Annual Economic Review of Agro-processing

agriculture,forestry & fisheriesDepartment:Agriculture, Forestry and FisheriesREPUBLIC OF SOUTH AFRICA

Annual Economic Review of the Agro-processing Industry in South Africa: Looking at 2011

Directorate: Agro-processing Support

September 2012

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Annual Economic Review of the Annual Economic Review of the

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South Africa: South Africa: Looking at 2011Looking at 2011

Directorate: Agro-processing Support

September 2012

DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES

2012

Published by Department of Agriculture, Forestry and Fisheries

Design and layout by Directorate Communication Services

Obtainable from the Department of Agriculture, Forestry and Fisheries Directorate Agro-processing Support Private Bag X416 Pretoria 0001

Compiled by Yemane Gebrehiwet

2nd floor: Sefala Building

503 Belvedere Street, Arcadia, South Africa

All correspondence can be addressed to:

The Director: Agro-processing Support

Private bag X416, Pretoria 0001, South Africa

Tel: +27 (12) 319 8457

Fax:+27 (12) 319 8093

Email: [email protected]

This publication is also available on the internet at:

http://www.daff.gov.za

iii

Contents

Preface .................................................................................................................................................................... v

Executive summary .................................................................................................................................................. vii

1. Introduction .................................................................................................................................................... 1

2. Overview of global economy ......................................................................................................................... 1

3. State of the domestic economy .................................................................................................................... 2

4. The agro-processing industry .......................................................................................................................... 3

4.1 Food products ................................................................................................................................................ 4

4.2 Beverages ...................................................................................................................................................... 6

4.3 Tobacco ......................................................................................................................................................... 8

4.4 Textiles ............................................................................................................................................................. 10

4.5 Wearing apparel ............................................................................................................................................. 13

4.6 Leather and leather products ......................................................................................................................... 15

4.7 Footwear ........................................................................................................................................................ 17

4.8 Wood and wood products ............................................................................................................................. 20

4.9 Paper and paper products ............................................................................................................................. 22

4.10 Rubber products ............................................................................................................................................. 24

4.11 Furniture .......................................................................................................................................................... 27

5. Conclusion ..................................................................................................................................................... 29

References ............................................................................................................................................................... 30

v

Preface

The agro-processing industry is among the sectors identified by the Industrial Policy Action Plan (IPAP), the New Growth Path and the National Development Plan for its potential to spur growth and create jobs because of its strong backward linkage with the primary agricultural sector. DAFF established a Directorate: Agro-processing Support in 2011 to complement the interventions undertaken by several governmental departments, notably, the Department of Trade and Industry. One of the main purposes of the directorate is to provide timely and updated economic information regarding agro-processing, in order to monitor the performance of the sector and provide an insight into the effects of economic policies and exogenous factors. To achieve this purpose, the directorate has started to publish a regular annual review of the agro-processing industry.

This publication Annual Economic Review of the Agro-processing Industry in South Africa: Looking at 2011 is the first an-nual economic review by the directorate and it evaluates the economic performance of the eleven divisions within agro-processing during 2011. These divisions, which are in line with the Standard Industrial Classification, are food products, beverages, tobacco, textiles, wearing apparel, leather and leather products, footwear, wood and wood products, paper and paper products, rubber products and furniture. The main economic indicators reviewed are the changes in the real value added, real output values, real gross fixed domestic investment, trade balance, capacity utilisation and total em-ployment.

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

Dr. Simphiwe Ngqangweni

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.

vii

Executive summary

The slowdown of economic growth in advanced economies during 2011 has subdued global economic growth and its spill over affected the growth of emerging and developing countries. Domestic economic growth, however, slightly increased from the preceding year, mainly supported by the tertiary sector as the growth rate of both primary and secondary sectors slowed down noticeably. During 2011, the manufacturing sector’s growth dropped from 5,4% in 2010 to 2,4% prompted by weak global economy growth that affected exports, higher production costs and weak domestic demand. Driven by global commodity and energy price, domestic PPI and CPI inflation have also accelerated moder-ately in 2011.

Real value added of the agro-processing industry, which measures the GDP contribution, however, slowed down substan-tially from 7,7% in 2010 to 1,5%. The divisions that showed growth in real value added were rubber products (32,2%), food (6,4%), beverages (6%), footwear (5,2%), tobacco (5%) and wood and wood products (1,4%). Real gross value added dropped in the leather and leather products (20%), textiles (16,1%), wearing apparel (11,4%), furniture (9,7%) and paper and paper products (5,7%) divisions.

Real output of the agro-processing industry increased from a marginal growth rate of 0,4% in 2010 to 2,1% in 2011. The growth rate was driven by rubber products (18,2%), beverages (4,9%), tobacco (4,9%), furniture (2,9%), wood and wood products (2,6%) and food (2,5%). Real output, however, declined for leather and leather products (8,9%), wearing ap-parel (4,1%), textiles (1,9%), paper and paper products (1,3%) and footwear (0,2%).

Real gross fixed investment in the agro-processing industry rebounded by 4,9% in 2011 following substantial declines of 31% and 16% in 2009 and 2010, respectively. Among the divisions that showed a growth in investment were rubber products (51,1%), textiles (40%), wearing apparel (16,9%), leather and leather products (14,1%), footwear (12,3%) and beverages (8,6%). Real gross fixed domestic investment, however, decreased in the wood and wood products (43,4%) food (8,9%), paper and paper products (4,8%) and tobacco (2,7%) divisions.

Real export of aggregate agro-processing products has been declining since 2007. Following contractions of 1,8% and 2,5% in 2009 and 2010, respectively, exports of agro-processing products decelerated by 1,7% in 2011. Among agro-processing products bucking the trend were rubber products (42,4%), leather and leather products (32,5%), wearing apparel (6,1%) and food (1,2%). For the remaining divisions, real exports dropped as follows; footwear (45,8%), furniture (26,4%), tobacco (17,3%) textiles (13,8%), paper and paper products (6,5%), wood and wood products (2,2%), and beverages (0,6%).

Real import of aggregated agro-processing products increased by 10,1%, following a 14,5% rise in 2010. Tobacco prod-ucts are the only agro-processing products of which the import values declined (16,9%). For all other agro-processing products, imports increased as follows; footwear (19,8%), food (14,7%), beverages (12,3%), rubber products (11,7%), textiles (11,5%), wood and wood products (10,1%), leather and leather products (7,8%), paper and paper products (4,8%), furniture (3,2%) and wearing apparel (2,9%).

As a result of the higher growth rate in imports relative to exports, the trade deficit of the agro-processing industry in-creased from R20 932 million in 2010 to R27 296 million in 2011. The three divisions that maintained a trade surplus (though it decreased) were wood and wood products (R159 million), tobacco (R356 million) and beverages (R3 837 mil-lion). The trade deficit increased in almost all the remaining products which includes wearing apparel (R8 842 million), textiles (R5 760 million), footwear (R5 362 million), food (R5 519 million), rubber products (R4 290 million), furniture (R1 458 million), leather and leather products (R417 million) and paper products (R2 million).

Total employment in agro-processing declined by 2,2% in 2011. Formal and informal employment also contracted by 2,2%. Among the divisions that created formal jobs were furniture (5,7%: 1 800 jobs), rubber products (6,6%: 799 jobs), paper and paper products (2%: 628 jobs), tobacco (2,5%: 62 jobs) and beverages (2%: 660 jobs). Formal jobs were shed in food (3,5%: 6 254 jobs), textiles (3,9%: 1 399 jobs), wearing apparel (6,1%: 3 428 jobs), leather and leather products (1,6%: 87 jobs), footwear (3,7%: 324 jobs) and wood and wood products (5,4%: 2 060 jobs). Informal employment, how-ever, decreased in all divisions except in the beverages and furniture divisions that created 3% (656) and 6,7% (307) more jobs, respectively. Informal employment was lost in food (2,7%: 327 jobs), textiles (3,1%: 510 jobs), wearing apparel (5,2%: 1 809 jobs), leather and leather products (5,1%: 21 jobs), footwear (2,8%: 47 jobs) and wood and wood products division (4,5%: 569 jobs). Therefore during 2011, agro-processing shed 9 605 and 2 321 formal and informal jobs, respectively.

1

1 Introduction

Global economic growth slowed down in 2011 as a result of weak economic growth in advanced economies, which also subdued the economic growth of emerging and developing economies. Despite the substantial slowdown of the primary and secondary sector, the South African economy grew slightly more than the previous quarter owing to a re-bounded tertiary sector. During 2011, the manufacturing sector’s growth dropped from 5,4% in 2010 to 2,4% prompted by, higher production costs, weak domestic demand and feeble growth of the global economy that affected exports. As a result, formal employment in the sector contracted in 2011. This annual review examines the economic performance of the agro-processing industry, which is the main subsector in manufacturing, amid poor global economy growth and moderate domestic economic growth registered in 2011.

