Agro-processing Machinery in the SADC Region and

( Grain Milling Machinery in Zambia and South Africa)

Gillian Chigumira Acknowledgements : Ms Astridah Munsaka , Mr Saul Levin and Dr Tracy Ledger

1

Background Focus for Industrialisation

in SADC

2

Background SADC Industrial Roadmap

• Agro-processing has been identified as one of the growth paths for SADC ……

• To transform SADC from its “deep structural fault-lines that remain entrenched, by resource-dependence, low value-addition and low levels of exports of knowledge-intensive products” (SADC, 2017a: 3).

• Agro processing selected due to linkages with the agricultural industry and linkages into the diverse food industry and retail.

• A fundamental question is whether agro-processing is also stimulating regional manufacturing capabilities in its machinery, equipment and parts?

3

Agro-processing Machinery Linkages to Farming, Processed Food and Metal Fabrication

4

Theoretical Underpinnings • Manufacturing-led industrialisation and import substitution industrialisation (ISI). • Manufacturing as an engine for growth; has strong backward and forward linkages

between itself and other sectors of the domestic economy; • It has strong properties of learning-by-doing; innovation; and technological progress. • The agro-processing fits within conceptualisation. • It stimulates growth for agricultural products in farming, while its output is input for

food industries and the retail sector. • It stimulates demand for the manufacturing of machinery, equipment and parts and

the aftermarket for repair and maintenance services • Itself stimulates demand for metal products, services in fabrication or working of steel

and engineering services. • ISI advocates for reducing import leakages and promoting manufacturing capabilities.

5

Methodology

• A regional value chain approach was used in this research. • For agro-processing machinery, an integrated regional value chain would

be one : • In which the majority of agricultural machinery, equipment and parts

used are manufactured within the region. • Demand factors examined in the paper encompass the contribution of the

agro-processing subsector, local consumption of grains and oils , machinery procurement, imports of agro-processing machinery, equipment and parts .

• Supply factors include supplier capabilities, types of machinery manufactured in the region, and government support.

6

Challenges and Limitations

• Research on agro-processing machinery is fragmented to non-existent. • This paper aimed to contribute to filling gaps in the body of knowledge, • And to encourage future research for the region around the machinery

used in the major agro-processing value chains. • The paper drew on interviews and engagement with firms, industry

associations and government departments, • And secondary data from government publications, newspapers,

international data portals and available firm websites.

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What Makes Up the SADC Manufacturing Sector?

8

13 13.2

12.3

11.4 10.9

10.6 10.8 10.9 11.2

10.9

0

2

4

6

8

10

12

14

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

%

SADC Total Share of Manufacturing to GDP as a %

Top 3 Manufacturing Sub-Sectors in SADC (Agro-processing)

. 2006/2007 2010/2011 2016/2017/2018 Botswana other manufacturing beverages; meat

and meat products; other manufacturing; meat and meat products; beverages

other manufacturing; meat and meat products; beverages

Lesotho textiles, clothing, footwear and leather; other manufacturing; food products and beverages

textiles, clothing, footwear and leather; other manufacturing; food products and beverages

textiles, clothing, footwear and leather; other manufacturing; food products and beverages

Namibia other manufacturing; meat processing grain mill products, other food products, beverages; basic non-ferrous metals

other manufacturing; meat processing grain mill products, other food products, beverages; basic non-ferrous metals

other manufacturing; meat processing grain mill products, other food products, beverages; basic non-ferrous metals

South Africa food, beverages and tobacco; metals; chemicals, plastic, rubber

food, beverages and tobacco metals; chemicals, plastic, rubber

food, beverages and tobacco metals; chemicals, plastic, rubber/ transport equipment

Tanzania manufacture of rubber and plastics products; manufacture of wood and of products of wood; manufacture of textiles

manufacture of furniture; manufacture of basic pharmaceuticals, medicinal chemical and botanical products; manufacture of rubber and plastics products

manufacture of furniture; manufacture of rubber and plastics products; manufacture of beverages

Zambia non-metallic mineral products; food products and beverages; wood and wood products

food products and beverages; non-metallic mineral products; wood and wood products

food products and beverages; wood and wood products; paper and paper products

Zimbabwe food-stuffs (including stock feeds) drink and tobacco ; textiles including ginning ; non-metallic mineral products

food-stuffs (including stock feeds) drink and tobacco ; non-metallic mineral products ; wood and wood products

Building SADC Manufacturing

• Therefore since the Roadmap advocates for a “vibrant agro-industry ”.

• To capture the full possible value, this paper advocates that the roadmap also focuses on the nature of the supply of machinery used for agro-processing.

