17 March 2006
Programme Director
The Chairperson of the Chamber
Delegates
Distinguished guests
Comrades, ladies and gentlemen
Good morning
The South African grain industry is one of the largest agro-processing
industries and produces between 25 and 33 percent of the total gross value of
agricultural production. The milling of maize and wheat is the next most
important downstream industry within the grains value chain.
In this country, there are approximately 22 large-scale maize millers that
account for approximately 85% of all maize meal produced in the country and a
number of small millers that emerged as a result of deregulation. It is
interesting to note that only four companies within the stable of 22 millers
produce over 73 percent of maize milled in South Africa.
Turning to wheat, there are approximately 17 mills producing about 95
percent of all bread and cake flour estimated at 200 000 tons milled by small
flour mills. Again, only four wheat-milling companies in this group of 17
produce about 90 percent of wheat milled in South Africa.
On the wheat front about 17 large-scale mills produce about 95% of all bread
and cake flour with an estimated 200 000 tons milled by small flourmills.
Whilst we appreciate the significance made by the wheat and the wheat milling
industries, I think the industries can do more in terms of promoting the
competition beyond the only four companies that dominate in this
environment.
I have deliberately given a pictorial view of the milling industry in terms
of numbers in an attempt to provide you with a feel of the importance of the
milling industry in South Africa. We know that the milling industry went
through some structural change shocks emanating from the deregulation process
and has fortunately managed to adjust positively to the comprehensive and
managed programme of deregulation and are emerging strong and internationally
competitive.
We are all aware that maize is the most important and strategic grain crop
in South Africa due to its position as a food security grain for the majority
of the South African population and a major ingredient in the animal feeds.
Therefore, milling occupies a strategic position on the grains value chain Its
competitiveness has multiplier effects on the success and sustainability of
industries such as animal feed that creates the platform for the development of
the red meat, pork, poultry and dairy as well as human consumption.
In terms of available statistics, the quantity of maize milled prior to
deregulation was around about 5 million tons annually. Post deregulation, the
amount of maize milled for human consumption in relation to total production
has been declining since 2002 to an average of 2.6 million tons per annum.
This trend should worry the milling industry considering that the industry
is still contending with the problem of excess capacity in milling that is
underutilised. The industry needs to undertake consumer surveys to better
understand how factors such as prices, consumer tastes and preferences, prices
of substitutes products, fortification have on the demand for milled products
in order to survive in this complex marketing environment.
Wheat milling is another grain of strategic importance to South Africa and
is also providing a platform for the development of another food security
product, namely our daily bread. Unlike maize, wheat milling statistics have
shown a growing trend over the past three years and the industry must again,
understand the factors contributing to the positive trend and put strategies in
place to maintain the growth trajectory. The animal feeds manufacturers and the
wheat millers add another dimension to the totality of the South African
milling industry and I believe their contributions to the general milling
fraternity is as significant.
The current initiative about the introduction of bio-fuels in South Africa
by 2015 is regarded as a major challenge to the whole maize industry value
chain and in particular the millers due to increased competition that might
push the maize prices higher than the current prices.
Transformation process is one of the challenges facing the milling industry
in general in order to ensure equity and fair competition. At least the grain
value chain is integrated from the top to down-stream, but the penetration of
new entrants into the traditionally-build value chains is tight. Therefore, we
encourage the Chamber of Milling to minimise the transaction costs for new
entrants in order to ensure maximum participation of all the industry
role-players.
The Department has observed over a number of years the key challenges faced
by the grain industry value-chain and facilitated a partnership process that
led to the development of a grain strategy in this country of which the milling
industry is an integral part of. The Department of Agriculture has considered
the strategy and is developing options to take the strategy towards
implementation. The strategy should now henceforth be regarded as a basis for a
long-term partnership to promote the competitiveness of the industry to ensure
that food security is promoted and the other industries that depend on the
grain industry survive in the long term.
In conclusion, since 1998 to date, the milling industry has been grappling
with the conversion of the maize and wheat into products and as a result we
applaud the industry in improving this conversion in order to meet the
international standards.
I would like to wish you well in your endeavours as an industry and hope
that the deliberations you have had will expand the horizons of your
intentions.
I thank you.
Issued by: Department of Agriculture
17 March 2006
Source: (Department of Agriculture)http://www.nda.agric.za
