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Annual Economic Review of the Agro-processing Industry in South Africa: 2012

Directorate: Agro-processing SupportSeptember 2013

Annual Economic Review of the Agro-processing Industry in South Africa: 2012

Directorate: Agro-processing Support

September 2013

DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES

2013

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 Dr. Yemane Gebrehiwet with inputs from:

Deborah Makola, Dorothy Soois, Kamohelo Mathibeli and Vhutshilo Nelwamondo

Sefala Building 233

503 Belvedere Street, Arcadia, South Africa

All correspondence can be addressed to:

The Acting 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

Acronyms ................................................................................................................................................................. iv

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 ................................................................................................................................................ 3

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

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

4.4 Textiles ............................................................................................................................................................. 9

4.5 Wearing apparel ............................................................................................................................................. 11

4.6 Leather and leather products ......................................................................................................................... 13

4.7 Footwear ........................................................................................................................................................ 15

4.8 Wood and wood products ............................................................................................................................. 17

4.9 Paper and paper products ............................................................................................................................. 20

4.10 Rubber products ............................................................................................................................................. 22

4.11 Furniture .......................................................................................................................................................... 24

5. Conclusion ..................................................................................................................................................... 26

References ............................................................................................................................................................... 26

iv

Acronyms

CPI Consumer Price Index

DAFF Department of Agriculture, Forestry and Fisheries

EU European Union

FAO Food And Agriculture Organization

GDP Gross Domestic Product

IPAP Industrial Policy Action Plan

IMF International Monetary Fund

NAFTA North American Free Trade Agreement

NESOI Not Elsewhere Specified or Indicated

PPI Producer Price Index

SA South Africa

SADC Southern African Development Community

US United States

v

Preface

The agro-processing industry is among the sectors identified by the Industrial Policy Action Plan, the New Growth Path and the National Development Plan for its potential to spur growth and create employment 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 eco-nomic review of the agro-processing industry.

This publication Annual Economic Review of the Agro-processing Industry in South Africa: Looking at 2012 is the second annual economic review by the directorate and it evaluates the economic performance of the 11 divisions within agro-processing during 2012. 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.

Mr Herbital Maluleke

Acting Director: Agro-processing Support

Pretoria

vii

Executive summary

The slowdown of economic growth in both emerging and advanced economies subdued global economic growth during 2012. Following the trend, domestic economic growth moderated, driven by the contraction of the pri-mary sector and the moderated growth of the secondary and tertiary sector. During 2012, the unemployment rate in-creased slightly, prompted by weak domestic economy growth. While domestic PPI moderated during the period prompted by the slowdown of agricultural, manufacturing and mining producer prices, the CPI inflation accelerated modestly in 2012.

Real output of the agro-processing industry rebounded by 4,8% in 2012 following a 2,1% contraction in 2011. Except for textiles output, that showed a 3,1% contraction, the real output increased for the remaining divisions as follows: Furniture (10,7%), leather and leather products (8,1%), food (7,3%), tobacco (6,5%), paper and paper products (3,8%), rubber (2,9%), wearing apparel (2,3%), beverages (2,3%), footwear (2,3%) and wood and wood products (0,2%). Following the output growth, real value added of the agro-processing industry, which measures the GDP contribution, rebounded from a contraction of 2,6% in 2011 to 3,5% in 2012. The divisions that showed growth in real value added were furniture prod-ucts (17,6%), food (6,9%), tobacco (3,1%), wearing apparel (2,0%), and paper and paper products (1,9%). Real gross value added dropped in the textile (1,8%), beverages (1,2%), wood and wood products (0,2%) and footwear (0,2%) divi-sions.

Real gross fixed investment in the agro-processing industry moderated by 1,4% in 2012 from 5,9% growth in 2011. Real gross fixed domestic investment increased in the furniture (40,4%), wearing apparel (16,9%), paper and paper products (16,5%), footwear (12,3%) and food (8,8%) divisions. Among the divisions that showed a decline in real investment were leather and leather products (34,3%), tobacco (32,4%), rubber (20,6%), textiles (15,6%), wood and wood products (7,2%) and beverages (3,9%).

Real exports of aggregate agro-processing products have been declining since 2010; however, it rebounded by 6,7% in 2012. Among the agro-processing divisions with increasing exports were tobacco (45,6%), food (21,6%), footwear (18,5%), beverages (15,2%) and wearing apparel (6,6%). However, real exports for the remaining divisions dropped as follows: Furniture (17,2%), textiles (11,3%), paper and paper products (10,2%), wood and wood products (8,4%), leather and leather products (5,4%) and rubber (0,3%) divisions. Real imports of aggregated agro-processing products moder-ated to 8,7% in 2012 from a 10,2% growth in 2011. Except for leather and leather products and the textiles divisions that were contracted by 6,3% and 0,5%, respectively, real imports increased in the remaining division as follows: Tobacco (30,4%), food (15,2%), beverages (11,8%),rubber (10,9%), wearing apparel (9,8%) furniture (9,3%), footwear, (5,2%), pa-per and paper products (3,0%) and wood and wood products (2,6%).

As a result of the higher growth rate in real imports compared to real exports, the trade deficit of the agro-processing in-dustry widened from R31 074 million in 2011 to R34 403 million in 2012. The divisions that maintained a trade surplus are beverages (R3 493 million) and tobacco (R417 million). The trade deficit in the remaining products is as follows: Wearing apparel (R9 835 million), food (R 7 451 million), footwear (R5 669 million), rubber (R5 169 million), furniture (R2 443 million), paper and paper products (R1 145 million), leather and leather products (R507 million) and wood and wood products (R169 million).

Having contracted by 2,6% in 2011, total employment in agro-processing increased slightly by 0,6% in 2012. During the period, formal employment decreased by 0,3%, while informal employment rebounded by 2,4%. Among the divisions that created informal jobs were furniture (12,2%: 873 jobs), beverages (6,8%: 2 222 jobs), food (3,1%: 533 jobs), footwear (4,9%: 115 jobs) and wearing apparel (1,9%: 919 jobs). However, the leather and leather products and textiles divisions shed 52 and 551 informal jobs, respectively. Formal employment in the agro-processing industry were lost in leather and leather products (12,2%: 652 jobs), textiles (5,8%: 1 986 jobs), paper and paper products (3,9%: 1 236 jobs), wearing apparel (1,7%: 879 jobs) and food (0.6%: 955 jobs) divisions. Among the divisions, formal jobs were created in footwear (102 jobs; 1,2%), rubber products (489 jobs: 3,8%), furniture (2734 jobs 8,3%), beverages (1005; 3%) and tobacco (89 jobs, 3,4%). Therefore, agro-processing shed 760 formal jobs and created 4 049 informal jobs. As a result, the total num-ber of employment was 575 811 in 2012.

1

1 Introduction

The global economic growth continued to slow down in 2012 as a result of a moderation in the economic growth of both advanced and emerging and developing economies. The contraction of the primary sector and the slowdown of both secondary and tertiary sector also induced the South African economy’s growth to be subdued compared to the previous year. This annual review examines the economic performance of the agro-processing industry amid the slowdown of the global and domestic economy growth recorded in 2012.

The annual review is organised as follows: The next section presents the overview of the global economy during 2012. Section three provides a succinct summary of the state of the domestic economy. Section four gives the effect of the global and domestic economic situation on the 11 divisions of the agro-processing industry. The section reviews how the global and domestic economy affected the real value added, real output, gross fixed domestic investment, trade, capac-ity utilisation and employment level of each division during 2012. The conclusion of the review is provided in section five.

