Required Report - public distribution

**Date:** 3/10/2006

**GAIN Report Number:** SF6010

SF6010

**South Africa, Republic of**

**HRI Food Service Sector**

**HRI Sector Report**

**2006**

**Approved by:**

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

U.S. Embassy, South Africa

**Prepared by:**

Margaret Ntloedibe

**Report Highlights:**

The biggest growth industry in South Africa is tourism. According to the
HotelBenchmark Survey, tourism in South Africa is expected to grow by
almost 6% for the coming years, and currently contributes more than 9%
to Gross Domestic Product. This is a remarkable achievement for a
country that - just over ten years ago - was not even on the tourists\'
map. In 2005, the U.S. exported US\$ 223 million of agriculture, fish,
and forestry products to South Africa, a high value since 2000. A
variety of high value products such as almonds, pistachios, canned
salmon, whiskey, and frozen food preparations have shown consistent
growth over the last five years and present important opportunities for
U.S. exporters.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Pretoria \[SF1\]

\[SF\]

TABLE OF CONTENTS

Section 1. Market
Summary...........................................................................
3 of 16

1.  Advantages and Challenges for US Exporters.......... 5 of 16

Section 2. Road Map for Market
Entry........................................................ 5 of 16

1.  Hotels and
    Resorts......................................................... 5
    of 16

> 2.1.1 Hotels
> profiles.................................................................
> 6 of 16

2.  Entry
    Strategy.................................................................
    7 of 16

3.  Distribution
    Channel...................................................... 7 of
    16

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1.  Restaurants...................................................................................
    7 of 16

    1.  Restaurants company
        profiles..................................... 8 of 16

    2.  Entry
        Strategy.................................................................
        8 of 16

    3.  Distribution
        Channel...................................................... 10
        of 16

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2.  Institutional Contract Food
    Services....................................... 10 of 16

    1.  Major Caterer's
        profile.................................................. 10 of
        16

    2.  Entry
        Strategy................................................................
        11 of 16

> 2.3.3 Distribution
> Channel..................................................... 11 of 16

Section 3.
Competition...................................................................................
11 of 16

Section 4. Best Products
Prospects.............................................................
15 of 16

A.  Products present in the market which have good sales

> Potential...........................................................................
> 15 of 16

B.  Products not present in significant quantities but which

> Have good sales potential...........................................
> 15 of 16

C.  Products not present because they face significant

> Barriers...........................................................................
> 16 of 16

Section 5. Post contact and further
information.................................... 16 of 16

# Section 1. MARKET SUMMARY

South Africa, with a population of around 46.9 million people, has a
market-oriented economy and is a net exporter of agricultural products.
The Global Competitiveness Report ranks South Africa 42 out of 117
countries, the third place among all developing countries globally. Over
the last five years the United States has exported an average of 223
million dollars per year of agricultural, fish and forestry products to
South Africa

South Africa has a large and complicated food service market. The
foodservice sector of the South African economy is not only the largest
employer in the country, but has the potential to make a real difference
in terms of economic empowerment, skills transfer and social

upliftment. The foodservice establishment is comprised of sectors such
as Commercial, Institutions and Services; and Staff Feedings. Classified
under the commercial sector are hotels, restaurants, fast food
independents, fast food chains, clubs and national parks/resorts.
Institutions and Services includes transport services, hospital (public
and private), educational institutions and prisons. The staff feeding
sector includes canteens (in-house cafeteria's), mines, South African
Police, and the South African Defence Force. The food industry accounts
for the largest section of the South African manufacturing industry.

The following table summarizes the South African market and lifestyle
statistics as presented by Euromonitor.