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SADC Demand of Agro-processing Machinery

• Growth in Imports suggests growth in demand for machinery

•  Suggests possibilities for Import substitution industrialisation

• Possibilities for building manufacturing capabilities

11

0

100000

200000

300000

400000

500000

600000

700000

800000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

US

$ 00

0'

Imports Exports

SADC region imports and exports of agro-processing machinery

SADC Demand of Agro-processing Machinery (Imports) i.  industrial preparation or manufacture of food or drink ii.  extraction or preparation of animal or fixed vegetable fats or oils iii.  industrial preparation of meat or poultry iv.  parts industrial preparation or manufacture of food or drink v.  bakery, industrial preparation or manufacture of macaroni, spaghetti vi.  sugar manufacture vii.  brewery machinery viii. cleaning, sorting or grading eggs, fruit or other agricultural produce ix.  parts grain milling machinery x.  industrial preparation of fruits, nuts or vegetables xi.  presses, crushers and similar machinery used in the manufacture of wine, cider, fruit xii.  industrial preparation or manufacture of confectionery, cocoa or chocolate xiii. mixing, kneading, crushing, grinding, screening, sifting, homogenising, emulsifying or stirring xiv. milling machinery for grains xv.  milking machinery and bakery ovens

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Major Consumption Patterns in SADC

• What type of machinery to look at for this paper?

• Grains , maize/corn, wheat, sorghum, millet, rice

• Consumption of maize has grown from 45 million tons in 2006 to 72 million tons in 2018.

• The strength of the maize consumption suggests a positive outlook for related agro-processing of grains

•  And therefore growing demand for agro-processing machinery.

•  .

0

10000

20000

30000

40000

50000

60000

70000

80000

2006/2007

2007/2008

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

2015/2016

2016/2017

2017/2018

1000

tons

Barley Corn Millet Oil, Palm Oil, Soybean Oil, Sunflowerseed Rice, Milled Sorghum Wheat Linear (Corn)

SADC Imports & Exports of Grain Milling Machinery

•  The region is a net importer of grain milling machinery

• Growth in the imports of such machinery is due to increasing demand for grain products as a staple food, and for livestock feed

•  In addition, government and private investments and initiatives have contributed to a growth in new processing firms, and this has seen machinery imports.

•  Top importers of grain milling machinery and parts are South Africa, Zambia, Malawi, Angola, Namibia, Mozambique and Tanzania.

•  Top exporters South Africa

14

0

20000

40000

60000

80000

100000

120000

140000

160000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

US

000'

Imports Exports

ZAMBIA CASE STUDY 1

• The National Industrial Policy of Zambia

• 8 priority focus areas within the manufacturing sector,

i.   agro-processing ii.  textiles and garments iii.   engineering products iv.  wood and wood products v.  leather and leather products; vi.  mineral (metallic and non-metallic)

processing and products vii.  pharmaceuticals and viii.  the blue economy

•  .

Zambia Index of industrial production

0

50

100

150

200

250

300

350

400

450

500

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

inde

x

Food, Beverages & Tobacco Textile, Clothing & Leather Wood & Wood Products Paper & Paper Products Non-metallic Mineral Products Chemicals, Rubbers & Plastics Linear (Food, Beverages & Tobacco)

Imports and Exports of Agro-processing Machinery • Zambia is a net importer of agro-processing

machinery i.   milling machinery for grains ii.  brewery machinery, iii.  industrial preparation or manufacture of food or

drink (not elsewhere specified) n.e.s. , iv.  bakery and industrial machinery for macaroni,

spaghetti v.   parts for milling industry of grains •  Imports 2001 US 25million and US$155 million in

2017. •  Imports of agro-processing machinery represent a

leakage • Growth in imports – demand- possibilities for

manufacturing 0

50000

100000

150000

200000

250000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

US

$000

Zambia imports and exports of 20 types of agro-processing machinery

Imports Exports

35

78

0

10

20

30

40

50

60

70

80

90

2007 2018

Num

ber

Zambia Number of Milling Firms

Large 20 Med 27 Small 31

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Grain Milling in Zambia

7000 hammer

mills in rural areas

300 Hammer

Mills installed by Govt

Zambia Interviews – Grain Millers • Milling firms in Zambia use a combination of mechanical and semi-automated machinery. • Growth in sales of processed products, has led to purchasing of bigger and more advanced milling

plants and therefore imports. •  Imports originate from Turkey, Russia, Germany, Switzerland, United Kingdom (UK) Britain, Italy,

United States (US), and South Africa. •  Spare parts of machinery generally cannot be interchanged between brands, but spare parts can be

purchased from foreign-affiliated authorised depots or suppliers of the machinery. •  It is estimated that 10% of spare parts are sourced either locally or within the SADC region, while the

remainder must be imported deep sea •  A major constraint faced by milling firms is the unavailability of locally produced advanced machinery

and parts, which forces them to import. • Waiting periods of machinery imported from Europe can be as long as four to five months, a delay that

disrupts production. • Willingness to procure locally and within the region, if machinery is available, of a sufficient quality,

durable and if deliverable times are shorter with equipment servicing and support being available.

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Zambia Interviews – Suppliers of Grain Milling Machinery

• Very few manufactures of advanced machinery. • Firms mainly import parts from India and China which they assemble for the market.