The annual review is organised as follows: the following section presents the overview of the global economy as it shed light on the prospects for domestic export growth. Section three provides a succinct summary of the state of the domestic economy to provide an insight into the growth in domestic demand, which is largely determined by a firm growth of the economy, employment and inflation. Section four gives a comprehensive but brief effect of the global and domestic eco-nomic situation on the eleven divisions of the agro-processing industry. The section reviews how the global and domestic economy in 2011 affected the real value added, real output, gross fixed domestic investment, trade balance, capacity utilisation and employment level of each division. The conclusion of the review is provided in section five.

2Overview of global economy

The growth of global economy moderated from 5,3% in 2010 to 3,9% in 2011 because of the advanced econo-mies’ lower growth rate of 1,6%, which slowed from 3,2% in 2010. In addition, emerging and developing economies’ growth moderated from 7,5% in 2010 to 6,2% in 2011. Output growth in the US decreased to 1,7% from 3% in 2010, prompted by higher food and energy prices that weakened consumer demand. The earthquake and tsunami substan-tially affected Japan’s economy, which resulted in sliding exports and consumer demand; hence, the contraction of the economy by 0,7% in 2011 (see Table 2.1).

The Euro area’s growth has also slowed down from 1,9% in 2010 to 1,5% in 2011. High unemployment, fiscal austerity and lack of business and consumer confidence in the region remained the main causes for the slow growth. In addition, many economies, including Italy, Spain, Portugal, Ireland, Greece, Slovenia and Cyprus entered into a recession in the fourth quarter of 2011. The banking sector in the area was also affected by the financial and economic crisis. The UK’s economy also slowed down as a result of the decline in business investment.

The spill-over effect of the crisis in Europe affected the emerging market and developing economies through declining external demand. As a result, the economic growth of China and India moderated from the previous year. Economic growth in sub-Saharan Africa, however, remained firm in 2011 mainly because of the high prices of export commodities and new resource extraction facilities in the region.

TABLE 2.1: Overview of the world economic outlook projections (percentage change)

2010 2011

World outputAdvanced economiesUSEuro areaJapanEmerging and developing economiesChinaIndiaRussiaBrazilSub-Saharan AfricaSouth Africa

5,33,23,01,94,47,5

10,410,8

4,37,55,32,9

3,91,61,71,5

–0,76,29,27,14,32,75,23,1

Source: IMF (2012)

The global oil price shot up from $79 in 2010 to $104 in 2011 amid global supply uncertainities, social and political unrest in North Africa and the Middle East. In addition, the world food and energy price index increased by 24% and 30%, re-spectively, in 2011. As a result, the global consumer price inflation increased from 1,5% to 2,7% in advanced economies and from 6,1% to 7,1% in emerging and developing countries, respectively. Owing to weaker global economic growth, the world trade volume of goods and services dropped sharply from 12,9% in 2010 to 5,8% in 2011.

2

3 State of the domestic economy

South Africa’s economic growth rose modestly from 2,9% in 2010 to 3,1% in 2011 mainly because of the rebound of the tertiary sector. Excluding the volatile primary sector, the economy grew by 3,3%, which was far lower than the pre-recession growth rate registered in 2008 (see Table 3.1). During 2011, the primary sector remained stagnant as the de-cline in agricultural growth was offset by mining. The agricultural sector’s real value added declined because of the contraction of field crops and poor growth in horticulture and animal production. The mining sector’s growth decelerated from 5,5% in 2010 to 0,2% in 2011 owing to elevating cost pressures, infrastructure constraints, higher electricity prices and weak global demand.

TABLE 3.1: South African economic growth rate (percentage change at seasonally adjusted annualised rates)

2008 2009 2010 2011

Primary sector Agriculture MiningSecondary sector Manufacturing Tertiary sectorNon-primary sector

–0,116,1–5,63,02,64,54,1

–4,2–1,5–5,4–6,9

–10,11,0

–1,1

4,00,55,54,35,42,32,8

0,0–0,40,22,12,43,63,3

Total 3,6 –1,5 2,9 3,1

Source: Reserve Bank (2012)

The growth of the secondary sector also decelerated from 4,3% in 2010 to 2,1% in 2011. The lower growth rate was mainly the result of a moderation in the manufacturing sector’s growth rate from 5,4% in 2010 to 2,4% in 2011. The con-traction of the manufacturing sector was mainly because of the deteriorating effects of the global economic slowdown on export-oriented industries, weak domestic demand, industrial action and increasing production cost. The construction sector showed a lacklustre growth of 0,8% in 2011. The electricity, gas and water sector also grew marginally by 1,3%. The growth of the tertiary sector increased from 2,3% in 2010 to 3,6% in 2011, prompted by the accelerated growth of com-merce (4,4%), transport and communication (3,3%) and financial and other services (3,5%).

During 2011, the real gross domestic expenditure increased from 4,2% in 2010 to 4,3% in 2011. The growth was mainly supported by the rise in the gross capital formation which rebounded from a drop of 1,6% in 2010 to a 4,4% growth in 2011. From the three components of gross fixed capital formation, outlay by private business enterprises increased by 5,3%, fol-lowed by public corporations (4,2%) and general government (0,8%). Household consumption expenditure also increased from 3,7% in 2010 to 5% in 2011. The rise in the expenditure was mainly the result of the increase in spending on services (3,8%), semidurables (7%) and non-durables (2,9%). Expenditure on durable goods, however, moderated from 18,1% in 2010 to 15,7%. Real final consumption expenditure by general government also moderated from 4,9% in 2010 to 4,5% in 2011.

Total average employment in the economy increased by 203 000 and the number of unemployed people increased by 64 750 in 2011. The unemployment rate, however, remained stable at 24,9%. Among the sectors that generated em-ployment were community and social services (122 000) trade (67 750), finance and other business services (54 750), manufacturing (27 000) and mining (6 750). The sectors that shed jobs were private households (27 250), agriculture (25 000), transport (12 250) and utilities (4 250).

Producer price inflation (PPI) in-creased from 6% in 2010 to 8,3% in 2011. Notable drivers for the rise in the PPI inflation are agricultural pro-ducer prices, which increased from a 1,3% decline in 2010 to 6,8% growth in 2011. In addition, manu-facturing PPI has risen from 1,8% in 2010 to 5,7% in 2011, bolstered by the rise in PPI for chemicals (6,1%), manufactured foods (5,9%) and pe-troleum and coal products (22,2%).

Source: Statistics SA (2012a, 2012b)

3

Consumer price inflation also increased from 4,1% in 2010 to 5% in 2011, prompted by food inflation, which jumped from 0,7% in 2010 to 7,2% in 2011.

The main drivers of food inflation were the rise in meat product prices from 0,5% in 2010 to 10,4% in 2011 and by the rebound of bread and cereals prices from a 1,5% contraction in 2010 to 7,1% growth in 2011. During 2011, processed and unprocessed food products increased by 7,9% and 6,6%, respectively. Other consumer products, the prices of which rose markedly, include petrol (20,9%) and electricity and other fuels (16,9%)

TABLE 3.2: Exchange rates of the rand (percentage change)

31 Dec. 2009 to 30 Jun. 2010

30 Jun. 2010 to31 Dec. 2010

31 Dec. 2010 to 30 Jun. 2011

30 Jun. 2011 to 30 Dec. 2011

Weighted average1 3,1 8,6 –6,4 –11,9

EuroUS dollarChinese yuanBritish poundJapanese yen

13,5–3,6–4,23,3

–7,4

5,915,512,212,2

6,1

–10,0–2,3–4,2–5,5–3,5

–6,5–16,6–18,8–13,4–19,5

Source: Reserve Bank (2012)

The average level of the nominal effective exchange rate of the rand dropped by 3,2% in 2011, after showing a firm strength of 14,4% in 2010. Table 3.2 shows that substantial depreciation of the rand occurred during the second half of 2011 mainly because of the sentiment that was affected largely by the downgrading of the sovereign debt of Italy, Slovenia, Japan and the US and the falling trend in commodity prices, which contributed to the acceleration of the de-preciation of the rand together with many other emerging market currencies. The real effective exchange rate also de-preciated by 13,7% in 2011 following a 10,1% appreciation in 2010 (Reserve Bank, 2012).

4 THE AGRO-PROCESSING INDUSTRY

The FAO (1997) defines agro-processing as a subset of manufacturing that processes raw materials and interme-diate products derived from the agricultural sector. Therefore, the agro-processing industry basically transforms products originating from agriculture, forestry and fisheries. According to the Standard Industrial Classification, the agro-processing industry comprises the following eleven divisions: food products, beverages, tobacco, textiles, wearing apparel, leather and leather products, footwear, paper and paper products, wood and wood products, rubber and furniture. This section reviews the economic performance of these divisions during 2011.