+-----------------------+----------+----------+----------+----------+
|                       | 2002     | 2003     | 2004     | 2005     |
+-----------------------+----------+----------+----------+----------+
| Annual gross          | 6        | 10       | 13       | 13       |
|                       | 7,847.74 | 5,196.75 | 0,409.14 | 2,184.01 |
| Income (US\$          |          |          |          |          |
|                       |          |          |          |          |
| million               |          |          |          |          |
+-----------------------+----------+----------+----------+----------+
| Annual disposable     | 5        | 8        | 11       | 11       |
|                       | 7,085.32 | 9,154.52 | 0,714.97 | 2,260.00 |
| Income (US\$ million) |          |          |          |          |
+-----------------------+----------+----------+----------+----------+
| GDP measured          | 46       | 47       | 50       | 53       |
|                       | 0,361.00 | 7,487.00 | 1,667.00 | 2,011.00 |
| At purchasing power   |          |          |          |          |
|                       |          |          |          |          |
| Parity (international |          |          |          |          |
| \$                    |          |          |          |          |
|                       |          |          |          |          |
| Million)              |          |          |          |          |
+-----------------------+----------+----------+----------+----------+
| Annual rates of       | 9.16     | 5.86     | 1.39     | 3.04     |
|                       |          |          |          |          |
| Inflation (% growth)  |          |          |          |          |
+-----------------------+----------+----------+----------+----------+
| Real GDP growth       | 3.60     | 2.80     | 3.70     | 4.00     |
|                       |          |          |          |          |
| (% growth)            |          |          |          |          |
+-----------------------+----------+----------+----------+----------+
| Consumer expenditure  | 6        | 10       | 12       | 12       |
|                       | 4,737.07 | 2,036.50 | 5,408.78 | 9,062.77 |
| (US\$ million)        |          |          |          |          |
+-----------------------+----------+----------+----------+----------+
| Consumer expenditure  | 11,574.5 | 17,894.2 | 21,573.9 | 22,406.3 |
|                       |          |          |          |          |
| On food (US\$         |          |          |          |          |
| million)              |          |          |          |          |
+-----------------------+----------+----------+----------+----------+
| Internet users        | 3,100.00 | 3,833.62 | 4,657.30 | 5,505.24 |
| (\`000)               |          |          |          |          |
+-----------------------+----------+----------+----------+----------+
| Tourism receipts      | 2,728    | 3,501    | 3,592    | 3,711    |
| (US\$ million         |          |          |          |          |
+-----------------------+----------+----------+----------+----------+

Source: Euro monitor

Tourism, South Africa's fastest growing industry, with an estimated
annual growth rate of 12 percent, is the fourth largest industry in
South Africa, supporting about 700 hotels, 2800 guesthouses and 10,000
restaurants. The Travel and Tourism industry in South Africa is a major
contributor to the economy and presently accounts for 8.2% of GDP. The
current employment figure of 7% of South Africa's workforce is expected
to grow to over 1.2 million

people by 2010. Tourism plays a significant role in the domestic economy
employing some 512,000 or 3% of the total workforce and contributing R73
billion or 7.1% to Gross Domestic Product. An average tourist spends
R1,548 per day, staying about 12 days in the country, but the strong
rand has eroded South Africa's price competitiveness as a tourist
destination. According to the South African Department of Environmental
Affairs and Tourism, more than 1.3 million foreigners visited South
Africa between January through September 2005, a 4.3% per cent increase
from the previous year.

South Africa has the highest arrivals of any African country and
represents 20% of the continent's arrivals. Considering competitors such
as Thailand, Australia and Brazil, only Thailand surpasses South Africa
in terms of total foreign arrivals. Tourism is central to growth and
development in South Africa. In responding to this, the South African
government has launched the Accelerated and Shared Growth Initiative
(ASgisa), whose ultimate objective is to halve unemployment and poverty
by 2014. The Asgisa aims to create at least 500,000 tourism jobs by
2014, while Environment Affairs and Tourism said in August 2005 that
permanent jobs were created through domestic tourism during the first
five monthly in 2005 or average of 100,000 per month. The increase in
the first nine months of 2005 was 10.3% annually.

Statistics South Africa released the following tourism data on January
11, 2006: The number of tourists to SA rose 14,3% year on year in
August, continuing the steady upswing in tourist figures seen in recent
months on the back of a more stable rand. Data released by Statistics SA
show that the total number of foreign travelers who visited SA from the
rest of the continent, as well as overseas tourists, rose to 650,290
compared with 568,890 in August 2004. A dip in the numbers earlier this
year, particularly from international markets, was attributed to the
strong rand. The strength of the local currency has also affected
tourists\` spending patterns and length of stay.