2Overview of global economy

Owing to the slowdown of economic growth in advanced economies, as well as emerging and developing economies, the global economic growth moderated from 4,0% in 2011 to 3,2% in 2012. The growth of the emerging and developing economies also moderated from 6,4% in 2011 to 5,1% in 2012 because of a sharp drop in demand from key advanced economies and an end of investment booms in some of the major emerging market economies. Similarly, the economic growth of advanced economies moderated from 1,6% in 2011 to 1,2% in 2012. While Japan’s output growth rebounded by 2,0% in 2012 from a contraction of 0.6% in the previous year, prompted by fiscal and mon-etary stimulus, the Euro area’s output contracted by 0,6% in 2012, owing to the fiscal consolidation, poor export perfor-mance and low business confidence. The output growth in the US, however, increased from 1,8% in 2011 to 2,2% in 2012 as a result of the increase in consumer spending and government outlays.

The weak external demand in advanced economies and Euro area also affected the emerging market and developing economies. Brazil’s economic growth slowed down in 2012 because of high inflation and increasing exchange market pressure. Similarly, China, Russia and India’s economies moderated in 2012 from the previous year. In addition, eco-nomic growth in sub-Saharan Africa moderated slightly compared to 2011, owing to the difficulties in internal transitions.

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

2010 2011 2012

World output

Advanced economies

US

Euro area

Japan

Emerging and developing economies

China

India

Russia

Brazil

Sub-Saharan Africa

South Africa

5,3

3,2

3,0

1,9

4,4

7,5

10,4

10,8

4,3

7,5

5,3

3,1

4,0

1,6

1,8

1,4

–0,6

6,4

9,3

7,7

4,3

2,7

5,3

3,5

3,2

1,2

2,2

-0,6

2,0

5,1

7,8

4,0

3,4

0,9

4,8

2,5

Source: IMF (2013)

The global oil price has been relatively stable over the past two years and it showed a slight increase from $104 in 2011 to $105 in 2012 despite geopolitical events in the Middle East and North Africa, the European Union oil embargo and United State sanctions against Iran. Following an increase of 19,7% in the previous year, the global food price index con-tracted by 1,8% in 2012 and energy price index showed a marginal growth of 1,0% during the same period. Owing to a decline in the global food price index and slowdown in enegy price index, the global price consumer inflation moder-ated from 2,7% to 2,0% in advanced economies and from 7,2% to 5,9% in emerging and developing economies, re-spectively. Similalrly, the world trade volume of goods and services dropped from 6,0% in 2011 to 2,5% in 2012, as a result of weaker global economic growth.

2

3 State of the domestic economy

South Africa’s economic growth moderated from 3,5% in 2011 to 2,5% in 2012 mainly as a result of the contrac-tion of the primary sector. Excluding the volatility in the primary sector, the growth of the economy also moderated by 2,8% in 2012 following the 3,6% growth rate registered in 2011 (see Table 3.1). During 2012, the primary sector con-tracted by 2,2% as a result of a 4,0% decrease in the mining sector owing to widespread labour unrest at platinum mines, gold, iron ore and coal mines. The agricultural sector’s real value added, however, rebounded by 2,3% in 2012, resulting from the favourable weather conditions in most maize-producing areas in the country.

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

2008 2009 2010 2011 2012

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

4,10,45,74,45,52,52,9

0,2-0,10,32,93,63,83,6

–2,22,3

–4,02,12,43,62,8

Total 3,6 –1,5 3,1 3,5 2,5

Source: Reserve Bank (2013)

The growth of the secondary sector also moderated from 2,9% in 2011 to 2,1% in 2012. The lower growth rate resulted mainly because of the slowdown of the manufacturing sector’s growth rate from 3,6% in 2011 to 2,4% in 2012 as a result of the changing of the trading environment in Europe, structural problems, reduced raw material supplies and changing consumer demand (Reserve Bank, 2013). The construction sector, on the other hand, grew by 2,5% in 2012 following a marginal 0,5% growth in 2011. The electricity, gas and water sector, however, contracted by 1,2% in 2012 following a 1,1% growth in 2011. The growth of the tertiary sector moderated slightly from 3,8% in 2011 to 3,6% in 2012. In the tertiary sector, financial and other services grew by 3,3%, followed by general government (3,1%) and transport and communication (2,3%).

During 2012, the real gross domestic expenditure moderated from 4,6% in 2011 to 4,1% in 2012. This was mainly as the result of a change in inventories that slowed down from 5,1% in 2011 to 3,3% in 2012. During 2012, the gross fixed capital formation increased by 5,7%. The three components of gross fixed capital formation increased as follows: Public corpora-tions (9,1%), general government (8,5%) and private business enterprises (3,9%). Household consumption expenditure moderated from 4,8% in 2011 to 3,5% in 2012. The change in the household consumption expenditure was mainly as a result of the slowdown in spending on services (1,8%), non-durables (2,5%) and durables (11,0%). Expenditure on semi durable goods, however, increased from 5,9% in 2011 to 6,2% in 2012. Real final consumption expenditure by general government moderated from 4,6% in 2011 to 4,2% in 2012.

The unemployment rate increased to 25,1% in 2012 from 24,9% in the previous year as a result of a notable increase in the labour force during the period (402 000). During 2012, the total average employment in the economy increased by 258 000 and the number of unemployed people increased by 144 000. Among the sectors that generated employment were community and social services (139 750), finance and other business services (62 750), agriculture (46 250), transport (44 000), mining (38 250), private households (13 250) and utilities (12 000). The sectors that shed jobs were manufacturing (51 750), construction (28 000) and trade (18 000).

Producer price inflation moderated from 8,3% in 2011 to 6,2% in 2012. The main drivers for the slowdown of producer price inflation were the agricultural producer prices (which moderated from 6,8% in 2011 to 4,4% in 2012), manufacturing pro-ducer prices (which slowed down from 5,7% in 2011 to 4,8% in 2012) and the mining producer price (which moderated from 5,7% in 2011 to 4,9% in 2012). Consumer price inflation, on the other hand, accelerated marginally from 5% in 2011 to 5,7%. While there was an increase in food inflation from 7,2% in 2011 to 7,5% in 2012, meat product prices dropped from 10,4% in 2011 to 7,5% in 2012. The bread and cereals prices, however, increased from 7,1% in 2011 to 8,3% in 2012. During 2012, processed and unprocessed food products increased by 7,8% and 7,2%, respectively. Other consumer products, the prices of which rose markedly during 2012, include petrol (15,8%) and electricity and other fuels (12,6%).

3

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

31 Dec. 2011 to 30 Jun. 2012

30 Jun. 2012to 30 Dec. 2012

Weighted average1 3,1 8,6 –6,4 –11,9 0,6 –4,1

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

0,6–2,1–1,2–3,40,3

–6,7–2,1–4,0–5,46,0

Source: Reserve Bank (2013)

Table 3.2 shows that there has been substantial depreciation of the rand after the global financial crisis since 2009. Depreciation continued to occur during the second half of 2012 following the release of worse-than-expected domestic economic growth data, dropping of the international prices of gold and platinum and labour unrest in the country (Reserve Bank, 2013). All these contributed to the acceleration of the depreciation of the Rand together with many other emerging market currencies. The real effective exchange rate also declined by 2,4% in 2012, following a significant depreciation of 13,7% in 2011.

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 11 divisions: Food products, beverages, tobacco, textiles, wearing apparel, leather and leather products, footwear, paper and paper products, wood and wood products, rubber and furniture.

The agro-processing industry contributed 28,4% and 5,0% of the real value added (GDP) by the manufacturing sector and the economy, respectively, during 2012. Its contribution to the real output of the manufacturing sector and the economy was also 29,5% and 13,6%, respectively. Its share of real domestic fixed investment in the manufacturing sec-tor and the economy was 14% and 2,4%, respectively, during the same period. In addition, 14% and 7,6% of the total export by the manufacturing sector and the economy, originated from agro-processing. During 2012, the industry ac-counted for 40,3% 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 2012.

4.1 FOOD PRODUCTS

Real output of the food division rebounded by 7,3% in 2012 following a contraction of 1,0% in 2011 (see Figure 4.1). Similarly the real value added showed a growth of 6,8% in 2012, after showing a contraction of 3,7% in the previous year. During 2012, the output price remained unchanged whereas the intermediate price of food products increased by 3,8% in 2012.

