Dr John Purchase presented at the AgChem Asia Summit on Meeting South Africa's Ag-Chem Market. This presentation addresses: Overview of South Africa’s agriculture landscape Overview of its pesticide demand Identifying opportunities for trade and future business development Market analysis: Understanding what works and what doesn’t

1. Meeting the Needs of
South Africa’s Ag-Chem Market
AgChem Asia Summit 2011
20-21 October 2011
Dr John Purchase

2. Outline of Presentation
• Overview of South Africa’s agriculture
landscape
• Overview of its pesticide demand
• Identifying opportunities for trade and
future business development
• Market analysis: Understanding what works
and what doesn’t
• Concluding remarks

3. Overview of South Africa’s
agriculture landscape

4. Overview of SA’s agriculture landscape
• Well developed commercial sector and subsistence
oriented sector – dual economy
• Only ~12% of land area arable, of which 22% high
potential
• ~1.3 million hectares under irrigation
• Water major limiting factor – SA mostly semi-arid
• Deregulation & market economy
• Number of competitive advantages
- ‘World-class’ infrastructure
- Counter-seasonality to Europe/Asia
- Biodiversity
- Trade agreements
- Competitive input costs
- Access to latest technology & innovation

5. Role of Agriculture in
SA Economy
• Strategic sector – provides food, fiber, wine & beer,
satisfying two basic needs of man (+ others!)
• Has provided national food security since the start
of the 20th century (Pop: ~4,0 million), right
through to the 21st century (Pop: ~50,0 million,
~60% in urban areas)

6. Status and Trends
South Africa

7. Contribution of Primary
Agriculture to GDP (Source: Statssa)
5
4
%
3
2
94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 06 07 08 09
Graph: ABC

8. SA economic growth: Tradable goods
sectors lag the non-tradable goods sectors
GDP % per Sector of Economy
300
250
GDP
200 Agric
Mining
INDEX
150 Manufacturing
Construction
100 Trade
Transport
50
Finance
0
20002001200220032004200520062007200820092010
Source: StatsSA
Graph: ABC

9. Inflation
Source: AMT, 2011

10. Exchange rate
Source: AMT, 2010

11. SAARF LSM Segments: Proportion of SA adult
population and average monthly household
income in 2009
Source: SAARF (2010a) & BFAP, 2010

12. LSM class mobility: All adults during the
period 2004 to 2010
Source: SAARF AMPS data for the period 2004 to 2010, as quoted by BFAP

13. SA Resource Situation
• Land issue: sensitive now, Green Paper released.
• Energy crisis and energy security situation
- Electricity price hikes (31% + 25% pa over 3 years)
• Scarce high potential agricultural land to mining, esp.
Mpumalanga, and urban development.
• Water management and water quality crisis
• Climate Change effects create uncertainty
• Soil degradation/erosion
• Biosecurity threats (FMD, Avian Flu, etc.)
• Question: Resources for sustainable expansion?!
• Greater competition for resources – price effect?

14. Performance of Sector
Gross Value of Production in Rand million
70000
Field Crops Horticulture Animal Production
60000
50000
R'million
40000
30000
20000
10000
0
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Source: DAFF, 2010. 1 Chinese Yuan = 1.2 South African Rand

15. Field crops
• Maize – major importance, net exports, GM
• Wheat – also staple food, net imports
• Sugar – net exports, move into Africa
• Soya – growing importance, cake imports, GM
• Sunflower – growing importance, S/D balance
• Groundnuts – net exports, but declining
• Dry beans – net imports, also from China

16. Horticulture
• Totally deregulated market
• Viticulture & Wine – major export industry
• Citrus – 2nd biggest global exports, growing
• Deciduous fruit – major net exports
• Table grapes – major net exports
• Sub-tropical fruit – net exports
• Vegetables – S/D balance, some
imports/exports

17. Animal Production
• Value of production in 2009:
- Broilers R22.5 billion
- Beef R13.3 billion
- Fresh milk R9.1 billion
- Eggs R6.6 billion
- Mutton R3.1 billion
- Pork R3.1 billion
- Wool R1.1 billion

18. SA Agribusiness
• Strong input sector: Seed, fertilizer, crop
protection and veterinary chemicals,
animal feed, packaging, agricultural
machinery, fuel, etc.
• Financial sector: Major banks, DFI’s,
insurance companies, auditors,
agribusinesses, etc.,
• Storage, trade and agro-logistics
• Agro-processing and packaging
• Retail Sector

19. Agricultural trade
Agricultural trade trends
Total 25
20
Primary
15
35
R billion
10 30
25
Processed
5
20
15
-
R billion
2004 2005 2006
10 2007 2008
Year
5
Primary exports Primary imports Primary trade balance
-
2004 2005 2006 2007 2008
-5
-10
Year
Source: DAFF/NAMC, 2009. Processed exports Processed imports Processed trade balance
1 Chinese Yuan = 1.2 South African Rand
19