The UK remained the leading country of origin of overseas travelers,
constituting 21.4% (35,015) of total tourists, followed by the US with
23914 (14.6%) travelers and Germany in third place, with 15,311 (9.3%)
tourists visiting SA during that period. The highest increase in the
number of arrivals from these leading source countries was from the US.
Other main countries of origin of overseas travelers were Italy with
10,578, France (9,616) and the Netherlands (7,812). Overseas visitors in
August totaled 163,888.

 

Travelers from African countries still constitute the majority of
tourists coming into the country, with the largest increase coming from
Mozambique. Travelers from Mozambique increased 93.4% to 64,181 in
August, as visa requirements have become less stringent. \"The most
common mode of travel used by foreign travelers arriving in SA was road,
involving 71% travelers, and (for) the total number of travelers
departing, road constituted the most common mode of travel (69.9%),\"
Stats SA. Most foreign tourists bednights (44%) and particularly African
tourist bednights (51%), are spent in the homes of friends and
relatives, followed by in hotels with similar percentages both Africa
and overseas (25% overall). Overseas visitors are more likely than
Africans to use all other forms of accommodation such as game lodges and
self-catering, except guest houses.

Benefiting from this growth in terms of increased trade and investment
opportunities is the hospitality industry, which includes a vast array
of well-developed and sophisticated hotels, restaurants, cafes, resorts,
country clubs, fast food outlets, bars, airlines, supermarkets and
convenience stores.

South Africa, with an expanding middle class and a relatively stable
economy, presents growing opportunities for U.S. niche food products. In
addition, with its well-developed

transportation infrastructure, South Africa is ideally placed to serve
as an export hub to markets throughout the region.

The government established the Food Pricing Monitoring Committee in
November 2002, to monitor the prices of basket of basic food items.

1.  Advantages and Challenges for US exporters

+---------------------------------+------------------------------------+
| Advantages                      | Challenges                         |
+---------------------------------+------------------------------------+
| South Africans are developing a | Consumers may need to be educated  |
| taste for                       | in                                 |
|                                 |                                    |
| western foods are willing to    | preparing and eating products.     |
| try anything                    |                                    |
|                                 |                                    |
| once.                           |                                    |
+---------------------------------+------------------------------------+
| The growing HRI industry needs  | Already acquired tastes and        |
|                                 | preferences for traditional        |
| imported food and beverage      | locally produced products.         |
| products.                       |                                    |
+---------------------------------+------------------------------------+
| Importers and distributors can  | Consumers are price-conscious and  |
| help develop heavy brand        | some do not exhibit brand loyalty. |
| loyalty.                        | Products must                      |
|                                 |                                    |
|                                 | constantly be promoted.            |
+---------------------------------+------------------------------------+
| South African importers seek    | Higher prices for U.S. food        |
| suppliers who can offer         | products relative                  |
| reliable and quality products,  |                                    |
| consolidators of mix containers | to local market and neighboring    |
| at competitive prices.          | countries' products.               |
+---------------------------------+------------------------------------+
| South Africa is a gateway for   | Competition is stiff from other    |
| regional markets.               | countries' and                     |
|                                 |                                    |
|                                 | locally produced products.         |
+---------------------------------+------------------------------------+
| South African consumers         | Limited knowledge of HRI           |
| consider U.S. products to be of | industries and                     |
| generally high quality.         |                                    |
|                                 | consumers of the specific          |
|                                 | varieties and qualities of U.S.    |
|                                 | products.                          |
+---------------------------------+------------------------------------+

# Section 2. ROAD MAP FOR MARKET ENTRY

## 2.1 Hotels and Resorts

There is a huge range of accommodation types in South Africa, from five
star hotels including hotel chains to lodges, guesthouses, bed &
breakfast (B&B) establishments, self-catering properties, youth hostels
and international hotels. The B&B, Guest House & Game Lodge market
sectors represent the fastest growing segment of the tourism industry in
South Africa. The Tourism Grading Council of South Africa is an official
body launched in 2003 mandated to grant Star grading to accommodation
establishments in South Africa, from B&B; Guest House; Hotel; Lodge;
Self-Catering; Backpacker and Hostelling; Caravan and Camping; and
Country House. There are approximately 1,600 graded establishments.
There are an estimated 30,000 establishments nationally, ranging from
luxury Guest Houses & Game Lodges that regularly host visiting heads of
state, to the more economical B&B's which together offer thousands of
bed nights. Hospitality Resorts and Hotels are owned by the Premier
Group, which is owned by Anglo American. Premier and Anglo American have
extensive holdings in the milling, baking, dairy, fish, confectionery
and edible oils industries.