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).

Source: Quantec EasyData (2013)

4

The real gross domestic fixed investment in the food division showed an exceptional average annual growth rate of 17% from 2002 to 2008. Real gross domestic fixed investment contract-ed in 2010 and 2011 by 8,1% and 7,5%, re-spectively, but rebounded by 8,8% in 2012 (see Figure 4.2). The nominal value of gross fixed capital formation in Table 4.1 shows that during 2012 the investment in buildings and construction works increased by 49,1%, fol-lowed by investment in machinery and other equipment (22,3%) and transport equipment (21,1%).

TAbLE 4.1: Gross fixed capital formation by type of asset: Food products (R million)

Asset type 2010 2011 2012 % Change

Buildings and construction worksTransport equipmentMachinery and other equipment

95954

4 376

1 4073

6 076

1 506,753,2

7 438,9

49,121,122,3

Total 5 388 7 189 8 998,8 25,2


After decreasing by 1,5% in 2011, real exports of food rebounded by 21,6% in 2012. Real im-ports, on the other hand, rose by 15,2% in 2012 following a 17,8% growth in 2011 (see Figure 4.3). As a result, the trade deficit widened from R7 041 million in 2011 to R7 451 million in 2012. In addition, export-to- output ratio increased marginally from 9,1% in 2011 to 9,7% in 2012 and the import-to-domestic demand ratio in-creased modestly from 14,2% in 2011 to 16,2 % in 2012.

TAbLE 4.2: The top five exported food products in 2012

Product HS code R million % Share in 2012 % Share in 2011

Fruit and vegetable juices, not fermented or spirited

Fruit, nut, edible plant parts prepared or preserved

Cane or beet sugar and chemically pure sucrose

Food preparations NESOI (not elsewhere specified or included)

Fish frozen (no fish fillets or other fish meat)

2009

2008

1701

2106

0303

1 870,6

1 527,7

1 515,9

1 208,4

940,2

8,1

6,6

6,5

5,2

4,1

8,3

6,8

5,9

5,7

4,4


The top five exported food products during 2012 are presented in Table 4.2. Fruit and vegetable juices (8,1%) are the main exported product followed by fruit, nuts, edible plant parts prepared or preserved (6,6%) and cane or beet sugar (6,5%). As a main destination for the exports, the SADC accounted for the highest share of 40,5%, followed by the EU (17,4%), Eastern Asia (8,0%), Northern Asia (4,0%) and NAFTA (3,7%).



5

TAbLE 4.3: The top five imported food products in 2012

Product HS code R million % Share in 2012 % Share in 2011

RiceMeat and edible offal of poultry, fresh, chilled or frozenPalm oil and its fractions, not chemically modifiedSoya-bean oilcake and other solid residueSoya-bean oil and its fractions, not chemically modified

1006

0207

1511

2304

1507

5 601,1

3 520,9

3 342,5

2 808,4

2 117,3

13,4

8,4

8,0

6,7

5,2

11,0

8,2

8,9

7,8

8,1


Among the top imported food products in 2012, rice accounted the highest share (13,4%) followed by meat and edible offal of poultry (8,4%), palm oil and its fractions (8,0%), soya-bean oil (6,7%) and its fractions (5,2%) (see Table 4.3). The main source of imports during 2012 were the EU (25,6%), South Asia (25,3%), South and Central America (20,5%), Eastern Asia (8,4%) and NAFTA (3,8%).

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 de-mand

Other

Raw materials Labour

Skilled Semi- and un-skilled

201020112012

83,183,482,7

16,816,617,1

2,22,23,0

1,41,41,4

0,10,20,2

9,99,5

10,0

3,13,12,7

Source: Statistics SA (2013)

The utilisation of production capacity by large enterprises in the food division shows a marginal decrease in 2012. Insufficient demand is the main reason for the increase in underutilisation followed by shortage of raw materials (see Table 4.4).

Formal employment in the food division declined by 0,6% following a contraction of 3,4% in the previous year and informal employment rebounded by 3,1% in 2012 from a contraction of 4,2% in 2011. As a result, the total employment increased marginally by 0,2% in 2012 (see Figure 4.4). Table 4.5 shows that 1,9% of jobs were lost by semiskilled and un-skilled workers, while jobs were created for high-level skilled (1,0%) and mid-level skilled (0,9%) workers. While the unit labour cost increased by 1,3%, the capital intensity decreased by 1,3% in the food divi-sion.

TAbLE 4.5: The skill level of employees: Food products

Skill level 2011 2012 % change

High levelMid-levelSemiskilled and unskilledInformal

13 19575 06983 33717 344

13 32575 71681 79717 878

1,00,9

–1,93,1

Total 189 137 188 715 –0,2



6

4.2 bEvERAGES

After rebounding by 11,1% in 2010, real value added of the beverages division declined by 0,6% and 1,2% in 2011 and 2012, respectively. Real output, on the other hand, grew by 2,3% in 2012 after contracting by 0,8% in 2011 (see Figure 4.5). During 2012, the output and intermediate input prices for beverage products decreased by 3,4% and 4,4%, respectively.

Real gross domestic fixed investment in the beverages division contracted by 3,9% in 2012 after rebounding by 10,2% in 2011 (see Figure 4.6). The nominal value of gross fixed capital formation in the beverages division also declined by 2,6% following an 18,8% growth in 2011 (see Table 4.6). Most of the drop in the capital formation was for the buildings and construction works (15,6%). However, investment in transport equipment and machinery and other equipment increased by 12,6% and 9,6%, 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

281,125,0

5 110,6

–15,612,6

9,6

Total 4 223,8 5 017,4 5 146,7 2,6


The export performance of the beverages division has been robust compared to other agro-processing prod-ucts during the past decade. Real export rebounded by 15,2% in 2012. However, real imports increased by 11,8% in 2012, following a 12,4% growth in 2011 (see Figure 4.7). As a result, the trade balance increased from R2 943 million in 2011 to R3 493 million in 2012. In addition, the export-to-output ratio increased marginally from 14,0% in 2011 to 14,7% in 2012 and similarly the import-to-domestic demand ratio increased from 7,5% in 2011 to 8,2 % in 2012.

TAbLE 4.7: The top five exported beverage products in 2012

Product HS code R million% Share

2012 2011

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

22042207220822062202

5 980,61 175,5

859,7370,0364,1

61,612,1

8,93,83,8

63,110,6

9,33,94,3





7

Table 4.7 shows that wine of fresh grapes was the main product that accounted for 61,6% of the total beverage exports, followed by ethyl alcohol beverages (12,1%) in 2012. As a main destination for the exports, the EU accounted for the highest share of (41,5%) followed by the SADC (16,0%), NAFTA (10,0%), North Africa (5,7%) and Eastern Asia (4,7%).

TAbLE 4.8: The top five imported beverage products in 2012


2012 2011

Ethyl alcohol, undenatured <80% alcoholWaters, sweetened, etc., and other non-alcoholic beveragesMalt, whether roasted or notBeer made from maltWine of fresh grapes

22082202110722032204

2 851,3611,4

508,1251,4199,4

56,612,110,1

5,04,0

61,77,9

10,14,43,7


The list of the top five imported beverage products during 2012 is presented in Table 4.8. Among the beverages products, ethyl alcohol (56,6%) and waters and other non-alcoholic beverages (12,1%) made up 69% of the total beverage im-ports, followed by malt, whether roaster or not (10,1%) and beer made from malt (5,0%) (see Table 4.8). The EU was the largest source of imports of beverage products (68,5%) followed by NAFTA (15,0%), South and Central America (2,6%), Oceania, including Australia and New Zealand (2,0%) and the SADC (1,3%).