During 2011, the agro-processing industry contributed to 30,5% and 5,2% of the real value added (GDP) by the manu-facturing sector and the economy, respectively. Its contribution to the real output of the manufacturing sector and the economy was also 29,8% and 8,4%, respectively. Its share of real domestic fixed investment in the manufacturing sector and the economy was 14% and 2,4%, respectively, during the same period.

In addition, 14% and 8% of the total export by the manufacturing sector and the economy, originated from agro-pro-cessing. Similarly, 14% and 11% of the total imports of the manufacturing sector and the economy, respectivaely, were agro-processing products. During 2011, the industry accounted for 39,2% and 4,3% of the total employment in the manufacturing sector and the economy. This section reviews the economic performance of each division in the agro-processing industry during 2011.

1 The Reserve Bank calculates the nominal effective exchange rate of the rand based on trade in and consumption of manufactured goods between South Africa and its most important trading partners. It is calculated against fifteen currencies. The weights of the five major currencies are in brackets: Euro (0,34), US dollar (0,14), Chinese yuan (0,12), British pound (0,10), Japanese yen (0,10).

4

4.1 FOOD PRDUCTS

Real output of the food division re-bounded by 2,1% and 2,5% in 2010 and 2011, respectively, after drop-ping by 3% in 2009 (see Figure 4.1). Real value added, on the other hand, was among a few agro-pro-cessing industries that depicted a growth during the 2009 recession (6.3%). During 2011, real value add-ed growth accelerated by 6,4%. The output and intermediate input price of food products declined by 4,2% and 5,4%, respectively, in 2011.

The real gross domestic fixed invest-ment in the food division showed an exceptional average annual growth rate of 17% from 2002 to 2008. After the recession in 2009, however, its growth has been decelerating (see Figure 4.2). Real gross domestic fixed investment contracted by 16% in 2009 and decelerated by 8,9% and 8,8% in 2010 and 2011, respectively. The nominal value of gross fixed cap-ital formation shows that investment in new machinery and other equip-ment increased by 38,8% followed by investment in new transport equip-ment, which grew by 35,2%.

The growth of investment on new buildings and construction works was marginal (8,4%) (see Table 4.1).

TABLE 4.1: Gross fixed capital formation by type of asset: food products (R million)

Asset type 2010 2011 % Change

Buildings and construction worksTransport equipmentMachinery and other equipment

95954

4 376

1 04073

6 076

8,435,238,8

Total 5 388 7 189 33,4

Source: Quantec EasyData (2012)

After growing remarkably by 13,2% in 2009, exports remained sluggish in 2010 and increased marginally by 1,2% in 2011. Imports, however, kept rising, especially in 2010 and 2011, when it bounced by 13,7% and 14,7%, respectively (Figure 4.3). As a result, the trade deficit widened from R3 435 million in 2010 to R5 519 million in 2011. The export to output share decreased3 marginally from 9,5% in 2010 to 9.1% in 2011. The surge in imports, induced the import to domestic demand share4 to its highest level (14,2%) in 2011.


SSource: Quantec EasyData (2012)


2 Real value added refers to the difference between the real output value and real intermediate input consumption.3 Export to output share measures how much of the total output is exported.4 Import to domestic demand measures how much of the domestic demand is satisfied by imports. Domestic demand is equal to total output

plus imports minus exports.

5

TABLE 4.2: The top five exported food products in 2011

Product HS code R million% Share in 2011

% Share in 2010

Fruit and vegetable juices, not fermented or spiritedFruit, nut, edible plant parts prepared or preserved Cane or beet sugar and chemically pure sucroseFood preparations NESOI (not elsewhere specified or included)Fish frozen (no fish fillets or other fish meat)

20092008170121060303

1 6701 3731 9151 146

895

8,36,85,95,74,4

8,18,39,64,64,2


The top five exported food products during 2011 are presented in Table 4.2. Fruit and vegetable juices (8,3%) and fruit, nut, edible plant parts prepared or preserved (6,8%) are the main products exported followed by cane or beet sugar (5,9%). The share of sugar export, however, declined in 2011 compared to 2010. The main export destinations for food products during 2011 were the SADC (38,2%), EU (19%), Eastern Asia (8,5%), Northern Africa (3,9%) and NAFTA (3,5%).

TABLE 4.3: The top five imported food products in 2011

Product HS code R million % Share in 2011

% Share in 2010

RicePalm oil and its fractions, not chemically modifiedMeat and edible offal of poultry, fresh, chilled or frozenSoya-bean oil and its fractions, not chemically modifiedSoya-bean oilcake and other solid residue

10061511020715072304

3 6792 9922 7342 7122 606

11,008,908,208,107,8

11,308,004,807,409,1


Among the top imported food products in 2011, rice accounted the highest share (11%) followed by palm oil and its fractions (8,9%), meat and edible offal of poultry (8,2%) and soya-bean oil and its fractions (8,1%) (see Table 4.3). The main source of imports during 2011 were South Asia (27,5%), EU (25,6%), South and Central America (21,9%), NAFTA (4,6%) and Eastern Asia (4%).

TABLE 4.4: Utilisation and reasons for underutilisation of production capacity by large enterprises: food products (percentage)

Period Utilisation Reasons for underutilisation

Total under-utilisation

Shortages Insufficient demand

Other

Raw materials Labour

Skilled Semi and un-skilled

200920102011

82,183,183,4

17,916,816,6

2,22,22,2

1,81,41,4

0,20,10,2

9,99,99,5

3,73,13,1

Source: Statistics SA (2012c)

The utilisation of production capacity by large enterprises in the food division shows that it increased marginally in 2011. Insufficient demand and other reasons such as downtime because of maintenance and lower productivity re-mained the two foremost reasons for un-derutilisation followed by shortage of raw materials (see Table 4.4).


6

Despite showing a marginal growth in output and export, jobs were lost n the food division during 2011. Formal employ-ment declined by 3,5% and informal employment dropped by 2,7% (see Figure 4.4). Table 4.5 shows that the share of jobs lost by semiskilled and unskilled workers was higher (4,9%) compared to high-level (2,1%) and mid-level (2,1%) skilled workers. During 2011, unit labour cost in the food division rose by 5,2%, while capital intensity increased marginally by 0,4%.

TABLE 4.5: The skill level of employees: food products

Skill level 2010 2011 % change

High levelMid-levelSemiskilled and unskilledInformal

13 48576791

87 64012 229

13 19575 06983 33711 902

–2,1–2,2–4,9–2,6

Total 190 695 183 503 –3,8


4.2 BEVERAGES

After plummeting by 22,4% in 2009, real value added of the beverages division rebounded by 13,7% in 2010 and the growth moderated to 6% in 2011. Real output, on the other hand, grew by 2% and 4,9%, in 2010 and 2011, respec-tively, after dropping substantially by 11,3% in 2009 (see Figure 4.5). During 2011, the output price for beverage products increased marginally by 0,4% and the intermediate input price went up by 1,6% .

The growth of real gross domestic fixed investment in the beverages division re-bounded by 8,6% in 2011 after dropping by 15,2% and 7,1%, in 2009 and 2010, respectively (see Figure 4.6). The nominal value of gross fixed capital formation in the beverages division shows a growth of 18,8% in 2011(see Table 4.6). Most of the growth in the capital formation was for machinery and other equipment (25,8%). Investment on buildings and construction works and transport equipment, however, dropped by 32% and 29%, respectively.

TABLE 4.6: Gross fixed capital formation by type of asset: beverages (R million)



488,531,5

3 703,8

333,222,2

4 662,0

–31,8–29,025,8

Total 4 223,8 5 017,4 18,8




7

The export performance of the beverag-es division has been robust compared to other agro-processing products during the past decade. Real export, however, declined marginally by 0,6% in 2011. Imports, on the other hand, jumped up by 12,3% after dropping substantially by 24% in 2010 (see Figure 4.7). As a result, the trade surplus shrank from R4 198 in 2010 to R3 837 in 2011. In addition, export to output share dropped from 15,5% in 2010 to 14,2% in 2011 and the import to domestic demand share in creased mar-ginally from 7% in 2010 to 7,6% in 2011.

TABLE 4.7: The top five exported beverage products in 2011

Product HS code R million% Share

2011 2010

Wine of fresh grapesEthyl alcohol, undenatured, > 80% alcohol.Ethyl alcohol, undenatured < 80% alcoholWaters, sweetened, etc., and other non-alcoholic beverages Fermented beverages (cider, perry, mead etc.)

22042207220822022206

5 491,8925,4811,6372,3341,6

63,110,6

9,34,33,9

63,715,6

7,23,43,3


Table 4.7 shows that wine of fresh grapes was the main products that accounted for 63,1% of the total beverage exports followed by ethyl alcohol beverages in 2011. As a main destination for the exports, the EU accounted for the highest share of 45,8%, followed by SADC (15,8%), NAFTA (9,5%), Western Asia (4%) and Northern Africa (3,8%).

