Challenges and Opportunities in the Food Value Chain

DSC_6971Thabi Nkosi, senior economist at Agri SA, says an effective food value chain is essentially important because people need food on the plate. It is very difficult to get processed food directly from the farmer. Nobody wants a whole cow on the table. Processed food must be readily available to the consumer in an affordable and safe manner.

 

Nkosi was taking part in the popular weekly discussion programme, Nation in Conversation, hosted by Galileo Capital CEO Theo Vorster. The topic of this week’s discussion was the complexity of the food value chain and its importance for the consumer.

Also taking part in the programme was Dr John Purchase, CEO of Agbiz. He explains that the food value chain starts with the consumer who buys his food products at the retailer. The retail shops in turn get their supplies from food processors. Further down the chain are storage facilities, logistics, transport and eventually the farmer. He depends on service providers and input suppliers for the seed, fertilizer, financing, insurance that he needs to run his business. The important aspect is what the consumer wants in terms of quality, price and product preferences.

 

Purchase agrees that three of the most critical issues in food security are safe, nutritious and affordable food for the population. The agricultural food value chain starts with a good policy on food security. Food security is a complex, multi-dimensional situation. The Economist Food Security Index rates South Africa among the top 20 to 30 percent food security performers in the world. On the living standard index, cities such as Johannesburg and Cape Town are amongst the cheapest in the world, and the so-called Big Mac index shows that South Africa’s Big Macs are the cheapest. There are many indicators to show that South Africa has good to even very good food security. The problem is that there are too many poor people in the country who do not have discretionary household income to buy enough food for their daily sustenance.

 

Should the food value chain fail, says Nkosi, it would mean food insecurity and hunger. Essentially everyone needs a balanced diet. It would not help, for instance, if the food chain provides only one type of food. If the food system fails, one would look at food insecurity on a much broader scale.

 

Asked by Vorster what government and other role players could do to overcome bottlenecks in the food value chain, Purchase points out that defining the role of government is critically important. If government starts to intervene too much in the private sector space, the private sector becomes risk averse. They do not want to see government as both role player and referee for fear that it will become biased. Government has a very important role to play, but the distinctive roles of government and the private sector must be clearly defined. There are a lot of discussions with government on different forums, at one of which agriculture has been the number one item on the agenda.

 

Referring to the National Development Plan, Nkosi points out that its looks at the food value chain from a very broad perspective. It addresses the ability of people to afford food, to increase income to enable people to afford a balanced meal, improve efficiency in the food value chain, and make energy provision more effective. It also looks at disaster management and the role of the food value chain in creating jobs.

 

Market development is at the core of job creation, adds Purchase. The South African market is pretty much saturated. The focus must be on strong market development in Europe, Africa, the Middle East and the Far East, and maintaining a positive trade balance for agricultural products. Competitiveness, efficiency and productiveness are crucial elements. This is the terrain of private enterprise. The National Development Plan presupposes an ideal policy environment, but there is too much uncertainty around land reform, the investment climate and infrastructure development. However, it makes some very good points about the competitiveness of the value chain, creating capacities within the people and raising skills levels. Nevertheless, the National Development Plan targets have to be reviewed and updated regularly to make sure that they remain relevant to keep pace with changes in agriculture and the food value chain.

 

Nkosi adds that there are no quick-fix solutions to driving down costs and increasing competitiveness and efficiency. To compete internationally, production costs have to be sustainable and manageable. South Africa does not have the best climate to produce all the right products. Foreign investors must look to South Africa as a haven for testing new products and opening up new markets. “That can only happen if the right environment is there to incentivise such new investments”, she concludes.