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




Other



201020112012

77,880,682,0

22,219,418,0

2,72,42,1

1,31,61,3

0,40,20,2

15,311,5

9,7

2,33,74,7


Following an increase of output in the beverages division, the utilisation of production capacity increased from 80,6% in 2011 to 82,0% in 2012 (see Table 4.9). Insufficient demand remains the main reason for underutilisation, followed by short-age of raw materials and skilled labour.

The beverages division is among a few agro-processing industries that created jobs in 2012 (see Figure 4.8). The total number of employment increased by 4,8% in 2012. Informal employment in the sector grew by 6,8%, whereas the formal employment increased by 3,0% in 2012. Table 4.10 shows that employment increased more for high-level skilled workers (7,0%), followed by the mid-level skilled (4,2%) and semiskilled and unskilled workers (0.8%) during 2012. Labour unit cost and capital intensity in the beverage division contracted by 5,8% and 6,8%, respectively.

TAbLE 4.10: The skill level of employees: beverages



5 54711 63916 63932 843

5 93512 13116 76635 065

7,04,20,86,7

Total 66 669 69 896 4,8



8

4.3 TObACCO

The real output rebounded from a 0,8% contraction in 2011 to 6,5% growth in 2012 (see Figure 4.9). As a result, the real value added accelerated from a marginal 0,2% growth in 2011 to 3,1% in 2012. The intermediate input and output price of tobacco contracted by 0,1% and 0,6%, respectively during 2012.

Real gross domestic fixed investment has been de-clining since 2004 and this trend has continued in 2012, when it contracted significantly by 32,4% (see Figure 4.10). As indicated in Table 4.11, the current value of gross fixed capital formation also declined by 26% in 2012. Gross fixed capital formation for transport equipment, as well as machinery and other equipment contracted significantly by 54,5% and 25,8%, respectively, while gross fixed capital forma-tion for buildings and construction remained un-changed during 2012.

TAbLE 4.11: Gross fixed capital formation by type of asset: Tobacco (R million)



0,31,8

121,6

0,11,1

121,8

0,10,5

90,4

0,0–54,0–25,7

Total 123,6 123 91 –26,0


Real exports of tobacco products rebounded sig-nificantly by 45,6% in 2012 following a 22,9% con-traction in 2011. Real imports also rebounded con sider ably by 30,4% from a 16,8% decline dur-ing the previous year (see Figure 4.11). As a result of the substantial increase in real exports, the trade surplus increased from R2 565 million in 2011 to R417 million in 2012. During 2012, the export-to-output ratio increased from 8,9% in 2011 to 11,2% in 2012 and the import-to-domestic demand ratio increased from 3,0% in 2011 to 3,8% in 2012.

TAbLE 4.12: The top three exported tobacco products in 2012


2012 2011 2010

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

240224032401

928,4612,2

0,7

58,038,3

0,0

59,237,2

0,1

49,642,9

0,1





9

As indicated in Table 4.12, are the top two groups of exported tobacco products during 2012 were cigars, cigarettes, etc. (58,0%) and tobacco and tobacco substitutes (38,3%). During the same period, Western Asia (38,8%), Northern Africa (18,2%), the SADC (17,9%) and Sub-Saharan Africa, excluding the SADC (13,8%), were among the top export destinations of South Africa’s tobacco products.

TAbLE 4.13: The top three imported tobacco products in 2012


2012 2011 2010

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

240224032401

325,791,452,9

63, 617,810,3

61,416,813,1

49,824,113,2


The top three imported products were the same group of products as for exports. However, the share of cigars, cigarettes, etc. (63,6%) has continued to increase and dominate compared to the rest (see Table 4.13). During 2012, the EU re-mained the main source of imports for tobacco products (36,3%) followed by Europe other than the EU (34,7%), South Asia (6,1%), the ADC (4,7%) and South and Central America (3,8%).

During 2012, the total employment in the tobacco divi-sion increased by 3,4%, following a growth in real output (see Figure 4.12). As indicated in Table 4.14, the highest growth in employment was for high-level skilled workers (7,3%) followed by mid-level (4,6%) and semiskilled and unskilled workers (3,3%). As a result of the increase in em-ployment, labour unit cost in the tobacco division in-creased significantly by 13,6%, while capital intensity contracted by 12,7% during 2012.

TAbLE 4.14: The skill level of employees: Tobacco



422884

1 237–

453925

1 278–

7,34,63,3

–

Total 2 568 2 656 3,4


4.4 TExTILES

Figure 4.13 shows that the real output of the textiles division has been declining since 2008 and this trend has continued in 2012, when it further de-ceased by 3,1%. Real value added also decreased by 1,8%, following an 11,1% contraction in 2011. During 2012, the output price and intermediate in-put price of the division decreased by 0,6% and 1,7%, respectively.



10

The growth of real gross domestic fixed investment declined significantly by 15,6% after showing a sub-stantial 36,9% growth in 2011 (see Figure 4.14). Table 4.15 indicates that the current value of gross capital formation decreased considerably for transport equip ment (40,9%), buildings and construction works (19,4%) and machinery and other equipment (9,8%).

TAbLE 4.20: Gross fixed capital formation by type of asset: Textiles (R million)



79,222,3345

19423

795,3

156,413,6

717,5

–19,4–40,9

–9,8

Total 446,5 1 012,3 887,4 –12,3


Real export of textile products have been declining for the past decade and it has continued to do so in 2012, as there was further contraction of 11,3% (see Figure 4.15). During 2012, imports declined marginally following a substantial growth of 11,6% in the previous year. As a result of a substantial decline in real exports, the trade deficit of the textile division widened from R5 831 million in 2011 to R5 926 mil-lion in 2012. The export-to-output ratio of textile products increased from 11,7% in 2011 to 12,7% in 2012. Similarly, its import-to-domestic demand ratio increased from 31,7% in 2011 to 34,2% in 2012.

TAbLE 4.16: The top five exported textile products in 2012


2012 2011

Wool and fine or coarse animal hair, carded and combedTarpaulins, sails, awnings, tents, etc.Non-wovens, whether impregnated or not, coated, etc.Made-up articles of textile materials NESOIWool, not carded or combed

51056306560363075101

553,8237,3206,4115,2100,1

19,58,47,34,13,5

22,28,68,13,94,6


Out of the top five exported textile products shown in Table 4.16, wool and fine coarse animal hair (19,5%) and tarpaulins, sails, awnings, tents etc. (8,5%), were the main exported products in 2012, followed by non-wovens (7,3%). During 2012, the top destinations for textile products were the EU (30,3%), SADC (26,2%), Eastern Asia (7,9%), NAFTA (5,9%) and Oceania, including Australia and New Zealand (5,2%).

TAbLE 4.17: The top five imported textile products in 2012


2012 2011

Woven synthetic filament yarn, monofilament > 67dtexBed, table, toilet and kitchen linensNon-wovens, whether impregnated or not, coated, etc.Woven fabric, >85% synthetic + cotton, <170g/m2Made-up articles of textile materials NESOI

54076302560355136307

1 186,6647,4639,9534,4459,2

11,76,46,35,34,5

10,56,46,35,74,1




11

Table 4.17 indicates that in 2012, the main imports of textile products were woven synthetic filament yarn (11,7%), bed and other linens (6,3%) and non-wovens (6,3%). Eastern Asia (44,9%), South Asia (22,5%), EU (14,6%), Western Asia (3,8%) and NAFTA (2,4%), were the main sources of imports during 2012.

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




Other



201020112012

71,970,771,2

28,129,328,9

3,01,70,9

1,00,70,7

0,10,10,4

20,924,724,9

3,12,22,0


Table 4.18 shows that the utilisation of production capacity by large enterprises in the textile division increased by 0,5 percentage point in 2012, despite the drop in real output. Similar to the previous years, insufficient demand was the prin-cipal cause of underutilisation in 2012.

