth markets such as Nigeria, Angola, and Mozambique.
The most important agriculture commodities being exported out of the Western Cape are apples and pears; wines and table grapes; and citrus.
Western Cape-based companies have seen the opportunities that exist in Africa. “You have retailers such as Shoprite, Checkers and Pick ‘n Pay locating investments into strategic locations in Africa. The importance of that is it leads to a stronger growth economically for the Western Cape and South Africa,” Kajie says.
“The IMF (International Monetary Fund) indicated that 7 of 10 fastest growing economies in the world are located on the African continent. Because of our strategic location we can access those markets, for exporters out of Cape Town and the Western Cape to target those high growth economic hot spots on the African continent and work competitively.”
Kajie says there are particular industries and sub-sectors that are emergent in the Western Cape. And while industrialisation has taken place the province has a strong value chain and supply chain.
“Naturally the next thing to do is look further up the value chain to technology and innovation. Two particular instances of international companies establishing a footprint in the Western Cape in the last year or two is a market in organic animal feed. It's a first to the world market, which means that new global innovation and technology globally is now starting to happen in the Western Cape agribusiness sector. The second is an investment that was placed in Cape Town where the company wants to develop, manufacture, and distribute ready-to-use therapeutic foods into the rest of Africa to combat factors such as malnutrition.”
“This tells us that international companies are seeing Cape Town as a headquarter base to target the African story. We feel that it is because of our first-world infrastructure and a well-regulated business and political environment – generally speaking when benched-marked against the rest of Africa.
All in all, Kajie says it's really about rolling out the red carpet for international investors and local businesses so that they can optimise their activities destination and to make Cape Town and the Western Cape a globally competitive business destination to attract other countries to set up shop here.
