""

Required Report - public distribution

**Date:** 12/4/2003

**GAIN Report Number:** SF3043

SF3043

**South Africa, Republic of**

**Retail Food Sector**

**Report**

**2003**

**Approved by:**

![](media/image1.wmf)Scott Reynolds

U.S. Embassy, South Africa

**Prepared by:**

Margaret Ntloedibe

**Report Highlights:**

South Africa's economic situation and strength of the rand have improved
in 2003, and some opportunities exist for U.S. food products in South
Africa. The food retail sector continues to expand and supermarkets,
convenience stores and forecourts are rapidly becoming the dominant food
retail outlets. A boom in the franchise sector, convenience stores, and
forecourts, which are good venues for imported products, provide better
access and convenience for the consumers. Best prospects for U.S.
products include wheat, animal fats, inexpensive frozen animal protein,
and further processed grocery products.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Pretoria \[SF1\]

\[SF\]

**I. Market Summary**

South Africa, with a population of around 44 million people, possesses a
modern infrastructure supporting an efficient distribution of goods to
major urban centers throughout southern Africa and well-developed
financial, legal, communications, energy, and transport sectors. South
Africa's unpredictable economy makes medium and long-term planning for
food retailers a challenging exercise. There are many players in the
food retail industry in South Africa ranging from highly sophisticated
retail chain supermarkets such as Pick n Pay, Shoprite-Checkers, Spar,
Woolworths, etc; wholesale outlets such as Makro, Metro, Trade Center,
Cash & Carry, etc; independent stores such as Biforce Group, Bargain
Group, Shield Wholesalers etc; convenience chain stores including
forecourts (gas stations with convenience type stores); traditional
stores which includes independent stores such as general dealers, cafes,
spaza shops, street vendors, hawkers and tuck shops etc, at one end to
primitive little street corner stalls at the other end of the retail
sector. The South African food and beverage market is becoming
increasingly sophisticated and is supplied by both local and imported
products.

South Africa has a two-tiered economy, one rivaling other developed
countries and the other with only the most basic infrastructure. It
therefore is a productive and industrialized economy that exhibits many
characteristics associated with developing countries, including a
division of labor between formal and informal sectors-and uneven
distribution of wealth and income. The formal sector, based on mining,
manufacturing, services, and agriculture, is well developed.

**Exports**: In 2002, South Africa's agricultural, fish and forestry
exports reached a total of about R34.8 billion up from 26.5 billion in
2001. United Kingdom (3.9 billion), Japan (3.5 billion), Netherlands
(R2.4 billion), United States (2.0 billion), and Italy (1.9 billion)
were the country's five largest export destinations. In 2003, South
Africa's agricultural, fish and forestry exports from January through
August reached a total of about R22.0 billion. South Africa's major
exported agricultural, fish and forestry products for 2002 were dried
and fresh citrus fruit, wines of fresh grapes, undenatured spirits,
frozen fish fillets and corn. In 2003, South Africa's major exported
agricultural, fish and forestry products from January through August are
dried and fresh citrus, wines of fresh grapes, frozen fish fillets and
corn.

**Imports**: South Africa's total agricultural, fish and forestry
imports for 2002 amounted to R17.3 billion, a 40.3% increase from 2001.
The largest value of imports were from Argentina (R1.9 billion), United
States (R1.6 billion), Brazil (R1.1 billion), United Kingdom (R1.0
billion), and Malaysia (R1.0 billion). In 2003, South Africa's
agricultural, fish and forestry exports from January through August
reached a total of about R10.8 billion. Thus far, in 2003 the leading
suppliers are Argentina (R1.3 billion), Brazil (R0. 692 billion), United
States (R0. 675 billion), China (R0. 648 billion), and Malaysia
(R0.609). Cereals, animal fats, whiskey, and hardwood lumber were South
Africa's 2002 major imported agricultural, fish and forestry products.
Current trends indicate that South Africa will continue to supplement
local agricultural production with imports, but imports will represent
less than 30% of total retail value.