The total employment in the textile division has been de-creasing since 2008 (see Figure 4.16). The deceleration slowed down from 5,0% in 2011 to 4,4% in 2012. During the period, formal and informal employment contract-ed by 5,8% and 2,4%, respectively. Table 4.19 shows that most job losses during the period were by semi-skilled and unskilled (6,8%) and mid-level skilled workers (6,2%) followed by high-level skilled workers (4,5%).

TAbLE 4.19: The skill level of employees: Textiles



2 1335 650

26 76823 394

2 0365 298

24 95822 843

–4,5–6,2–6,8–2,4

Total 57 673 55 136 –4,4


4.5 WEARING APPAREL

During 2012, real output in the wearing apparel divi-sion increased by 2,3%, following a 1,0% contraction in 2011. Similarly, real value added accelerated moderately from 0,7% in 2011 to 2,0% in 2012 (see Figure 4.17). In 2012, output and intermediate input price of the sector declined by 1,5% and 7,3%, re-spectively.



12

The real gross domestic fixed investment continued to increase by 16,9% in 2012, following a 17,4% growth in 2011 (see Figure 4.18). Table 4.20 shows that the current value of gross fixed capital formation increased for buildings and construction works (20,3%) and machinery and other equipment (29,4%). However, it decreased for transport equip-ment by 32,6%. Machinery and other equipment comprised 98% of the total gross fixed capital forma-tion in the wearing apparel division.

Table 4.20: Gross fixed capital formation by type of asset: Wearing apparel (R million)



8,67,1

252,8

5,94,6

360

7,13,1

465,7

20,3–32,629,4

Total 268,4 370,5 475,9 28,4


Since 2002, the real exports of wearing apparel have been decreasing, while imports have been increasing substantially (see Figure 4.19). During 2012, real exports increased by 6,6%, however, imports increased by 9,8%. Therefore, the real trade deficit of wearing ap-parel widened from R8 940 million in 2011 to R9 835 million in 2012. The export-to-output ratio of wearing ap-parel increased from 5,3% in 2011 to 6,0% in 2012 and the import-to-domestic-demand ratio increased from 41,6% % in 2011 to 45,5% in 2012.

TAbLE 4.21: The top five exported wearing apparel products in 2012


2012 2011

Men’s or boys’ suits, ensembles, etc., not knit, etc.Pantyhose, socks and other hosiery, knit or crochetTrack suits, ski-suits and swimwear, not knit, etc.Women’s or girls’ suits, ensembles etc., not knit, etc.T-shirts, singlets, tank tops, etc., knit or crochet

62036115621162046109

126,478,159,258,151,8

11,16,95,25,14,6

12,27,44,84,84,4


The top five exported wearing apparel products are presented in Table 4.21. The main exported wearing apparel product group was men’s or boys’ suits, ensembles, etc., not knit, etc. (11,1%), followed by pantyhose, socks and other hosiery, knit or crochet (6,9%) and track suits, ski-suits and swimwear, not knit, etc. (5,2%). The majority of the wearing apparel products were exported to the SADC (37,9%), EU (8,3%), NAFTA (7,1%), Northern Africa (5,3%) and Western Asia (4,4%) in 2012.

TAbLE 4.22: The top five imported wearing apparel products in 2012


2012 2011

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

1 718,81 481,31 411,71 031,9

677,2

11,710,1

9,67,04,6

11,710,9

9,86,15,2




13

The top five imported wearing apparel products during 2012 are presented in Table 4.22 and it shows that men’s or boys’ suits, ensembles, etc., not knit (11,7%), women’s or girls’ suits, ensembles, etc., not knit, etc. (10,1%) and T-shirts, singlets, tank tops, etc., knit or crochet (9,6%) make up for most of the imported wearing apparel products. During 2012, the ma-jor source of import was Eastern Asia (61,4%), followed by Southern Asia (12,1%), SADC (9,3%), Sub-Saharan Africa (ex-cluding the SADC) (3,5%) and the EU (2,8%).

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




Other



201020112012

77,178,780,4

22,921,319,6

1,31,00,9

1,61,30,9

1,31,21,0

15,013,812,2

3,84,14,7


Following an increase in output, the utilisation capacity of the wearing apparel division increased from 78,7% in 2011 to 80,4% in 2012 (see Table 4.23). Despite a decline in insufficient demand by 1,6 percentage points, it still remained the main reason for underutilisation of production capacity in 2012. Other reasons such as downtime owing to maintenance and lower productivity, also contributed to 4,7% of the total underutilisation of production capacity in the division.

During 2012, total employment in the wearing apparel divi-sion remained unchanged, following a 6,4% contraction in 2011 (see Figure 4.20). However, informal employment in-creased by 1,9%, while formal employment decreased by 1,7%. Table 4.24 shows that most of the job losses occurred by mid-level skilled (1,9%) and semiskilled and unskilled work-ers (1,7%), while employment incresed by 0,2% for high-level skilled workers. Both unit labour cost and capital in tensity declined by 1,2% and 1,0% in 2012, respectively.

TAbLE 4.24: The skill level of employees: Wearing apparel



2 5856 793

43 69847 548

2 5906 666

42 94148 467

0,2–1,9–1,71,9

Total 100 624 100 665 0,0


4.6 LEATHER AND LEATHER PRODUCTS

In 2012, the real output increased by 8,1% after showing a decline of 4,9% in 2011. Similarly, real value added re-bounded by 4,5% in 2012, following a substantial decline of 25,4% in 2011 (see Figure 4.21). Both the output price and intermediate input price of leather and leather products de-creased by 2,1% and 3,9%, respectively, during 2012.



14

During 2012, the real gross domestic fixed investment in the leather and leather products division decreased by 34,3%, following a growth of 5,0% in 2011 (see Figure 4.22). The nominal gross fixed capital formation in the division shows that investment in machinery and other equipment, buildings and construction works and trans-port equipment contracted by 28,1%, 5,3% and 40,0%, respectively. (see Table 4.25). Machinery and other equipment constituted 74,3% of the total gross fixed capital formation in 2012.

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



4,80,532

5,70,5

37,4

5,40,3

26,9

–5,3–40,0–28,1

Total 37,3 43,6 36,2 –16,9


After showing a substantial growth of 16,4% in 2011, real exports of leather and leather products dropped by 5,4% in 2012. The real imports value also dropped from a 7,0% growth in 2011 to 6,3% contraction in 2012 (see Figure 4.23). As a result, the trade deficit decreased from R553 million in 2011 to R507 million in 2012. The export-to-output ratio of leather and leather products increased from 37,9% in 2011 to 38,2% in 2012. Similarly, its import-to-domestic-demand ratio increased margin-ally from 44,1% in 2011 to 44,6% in 2012.

TAbLE 4.26: The top five exported leather and leather products in 2012


2012 2011

Bovine or equine leather, no hair NESOIArticles of leather, NESOITravel goods, handbags, wallets, jewellery cases, etc.Goat or kidskin leather, no hair NESOILeather of animals NESOI

41044205420241064107

543,0114,9

67,760,856,2

25,05,33,12,82,6

20,56,63,31,1

33,9


The top five exported leather and leather products in 2012 are presented in Table 4.26. Bovine or equine leather ac-counted for a 25,0% share, followed by articles of leather, NESOI (5,3%) and travel goods, handbags, wallets, jewellery cases, etc. (3,1%) in 2012. Among the top export destinations for South African leather products during 2012 were the EU (18,9%), Eastern Asia (10,1%), South Asia (4,2%), NAFTA (3,3%) and the SADC (2,3%).

TAbLE 4.27: The top five imported leather and leather products in 2012


2012 2011

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

42024107410442014113

1 824,9296,4288,8

35,136,4

64,810,510,3

1,31,3

62,311,310,1

1,31,5




15

Table 4.27 shows the top five imported leather and leather products in 2012. Travel goods, handbags, wallets and jewel-lery cases were the most imported leather products that accounted for 64,8% share in 2012. Similar to textile and wearing apparel products, Eastern Asia (57,1%) and South Asia (14,2%) were the major sources of imports for leather and leather products. Other sources of imports include South and Central America (10,1%), EU (8,3%) and NAFTA (1,1%).