TABLE 4.8: The top five imported beverage products in 2011


2011 2010

Ethyl alcohol, undenatured <80% alcoholMalt, whether or not roastedWaters, sweetened etc and other non-alcoholic beveragesBeer made from maltWine of fresh grapes

22081107220222032204

2 633,8437,0344,8188,8158,0

61,710,1

7,94,43,7

60,36,98,54,23,4


The list of the top five imported beverage products during 2011 includes ethyl alcohol and malt that made up for 61,7% and 10,1% of total beverage imports followed by waters and beer made from malt that accounted for 7,9% and 4,4%, respectively (see Table 4.8). The EU was the largest source of imports of beverage products (69,6%) followed by NAFTA (14,6%), South and Central America (2,6%) Oceania including Australia and New Zealand (1,7%) and SADC (1,3%).

TABLE 4.9: Utilisation and reasons for underutilisation of production capacity by large enterprises: beverages (percentage)



Shortage of Insufficient demand

Other


Skilled Semi and unskilled

200920102011

78,677,880,6

21,422,219,4

3,32,72,4

1,51,31,6

0,00,40,2

13,815,311,5

2,52,33,7



8

Following an increase of output in the beverages division, the utilisation of production capacity increased from 77,8% in 2010 to 80,6% in 2011 (see Table 4.9). Insufficient demand and other reasons such as downtime because of mainte-nance and lower productivity, however, remained the two main reasons for underutilisation followed by shortage of raw materials and skilled labour.

The beverages division is among a few agro-processing industries that created jobs in 2011 (see Figure 4.8). The total number of employed people increased by 2,4% , while formal and informal em-ployment rose by 2% and 3%, respec-tively. Table 4,10 shows that employment increased for high-level skilled workers (5,3%) more than for the semiskilled and unskilled (3,2%) and mid-level skilled workers (2,6%). During 2011, labour unit cost in the beverage division increased by 2,5%; however, capital intensity dropped by 2,3%.

TABLE 4.10: The skill level of employees: beverages


High-levelMid-levelSemiskilled and unskilledInformal

5 26811 34116 12521 688

5 54711 63916 63922 343

5,32,63,23,0

Total 54 422 55 840 2,6


4.3 TOBACCO

Real value added and output of the to-bacco division increased by 5% in 2011 (see Figure 4.9). Though the growth of output accelerated from 2% in 2010, the growth of real value added moderated from its remarkable growth of 15% in 2010. Both real value added and output, however, are still below their 2008 (prere-cession) level. During 2011, the output price of tobacco products remained relatively unchanged and the intermedi-ate input price increased marginally by 1,6%.



9

Real gross domestic fixed investment in the tobacco division has been declining since 2004. The drop was sharp in 2006 and 2009, when it decreased by 20% and 18,6%, respectively. During 2011, the deceleration of real gross domestic fixed investment moderated to 2,7% (see Figure 4.10). The current value of gross fixed capital formation also subsid-ed slightly in 2011 (see Table 4.11). Gross fixed capital formation for buildings and construction works and transport equip-ment contracted considerably by 33% and 38%, respectively, in 2011. In nomi-nal terms, investment in machinery and other equipment remained stagnant.

TABLE 4.11: Gross fixed capital formation by type of asset: tobacco (R million)



0,31,8

121,6

0,11,1

121,8

–33,0–38,0

0,2

Total 123,6 123,0 –0,5


After showing a robust growth of 44,5% in 2009, real export of tobacco products decreased in 2010 and 2011 by 28% and 17%, respectively. Imports, on the other hand, have started to expand from a negligible level before 2004 to a no-ticeable level during the past five years (see Figure 4.11). During 2011, imports dropped markedly by 17%. Owing to the sharp reduction of exports relative to im-ports, however, the trade surplus con-tracted from R432 million in 2010 to R356 million in 2011. In addition, export to out-put share dropped from 11% in 2010 to 8,9% in 2011 and import to domestic demand share decreased from 3,7% in 2010 to 2,9% in 2011.

TABLE 4.12: The top three exported tobacco products in 2011


2011 2010

Cigars, cigarettes etc., of tobacco or substitutesTobacco and tobacco substitute products NESOITobacco, unmanufactured; tobacco refuse

240224032401

703,7441,7

1,2

59,237,2

0,1

49,642,9

0,1


Table 4.12 presents the top three exported tobacco products in 2011. Cigars, cigarettes etc. (59,2%) and other tobacco and tobacco substitutes (37,2%) are the main product groups that formed all exports. Among the top export destinations during 2011 were Western Asia (39,4%), Northern Africa (22,1%), Sub-Saharan Africa, excluding the SADC (14,5%) and SADC (14,3%). Compared to 2010, the share of Western Asia and Sub-Saharan Africa excluding the SADC has increased moderately compared to the other regions.



10

TABLE 4.13: The top three imported beverage products in 2011


2011 2010

Cigars, cigarettes etc., of tobacco or substitutesTobacco and tobacco substitute products NESOITobacco, unmanufactured; tobacco refuse

240224032401

227,962,548,8

61,416,813,1

49,824,113,2


Similar to the exported tobacco prod-ucts, the three product groups also re-mained the main imported products. However, the share of cigars, cigarettes etc. has increased substantially com-pared to other tobacco and tobacco substitute products in 2011 (see Table 4.13). The EU remained the main source of imports for tobacco product (35,8%) followed by Europe other than the EU (19,4%), SADC (12%), South and Central America (6,5%) and South Asia (5,8%). Compared to 2010, the share of Europe other than the EU increased markedly from 5,7% in 2010 to 19,4% and Eastern Asia decreased from 14,6% in 2010 to 5,2% in 2011.

Following the growth in output, total employment generated by the tobacco division increased by 2,4% in 2011 (see Figure 4.12). Table 4.14 shows that the highest growth in employment was for high-level skilled workers (5,7%) followed by mid-level (3,2%) and semiskilled and unskilled workers (1,6%). During 2011, labour unit cost in the tobacco division in-creased by 2,9%, while capital intensity dropped by 9,5%.

TABLE 4.14: The skill level of employees: tobacco



399857

1 217–

422884

1 237–

5,73,21,6

–

Total 2 473 2 543 2,8


4.4 TEXTILES

The real output of the textiles division has been declining since 2008. During 2011, the deceleration moderated from 5,4% in 2010 to 1,9%. Real value added, how-ever, plummeted by 16% in 2011 (see Figure 4.13) and it was the substantial decline registered during the past ten years. During 2011, the output price of the division increased marginally by 0,6%, while intermediate input price dropped by 4,6%.


11

Despite a drop in real output and value added, the growth of real gross domes-tic investment in the textiles division in-creased substantially by 40% in 2011, following a 19,8% growth in 2010. As a result, real investment in 2011 was more than the prerecession level in 2008 (see Figure 4,14). Table 4.15 shows that the current value of gross fixed capital for-mation considerably increased for build-ings and construction works (145%) and machinery and other equipment (130%). There was also a marginal increase in gross fixed capital formation for new transport equipment (3,1%).

TABLE 4.15: Gross fixed capital formation by type of asset: textiles (R million)



79,222,3

345,0

194,023,0

795,3

145,03,1

130,0

Total 446,5 1 012,3 127,0


The trend of textiles export has been de-clining during the past decade. Conversely, imports have been on the rise during similar period (see Figure 4.15). During 2011, exports dropped by 13,8% and imports grew firmly by 11,5%. As a result, the trade deficit of the textiles division widened from R4 860 in 2010 to R5 760 million in 2011. In addition, import to domestic demand share reached its highest level (34,2%). Export to output share, however, increased marginally from 12,1% in 2010 to 12,9% in 2011 mainly because of a substantial drop of textiles output relative to exports.

TABLE 4.16: The top five exported textile products in 2011


2011 2010

Wool and fine or coarse animal hair, carded and combedTarpaulins, sails, awnings, tents, etc.Non-wovens, whether or not impregnated, coated etc.Wool, not carded or combedCarpets and other textile floor coverings, tufted

51056306560351015703

600,7233,4218,5125,4107,5

22,28,68,14,63,9

21,511,16,83,25,2

Table 4.16 shows the top five exported textile products during 2011. Wool and fine or coarse animal hair (22,2%) and tarpaulins, sails, awnings, tents (8,6%) were the main exported products followed by non-wovens (8,1%). The top export destinations for textile products during 2011 were the EU (34,7%), SADC (24,5%), Eastern Asia (8,1%), NAFTA (5,6%) and Oceania, including Australia and New Zealand (4,5%).

