INDUSTRY NEWS

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HIGHER INFLATION AFFECTS POOR CONSUMERS

The Consumer Price Index (CPI) inflation rate for December which was released last month, shows a slight increase from 5.6% to 5.7% year-on-year, providing the latest insights as to where the household sector is most or least pressured by price increases. First National Bank’s Household and Consumer Sector Strategist, John Loos, said the rise was due to an increase in year-on-year petrol price inflation. Loos said the key area to watch now was the residential rental market for signs of strengthening, which could drive CPI inflation higher due to its heavy weight. “Recently, we have seen the rental inflation rates rising slightly in the index, although still very much subdued. Along with this in mind, food price inflation is a key, and of concern has been the recent double-digit price inflation in the Producer Price Index for the agricultural products. This suggests that the impact of the recent global food price surge, as the result of the United States drought conditions, may not yet be over.” Loos went on to say that the third major item to watch was oil and petrol prices.

“Here, signs are more encouraging perhaps, and one would expect to see slowing year-on-year petrol price rise as high base effects from prior oil price surges looks to be taking some effect, slowing the year-on-year oil Rand oil price inflation in recent months.” Loos said the other “big ticket” inflation item was the transport subindex, which contributes 1% point to the overall CPI inflation rate and showing inflation of 5.5%. “Keeping this overall index below overall CPI inflation is slow vehicle price inflation, but its fuel cost component is the troublesome one, caused by a significant year-on-year fuel price increase of 12.4% year-on-year. Its public transport sub-index was also showing a high 15.5% inflation rate, arguably caused largely by rising fuel costs. “Another major sub-index with problematic elements is the Housing CPI which, although only showing 6% inflation, possesses the electricity subcomponent which showed 10.3% inflation as Eskom continues to ratchet up the tariffs, while the water and other services component including municipal rates were not far behind at 9.1% inflation. A final sub-index that deserves mention for the wrong reasons is that of education, which shows an inflation rate of 9%.” Loos said that examining the key components of CPI inflation, food and non-alcoholic beverages inflation remains the most troublesome component of the CPI, contributing 1.1% point to the overall inflation rate. This is of particular concern at the current time due to food prices exerting greater financial pressure on the lower income groups, at a time when the risk of social upheaval is not insignificant, judging by the late 2012 widespread strike actions. Meanwhile the Reserve Bank’s Monetary Policy Committee (MPC) has decided to keep the repurchase rate unchanged at 5.0% per annum. However, Reserve Bank governor, Gill Marcus, said the MPC will monitor developments closely and will not hesitate to act in a manner consistent with its mandate.

In her statement, Marcus said food prices, exchange rate and wage settlements continue to pose a significant near-term risk to the inflation outlook. She said the MPC would continue to assess the balance of risks to the inflation outlook to be on the upside. “The MPC remains concerned about the possibility of a wage-price spiral and its potential to exacerbate the high level of unemployment. We need cohesion of policy and decision making to provide the necessary certainty for sustainable economic growth and development.” Marcus expressed concerns over the country’s domestic economic growth, saying it remains “fragile and below potential”. This followed an annual growth rate of 1.2% in the third quarter of 2012, and a forecasted growth rate of around 2.5% for this year. The International Monetary Fund also revised down its 2013 growth forecast for South Africa to 2.8%, from a previous 3% estimate in October.

Birch says exports for 2012 reached a whopping 417 million litres — 10 million litres more than the previous record of 407 million achieved in 2008, and a 17% increase on volumes from 2011.

“The record levels are the result of a more favourable currency, as well as shortage of wines, stemming from a significant drop in the recent harvests of competitor wine-producing nations in Europe, Latin America, Australia and New Zealand.”

SA Wine Industry & Information Systems anticipated that the 2013 wine grape crop should amount to a total of 1 384 357 tons. Birch said that while bulk exports accounted for 59% of volumes in 2012, this was in line with a global growing trend. She said while packaged wines generally offered higher returns, local producers have been forced to compete globally by providing what the mainstream markets want.