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




Other



201020112012

73,471,969,4

26,628,130,6

7,43,73,1

0,70,60,5

1,01,00,6

15,216,321,5

2,26,54,9


Despite an increase in output, the utilisation capacity by the leather and leather products division contracted by 2,5 per-centage points in 2012 (see Table 4.28). Insufficient demand remained the major reason for underutilisation, other rea-sons, such as downtime because of maintenance also continued to be the second reason for underutilisation, followed by a shortage of raw materials in 2012.

Since 2007, the decline in investment resulted in the shedding of jobs in the leather and leather products divi-sion. During 2012, total employment dropped by 11,9% compared to the previous year (see Figure 4.24). Similarly, formal and informal employment dropped by 12,2% and 8,9%, respectively (see Figure 4.24). Table 4.29 shows that semiskilled and unskilled employees lost most of the jobs (12,7%). During 2012, labour unit cost in the division declined by 14,4%, while capital intensity increased by 5,7%.

TAbLE 4.29: The skill level of employees: Leather and leather products



2 5856 793

43 69847 548

2 5906 666

42 94148 467

0,2–1,9–1,71,9

Total 100 624 100 665 0,0


4.7 FOOTWEAR

The real output in the footwear division increased by 2,3% in 2012 after showing a marginal contraction of 0,2% in 2011. Despite the growth in the real output, real value added contracted slightly by 0,2% in 2012, fol-lowing a poor growth performance since 2008 (see Figure 4.25). During 2012, output price increased slightly by 0,2% and intermediate input price decreased by 2,1% after showing a 6,0% increase in the previous year.



16

Real gross domestic fixed investment increased by 12,3% in 2012, following a 13,8% growth in the previous year (see Figure 4.26). The current value of gross fixed capital formation increased by 28,3% (Table 4.30). Investment in buildings and construction works in-creased significantly by 175,0% and it rose by 24% for machinery and other equipment. The gross fixed capital formation transport for equipment, however, dropped by 8,3%.

TAbLE 4.30: Gross fixed capital formation by type of asset: Footwear (R million)



3,61,6

56,2

2,41,2

72,5

6,61,1

89,9

175–8,324,0

Total 61,5 76,1 97,6 28,3


Figure 4.27 shows that real exports of footwear products increased significantly by 18,5% and real imports in-creased by 5,2% in 2012. Despite an increase in ex-ports, the trade deficit increased from R5 401 in 2011 to R5 669 million in 2012. Therefore, export-to-output ratio increased slightly from 3,3% in 2011 to 4,1% in 2012 and import-to-domestic-demand ratio increased from 49,5% in 2012 to 52,8% in 2012.

TAbLE 4.31: The top five exported footwear products in 2012


2012 2011 2010

Footwear, outer sole rubber, plastic or leather and upper leatherWaterproof 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

108,955,440,032,522,5

33,517,012,310,0

6,9

35,217,812,210,3

5,7

21,59,86,63,7

43,6


The top five exported footwear products in 2012 are presented in Table 4.31. The footwear, outer sole rubber, plastic or leather and upper leather accounted for 33,5% of all exports of footwear products in 2012. Among the top export desti-nations, the SADC accounted for 59,8% of the exported footwear products, followed by Northern Africa (3,9%) NAFTA (3,6%), EU (3,0%) and Sub-Saharan Africa excluding the SADC (2,3%).

TAbLE 4.32: The top five imported footwear products in 2012


2012 2011 2010

Footwear, outer sole and upper rubber or plastic NESOIFootwear, outer sole rub, plastic or lea and upper textileFootwear, outer sole rub, plastic or leather and upper leatherFootwear NESOIParts of footwear; insoles ,etc.; gaiter, etc., parts

64026404640364056406

3275,31386,9

148,7139,2

73,6

38,328,021,2

1,71,6

39,823,824

1,51,7

3919,724,8

1,21,9




17

Table 4.32 presents the top five imported footwear products in 2012. Footwear, outer sole and upper rubber or plastic NESOI were the main imported products and it accounted for 38,3% of all footwear imports in 2012. Similar to the leath-er and leather products, Eastern Asia (67,7%) South Asia (16,7%), the EU (5.2%), South and Central America (1,4%) and NAFTA (0,2%) were the major sources of imports for footwear products.

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




Other



201020112012

87,887,889,3

12,212,210,7

1,11,61,4

2,11,10,6

0,00,00,0

8,79,38,7

0,10,20,0


The utilisation of production capacity of the footwear division increased by 1,5 percentage points as reflected by the rise in the output of footwear during 2012 (see Table 4.33). The division is among the few agro-processing industries that have the highest percentage of utilisation capacity. During 2012, insufficient demand remained the key reason for underutilisa-tion, followed by a shortage of raw materials.

Employment in the footwear division has been declin-ing during the past decade (see Figure 4.28). During 2012, however, the total number of employment in-creased by 2,0% compared to 2011. Both formal and informal employment increased by 1,2% and 4,9%, respectively, during the period. Table 4.34 shows that employment increased by 2,2% for high skilled and by 1,9% for semiskilled and unskilled level employees. During 2012, labour unit cost increased by 6,9% in the division; however, capital intensity dropped marginally by 1,3% owing to a growth in employment.

TAbLE 4.34: The skill level of employees: Footwear



268529

7 7372 355

274533

7 8292 470

2,20,81,94,8

Total 10 889 11 106 2,0


4.8 WOOD AND WOOD PRODUCTS

After declining by 2,6% in 2011, the real output of wood and wood products increased marginally by 0,2% in 2012. However, real value added decreased by 0,2% during the same period, following a moderate growth of 5,3% recorded in 2011 (see Figure 4.29). Both the out-put and intermediate input price for wood and wood products increased by to 2,1% and 1,0%, respectively, in 2012.



18

The real gross domestic fixed investment in the wood and wood products division has been declining since its peak level in 2008. During 2012, the real gross domestic fixed investment decreased by 7,2% following a signifi-cant contraction of 57,7% and 42,5% in 2010 and 2011, respectively (see Figure 4.30). During the same period, the current gross fixed capital formation by type of assets showed a 5,2% growth, as a result of a sub-stantial increase of investment in building and construc-tion work (40,1%) and a moderate growth in machinery and other equipment (4%), which offset a 43,3% de-crease in transport equipment.

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

67,413,3

486,1

40,1–43,3

4,0

Total 1070,8 538,6 566,8 5,2


As shown in Figure 4.31, the trade surplus of wood and wood products has been declining over the past dec-ade as a result of a substantial increase in real imports and a sharp drop in real exports. The value of real ex-ports contracted by 8,4% in 2012, following a marginal growth of 1,3% recorded in 2011 and the value of real imports moderated from 10,2% in 2011 to 2,7% in 2012. Owing to a relatively higher growth of real imports com-pared to real exports, the trade balance experienced a deficit of R168 million in 2012 from a surplus of R53 mil-lion observed in 2011. As a result, the import-to-domes-tic demand ratio rose from 15,9% in 2011 to 16,4% in 2012 and export-to-output ratio moderated from 21,3% in 2011 to 19,9% in 2012.

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


2012 2011

Fuel wood in logs, etc.; wood in chips, etc.Fibreboard of wood or other ligneous materialsBuilders’ joinery and carpentry of woodWood in the rough, stripped or not of sapwood, etc.Particle board and similar board of wood, etc.

44014411441844034410

1 311,1202,5181,6180,2143,8

42,66,65,95,94,7

50,35,97,12,53,9


Table 4.36 shows that the percentage share of fibreboard (6,6%), wood in the rough (5,9%) and particle of board (4,7%) increased in 2012 as compared to 2011. However, among the imported wood products, fuel of wood in logs (42,6%) remained the main exported products in 2012. The major export destinations during 2012 were East Asia (42,8%), the SADC (18,1%), Oceania (including Australia and New Zealand) (5,0%) and European Union (4,4%).