12

TABLE 4.17: The top five imported textile products in 2011


2011 2010

Woven synthetic filament yarn, monofilament > 67dtexBed, table, toilet and kitchen linensNon-wovens, whether or not impregnated, coated, etc.Woven fabric, >85% synthetic + cotton, <170g/m2

Woven cotton fabric, >85% cotton, <200 g/m2

54076302560355135208

996,2610,1594,8538,6476,7

10,56,46,35,75,0

10,56,04,94,44,8

Table 4.17 shows the top five imported textile products in 2011. The main imported products were woven synthetic fila-ment yarn (10,5%), bed and other linens (6,4%) and non-wovens (6,3%) which altogether accounts for 23% of textile imports. The major source of imports during 2011 were Eastern Asia (43%), South Asia (23%), EU (15%), Western Asia (3,9%) and NAFTA (2,6%).

TABLE 4.18: Utilisation and reasons for underutilisation of production capacity by large enterprises: textiles (percentage)




Other



200920102011

71,571,570,5

28,528,529,5

1,53,72,0

0,81,10,8

0,10,10,2

22,919,523,5

3,03,82,9


Following a significant decline in output, the utilisation of production capacity by large enterprises in the textiles division reached its lowest rate of 70,5% in 2011 (see Table 4.18). The principal causes of underutilisation were insufficient de-mand for local textile products owing to the surge of cheap imports.

The trend of total employment in the tex-tiles division has been decreasing, follow-ing a similar trend in production, exports and utilisation capacity (see Figure 4.16). During 2011, total employment dropped by 3,6% and formal and informal em-ployment declined by 3,9% and 3,1%, respectively. Semiskilled and unskilled workers lost most of the jobs (4,4%) fol-lowed by mid-level skilled workers (3,8%) and high-level skilled workers (2%) (see Table 4.19). During 2011, labour unit cost in the division grew by 1% and capital intensity rose by 3.7% because of the in-creased investment.

TABLE 4.19: The skill level of employees: textiles



2 1775 877

28 00316 710

2 1335 650

26 76816 200

–2,0–3,8–4,4–3,0

Total 52 767 50 751 –3,8

13

4.5 WEARING APPAREL

After showing a marginal growth of 1,3% in 2010, real output of wearing apparel decreased by 4,1% in 2011. Similarly, real value added dropped by 11,4% in 2011, after showing a remarkable growth of 15,7% in 2010 (see Figure 4.17). During 2011, both the output and inter-mediate input price of the wearing ap-parel division decreased by 2,7% and 9%, respectively.

After declining by 26% and 6,5% in 2009 and 2010, respectively, real gross do-mestic fixed investment in wearing ap-parel division rebounded by 17% in 2011 (see Figure 4.18). The nominal gross fixed capital formation by type of asset in the wearing apparel division shows that most of the growth in investment was for ma-chinery and other equipment (42,4%), which constituted 97% of the total invest-ment in 2011 (see Table 4.20). Buildings and construction works and transport equipment contracted by 31% and 35%, respectively.

TABLE 4.20: Gross fixed capital formation by type of asset: wearing apparel (R million)



8,67,1

252,8

5,94,6

360,0

–31,0–35,042,4

Total 268,4 370,5 38,0


The trade deficit of wearing apparel has been widening as the trend of exports has become negligible and the trend of imports has been of substantial growth since 2004. During 2011, exports in-creased by 6,1% and the growth of im-ports moderated from 18% in 2010 to 2,9% in 2011. Therefore, the trade deficit of wearing apparel reached the highest level in 2011 (R8 842 million) from the R8 611 million it recorded in 2010. Export-to-output share increased from 4,6% in 2010 to 5,7% in 2011 and import-to-do-mestic demand share reached the highest level of 43,6% in 2011 from 39,6% in 2010.




14

TABLE 4.21: The top five exported wearing apparel products in 2011


2011 2010

Men’s or boys’ suits, ensembles etc., not knit, etc.Pantyhose, socks and other hosiery, knit or crochetMen’s or boys’ suits, ensembles, etc., knit or crochetTrack suits, ski-suits and swimwear, not knit, etc.Women’s or girls’ suits, ensembles etc, not knit, etc.

62036115610362116204

119,072,252,047,647,4

12,27,45,34,84,8

14,39,03,75,54,5


Table 4.21 presents the top five exported wearing apparel products in 2011. Among the top export destinations for wear-ing apparel products in 2011 were the SADC (36,6%), EU (10,6%), NAFTA (7,6%), Western Asia (5,3%) and Sub-Saharan Africa, excluding the SADC (4,5%).

TABLE 4.22: The top five imported wearing apparel products in 2011


2011 2010

Men’s or boys’ suits, ensembles,. etc, not knit, etc.Women’s or girls’ suits, ensembles etc., not knit, etc.T-shirts, singlets, tank tops, etc., knit or crochetSweaters, pullovers, vests, etc., knit or crochetedMen’s or boys’ shirts, not knitted or crocheted

62036204610961106205

1 457,41 371,01 234,2

761,9652,7

11,710,9

9,86,15,2

10,711,3

9,86,14,9


Table 4.22 presents the top five imported wearing apparel products in 2011. Eastern Asia remained the key source of imports by accounting for 64% of the total imports, followed by South Asia (12,5%), the SADC (7,5%), EU (2,6%) and Sub-Saharan Africa, excluding the SADC (2,3%).

TABLE 4.23: Utilisation and reasons for underutilisation of production capacity by large enterprises: wearing apparel (percentage)




Other



200920102011

79,877,178,6

11,212,911,4

1,31,21,0

0,91,61,2

0,61,31,2

13,415,013,9

3,83,73,9


Though the utilisation capacity has increased by 1,5 percentage point in 2011, it was not reflected by output growth in the division (see Table 4.23). Insufficient demand, followed by other reasons such as downtime because of maintenance and lower productivity are the two main reasons for underutilisation of production capacity.

15

Similar to the textiles division, the trend of total employment in wearing apparel has been declining following the surge in imports, output reduction and low utilisa-tion capacity (see Figure 4.20). As a re-sult, total employment contracted by 5,8% in 2011. Similarly, formal and infor-mal employment dropped by 6,1% and 5,2%, respectively. The change in em-ployment by the skill level shows that most of the job losses were by mid-level (6,3%) and semiskilled and unskilled workers (6,1%). High-level skilled workers lost 4,4% of the jobs (see Table 4.24). During 2011, labour unit cost remained unchanged, while capital intensity in-creased by 2,5% because of the boost in domestic fixed investment.

TABLE 4.24: The skill level of employees: wearing apparel



2 7037 246

46 55334 474

2 5856 793

43 69832 665

–4,4–6,3–6,1–5,2

Total 90 976 85 740 –5,8

Sou rce: Quantec EasyData (2012)

4.6 LEATHER AND LEATHER PRODUCTS

After showing a substantial growth of 12,9% in 2010, real output decreased by 9% in 2011. Similarly, real value add-ed dropped substantially by 20% in 2011, after remaining sluggish in 2009 and 2010 (see Figure 4.21). During 2011, the output price of leather and leather products remained unchanged; inter-mediate input price, however, declined by 3,5%.

After decelerating significantly in 2009 and 2010, real gross domestic fixed in-vestment in the leather and leather products division rebounded by 14% in 2011 (see Figure 4.22). The nominal gross fixed capital formation in the divi-sion shows that investment in buildings and construction works showed substan-tial growth of 18,7% followed by new machinery and other equipment (16,8%) (see Table 4.25). Investment in trans port equipment, however, remain-ed unchanged. Machinery and other equipment constituted 86% of the total gross fixed capital formation in 2011.




16

TABLE 4.25: Gross fixed capital formation by type of asset: leather and leather products



4,80,5

32,0

5,70,5

37,4

18,70,0

16,8

Total 37,3 43,6 16,9


After showing a sluggish performance in 2010, real export value of leather and leather products grew considerably by 32,5% in 2011. The growth of imports, on the other hand, moderated from 27,6% in 2010 to 7,8% in 2011 (see Figure 4.23). As a result, the trade deficit narrowed from R626 million in 2010 to R417 million in 2011 and export-to-output share in-creased from 31% in 2010 to 35,9% in 2011. Import to domestic demand share also rose from 38,9% in 2010 to 41,5% in 2011.

TABLE 4.26: The top five exported leather and leather products in 2011


2011 2010

Bovine or equine leather, no hair NESOIArticles of leather, NESOILeather of animals NESOITravel goods, handbags, wallets, jewellery cases, etc.Saddlery, harness, traces, leads, etc., any material

41044205410742024201

423,0135,9

69,867,235,8

20,56,6

3.39,03,31,7

12,52,56,32,01,8


The top five exported leather and leather products in 2011 are presented in Table 4.33. Among the top export destina-tions for South African leather products during 2011 were the EU (21%), Eastern Asia (7,4%), South Asia (2,7%), NAFTA (2,3%) and Western Asia (2,2%). Compared to 2010, the share of export to EU increased from 15,3% to 21% in 2011.