20. South African Agricultural Trade
(Source WTA & GTA, USDA-FAS)
(US$ billions) 2007 2008 2009
Agricultural exports $4.0 $5.2 $5.2
% of total SA exports 5.7% 6.5% 8.3%
Agricultural imports $4.2 $4.7 $4.2
% of total SA imports 5.3% 5.2% 6.4%

21. Major agricultural products exported:
(US$ millions) 2007 2008 2009
Wine $673.6 $753.9 $727.5
Citrus $613.1 $711.4 $667.1
Corn $32.1 $510.3 $444.6
Table grapes $364.5 $387.6 $379.7
Apples $329.5 $367.3 $364.7
Sugar $276.1 $217.9 $386.7

22. Major export destinations (2009)
China
United States
Germany
Mozambique
Kenya
Zimbabwe
Netherlands
United
Kingdom
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

23. Major agricultural products imported:
(US$ millions) 2007 2008 2009
Rice $302.1 $463.9 $458.8
Wheat $261.6 $444.6 $282.0
Soybean cake $209.8 $311.9 $297.1
Palm oil $195.7 $299.3 $232.1
Soybean oil $212.0 $288.5 $106.9
Whisky $212.5 $202.9 $201.6

24. Major countries imported from (2009)
United States
Indonesia
Netherlands
China
Malaysia
Germany
Thailand
Brazil
Argentina
0% 2% 4% 6% 8% 10% 12% 14% 16%

25. Challenges
• Government:
- Food security, both household and national:
Access to safe, nutritious and affordable food for all
- New Growth Path: Job creation, Shared Growth &
Opportunities
- Empowerment of PDI’s, e.g. AgriBEE, EE, etc.
- Land Reform & Rural Development
- Industrial Policy Action Plan II: Agro-processing
- Competitive environment (Competition Act)
- Sustainable resource management, e.g. CC
- African development, etc.

26. Challenges
• Private Sector:
- Profitability and competitiveness
- Transparent and reliable markets (Integrity!)
- Engage Govt ito enabling policy environment:
Create confidence for long term investment
- Need for inclusive Strategic Framework/Plan
- Sustainable transformation
- Institutional and value chain support (R&D,
SPS matters, resource base management,
trade facilitation, training & skills development,
agro-logistics, Act 36 of 1947, etc.)
- African opportunities

27. Overall Prospects
• Much greater food security awareness, both globally and
locally – very positive. Priority for G20, Paris.
• Awareness by government to work closer with Private Sector
• Greater awareness by all of the need to support both commer-
cial and developing agriculture. Better implementation NB!
• Substantial markets: locally, regionally, globally, and especially
to the East. Need market development, though!
• General commodity and agribusiness infrastructure is good
basis – build on this & other institutional capacity.
• New technology/expertise through especially multinationals.
• New global investors looking to Africa for food production
- major development.

28. Conclusion
• Healthy and robust agro-food industry
• Technologically advanced, globally competitive
• Challenges: ‘Nationalisation talk’, Agro-logistics,
climate change, water availability and quality,
environmental sustainability, food safety
regulations, R&D, etc.
• Opportunities: Growing population, consumer
spending trends, new markets (esp. to East), etc.
• Major contributor to Food Security, growth
and employment in RSA.

29. Conclusion
• We live in uncertain times – many risks and
variables, some controllable, others not or less so.
• Must fully understand both macro- and micro-
environment, and the risks and opportunities
posed.
• Develop strategic plan and develop business plan
accordingly.
• Must clearly articulate and live the value
proposition you bring to the value chain.
• BUT, maintain flexibility and adaptability.

30. Overview of its crop protection
chemicals demand

31. South African sales for crop protection
products: (At grower level, in millions)
Year 2000 2001 2002 2003 2004 2009 est*
SALES (Rand) R 1 712 R 2 092 R 1 850 R 1 500 R 2 100 R 3 104
(x1 000 000)
EX RATE (R/$) 6.92 8.58 10.54 7.55 6.50 7.34
US$ $ 247.4 $ 243.8 $ 175.5 $ 198.7 $ 323.1 $ 422.9
(x1 000 000)
VOLUME (kg) 50.0 46.6 42.0 35.0 49 53.7
(x1 000 000)
R PRICE/kg R 34.24 R 44.89 R 44.05 R 42.86 R 42.86 R 57.80
$ PRICE/kg $ 4.95 $ 5.23 $ 4.18 $ 5.68 $6.59 $ 7.88
Source: AVCASA, 2011
• *Industry Estimate, as no official figures available since 2004. ~95% accurate.
• AVCASA no longer collects data as it could be in breach of Competition Act
1 Chinese Yuan = 1.2 South African Rand

32. Identifying opportunities for trade
and future business development

33. Market and market features
• Highly competitive market – requires innovation
and new product lines continuously.
• Crop protection market comprises 4 major
segments:
- Insecticides
- Herbicides
- Fungicides
- Other chemicals (Adjuvants, PGR’s, etc.)
• South Africa is ± 1.5% of the world market
• Rest of Africa is ± 1.5% of the world market
• Total Africa is ± 3.0% of the world market
• SA has growing market (~2% consumption
growth in real terms)

34. Market and market features (Cont.)
• Use changing with huge adoption of GM-crops,
e.g. glyphosate versus atrazine use
• Revenue growth very uncertain, depending on
exchange rate movements, move to generics,
etc.
• Generic products from the Far East (mostly PRC)
already have major market share in South Africa.
• Current market share of generic products is
around 75% and growing as increasingly major
products come off patent.