Consumer trends: South Africans enjoy new choices, but price sensitivity
rules their behavior. A source survey in 2002 found that 47.8% base
their decisions on price and 16.9% buy store brands because they are
good value for money. Only 13.4% mentioned quality as a motivator, while
4.3% perceived the store brand to be equal to branded items. Store brand
sales in the major stores increased by 0.2% in 2002. South Africa store
brand increases have been driven by Pick n Pay Supermarkets and Spar
stores with Spar's growth increasing from 9.8% in 2000, 10.8% in 2001
and reaching 11.7% in 2002, while Pick n Pay Supermarkets went from
11.2% in 2000 to 10.8% in 2001, and back up to 11.2% in 2002. Store
brand are outgrowing the market in all categories except toiletries and
confectionery. Branded beverages grew by 17.7% while store label
beverages saw a 25.8% growth. Household brands grew by 15.6% and store
label household products had a 23.9% growth. Checkers Hyper and Shoprite
Checkers experienced a decline in share.

South Africa is aggressively marketing local products and has introduced
the "Proudly South African" campaign whereby consumers will associate
the campaign with products and services made in South Africa. Sources
report that recognition of the Proudly South African logo has grown from
10% to 64% with 32% of the population having seen the logo on products.
Currently 20% - 30% of the population is consciously buying products
with the logo on it. South African consumers now enjoy access to
organically grown fruits and vegetables while having more brands to
choose from on grocery shelves. Retailers, for example Pick n Pay and
Boxer have opened stores in the townships, places that have historically
been underserved by large supermarket style stores.

Trade sources report that chicken appears to be South Africa's most
popular take-away food, with 44% of people who purchased takeaways in
the space of a month choosing meals from a specialized chicken outlet at
least once. Kentucky Fried Chicken, Chicken Licken and Nando's were
voted the top three takeaway venues. Of the 43% who chose chicken (1.8
million people), 66% were black, 18% white, 8% colored and 7% Indian.
The research shows that 4.2 million people (26% of the urban adult
population) bought takeaways during the month surveyed. Kentucky Fried
Chicken came out on top, with 1.2 million buyers, followed by McDonalds
(446,000), Nandos (382,000), Spur (322,000) and Steers (310,000).

Franchising in South Africa contributes a massive 11.6% (including fuel)
and 6.8% (excluding fuel) to Gross Domestic Product (GDP). The turnover
for the franchise sector in South Africa is estimated at R134.7 billion.
Turnover excluding fuel is estimated at R78.4 billion. Currently, there
are 165 franchisers and affiliates registered with the Franchise
Association of South Africa (FASA) and over 6000 franchisees. 89.7% of
franchises in South Africa have been locally developed while 10.3% were
developed internationally. Franchised convenience stores include: OK
Mini Mark (previously 8-Till-late), OK Grocer, Sentra, Value Stores,
Friendly Everyday and Friendly Shoppe.

Forecourt stores are a growing part of the South African retail sector,
mirroring the international trend. The South African fuel sector
(forecourt stores) has entered the convenience franchise market with
franchised forecourt stores. BP Express Shop, Caltex Star Mart, Zenex,
Engen Quick Shop, Exel Convenience Store, Shell Select and Total La
Boutique all offer franchise opportunities with the investment required
ranging from R30,000 to over R1 million. Forecourts have shifted in the
emphasis from gas sales to added value. The in-store bakery is playing
an increasingly important role in convenience and forecourt stores with
baked goods forming an integral part of the offering. Convenience chains
and forecourts anticipate a boom in convenience breakfasts, and
currently programs are undertaken to introduce the breakfast-on-the-go
culture to South Africa versus the sit-down breakfast. Industries are
getting everything in place for the next big thing in meal solutions.

Trends in distribution channels show that outsourcing has become a major
trend and is beginning to take off in South Africa. Outsourcing has a
bright future ahead as more and more industries are focusing on their
core competencies, contracting approximately 80%-90% of their non-core
processes to the third party logistic providers. It is predicted that
the outsourcing growth phase will continue for at least the next five
years.

Internet sales: Although South Africans have become increasingly
involved in on-line commerce, growth had been slower than expected. At
the end of 2000, the growth rate was 18%, or 362,000 Internet shoppers.
It is estimated that there will be approximately 1,800,000 by the end of
2003. Types of e-commerce transactions that are doing well in the local
market include on-line Financial Services, i.e. banking and share
dealing. In the food retail sector consumers may log onto the Pick 'n
Pay online shopping site (www.pnp.co.za) and browse through their
virtual aisles for home shopping instead of driving all the way to the
store and spending at least an hour pushing a trolley up and down the
aisles.