TABLE 4.27: The top five imported leather and leather products in 2011


2011 2010

Travel goods, handbags, wallets, jewellery cases, etc.Leather of animals NESOI Bovine or equine leather, no hair NESOIComposition leather, in slabs, sheets or stripsSaddlery, harness, traces, leads, etc, ,any material

42024107410441134201

1 624,4293,8263,9

39,135,1

62,311,310,1

1,51,3

48,118,912,9

1,61,3


Table 4.27 shows the top five imported leather and leather products in 2011. Similar to textile and wearing apparel prod-ucts, Eastern Asia (57,2%) and South Asia (13,7%) are the major sources of imports for leather and leather products. Other sources include South and Central America (11,3%), EU (6,8%) and NAFTA (1,3%). Compared to 2010, the share of im-ports from Eastern Asia increased from 44,4% to 57% in 2011; while the share of South and Central America declined from 19,6% to 11,3% in 2011.


17

TABLE 4.28: Utilisation and reasons for underutilisation of production capacity by large enterprises: leather and leather products (percentage)




Other



200920102011

70,673,471,9

29,426,628,1

6,97,43,7

0,90,70,6

0,41,01,0

20,715,216,3

0,52,26,5


Following the reduction in output, the utilisation capacity by the leather and leather products division contracted by 1,5 percentage point (see Table 4.28). While insufficient demand remained the major reason for underutilisation, other rea-sons, such as downtime because of maintenance and lower productivity, became the second prominent cause for underutilisation followed by the shortage of raw materials in 2011.

The surge in imports and the decline in investment since 2009 prompted the shedding of jobs in the leather and leath-er products division. During 2011, total employment dropped by 1,8% (see Figure 4.24). Similarly, formal and infor-mal employment dropped by 1,6% and 5%, respectively (see Figure 4.24). Table 4.29 shows that semiskilled and unskilled employees lost most of the jobs (2,3%). During 2011, labour unit cost in the divi-sion declined by 11,8%, while capital in-tensity increased by 7,8%.

TABLE 4.29: The skill level of employees: wearing apparel



1931 1074 138

421

1941 1124 044

400

0,00,4

–2,35,0

Total 5 859 5 751 –1,8


4.7 FOOTWEAR

Real output remained unchanged in 2011 after contracting by 7,3% and 4,9% in 2009 and 2010, respectively (see Figure 4.25). Real value added, on the other hand, rebounded by 5,2% in 2011 after declining since 2008. During 2011, output price and intermediate input price for the footwear division increased by 1,6% and 3,5%, respectively.



18

After dropping significantly in the 2009 recession, real gross domestic fixed in-vestment rebounded substantially by 57,4% and 12,3%, in 2010 and 2011, respectively (see Figure 4.26). Table 4.30 shows that the current value of gross fixed capital formation increased by 24% and the largest share of the growth is accounted for by machinery and oth-er equipment (29%). Gross fixed capital formation for building and construction works and transport equipment, howev-er, dropped by 33% and 25%, respec-tively.

TABLE 4.30: Gross fixed capital formation by type of asset: footwear (R million)



3,61,6

56,2

2,41,2

72,5

–33,0–25,029,0

Total 61,5 76,1 23,7


Figure 4.27 shows that exports of foot-wear products are negligible and im-ports have been substantially increasing during the past decade. In 2011, the value of imports soared by 20%; as a re-sult, the trade deficit expanded from R4 372 million to R5 362 million. Therefore export-to-output share declined from 6% in 2010 to 3,4% in 2011 and import-to-domestic demand share grew from 47,4% in 2010 to 52% in 2011, the high-est share among all the agro-processing products.

TABLE 4.31: The top five exported footwear products in 2011


2011 2010

Footwear, outer sole rubber, plastic or leather and upper leatherWater proof footwear, rubber or plastics, bond soleFootwear, outer sole and upper rubber or plastic NESOIFootwear, outer sole rub, plastic or lea and upper textileFootwear NESOI

64036401640264046405

88,444,930,726,014,3

35,217,812,210,3

5,7

21,59,86,63,7

43,6


Table 4.31 shows the top five exported footwear products in 2011. The SADC accounts for 62% of the exported footwear products, followed by the EU (5,4%) and Oceania, including Australia and New Zealand (4%), NAFTA (3%) and Northern Africa (3%). While the share of the EU has declined from 44% in 2010 to 5,4% in 2011; the share of SADC has increased from 44,4% in 2010 to 62% in 2011.



19

TABLE 4.32: The top five imported footwear products in 2011


2011 2010

Footwear, outer sole and upper rubber or plastic NESOIFootwear, outer sole rub, plastic or leather and upper leatherFootwear, outer sole rub, plastic or lea and upper textileParts of footwear; insoles ,etc.; gaiter, etc., partsFootwear NESOI

64026403640464066405

2 916,61 759,61 743,7125,4112,0

39,824,023,8

1,71,5

39,024,819,7

1,91,2


Table 4.32 presents the top five imported footwear products in 2010. Similar to the leather and leather products, Eastern Asia and South Asia are the dominant source of imports, comprising 68% and 15,7% of the total imports of footwear products, respectively. Other sources of imports were the EU (5.2%) and South and Central America (1,3%).

TABLE 4.33: Utilisation and reasons for underutilisation of production capacity by large enterprises: footwear (percentage)




Other



200920102011

93,587,887,8

6,512,212,2

0,11,11,6

0,12,11,1

000

5,38,79,3

0,90,10,2


Following the relatively unchanged output level in 2011, the utilisation of production capacity of the footwear division remained stagnant (see Table 4.33). The division, however, is among few agro-processing industries that have the highest percentage of utilisation capacity. During 2011, the shortage of raw materials and insufficient demand increased slightly as the main reasons for underutilisation.

Following the surge in imports and slug-gish output growth, the trend of employ-ment in the footwear division has been declining during the past decade (see Figure 4.28). In 2011, employment de-creased by 3,5% and formal and infor-mal jobs declined by 3,7% and 2,8%, respectively. Table 4.34 shows that 3,8% and 3,7% of the reduction in employ-ment was by mid-level and semiskilled and unskilled employees, respectively. High-level skilled employees have also lost 2,5% of the jobs. During 2011, la-bour unit cost remained unchanged in the division; however, capi tal intensity increased by 2,7% owing to a rebound in gross fixed domestic investment.

TABLE 4.34: The skill level of employees: footwear



275550

8 0331 665

268529

7 7371 618

–2,5–3,8–3,7–2,8

Total 10 523 10 152 – 3,5



20

4.8 WOOD AND WOOD PRODUCTS

Real output of wood and wood products rebounded by 2,6%, after consecutively declining in 2009 and 2010 by 10% and 1,6%, respectively. Following the growth in output, real value added grew mod-estly by 1.4% in 2011 (see Figure 4.29). During 2011, output price of wood and wood products remained unchanged and intermediate input price declined marginally by 0,7%.

The deceleration of real gross domestic fixed investment in the wood and wood products division continued after its peak level in 2008. During 2009 and 2010, real gross domestic fixed investment dropped significantly by 42% and 58%, respec-tively. It further decelerated by 43,4% in 2011 (see Figure 4.30). Table 4.35 shows that the nominal value of gross fixed cap-ital formation by the wood and wood products division declined by 49,7%. Investment in machinery and other equip ment and buildings and construc-tion works subsided substantially by 51,9% and 34,3%, respectively. In addition, gross fixed capital formation for transport equipment contracted by 9,4%.

TABLE 4.35: Gross fixed capital formation by type of asset: wood and wood products (R million)



73,225,5

972,1

48,123,1

467,4

–34,3–09,4–51,9

Total 1 070,8 538,6 –49,7


Figure 4.31 shows the trade surplus of wood and wood products has been nar-rowing since 2001 owing to a sluggish growth of exports and a relatively firm growth of imports. During 2011, the trade balance further narrowed as exports dropped by 2,2% and imports rose by 10,1%. As a result, the trade surplus which was R389 in 2010 contracted to R159 million in 2011. In addition, export-to-out-put share declined marginally from 10,5% in 2010 to 10,3% in 2011 and im-port-to-domestic demand share in-creased moderately from 8,6% in 2010 to 9,5% in 2011.




21

TABLE 4.36: The top five exported wood and wood products in 2011


2011 2010

Fuel wood in logs, etc.; wood in chips, etc.Builders’ joinery and carpentry of woodFibreboard of wood or other ligneous materialsParticle board and similar board of wood ,etc.Wood in the rough, stripped or not of sapwood, etc.