STRIKE IS UNLIKELY TO AFFECT WINE PRODUCTION

Despite wildcat strikes and labour protests that ensued in the farming sector in the Western Cape over the past few months, the South African Wine Industry remains optimistic that 2013 can still be one of the best harvest years ever. Chief Executive of Wine of South Africa (WOSA), Su Birch, says all indications are that this year’s local crop could be the third largest in recorded history. “This is assuming that good weather conditions continue and that there is a speedy and peaceful resolution to the farm workers strikes and harvests come in on time. The anticipated crop size is, despite a decrease in total plantings, thanks to one of the best winter seasons in the Western Cape for many years.”

WORLD TRADERS EYEING SA FOOD AND BEVERAGEMARKET

The international food service industry is adamant that the largest upcoming food and beverage trade show on the continent, Africa’s Big Seven (AB7) will be a spectacular show full of trading opportunities. The agribusiness, food service industry and the fast food phenomenon exhibition will take place at Gallagher Convention Centre in Midrand from 30 June to 2 July 2013. John Thomson, Managing Director of Exhibition Management Services, the organiser of AB7, says Africa is already providing a thriving market for companies operating in these sectors. He said the food and beverage trade show has in the past proven to be a versatile and effective international platform for tapping into the African market and promoting trading with the rest of the world.

The 2012 event, endorsed by the South African Consumer Goods Council, attracted a total of 8 730 buyers from 53 countries, of which 23 were from

The upcoming Africa’s Big Seven, food and beverage trade exhibition in Midrand Gallagher Convention Centre promises to be a specticular show for traders from across the world.

Africa. Yudi Dahlan from the Indonesian Trade Promotion Centre in Johannesburg says AB7 is a “true door-opener” to the African market.

“Our pavilion hosted more than 15 Indonesian companies at AB7 2012; every one of them is convinced that AB7 is the ultimate African showcase for their products. Many of them signed trade agreements with customers at the show.” Yolanda Roundtree, Marketing Supervisor of the Florida Department of Agriculture, says their role is to introduce US companies to the African market. “We come to Africa’s Big Seven because Southern Africa is a growing market with a lot of interest in US products.” Four-time AB7 exhibitor Heat and Control, is a leading manufacturer of food processing and packaging equipment systems, with more than 60-years experience. “The main aim of being at AB7 in 2012 was to promote our company, our products, and the services we offer to established clients as well as prospective new customers. We definitely achieved this!,” says Anria Malan, the company’s Project and Sales Manager.

Nederburg’s Viticulturist, Unathi Mantshongo at a vineyard.

be on packaged wines, from a reputational perspective for Brand South Africa, in terms of job retention in the packaging industry and also to maintain sustainable profit margins for producers. We are therefore greatly encouraged by the recent growth of packaged exports to North America, Japan, China, as well as several increasingly affluent African nations, all to regions where we have been increasing our marketing investment.” buoyed by the growing confidence in South Africa as a top wine-producing country amongst high-profile international critics, whose opinion carried great weight in the global wine business fraternity as well as with consumers.

Regarding farm workers strike, Birch said WOSA regretted the labour unrests that ensued in the Western Cape, and that huge strides were being made to ensure decent working conditions on all wineproducing farms. “The local Fairtrade office has confirmed that South Africa now has the highest number of Fairtrade-accredited wineries worldwide, with 65% of Fairtrade wines sold globally coming from our country.” At the same time, there was a steady growing support for the Wine and Agricultural Industry Ethical Trade Association (WIETA), with increasing numbers of producers subscribing to its code of good conduct, she added. This was particularly after the international market reacted so positively to last year’s launch of the WIETA ethical seal that provides a guarantee of fair labour practices in the production of wines in the country. “WIETA accreditation for rigorously audited fair labour conditions has accelerated since last year and with the increase in producer and worker training sessions scheduled, prior to auditing sessions, we expect many more labels to qualify during this year.” Some of the country’s biggest producers have already earned WIETA accreditation for their labels, including Distell, Spier, Fairview and Robertson Winery.