19

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


2012 2011

Wood sawn or chipped length, sliced ,etc., over 6 mm thickPlywood, veneered panels and similar laminated woodFibreboard of wood or other ligneous materialsBuilders’ joinery and carpentry of woodWood continuously shaped (tongued, grooved, etc.)

44074412441144184409

904,3405,2390,5222,5172,2

28,812,912,4

7,15,5

26,810,714,7

7,14,8


Table 4.37 presents the top five imported wood and wood products in 2012. The main imported products were wood sawn (28,8%), plywood (12,9%) and fibreboard (12,4%), which altogether accounted for 54% of wood and wood prod-uct imports in 2012. The major sources of imports during the period were South Asia (25,3%), East Asia (19,2%), European Union (19,1%), South and Central America (12,4%) 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 (percentage)




Other



201020112012

79,382,483,0

20,717,717,0

2,41,91,3

1,51,31,8

0,00,00,1

13,49,98,9

3,54,75,0


The moderate increase in real output in the wood and wood products division is reflected by a 0,6 percentage points growth in utilisation capacity during 2012. Insufficient demand and other reasons such as downtime because of mainte-nance and lower productivity remained the major reasons for underutilisation of production capacity in the division (see Table 4.38).

The total employment in wood and wood products divi-sion increased modestly by 1,2% during 2012. While in-formal employment recorded a growth of 3,6%, there was no change in formal employment in the division during the period (see Figure 4.32). Table 4.39 shows that a small percentage of jobs was only lost by semi-skilled and unskilled workers (0,8%), while a slight growth was observed in both mid-level skilled (1,0%) and high-level skilled (0,3%) workers. As a result of the growth in employment, the unit labour cost in the division in-creased by 4,7%, while capital intensity dropped by 23,1%, during 2012.

TAbLE 4.39: The skill level of employees: Wood and wood products



1 23814 79020 36317 457

1 24214 94020 19418 089

0,31,0

–0,83,6

Total 53 842 54 465 1.2



20

4.9 PAPER AND PAPER PRODUCTS

The real output of the paper and paper products divi-sion rebounded by 3,8% in 2012, following a decrease of 5,7% in 2011. Similarly, the real value added in-creased by 1,9% in 2012, after declining by 3,5% in 2011. Both the output and intermediate input price of paper products, on the other hand, decreased by 1,3% and 1,7%, respectively, during 2012.

The real gross domestic fixed investment in the paper and paper products division dropped by 29,5% and 3,1% in 2010 and 2011, respectively. It however, re-bounded by 16,5% in 2012 (see Figure 4.34). Table 4.40 shows that nominal gross fixed capital formation in-creased by 31,7% in 2012. Investment in both building and construction works, as well as in machinery and other equipment showed a substantially growth of 45,2% and 30,9%, respectively. Investment in transport equipment also increased by 17,8% in 2012.

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

361,927,2

5 218,0

45,217,830,9

Total 4 291,4 4 258,8 5 607,2 31,7


As depicted in Figure 4.35, the trade surplus in the pa-per and paper products division has been narrowing and it became a deficit in 2011. This is attributed to a substantial growth in imports and a drop in exports dur-ing the past decade. During 2012, real exports further decelerated by 10,2% from a 2,5% contraction in 2011. On the other hand, real import growth moderated to 3,0% in 2012, following a 4,9% growth in 2011. As a re-sult, the trade deficit in the division increased substan-tially from R380 million in 2011 to R1 billion in 2012. While the export-to-output ratio declined from 21,2% in 2011 to 19,9% in 2012, the import-to-domestic output ratio increased from 15,8% in 2011 to 16,4% in 2012.

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


2012 2011

Chemical wood pulp, dissolving gradesKraft paper and paperboard, uncoated Paper, uncoated, for writing etc., rolls; handmade paperChemical wood pulp, soda or sulphate, not dissolving gradesCartons, etc., paper; office box files, etc., paper, etc.

47024804480247034819

4 948,91 820,9

966,1755,4473,4

41,115,1

8,06,33,9

40,613,6

6,910,1

3,8





21

Among paper products, chemical wood pulp (41,1%), Kraft paper (15,1%) and uncoated paper (8,0%), were the top exported products in 2012. Altogether, these products accounted for 61,3 % of the total exports of paper and paper products in 2012 (see Table 4.41). During 2012, South Asia (26,4%) was the major export destination, followed by the European Union (17,0%), SADC (16,8%) and Eastern Asia (14,3%).

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


2012 2011

Paper and paperboard, coated with kaolin, etc.Paper, paperboard, wad ,etc., coat, etc., NESOIPaper, uncoated, for writing, printing, office machinesKraft paper and paperboard, uncoated Chemical wood pulp, soda or sulphate, not dissolving grades

48104811480248044703

2 118,81 414,2

765486,8348,9

25,019,413,1

6,63,7

24,316,2

8,85,63,9


Table 4.42 presents the top five imported paper and paper products in 2012. Paper and paperboard, coated with kaolin (25,0%) and wad (19,4%) were the two main imported products in 2012, followed by uncoated paper (13,1%) and kraft paper (6,6%).The major source of imports during the period was the European Union, which constituted 51,0% of the total imports, followed by Eastern Asia (17,0%), NAFTA (7,4%) and South Asia (7,0%).

TAbLE 4.43: Utilisation and reasons for underutilisation of production capacity by large enterprises: Paper and paper products (percentage)




Other



201020112012

87,585,486,1

12,514,613,9

0,60,80,8

0,70,61,7

0,20,10,1

6,87,05,9

4,46,15,6


Following an increase in the real output, the utilisation of production capacity by the paper and paper products division also increased by 0,7 percentage points in 2012 (see Table 4.43). Insufficient demand and other reasons such as down-time owing to maintenance and lower productivity were the two main causes of underutilisation of production capacity by the division during 2012.

Despite the increase in both real output and invest-ments, total employment in the paper and paper prod-ucts division contracted by 1,8% during 2012 (see Figure 4.36). Table 4.44 shows that most jobs were lost by sem-iskilled and unskilled workers (4,6%) followed by mid-level skilled (3,6%) and high-level skilled workers (2,4%). During 2012, both the unit labour cost and capital intensity of the division decreased by 1,6% and 3,5%, respectively.

TAbLE 4.44: The skill level of employees: Paper and paper products



2 9639 994

18 955–

2 8929 632

18 087–

–2,4–3,6-4,6

–

Total 31 845 30 610 –1,8



22

4.10 RUbbER PRODUCTS

In 2012, the real output of the rubber products division grew by 2,9% following a contraction of 2,3% in 2011. Despite the growth in the real output, real value added remained unchanged in 2012 following poor growth performance since 2006. The output price of rubber products declined by 1,5% in 2012 after showing a 3,7% growth in 2011. Similarly, the intermediate input price decreased by 5,4% following a 6,3% increase in 2011.

Real gross domestic fixed investment of the rubber divi-sion decreased significantly by 20,6% in 2012, following firm growth of 51,5% in 2011 (see Figure 4.22). The cur-rent value of gross fixed capital formation by type of asset shows that buildings and construction works, as well as machinery and other equipment in the division contracted by 13,1% and 11,1%, respectively. Capital formation for transport equipment, however, remained unchanged (see Table 4.45). Machinery and equip-ment constituted 90% of the total gross fixed capital formation in 2012.

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

120,04,3

1 100,2

–13,10,0

–11,1

Total 520,7 1 381,3 1 224,5 –11,4


Real exports of rubber products decreased marginally by 0,3% after showing a significant growth of 43,0% in 2011. Real imports of rubber products, on the other hand, increased by 10,9% in 2012 following a 10,8% growth in 2011. As a result, the trade deficit increased from R4 460 million in 2011 to R5 169 million in 2012. The export-to-output ratio increased from 23,5% in 2011 to 24,1% in 2012. Similarly, the import-to-domestic output ratio increased from 43,6% in 2011 to 47,4% in 2012.