44014418441144104403

1 553218,5181,4123,0

77,6

50,37,15,93,92,5

54,66,83,92,41,9


Table 4.36 shows the top five exported wood and wood products in 2011. Fuel wood in logs constituted half of the ex-ported wood products. During 2011, Eastern Asia and the SADC accounted for 49,5% and 13% of the total export desti-nation, respectively, followed by the EU (6%), Oceania, including Australia and New Zealand (5,3%) and Sub-Saharan Africa excluding the SADC (1,5%).

TABLE 4.37: The top five imported wood and wood products in 2011


2011 2010

Wood sawn or chipped length, sliced ,etc, over 6 mm thickFibreboard of wood or other ligneous materialsPlywood, veneered panels and similar laminated woodBuilders’ joinery and carpentry of woodVeneer sheets, etc, not over 6 mm thick

44074411441244184408

751,1410,7299,6197,3178,4

26,814,710,7

7,16,4

27,710,0

9,06,26,8


Among the top five imported wood and wood products, wood sawn and fibreboard of wood constitute 27% and 15% of the total imports, respectively (see Table 4.37). The main source of imports for wood and wood products were South Asia (25%), the EU (18,7%), Eastern Asia (17,3%), South and Central America (15,2%) and Sub-Saharan Africa, excluding the SADC (4,3%).

TABLE 4.38: Utilisation and reasons for underutilisation of production capacity by large enterprises: wood and wood products (per-centage)




Other



200920102011

78,479,282,2

21,620,817,8

3,12,31,8

1,51,51,3

0,20,00,0

13,813,3

9,8

2,83,54,8


In line with the increase in real output, the utilisation of production capacity by the wood and wood products division in-creased by three percentage points in 2011 (see Table 4.38). While the reasons for underutilisation owing to a shortage of raw materials, skilled labour and insufficient demand decreased, other reasons such as downtime because of main-tenance and lower productivity, increased moderately in 2011.

22

Following a lacklustre performance in output and investment growth, total em-ployment in the wood and wood prod-ucts division declined by 5,2% in 2011. Similarly, formal and informal employ-ment contracted by 5,4% and 4,5%, re-spectively. A higher percentage of jobs were lost by semiskilled and unskilled workers (6,1%) followed by high-level skilled (5,2%) and mid-level skilled work-ers (4,4%). During 2011, labour unit cost increased by 2% and capital intensity dropped substantially by 16,5% as a re-sult of a decline in domestic fixed invest-ment.

TABLE 4.39: The skill level of employees: wood and wood products



1 30615 47321 68912 564

1 23814 79020 36311 995

–5,2–4,4–6,1–4,5

Total 51 032 48 386 –5,2


4.9 PAPER AND PAPER PRODUCTS

Real output of the paper and paper products division has been decreasing since the recession in 2009, as a result it contracted by 10,7% and 2,5% in 2009 and 2010, respectively. It also deceler-ated further by 1,3% in 2011(see Figure 4.33). Similarly, real value added, dropped by 5,7% in 2011 after rebound-ing by 14,3% in 2010. During 2011, the output price of the division increased by 2,4%, while the intermediate input price dropped by 1,1%.

Real gross domestic fixed investment in the paper and paper products division has been declining substantially since 2009. It dropped by 36% and 30%, in 2009 and 2010, respectively. In 2011, real gross domestic fixed investment de-clined by 4,8% (see Figure 4.34). The cur-rent value of gross fixed capital formation by type of assets shows that there has been marginal change in 2011. While machinery and other equipment in-creased moderately by 4,4%, buildings and construction works contracted sub-stantially by 44,4% (see Table 4.40).




23

TABLE 4.40: Gross fixed capital formation by type of asset: paper and paper products (R million)



448,823,0

3 819,6

249,323,1

3 986,4

–44,40,44,4

Total 4 291,4 4 258,8 0,7


Similar to the trade balance of wood products, the trade surplus of paper and paper products has been shrinking since 2001 as the result of a higher growth of imports compared to exports. In 2011, exports declined by 6,5% and imports grew by 4,8%. As the result, South Africa became a net importer of paper and paper products for the first time. In addi-tion, export-to-output share decreased slightly from 10,5% in 2010 to 10,3% in 2011 and import-to-domestic demand share increased from 15,2% in 2010 to 16% in 2011.

TABLE 4.41: The top five exported paper and paper products in 2011


2011 2010

Chemical wood pulp, dissolving gradesKraft paper and paperboard, uncoated Chemical wood pulp, soda or sulphate, not dissolvingPaper, uncoated, for writing, printing, office machinesCartons, etc., paper; office box files, etc., paper, etc.

47024804470348024819

5 0761 703,41 259,3

869,8480,3

40,613,610,1

6,93,8

36,513,0

9,611,8

4,2


Table 4.41 shows the top five exported paper and paper products in 2011. Chemical wood pulp accounted for the high-est share (40,6%) of exported paper products. Top export destinations for paper and paper products in 2011 were South Asia (26,8%), the EU (16,6%), Eastern Asia (16,3%), SADC (14,7%) and Sub-Saharan Africa, excluding the SADC (4%).

TABLE 4.42: The top five imported paper and paper products in 2011


2011 2010

Paper and paperboard, coated with kaolin, etc.Paper, paperboard, wad ,etc., coat, etc., NESOIToilet paper and similar household, sanitary itemsPaper, uncoated, for writing, printing, office machinesKraft paper and paperboard, uncoated

48104811481848024804

2 118,81 414,2

985,5765,0486,8

24,316,211,3

8,85,6

25,314,1

9,710,6

4,6


Paper and paperboard, coated with kaolin (24,3%) and wad (16,2%) are the two main imported paper products, fol-lowed by toilet paper (11,3%) and paper uncoated (8,8%) (see Table 4.42). The main source of imports during 2011 were the EU (48,5%), Eastern Asia (15,5%), South Asia (8,5%), NAFTA (8,3%) and South and Central America (4%).


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TABLE 4.43: Utilisation and reasons for underutilisation of production capacity by large




Other



200920102011

87,287,485,4

12,812,614,6

0,80,50,8

0,70,70,6

0,10,10,1

6,86,87,0

4,24,36,0


The reduction in output of the paper and paper products division is also reflected by the decreased utilisation capacity in 2011 (see Table 4.43). Among the main reasons for underutilisation were insufficient demand and other reasons such as downtime because of maintenance and lower productivity.

Despite the decline in output production, total employment increased in the paper and paper products division by 2% in 2011 (see Figure 4.36). Table 4.44 shows that high-level and mid-level skilled employ-ment grew by 3,7% and 2,4%, respectively. In addition, semiskilled and unskilled em-ployment increased by 1,4%. During 2011, labour unit cost increased substantially by 14,7%, while capital intensity of the division declined sharply by 13,4%.

TABLE 4.44: The skill level of employees: paper and paper products



2 8579 760

18 694–

2 9639 994

18 955–

3,72,41,4

–

Total 31 285 31 913 2,0


4.10 RUBBER PRODUCTS

Real output of the rubber products division rebounded by 18,2% after declining in 2009 and 2010 by 6,3% and 3,8%, respec-tively. The division is among a few agro-processing industries of which the output level in 2011 was higher than the prereces-sion level recorded in 2008. Following the growth in output level, real value added also jumped by 32,2% in 2011, after poor growth performance since 2006. During 2011, the output price of rubber products remained unchanged, while the intermedi-ate input price increased by 4,6%.



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Real gross domestic fixed investment in the rubber products division increased significantly by 51% in 2011, following firm growth in 2010 (59%) (see Figure 4.38). The current value of gross fixed capital formation by type of asset shows that machinery and other equipment and buildings and construction works in the division expanded sharply by 176% and 111%, respectively. Capital forma-tion for transport equipment, however, dropped by 36% (see Table 4.45).

TABLE 4.45: Gross fixed capital formation by type of asset: rubber products (R million)



65,46,8

448,5

138,14,3

1 238,8

111,0–36,7176,0

Total 520,7 1 381,3 165,0


The trend of trade balance during the past decade shows that the trade deficit of rubber products has been widening owing to a surge in imports and sluggish export growth. During 2011, however, real export rebounded by 42,4% after declining since 2007. Imports also rose by 11,7% in 2011. As a result, the trade deficit increased marginally from R4 259 million in 2010 to R4 290 million in 2011. In addition, export-to-output share in-creased from 16,8% in 2010 to 21,6% in 2011 and import-to-domestic output in-creased marginally from 40% in 2010 to 40,9% in 2011.

TABLE 4.46: The top five exported rubber products in 2011


2011 2010

New pneumatic tires, of rubberConveyor or transmission belts of vulcanised rubberArticles of vulcanised rubber, except hard rubberTubes, pipes and hoses of vulcanised rubber, except hard rubberRetread or used tires, solid tires, etc.