• Unavailability of support in research and development, innovation and technology to make better products that meet technological frontier.

• High cost of labour and purchasing inputs, which makes the cost of production high.

• The region is seen as a potential area to supply too.

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South Africa Case Study 2

• The South African government has identified agro-processing as a critical driver of inclusive growth, with significant job creation potential.

• Agro-processing is the largest subsector of manufacturing, and has shown relatively rapid growth in both sales and employment.

• Growth in agro-processing means growth for demand of machinery , equipment and parts

•  .

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Food and beverages

Metals

Transport equipment

Chem

icals, plastic,

Coke, petroleum

products

Machinery and

Printing and publishing

Other m

anufacturing

Glass and non-m

etallic

Textiles, clothing, leather

Electrical m

achinery

Wood and w

ood products

Radio and IC

T equipment

Bill

ions

of c

onst

ant (

2018

) ran

d

2010 Q3 2015 Q3 2017 Q3 2018 Q2 2018 Q3

Imports and Exports of Agro-Processing Machinery •  South Africa is a net importer of agro-processing

machinery •  In value term, imports have risen from US$48

million in 2001 to US$252 million in 2018, slightly down from the peak reached in 2014.

•  cleaning, sorting or grading eggs, fruit and other •  industrial preparation or manufacture of food or

drink •  industrial preparation of meat or poultry • bakery and spaghetti and pasta making • mixing, kneading, crushing, grinding, screening,

sifting, homogenising •  extraction/preparation of animal or fixed

vegetable fats or oils • brewery machinery • milling machinery for grains • milling machinery cleaning, sorting or grading

seed, grain 21

0

50000

100000

150000

200000

250000

300000

350000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

US

000'

Imports Exports

Nature of Grain Milling in South Africa

• Growth in firms 100 to 300 • The growth in milling firms has been

attributed to growing demand for grain products locally and for export markets.

•  The South African government has invested in a number of green and brown field projects in the milling industry.

• This growth in the number of firms is capable of stimulating growth in manufacture of machinery or parts

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[VALUE]

[VALUE]

[VALUE]

0

50

100

150

200

250

300

350

1998 2008 2018

Num

ber

South Africa Growth of Milling Firms

South Africa Interviews – Grain Millers •  South African firms are larger and better equipped compared to other firms within the region,

and most of the larger firms are automated. • However, small and emerging firms – mainly in rural or peri-urban areas – use mechanical

machinery. •  Some difficulty in accessing right type of machinery locally •  Internationally, firms procure from mainly European manufactures (Germany, Switzerland,

France, UK, Turkey, Italy and Denmark), Australia, China, Japan and the US. •  For imported machinery, a major constraint is whether or not the supplier is able to offer the

necessary back-up during breakdowns and provide spares and maintenance timely •  The lag time in arrival of imports creates inefficiencies and, in addition, the cost of freight and

insurance adds to overall running costs •  Smaller firms in rural areas find it difficult to obtain parts since they are far from urban centres to

import •  Firms highlighted that although maintenance can be conducted locally, there is a general

shortage of requisite skills, especially electricians, fitters and turners. • Willingness to procure locally if price and quality is right

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South Africa Interviews – Suppliers of Grain Milling Machinery

• No association that specifically collects information in respect of agro-processing machinery.

• Established firms have agreements or partnerships with international firms to import, assemble and distribute and sell equip

• Most of these agreements are between South African and mainly European firms (Italy, Germany, Denmark, Turkey, Poland), Russia, India and the US .

• Potential clients, both local and in the region, do not have funds to purchase machines (with importing parts overall machinery becomes expensive)

• Issues of high electricity and water costs • Rising wages

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Conclusions : Possibilities ?

• Growing populations ….means • Demand for food ( staples maize, wheat, rice) …..means …… • Growth in agro processing of grains …..means …. • Demand for machinery , equipment and parts • Despite growth in agro-processing this is not translating into building manufacturing capabilities of machinery in SADC ……

• Illustrated by high levels of imports which are expected to grow. • COVID – delays in deep sea imports , halt in deep sea manufacturing limited movement for engineers to repair

• We need pooled efforts to translate import leakages into building machinery capabilities

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Possible Recommendations • Intensive research on

agro-processing machinery is warranted

• SADC Member States need to increasingly invest in innovation and technology capabilities to enable them to upgrade and expand their manufacturing base

• On the supply side •  R&D in any industry is essential

for achieving productivity and efficiency.

•  The main aim of R&D should be to make machinery of a sufficient quality and durability,

• Machinery that is efficient and affordable and meets the technological frontiers required by milling firms.

• Developing Regional Centres of Excellence

•  SADC Regional Development Fund to support industrial innovation and research with regional applicability

• On the demand side • Concerted efforts by government to

address information asymmetries is fundamental.

• Assistance to associations, businesses and firms in linking milling firms with local and regional manufacturers /stockists is essential.

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THANK YOU

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