TAbLE 4.46: The top five exported rubber products in 2012


2012 2011

New pneumatic tyres, of rubberConveyor or transmission belts of vulcanised rubberArticles of vulcanised rubber, except hard rubberTubes, pipes and hoses of vulcanised rubber, except hard rubberCompounded rubber, unvulcanised, primary forms ,etc.

40114010401640094005

2 013,9326,7252,1225,7107,5

52,58,56,65,92,8

557,77,25,21,4





23

The top five exported rubber products during 2012 are shown in Table 4.46. A new pneumatic tyre, of rubber comprised 52,5% of all exports of rubber products. The main export destinations during the period were the SADC (43,3%), EU (13,4%), Northern Africa(5,9%), NAFTA (4,5%), and sub-Saharan Africa, (4,3%).

TAbLE 4.47: The top five imported rubber products in 2012


2012 2011

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

6 030,01 171,0

806,7653,8297,0

55,610,8

7,46,02,7

5411,7

8,562,9


Table 4.47 presents the top five imported rubber products during 2012. The new pneumatic tyre of rubber accounted for 55,6% of all imports of rubber products. The main sources of import during the period were Eastern Asia (34,6%), the EU (28,7%), South Asia (13,6%), NAFTA (10,3%) and Western Asia (1,3%).

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




Other



201020112012

81,185,588.3

18,914,511,8

0,40,20,5

0,200,3

0,00,00,0

16,812,710,6

1,41,50,3


Following an increased real output, the utilisation of production capacity increased by 2,8 percentage points (see Table 4.48). Insufficient demand remained the main reason for the underutilisation of production capacity in the division, even though it has been declining since 2010.

Following a significant rise in real output, total employ-ment in the rubber division grew by 3,7%. Highest em-ployment growth occurred for high-level skilled workers (5,6%) followed by mid-level skilled (4,3%) and semi-skilled and unskilled workers (3,3%) (see Table 4.49). During 2012, the labour unit cost of the division in-creased by 8,4%, while the capital intensity declined by 0,3% as the result of the increase in employment.

TAbLE 4.49: The skill level of employees: Rubber products



1 3823 0598 526

–

1 4593 1918 807

–

5,64,33,3

–

Total 12 968 13 457 3,7



24

4.11 FURNITURE

During 2012, the real output of the furniture division re-bounded by 10,7%, following a 1,0% and 4,7% con-traction in 2010 and 2011, respectively. Similarly, after dropping by 8,0% and 8,2% in 2010 and 2011, respec-tively, the real value added rebounded by 17,6% in 2012 (see Figure 4.11). Intermediate input and output price, on the other hand, contracted by 4,9% and 0,7%, respectively in 2012.

During 2012, the real gross domestic fixed investment grew substantially by 40,5% after showing a 7,7% growth in 2011 (see Figure 4.42). The nominal gross fixed capital formation of the furniture division also grew by 54,5%. Most of the growth in investment was for ma-chinery and equipment (77,3%) followed by transport equipment (7,0%). Investment for building and con-struction works however, decreased by 11,3% (see Table 4.50).

TAbLE 4.50: Gross fixed capital formation by type of asset: Furniture (R million)



61,14,2

175,1

73,44,3

220,4

65,14,6

390,8

–11,37,0

77,3

Total 240,3 298 460,5 54,5


South Africa became a net importer of furniture in 2008. During 2012, real exports declined by 17,2% following a contraction of 27,7% in 2011. In contrast, imports ac-celerated from 3,3% in 2011 to 9,3% in 2012. As a re-sult, the real trade deficit widened significantly from R1,7 billion in 2011 to R2,4 billion in 2012. As a result, the export-to-output ratio decreased from 22,5% in 2011 to 18,2% in 2012, while the import-to-domestic demand ratio remained relatively the same as the previous year (23,7%) during 2012.

TAbLE 4.51: The top four exported furniture products in 2011


2012 2011

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

2 150,4549,7

53,17,5

60,115,4

1,50,2

64,613,5

1,10,1





25

Among the top exported furniture products, seats and parts amounted to 60,1% of the total exports of furniture in 2012, followed by furniture NESOI which constituted 15,4% (see Table 4.51). During the period, European Union (51,7%) and SADC (17,0%) were the main export destinations followed by NAFTA (3,0%), North America (2,0%) andsub-Saharan Africa (excluding the SADC) (1,2%).

TAbLE 4.52: The top four imported furniture products in 2011


2012 2011

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

2 522,02 027,3

41,720,4

50,240,3

0,80,4

50,939,4

0,70,3


Table 4.52 presents the top four imported furniture products in 2012. Seats and parts (50,2%), as well as furniture NESOI (40,3%) were the main imported furniture products in 2012. The major source of import was Eastern Asia (50,2%) followed by the European Union (21,9%), South Asia (13,7%) and NAFTA (2,5%).

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




Other



201020112012

88,884,488,0

11,215,712,0

––

1,4

2,31,21,2

–––

7,913,8

8,8

1,00,70,6


The utilisation capacity in the furniture division increased by 3,6 percentage points, owing to the output growth during 2012. Insufficient demand was the main reason for underutilisation of production capacity, though it dropped by 5 per-centage points in 2012 (see Table 4.53).

Total employment in the furniture division, as shown by Figure 4.44, increased from 5,5% in 2011 to 9,0% in 2012. Similarly, both formal and informal employment increased by 8,3% and 12,2%, respectively. The high-est employment growth was for high-level skilled work-ers (9,0%),followed by semiskilled and unskilled workers (8,4) and mid-level skilled workers (7,5%). During 2012, the unit labour cost increased by 15,0%, while capital intensity of the division decreased by 5,5%.

TAbLE 4.54: The skill level of employees: Furniture



1 8698 089

23 1787 148

2 0388 698

25 1168 020

9,07,58,4

12,2

40 265 43 871 8,9 3,7



26

5 Conclusion

Global and domestic economic growth slowed down in 2012 compared to the previous year. During 2012, the real output of the agro-processing industry rebounded by 4,8% following a 2,1% contraction in 2011. Following the output growth, the real value added of the agro-processing industry, which measures the GDP contribution, also increased by 3,5%. Except for the textiles, beverages, wood and footwear divisions, real gross value added increased in all the remain-ing divisions. Real gross fixed investment of the agro-processing moderated from a 5,9 % growth in 2011 to 1,4% in 2012. Among the divisions that showed an increase in investment are the furniture, wearing apparel, paper, footwear and food divisions.

Real exports of agro-processing products rebounded by 6,7% in 2012. Among agro-processing products with growing exports were tobacco, food, footwear, beverages and wearing apparel. Real imports of aggregated agro-processing products also increased by 8,7% during 2012. Real imports increased for all agro-processing products, except for leather and textile products. As a result, the trade deficit of the agro-processing industry increased from R31 074 million in 2011 to R34 403 million in 2012. The two divisions that maintained a trade surplus during the period were tobacco and bever-ages. The trade deficit, however, widened for almost all the remaining agro-processing products

Following a modest growth rate of real fixed investment, total employment in the agro-processing industry increased marginally by 0,6% in 2012. While the industry shed 760 formal jobs, it created an additional 4 049 informal jobs. Among the divisions, footwear, rubber and furniture created formal jobs. Informal employment, however, increased in all divisions, except in the leather and textile divisions.

References

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

IMF (2013), World Economic Outlook, April 2013. International Monetary Fund.

Quantec EasyData (2013), RSA International Trade. Accessed in September 2013.

Reserve Bank (2013), Quarterly Bulletin, June 2013. South African Reserve Bank.

Statistics SA (2013), Manufacturing: Utilisation of Production Capacity by Large Enterprises.. Statistics South Africa.

27

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annual economic review of the agro-processing industry in ... · (2,9%), wearing apparel (2,3%),...

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