40114010401640094012

2 018,8284,6

265190,3

84,5

55,07,77,25,22,3

55,07,87,94,91,7


Table 4.46 shows the top five exported rubber products during 2011. A new pneumatic tyre, of rubber comprises 55% of all exports of rubber products. The main export destinations during 2011 were the SADC (35,2%), EU (19,9%), South and Central America (6,9%), Northern Africa (6,2%) and Sub-Saharan Africa, excluding the SADC (4,3%).



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TABLE 4.47: The top five imported rubber products in 2011


2011 2010

New pneumatic tyres, of rubberArticles of vulcanised rubber, except hard rubberConveyor or transmission belts of vulcanised rubberTubes, pipes and hoses of vulcanised rubber, except hard rubberArticles of vulcanised rubber, except hard rubber

40114016401040094015

4 983,51 082,9

787,7556,3272,1

54,011,7

8,56,02,9

51,612,3

8,24,12,8


The top five imported rubber products during 2011 are presented in Table 4.47. A new pneumatic tyre (of rubber) ac-counted for 54% of all imports of rubber products. The main sources of import during 2011 were Eastern Asia (36,7%), the EU (29,9%), South Asia (11,8%), NAFTA (9,5%) and Western Asia (1,3%).

TABLE 4.48: Utilisation and reasons for underutilisation of production capacity by large enterprises: rubber products (percentage)




Other



200920102011

77,581,185,5

22,518,914,5

0,30,40,2

0,50,20,0

000

20,616,812,7

0,91,41,5


Following a surge in output, the utilisation of production capacity increased by 4,4 percentage point mainly owing to an increase in demand (see Table 4.48). Insufficient demand, however, still remained the foremost reason for the underutili-sation of production capacity in the division.

Following the significant rise of output, ex-ports and utilisation capacity by the rubber division, total employment grew by 6,6% in 2011. Highest growth in employment oc-curred for high-level skilled workers (9,3%) followed by mid-level (7,9%) and semi-skilled and unskilled workers (6,8%) (see Table 4.49). During 2011, labour unit cost in the division remained unchanged; howev-er, capital intensity grew by 7,8% as the re-sult of considerable growth in investment.

TABLE 4.49: The skill level of employees: rubber products



1 2652 8347 980

–

1 3823 0598 526

–

9,37,96,8

–

Total 12 169 12 968 6,6



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4.11 FURNITURE

After dropping by 8,3% and 2,5% during 2009 and 2010, respectively, real output of furniture products rebounded by 3% in 2011. Real value added, however, de-clined by 9,7% in 2011 following a contrac-tion of 9% in 2010 (see Figure 4.41). During 2011, the output price for furniture in-creased moderately by 3,6% and the inter-mediate input price rose marginally by 0,4%.

Real gross domestic fixed investment re-bounded by 7,5% after declining sharply by 30,8% and 16%, in 2009 and 2010, re-spectively (see Figure 4.42). Table 4.50 shows that the nominal gross fixed capital formation increased by 24% in 2011. Investment in new machinery and other equipment grew by 25,8%. Similarly, invest-ment expanded by 20% for new buildings and construction works. New investment for transport equipment, however, increased marginally.

TABLE 4.50: Gross fixed capital formation by type of asset: furniture (R million)



61,14,2

175,1

73,44,3

220,4

20,02,4

25,8

Total 240,3 298,0 24,0

Quantec EasyData (2012)

The trade balance of furniture, which has been showing a surplus during most of the past decade has become a deficit since 2009. The deficit also became wider in 2011 owing to a higher growth rate of im-ports. During 2011, exports subsided by 26,4% and imports grew by 3,2%. As a re-sult, the trade deficit widened from R486 in 2010 to R1 458 in 2011. In addition, export-to-output share declined from 27,6% in 2010 to 21,9% in 2011. Import-to-domestic demand share also dropped from 24,3% in 2010 to 22,7% in 2011.




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TABLE 4.51: The top four exported furniture products in 2011


2011 2010

Seats (except barber, dental, etc.), and partsFurniture NESOI and parts thereofMattress supports; articles of bedding, etc.Slates and boards, with writing or drawing surfaces

9401940394049610

2 631,8549,3

46,54,1

64,613,5

1,10,1

67,911,9

0,80,0


Table 4.51 shows the top four exported furniture products in 2011. The main export destinations for furniture during 2011 were the EU (57%), SADC (14%), NAFTA (3,3%), Sub-Saharan Africa, excluding the SADC (1,6%) and Northern Africa (1,5%).

TABLE 4.52: The top four imported furniture products in 2011


2011 2010

Seats (except barber, dental, etc.), and partsFurniture NESOI and parts thereofMattress supports; articles of bedding, etc.Slates and boards, with writing or drawing surfaces

9401940394049610

2 180,71 682,4

31,614,2

50,939,4

0,70,3

49,536,5

0,60,5


The top four imported furniture products in 2011 are presented in Table 4,52. The main source of imports for furniture products during 2011 were Eastern Asia (48%), the EU (24,1%), South Asia (13,3%), NAFTA (2,4%) and Western Asia (1,7%).

TABLE 4.53: Utilisation and reasons for underutilisation of production capacity by large enterprises: furniture (percentage)




Other



200920102011

89,988,884,3

10,111,215,7

0,30,00,0

1,22,31,2

000

7,67,9

13,8

0,91,00,7


Following a marginal output growth and declining exports, utilisation capacity contracted by 4,5 percentage points dur-ing 2011 (see Table 4.53). Insufficient demand, as a main reason for underutilisation, significantly increased in percent-age points during 2011.

Total employment in the furniture division increased by 5,9% after dropping since 2008. Similarly, formal and informal em-ployment rose by 5,7% and 6,7%, respec-tively (see Figure 4.44). Table 4.54 shows that employment for high-level skilled work-ers increased by 6,7%, followed by semi-skilled and unskilled workers (5,9%) and mid-level skilled workers (5,2%). During 2011, labour unit cost in the division in-creased marginally by 0,6% and capital intensity increased by 8,9%.


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TABLE 4.54: The skill level of employees: furniture



1 7527 691

21 8834 606

1 8698 089

23 1784 913

6,75,25,96,6

Total 35 932 38 048 5,9


5 CONCLUSION

Weak economic growth of advanced economies slowed down global economic growth and its spill-over effect subdued the growth of emerging and developing countries in 2011. The domestic economy, however, grew slightly more than the previous year, mainly supported by tertiary sector. During 2011, real output of the agro-processing industry in-creased from a marginal growth rate of 0,4% in 2010 to 2,1%. Except for leather and leather products, wearing apparel, textiles, paper and paper products and footwear, real output increased for the remaining divisions. The decline in output production by these divisions also slowed down the real value added of the agro-processing industry, which measures the GDP contribution, substantially from 7,7% in 2010 to 1,5%.

Among the divisions that showed a growth in real gross fixed investment were rubber products, textiles, wearing apparel, leather and leather products, footwear and beverages. Real gross fixed domestic investment, however, decreased in the wood and wood products, food, paper and paper products and tobacco divisions. In aggregate, real gross fixed invest-ment for the agro-processing industry increased by 4,9% in 2011.

Exports of agro-processing products declined by 1,7% in 2011. Among agro-processing products with growing exports were rubber products, leather and leather products, wearing apparel and food. Real imports of aggregated agro-pro-cessing products, on the other hand, increased markedly by 10,1%. Imports rose for all agro-processing products, except for tobacco products. As the result, the trade deficit of the agro-processing industry increased from R20 932 million in 2010 to R27 296 million in 2011. The three divisions that maintained a trade surplus (though it diminished) were wood and wood products, tobacco and beverages. The trade deficit, however, widened for almost all the remaining agro-process-ing products

As a result of the marginal growth rate of real value added and output, total employment in the agro-processing industry declined by 2,2% in 2011. As a result, the industry shed 9 605 and 2 321, formal and informal jobs, respectively. Among the divisions that created formal jobs were furniture, rubber products, paper and paper products, tobacco and bever-ages. Formal jobs were shed in food, textiles, wearing apparel, leather and leather products, footwear and wood and wood products divisions. Informal employment, however, subsided in all divisions except in the beverages and furniture divisions.

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References

FAO (1997), The State of Food and Agriculture. Rome: Food and Agriculture Organization.

IMF (2012), World Economic Outlook, April 2012. International Monetary Fund.

Quantec EasyData (2012), RSA International Trade. Accessed in September 2012.

Manufacturing Circle (2012), Manufacturing Bulletin: Quarterly Review, Second Quarter

Reserve Bank (2012), Quarterly Bulletin, June 2012. South African Reserve Bank.

Statistics SA (2012a), Quarterly Labour Force Survey, various issues. Statistics South Africa.

Statistics SA (2012b), Consumer Price Index, various issues. Statistics South Africa.

Statistics SA (2012c), Producer Price Index, various issues. Statistics South Africa.

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Annual Economic Review of Agro-processing

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Transcript of Annual Economic Review of Agro-processing