According to the Department of Environmental Affairs and Tourism (DEAT)
issue of February 21, 2006, since 2003 the Grading Council has
officially graded 70% of all accommodation rooms in South Africa. In
2005, the Grading Council was invited by the World Tourism Organization
twice to present South Africa's Star Grading System model case-study in
promoting destinations. According to the hospitality publication, South
Africa overall occupancy improved by 4.4% to 69% in 2005. The increase
was higher than those of the European, Asian, and Middle East regional
hotel performance data for 2005.

There are 20 national parks in South Africa, all of which are
administered by the South African National Parks (SANParks). Most of
these resorts have their own restaurants. Generally, the trend towards
healthier eating is evident in this sector once again with an increase
in the consumption of fresh vegetables and salads. The consumption of
red meat has not changed, because the National Parks often offer venison
and other wild game meat on the menu, which is a novelty to tourists.

The National Parks negotiate contracts for certain products, and resorts
are then able to buy independently from these sources. Most perishable
items are purchased from local specialist retailers, while dry groceries
are often sourced from catering wholesalers.

Prospects: The latest trend in hotel investment in South Africa is that
a number of significant joint ventures are taking place between local
operators and overseas investors. Smaller and independent owners,
particularly are benefiting from an injection of capital, infrastructure
and expertise enabling them to compete on equal terms with large groups.

### 2.1.1 Hotel Profiles

Most of the key hotels are owned by large locally listed companies and
managed through agreements with international hotel management chains,
in particular, Mercure Accord Hotel (French), Sheraton Group (US),
Hilton (US), Legacy Hotels and Resorts (US), and Days Inn (US). In
addition to major foreign tourism projects, two South African groups
also have activities. The Sun International Group runs hotels and
resorts including the renowned Sun City Resort in Rustenburg in the
North West Province, while the Protea Group runs the Protea Hotel chain.
The table below provides an overview of some of the key hotel chains.

+---------------+-----------+------+---------------+-----------------+
| Hotel Group   | Sales     | No.  | Location      | Purchasing      |
|               |           | of   |               |                 |
|               | (US\$     |      |               | Agent Type      |
|               | million)  | Ho   |               |                 |
|               |           | tels |               |                 |
+---------------+-----------+------+---------------+-----------------+
| Mercure       | Not       | 28   | Major cities  | Local agents    |
| Accord        | available |      | and           |                 |
|               |           |      |               |                 |
|               |           |      | Tourist       |                 |
|               |           |      | centers       |                 |
+---------------+-----------+------+---------------+-----------------+
| Sheraton      | Not       | 3    | Major cities  | Local agents    |
| Group         | available |      |               |                 |
+---------------+-----------+------+---------------+-----------------+
| Hilton        | Not       | 2    | Major cities  | Local agents    |
|               | available |      |               |                 |
+---------------+-----------+------+---------------+-----------------+
| Legacy Hotels | Not       | 17   | Major cities  | Local agents    |
| &             | available |      | and           |                 |
|               |           |      |               |                 |
| Resorts       |           |      | Tourist       |                 |
|               |           |      | centers       |                 |
+---------------+-----------+------+---------------+-----------------+
| Sun           | Not       | 49   | Major cities  | Local agents    |
| International | available |      | and           |                 |
|               |           |      |               |                 |
| Groups        |           |      | Tourist       |                 |
|               |           |      | centers       |                 |
+---------------+-----------+------+---------------+-----------------+
| Protea Group  | Not       | 74   | Major cities  | Local agents    |
|               | available |      | and           |                 |
|               |           |      |               |                 |
|               |           |      | Tourist       |                 |
|               |           |      | centers       |                 |
+---------------+-----------+------+---------------+-----------------+

**Tourist Accommodation by Statistics South Africa December 2005
Release:**

**Key findings as at the end of September 2005**

**Number of stay unit nights increases**

** **

The number of stay units sold during September 2005 increased by 3.5%
(from 1,429,400 to 1,479,800) compared to September 2004. Furthermore,
the number of stay unit nights sold during the third quarter of 2005
increased by 6.3% (from 4,035,700 to 4,291,800) compared with the second
quarter of 2005. This increase could be partly due to the mid-year

school vacation in July and the higher number of foreign tourist
arrivals to South Africa during August and September annually.