Government Regulation: The South African government passed legislation
on shopping bags from May 2003 that all retailers have to offer the new
30 micron-government regulated shopping bag for sale, meaning no more
free plastic bags for shoppers. No bags of any kind are available free
of charge, and the normal charge for a plastic bas is R0.17 or
U.S.\$0.03. This measure is intended to reduce waste caused by plastic
grocery bags.

**Advantages and Challenges Facing U.S. Products in South Africa:**

+--------------------------------------+-------------------------------+
| Advantages                           | Challenges                    |
+--------------------------------------+-------------------------------+
| South Africans are developing a      | Consumers may need to be      |
| taste for western foods and are      | educated in preparing and     |
| willing to try anything once.        | eating products.              |
+--------------------------------------+-------------------------------+
| The growing retail food industry     | Already acquired tastes and   |
| needs imported food and beverage     | preferences for traditional   |
| products.                            | locally produced products.    |
+--------------------------------------+-------------------------------+
| Importers and distributors can help  | Consumers are price-conscious |
| develop heavy brand loyalty.         | and do not exhibit brand      |
|                                      | loyalty. Products must        |
|                                      | constantly be promoted.       |
+--------------------------------------+-------------------------------+
| South African importers seek         | Challenges for U.S. suppliers |
| suppliers who can offer reliable and | to respond to trade lead      |
| quality products at competitive      | inquiries in a time fashion.  |
| prices.                              |                               |
+--------------------------------------+-------------------------------+
| South Africa is a gateway for        | Competition is stiff from     |
| regional markets                     | other countries and locally   |
|                                      | produced products.            |
+--------------------------------------+-------------------------------+
| South African consumers view U.S.    | Limited knowledge of          |
| products as high quality.            | retailers and consumers of    |
|                                      | the variety and quality of    |
|                                      |                               |
|                                      | U.S. products.                |
+--------------------------------------+-------------------------------+

# II. Road Map for Market Entry

**A. Supermarket**:

[Entry Strategy:]{.underline}

Success in introducing a product depends on heavy promotion and pursuing
a product to the consumer. In South Africa's very competitive
marketplace it is essential that U.S. exporters choose the correct agent
or distributor. Evidence shows that the most successful U.S. company
ventures are those that have researched their market thoroughly before
engaging in a search for agents and distributors. Once contacts are
established it is advisable to visit South Africa since firsthand
knowledge of the market is highly useful.

In South Africa the terms "Agent" and "Distributor" have a very specific
meaning. Agents work on a commission basis after obtaining orders from
customers. Distributors buy and sell products directly to consumers. It
is common to appoint a single agent capable of providing national
coverage either through one office or a network of branch offices. In
addition to their role as the local representatives of U.S. exporters,
agents should be able to handle the necessary customs clearance, port
and rail charges, documentation, warehousing, and financing
arrangements. Local agents representing foreign exporters outside South
Africa who exports goods to South Africa, are fully liable under the
South African Import Control Law for all regulations and control imposed
on imported products. Local agents are required to register with the
Director of Import and Export Control of the Department of Trade and
Industry. It is important for a U.S. exporter to maintain close contact
with the local agent to track changes in importing procedures and to
ensure that the agent is effectively representing his or her interest.

[Market Structure:]{.underline}

Basis flow of imported food products:

-   Retail supermarket chains maintain their own distribution systems,
    using warehouses to allocate goods to supermarket branches.

-   Depending on the arrangements, in some instances imports are handled
    by the supermarket chain's head office or by branches themselves.

-   Trends in the distribution channels show that some of the
    supermarkets are moving toward outsourcing the services of
    warehousing and transportation.

[Major Supermarket profile:]{.underline}

Below is a chart of South Africa's major supermarket chains. There are
2028 supermarkets chain stores as show in the table below. For the most
part, they offer much the same range of products and brands. Gaining a
competitive edge through image and service is their major preoccupation.
The retailers work hard at establishing their own particular appeal.
Some, like Woolworths and Spar, do this by targeting a particular
shopper segment, such as upper income groups. Others, like Pick n Pay
and Shoprite-Checkers group, go head-to-head more on price and "shopping
experience".

