Sourcing in China for South Africa's F&B Industry

As with other developing countries, South Africa is relying on China for affordable products and technology to fuel its domestic consumption as well as investments to support its development needs. China's developing country status, its identification as a member of the Global South and BRICS (of which both countries are members along with Brazil, Russia and India), and G77 in the United Nations, are elements that carry significance for South Africa. At the same time South Africa is an important partner in China's broader African engagement strategy.[1]

The growth in trade and investment since the start of diplomatic relations in 1998 has allowed South Africa to diversify its commercial relations from the traditional northern axis comprised mainly of Europe and other African states. Trade between the two countries increased from more than $8 billion in 2006 to a record $20 billion in 2010, or nearly a fifth of China's trade with the African continent. China has now overtaken the United States as South Africa's biggest trading partner.[2]

South Africa's major exports to China are minerals, heavy chemicals, diamonds, grape wine and crafts. It imports clothing, machinery, televisions, communication equipment, furniture, footwear and other durables. In recent years, China has become increasingly competitive in higher value export products such as machinery, automobiles and electronic products. These now account for more than half of China's exports to Africa, with South Africa as its biggest market.[3]

Growth in food sector In the food and beverage industry, China is gaining a stronger foothold in South Africa for its processed food. Manufacturers particularly in the food processing and packaging sector are further investing in technology to meet the quality standards of Western markets. Moreover, their compliance with strict hygiene standards has led to higher global demand for ingredients and raw materials for food manufacturing.

According to Euromonitor International, the Chinese packaging industry should see growth sustained across all formats as the fast-paced lifestyles in both domestic and global markets have led to higher demand for processed food and conversion of traditionally unpackaged products to packaged products such as fruits and vegetables.[4]

In South Africa, food consumption in both overall dollar terms and per-capita terms is set to increase considerably mainly due to the emerging black middle class, which is driving consumer spending.
Food distribution patterns are also changing in that it has been estimated that 50% of South African food sales go through wholesale and cash and carry outlets, chiefly, as a result of the lack of formal retail outlets on the outskirts of urban and in rural areas. With the growth of disposable income outside of cities, the bigger supermarket chains, such as Pick'n Pay, Shoprite and Spar, are starting to invest in these areas. These developments in turn impact the eating habits of consumers as a greater variety of foods become readily available to them.

A case in point is the significant increase in sales of convenience foods, many of which are imported from China. Aside from the availability of more food types, another factor driving sales is the reduction in the consumer's time to prepare meals as a result of changing lifestyles.

The divergence of wealth in South African society also raises particular challenges for the packaging industry. First-world packaging is required for the convenience of the prosperous, meeting the demands of self-service retailing; yet affordable, efficient packaging is required for the safe transportation of basic foodstuff consumed by the majority of the country's population.[5]

However, the increase in foreign goods entering South Africa is also hurting some of the country's industries. The agricultural and manufacturing sectors, which are able to address domestic requirements, are faciBalenciaga