 

**Occupancy rate increases**

** **

The occupancy rate in September 2005 (50.9%) increased by 4.6% compared
with September 2004 (48.7%). Furthermore, the occupancy rate for the
third quarter of 2005 (48.2%) increased by 4.4% compared with the second
quarter of 2005 (46.1%).

 

**Total income from accommodation increases**

** **

In September 2005, income from accommodation was R637.5 million. This
was an increase of 12.0 % (R68.4 million) compared with September 2004.
Furthermore, income from accommodation in the third quarter increased by
of 11.9% (R184.9 million) compared with the second quarter of 2005. This
increase could be partly due to an increase in the 'average income per
stay unit night sold' and an increase in the 'number of stay unit nights
sold' in the third quarter compared to the second quarter.

2.  Entry Strategy

Although the majority of the hotels are part of the chain groups, each
hotel operates autonomously in terms of food purchases. In some cases
the head office may recommend regional or national suppliers, but
generally, hotels have a free reign as to what foods are served and whom
their suppliers are. Hotels prefer to buy directly from local
manufacturers, this is always not possible, and it is usually only
perishable products that are bought in this manner. Dry groceries are
usually sourced from catering wholesalers, while local specialist
retailers provide hotels with bakery goods, fruit and vegetables, meat,
and dairy products. Many hotels have in-house bakeries and contract
caterers to run in-house restaurants. Growth in the hotel industry is
largely reliant on the growth in foreign tourism, which is expected to
increase considerably in future.

2.1.3 Distribution Channel

In general, hotels do not import food and beverages but obtain their
requirements from the local manufacturers, catering wholesalers,
specialist retailers and others. This is because most if not all hotel
kitchens have the policy of holding only sufficient quantities of food
and beverages for short term needs only. The following table highlights
and summarizes sources of supply in percentage. The table below
indicates the sources of supply to the hotel industry:

  -------------------------------------------------------- --------------
  Sources of supply                                        \% of total

  Direct from manufacturers                                28

  Catering wholesalers                                     20

  Cash & Carry                                             5

  Specialist Retailers                                     32

  General Retailer                                         3

  Fresh Produce Market                                     12

  TOTAL                                                    100
  -------------------------------------------------------- --------------

2.  Restaurants

Restaurants plays an integral part in the tourists' experience of a
country. The Restaurant Association of South Africa (RASA) was launched
in November 2004 in order to gather statistics and provide evidence of
the size and importance of the foodservice industry to the tourism
industry, as well as South African economy. Restaurants and groups
represented in the association are the Grill House, News Café, The M&A
Group, Mikes Kitchen, The Steers Group, Nandos, Mugg & Bean, Global
Wrapps, Dulce Continental Cafes, O'Hagans and the Spur Group. South
Africa has a highly developed web of fast-food and chain restaurants.
The changing trend shows that people are eating out of home more often
than ever before. The restaurant industry, particularly the fast food
sector is faced with stiff competition from

the supermarket, retail chains and convenience store sector. The
supermarkets also offer ready meals every day of the week.

On food spending, visiting restaurants and bars is one of the favorite
activities of overseas tourists in South Africa. Overseas visitors spend
approximately R290.00 per day on food and beverage during their trip to
South Africa, which represents about 20% of the total daily spend.

According to DEAT, in 2005, the Tourism Grading Council launched the
grading scheme for restaurants, with thus far has not been as rapidly
adopted as they would have liked by the industry. The Grading Council
will be holding countrywide road shows on restaurant grading effective
March 2006, to meet the target of all restaurants graded by the time the
Soccer World Cup begins in 2010. The Grading Council later this year
will be launching a grading system for tourist transport services and a
star scheme for the golfing sector.