There continues to be a competitive marketing environment in South
Africa and an increasing concentration of power in the hands of the four
main food supermarket retail groups namely, Pick n Pay, Shoprite
Checkers, Woolworths and Spar. The big retail groups all differ in terms
of product range and clientele and are in fierce competition with each
other. One common characteristics among these retail groups is enormous
bargaining power. They are all able to dictate their buying terms to
suppliers who are expected to deliver products to central depots or
warehouses, where the products are then distributed to supermarkets and
retail outlet stores. Shoprite-Checkers and Spar, for example, are very
strong in the black areas (townships) whereas Woolworths is stronger in
the smaller "up-market" segment. Most supermarkets sell their own-label
products as well as manufacturer's brands. The retail industry prefers
to buy directly from local manufacturers. For imported products, some
supermarkets prefer to deal directly with U.S. companies, because an
import agent or a distributor acting as a middleman can add up to 30% to
the cost of the product, resulting in less margin for the supermarket

+-----------------+--------+---------+--------+--------+------------+
| Retail Name     | Own    | T       | N      | Lo     | Purchasing |
|                 | ership | urnover | umbers | cation |            |
|                 |        |         | of     |        | Agent Type |
|                 |        | (\$B    |        |        |            |
|                 |        | illion) | O      |        |            |
|                 |        |         | utlets |        |            |
+-----------------+--------+---------+--------+--------+------------+
| Pick n Pay      | Local  | 21.8    | 411    | Nati   | Direc      |
| Group:          | /Inter |         |        | onwide | t/Importer |
|                 |        |         |        |        |            |
| -   P n P       | na     |         |        |        |            |
|     Hypers      | tional |         |        |        |            |
|                 |        |         |        |        |            |
| -   P n P       |        |         |        |        |            |
|     Supers      |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   P n P       |        |         |        |        |            |
|     Family      |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   Score       |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   Ritevalu    |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   P N P       |        |         |        |        |            |
|     Minimarket  |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   Boardmans   |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   Franchise   |        |         |        |        |            |
|                 |        |         |        |        |            |
| \- P n P Gas    |        |         |        |        |            |
| Centers         |        |         |        |        |            |
+-----------------+--------+---------+--------+--------+------------+
| Shoprite        | Local  | Not     | 641    | Nati   | Direc      |
| Holdings:       |        | av      |        | onwide | t/Importer |
|                 |        | ailable |        |        |            |
| -   Shoprite    |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   Checkers    |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   Sentra      |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   8 Till Late |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   Hyperama    |        |         |        |        |            |
+-----------------+--------+---------+--------+--------+------------+
| Woolworths:     | Local  | Not     | 237    | Nati   | Direc      |
|                 | /inter | av      |        | onwide | t/Importer |
| -   Woolworths  |        | ailable |        |        |            |
|                 | na     |         |        |        |            |
| -   Country     | tional |         |        |        |            |
|     Road        |        |         |        |        |            |
|                 |        |         |        |        |            |
| -   Woolworths  |        |         |        |        |            |
|                 |        |         |        |        |            |
| > (franchised)  |        |         |        |        |            |
+-----------------+--------+---------+--------+--------+------------+
| Spar:           | Local  | Not     | 739    | Nati   | Direc      |
|                 | /Inter | av      |        | onwide | t/Importer |
| -   Superspar   |        | ailable |        |        |            |
|                 | na     |         |        |        |            |
| -   Spar        | tional |         |        |        |            |
|                 |        |         |        |        |            |
| \- Kwikspar     |        |         |        |        |            |
+-----------------+--------+---------+--------+--------+------------+