35. Regulatory features
• Agricultural chemicals are controlled by the
Fertilizers, Farm Feeds, Agricultural Remedies and
Stock Remedies Act, No. 36 of 1947.
• GM-crops controlled by the Genetically Modified
Organisms Act, No 15 of 1997.
• Current registration process problematic due to
capacity problems (toxicologists) at the
Department of Health.
• Database of Agricultural Remedies on:
www.croplife.co.za

36. Registration requirements
• The registration holder must be a South African registered
company
• Requirements are of a high standard and in line with EU
and USA requirements
• The formulated product is registered, not the active only.
• Efficacy, phytotoxicity and residue data must be generated
in field and laboratory trials
• For generic products 3 successful trials for an identical
registration are required
• Registration process takes between 6 to 18 months
• All products must be re-registered every year
• The South African importer/agent is responsible for all
the above functions.

37. Registration requirements (Cont.)
Chemical equivalence of the technical to be provided
by the manufacturer:
• Must be proven by an accredited GLP laboratory
(University of Beijing?).
• All impurities must be identified and quantified.
• Full analysis of 5 commercial batches required.

38. General features
• South Africa is a good market to do business in
because:
- It is a reverse season sales opportunity
- It has a well developed and stable agricultural
sector = predictable use and sales
- Legislative and financial infrastructures are very
secure = transparent procedures and
guaranteed payments
- It is the gateway to Sub-Sahara Africa = growth
opportunity

39. Major role players in SA Crop
Protection Chemicals Market
• Syngenta
• Arysta LifeSciences
• Villa Crop Protection
• Bayer Crop Science Ag
• Monsanto
• BASF
• Du Pont
• Others (~7 more)
• Distributors also play a major role in the
supply chain and are organized in ACDASA –
See www.acdasa.co.za

40. How do foreign manufacturers
sell to the SA market?
OVERSEAS MANUFACTURER / EXPORTER
SOUTH AFRICAN
FORMULATORS
IMPORTER / AGENT
DISTRIBUTORS / DEALERS
SALES AGENTS
CO-OPERATIVES/
AGRIBUSINESS
END USERS / FARMERS

41. Determining factor in
entering market
• Commercial farmers require the most
effective crop protection solution at the
most affordable cost, i.e. productivity
consideration is of paramount importance.
• Suppliers therefore have to ensure that a
range of good quality products are provided
for a range of crops by reputable
distributors to ensure maximum customer
satisfaction.

42. Market analysis: Understanding what
works and what doesn’t

43. How can manufacturers/exporters from
the PRC enter the South African market
• Not necessary to have own local office in South Africa.
• Appoint a reputable South African importing company
as your agent.
• Provide samples for formulation and local registration
tests and field trials.
• Provide chemical equivalence of the technical and 5-
batch analysis by a recognized GLP laboratory.
• Agent then obtains registration.
• Chinese manufacturer / exporter then sells technical
material or formulated product (in US$) to agent.
• Agent then sells to distributors / dealers.

44. Important points
• Many PRC origin products already registered and sold in
South Africa – limited opportunities however available.
• Product must be out of patent in South Africa before generic
product can be sold.
• After registration the technical or finished product must
always come from the same factory.
• Quality of the technical or finished product must always be
the same as that of the original sample.
• Chemical equivalence data, quality and competitive prices
are the most important factors determining the market share
of products from the PRC.
• Severe price competition exists now because of an over
supply of Chinese products .
• To obtain a significant market share, it is better to work
with one local agent only.

45. What doesn’t work
• CropLife very active in Africa with Africa Stockpiles
Programme (FAO Bilateral Programme) and CropLife
Clean Farms Project – major challenge!
• Unfortunately significant volumes of counterfeit or
fake product emerging from Far East – please don’t
bring to Africa – see www.agropages.com .
• Counterfeit and fake product having a dreadful
effect on man and the environment, whilst the
social implications are enormous.
• Food safety at serious risk.

46. Concluding remarks
• Growth opportunities especially in Africa.
• South Africa an excellent gateway to
especially Sub-Sahara Africa.
• Commercial farmers require the most
effective crop protection solution at the
most affordable cost.
• Focus on chemical equivalence, formulation,
labelling, price and especially quality.
• Approach industry with responsibility,
and the environment with stewardship.

47. THANK YOU
www.agbiz.co.za