2002 Rate: 1USD=8.6

**Pick n Pay**: The Pick n Pay Group is one of Africa's largest and most
consistently successful retailers of food, clothing and general
merchandise. The group operates through three divisions, the Retail
Division; the Group Enterprises Division; and Franklins Australia, each
with their own Managing Director and Management Boards. The Retail
Division manages Pick n Pay branded businesses such as food, clothing
and general merchandise in Hypermarkets, Supermarkets, Family Franchise
Stores, Mini Market Franchise, Butcheries Meat Centers); and Gas
Centers. The Group Enterprise Division manages other non-Pick n Pay
branded group activities including Score Supermarkets, Boardmans,
Business Development, E-commerce, property franchises, as well as
finding new investment opportunities for the group worldwide. Franklins
Australia operates 70 stores purchased in Sydney during the year 2002,
and these stores are not included in the total number of outlets above.
The emphasis of the supermarket division is on total convenience and
freshness, with stores aiming to add value through the supply of
irresistible fresh food. Pick n Pay has a total number of 411 stores
made up of 14 Hypermarkets, 113 Supermarkets, 97 Family Stores, 3
Ritevalu, 36 Mini Market Franchise, 21 Boardmans, 114 Score
Supermarkets, 3 Score Supermarkets Franchise, and 10 Pick n Pay Auto
Centers. Additionally it owns 53 TM Supermarkets in Zimbabwe.

**Shoprite Checkers**: Shoprite is a holding company with investments in
supermarkets, property, furniture and fresh produce companies. Across
its operations, Shoprite now owns 641 stores in 14 countries. It plans
to open a further 32 stores outside South Africa in existing
territories, as well as Angola, Ghana and India in 2004.

**Woolworths**: Woolworths Holdings Limited (WHL) is a South
African-based retail group that operates locally and internationally
through two subsidiaries. Woolworths (Proprietary) Limited operates and
franchises stores in South Africa, Africa and the Middle East; and
Country Road Limited, listed on the Australian Stock Exchange, operates
in Australia, New Zealand and Singapore. Woolworths offers select ranges
of apparel, cosmetics, toiletries, footwear, jewellery and food under
its own brand name. Country Road offers apparel and home ware in
Australia under its own brand name. Woolworths has 237 stores, including
111 Owned Woolworths, 82 Franchised Woolworths, and 44 Owned and
Franchised Country Road outlets.

**Spar**: The Spar organization is made up of two types of members: Spar
Retailers who are independent store owners, and Spar Distribution
Centers, which provide leadership and services to the Spar Retail
members. Both members belong to the Spar Guild of Southern Africa, a
non-profit company set up to coordinate and develop Spar in Southern
Africa. The members pay subscriptions to the Guild, which uses these
monies to advertise and promote Spar. The Spar grocery chain emerged in
the 1963 when a group of 8 wholesalers was granted exclusive rights to
the Spar name in South Africa, to service 500 small retailers. A number
of mergers and take-overs followed, and today all but one of the
wholesalers are owned by the Spar Group Limited which operates 6
distribution centers that supply goods and services to 739 Spar Stores
in South Africa comprising of 75 Superspar, 475 Spar, and 189 Kwikspar.

# B. Convenience Stores

[Entry Strategy:]{.underline}

Major wholesalers and retailers own most of the convenience stores in
South Africa, and contact has to be made direct with wholesalers and
retailers concerned. Convenience stores operate on extended shopping
hours. As with supermarkets, success in this field depends on heavy
promotion and pursuing a product to the consumer.

[Market Structure:]{.underline}

The market structure is covered in detail under the supermarket section
of this report.

[Major Convenience stores profile:]{.underline}

+---------------+--------------+-------+------+--------+------------+
| Retail Name   | Ownership    | Tur   | Nu   | Lo     | Type of    |
|               |              | nover | mber | cation |            |
|               | (Local or    |       | of   |        | Purchasing |
|               |              | (\$M) |      |        |            |
|               | Foreign      |       | Out  |        | Agent      |
|               |              |       | lets |        |            |
+---------------+--------------+-------+------+--------+------------+
| Friendly      | Convenience  | Not   | 53   | Nati   | Direc      |
| Shoppe's      | stop shop    | avai  |      | onwide | t/Importer |
| (previously   | owned by     | lable |      |        |            |
| known as      | Metcash      |       |      |        |            |
| Foodies       | Wholesaler   |       |      |        |            |
| Convenience)  |              |       |      |        |            |
+---------------+--------------+-------+------+--------+------------+
| 30 OK Mini    | Convenience  | Not   | 105  | Nati   | Direc      |
| Mark          | stop shops   | avai  |      | onwide | t/Importer |
| (previously   | owned by     | lable |      |        |            |
| known as      | Shopr        |       |      |        |            |
| 8-Till late); | ite-Checkers |       |      |        |            |
| and           |              |       |      |        |            |
|               |              |       |      |        |            |
| 85 Sentra     |              |       |      |        |            |
+---------------+--------------+-------+------+--------+------------+

# C. Traditional Markets

[Entry Strategy:]{.underline}

Food retailers in South Africa range from highly sophisticated
supermarkets at one end to primitive little street corner stalls.
Previously, predominantly black townships were virtually unserved in
terms of retail infrastructure. Informal market retailers cater to the
needs of the residents via independent grocery stores such as cafes,
general dealer stores and several informal South African retails
concepts (tuck shops, shebeens, taverns and spazas) including hawkers
(known as street vendors). With the end of apartheid, major retailers
have extended their services to these townships as well but spaza shops
are making their presence felt. Marketers saw the spaza as the beginning
of a new form of township convenience retailing, conveniently close to
consumers, and open at extended hours.

Spaza shops are defined as small retail enterprises operating from a
residential stand or home, engaged in the trading of consumer goods.
Spaza shops operating mainly in the townships are making their presence
felt in the local retail market. It has been estimated that spaza
retailers captured about 2.8% or R7.4 billion of the South African
retail trade in 2001. What is more, the findings of the source reveal
that the turnover of spaza retailers in 2000 was larger than the
combined turnover of branded superette stores operating in South Africa.
About 70% of micro-businesses in South Africa are concentrated in the
trade sector.

On average, start-up investment for spaza shops amounts to just over
R4,000 mainly financed by private savings or loans from relatives or
friends. Average employment amounts to almost 3 employees per business.
Considering that the number of spazas may amount to over 100,000, this
sector of the national economy could be providing between 230,000 to
290,000 jobs, and supporting more than a million people. The most
important products sold by spaza shops are (in descending order): soft
drinks, cigarettes, paraffin, candles, maize meal, alcoholic beverages,
bread and sugar.

There is now growing awareness of the importance of the spaza retailers
as a marketing channel among manufacturers and producers. More than 20%
of spaza owners report that products such as soft drinks, dairy and
bakery products are now delivered to their shops. The most serious
problems encountered by spaza owners are shortage of trading
stock/finance (38.8%), high level of crime and robbery (25%), severe
competition (20.6%), expensive transport (19.7%), and bad debt or the
granting of too much credit (17.1%).

Although spaza retailers are often seen as survivalist enterprises, it
is clear spazas are becoming not only a permanent phenomenon on the
South African economic scene, but more sophisticated and closely linked
to the rest of the economy than commonly perceived.

[Market Structure]{.underline}:

The market structure is covered in detail under the supermarket section
of this report.

[Traditional Market profile:]{.underline}

Wet markets in South Africa have traditionally been similar to those in
most developing countries. Informal market retailers cater to the needs
of the residents via cafes and several informal South African retails
concepts (tuck shops, shebeens, taverns and spazas) including hawkers
(known as street vendors). With the end of apartheid, major retailers
are extending their services to these townships as well, but spaza shops
are making their presence felt in townships as township convenience
retailing.

# III. Competition

**Exports**: In 2002, South Africa's agricultural, fish and forestry
exports reached a total of about R34.8 billion up from 26.5 billion in
2001. United Kingdom (3.9 billion), Japan (3.5 billion), Netherlands
(R2.4 billion), United States (2.0 billion), and Italy (1.9 billion)
were the country's five largest export destinations. In 2003, South
Africa's agricultural, fish and forestry exports from January through
August reached a total of about R22.0 billion. South Africa's major
exported agricultural, fish and forestry products for 2002 were dried
and fresh citrus fruit, wines of fresh grapes, undenatured spirits,
frozen fish fillets and corn. In 2003, South Africa's major exported
agricultural, fish and forestry products from January through August are
dried and fresh citrus, wines of fresh grapes, frozen fish fillets and
corn.

**Imports**: South Africa's total agricultural, fish and forestry
imports for 2002 amounted to R17.3 billion, a 40.3% increase from 2001.
The largest value of imports were from Argentina (R1.9 billion), United
States (R1.6 billion), Brazil (R1.1 billion), United Kingdom (R1.0
billion), and Malaysia (R1.0 billion). In 2003, South Africa's
agricultural, fish and forestry exports from January through August
reached a total of about R10.8 billion. Thus far, in 2003 the leading
suppliers are Argentina (R1.3 billion), Brazil (R0. 692 billion), United
States (R0. 675 billion), China (R0. 648 billion), and Malaysia
(R0.609). Cereals, animal fats, whiskey, and hardwood lumber were South
Africa's 2002 major imported agricultural, fish and forestry products.
Current trends indicate that South Africa will continue to supplement
local agricultural production with imports, but imports will represent
less than 30% of total retail value.

Market promotions by other European countries such as United Kingdom are
similar to USDA organized programs such as food shows, in-store
promotions, and trade missions. South Africa is aggressively marketing
local products and has introduced the "Proudly South Africa African"
campaign with products and services made in South Africa. Trade source
reports that recognition of the campaign has grown from 10% to 64% with
32% of the population having seen the Proudly South African logo on
products.

# IV. Best Product Prospects

A. [Products Present in the Market Which have Good Sales
Potential]{.underline}:

  ---------------------- ----------- ------------- ----------- ------------
  Products               1999        2000          2001        2002

  Course grains          32.7        8.7           2.2         46.6

  Planting seeds         6.9         11.8          7.4         12.5\*

  Pulses                 0.5         1.4           0.20        2.8

  Wheat                  12.7        15.6          4.4         8.6

  Vegetable oils         0.9         2.7           1.9         3.8

  Animal fats            0.8         0.7           1.2         5.3

  Hardwood lumber        13.8        18.2          9.4         11.2
  ---------------------- ----------- ------------- ----------- ------------

Total U.S. exports of agricultural, fish and forestry products to South
Africa totaled just over \$168 million in CY 2002. Rice, maize, planting
seeds, hardwood lumber, wheat and animal fats were South Africa's major
imported agricultural commodities. The US is one of the major suppliers
of rice and wheat to South Africa and has increased sales in several
consumer-oriented products. One of the growth areas is in intermediate
agricultural products, where for instance, planting seeds increased from
(\$7.4 million) in 2001 to (\$12.5 million) in 2002. This is the largest
export level of planting seeds since CY 1970. Animal fats increased from
(\$1.2 million) in 2001 to (\$5.3 million) in 2002.

B. [Products Not Present in Significant Quantities but Which have Good
Sales Potential]{.underline}:

The retail food sector continues to expand and supermarkets chains and
convenience stores are rapidly becoming the dominant retail outlets.
South Africans have always been big meat eaters, with fish often a
second choice for shoppers. The demand for fish has increased and now
more consumers are eating fish as a healthy alternative to meat as they
realize the positive benefits of adding fish to their diets. Fish is
anticipated to grow in sales in the South African market and imports
have increased 40% from January to August 2003 when compared with 2002.

C. [Products Not Present Because They Face Significant
Barriers:]{.underline}

Most retail food products may be imported into South Africa with little
or no import restrictions. However, there are import requirements and
other factors that will affect U. S. agricultural imports, mainly
non-tariff barriers, such as veterinary and health requirements,
labeling, food safety requirements, and shelf life requirements. In July
2000, South Africa imposed prohibitive anti-dumping duties on U.S.
chicken leg quarters, an action that has virtually cut off U.S. poultry
exports to South Africa.

**V. Post Contact and Further Information**

If you have any questions or comments regarding this report or need
further assistance, please contact AgPretoria at the following address:

Foreign Agricultural Service

U.S. Embassy Pretoria, South Africa

Washington, D.C., 20521-9300

Tel: 27-12-431-4235

Fax: 27-12-342-2264

Email: <agpretoria@fas.usda.gov>

For more information on exporting U.S. agricultural products to other
countries, please visit the Foreign Agricultural Service's website at:
[http://www.fas.usda.gov](http://www.fas.usda.gov/)