1.  Restaurant Company Profiles

The table below provides information on the major fast food and family
restaurants involved in this sector:

+-----------------+---------+-----------+------+----------+----------+
| Restaurant Name | Ow      | Sales     | No.  | Location | Pu       |
| and             | nership |           | of   |          | rchasing |
|                 |         | (US\$     |      |          |          |
| Outlet Type     |         | million)  | out  |          | Agent    |
|                 |         |           | lets |          | Type     |
+-----------------+---------+-----------+------+----------+----------+
| Nando's Group   | Local   | Not       | 195  | Major    | Local    |
|                 |         | available |      | cities   | agent    |
+-----------------+---------+-----------+------+----------+----------+
| Steers Group    | Local   | Not       | 989  | Major    | Local    |
|                 |         | available |      | cities   | agent    |
+-----------------+---------+-----------+------+----------+----------+
| King            | Local   | Not       | 188  | Major    | Local    |
| Consolidated    |         | available |      | cities   | agent    |
|                 |         |           |      |          |          |
| Holdings        |         |           |      |          |          |
+-----------------+---------+-----------+------+----------+----------+
| Tricon Global   | Local   | Not       | 450  | Major    | Local    |
|                 |         | available |      | cities   | agent    |
| Restaurants     |         |           |      |          |          |
+-----------------+---------+-----------+------+----------+----------+

2.  Entry Strategy

Specialist retailers such as bakeries, butcheries and green grocers are
the main suppliers to restaurants. Dry groceries are often purchased
through catering wholesalers, while perishables and frozen products are
purchased directly from the manufacturers or designated distributors.

-   Export opportunities in this sector may not be readily apparent,
    since these outlets generally prefer to source their inputs locally
    -- for goodwill assured supply, or due to a corporate relationship
    with a supplier. However, as the number of outlets increases, and
    competition between retail chains rises, it will become more
    difficult for them to meet their needs in the local market and
    maintain their quality and price competitiveness.

-   The South African fast-food market has witnessed strong growth in
    recent years due to changes in lifestyle trends and a growth in
    disposable income.

-   Although independent restaurants are plentiful, the growth in the
    number of franchised fast food chain restaurants has been phenomenal
    over the past number of years, which has brought about interest in
    American-style cuisine and consumption patterns. South Africa, has
    an extensive number of franchise restaurant chains serving fried
    chicken, hamburgers, steaks, hoagie-style deli sandwiches, and
    pizza. Portuguese and Italian-style cuisines are also popular, as
    well as seafood, steak and ribs. Some of the major chains are
    Nando's Group Holdings (Nando's Chicken land); The Steers Group
    (Steers, Debonair Pizza, FishAways, Church's Chicken, House of
    Coffees, Brazilian, ESP Illy Boutique, Wimpy and Whistle Stop); King
    Consolidated Holdings (McGinty's, Keg SA, Saddles Steak Ranches,
    Bimbos, and Dockside Porterhouse); McDonalds; Mike's Kitchen, Mugg &
    Bean, Global Wrapps, Dulce Continental Cafes, O'Hagans, the Spur
    Group, Something Fishy, Ocean Basket, Pleasure Foods, Chicken
    Licken, News Café, Pizza Perfect, St. Elmo's Pizza, Leisure Net
    (Bulldogs-British type-style pup), Black Steer (Steakhouse and
    take-out store), Flame Diners, and Max Frango's Chicken take-outs;
    Shoprite-Checkers; Tricon Global Restaurants Inc (Kentucky Fried
    Chicken and Pizza Hut); Subway Sandwiches; and TGIF's. Tex-Mex or
    South western cuisine has yet to significantly penetrate the South
    African market, although this cuisine might be popular, due to the
    South African consumer's preference for hot, spicy sauces. Pub-style
    restaurants are also booming.

-   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.

-   There is a growing awareness among South Africans of healthy eating,
    and along with this is the trend towards lighter meals. Chicken
    remains a popular meal item in the South African quick-service
    market and is likely to remain as such. Consumption of chicken and
    fish have grown considerably at the expense of red meat, and demand
    for fresh produce and foods without preservatives is increasing.
    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. The three largest chicken companies in South
    Africa still remain Kentucky Fried Chicken (KFC), Chicken Licken and
    Nando's Chickenland. KFC, 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. 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). However,
    Fontana Famous Roastery is making strides into the market and has
    grown from 13 outlets in 2003 to around 32 in 2004; Gallito's stands
    at 12 outlets and is said to be ready to expand; Church's Chicken
    master license has been sold by Famous Brands and the new owners are
    about to open a number of non-South Africanized Church's in the
    western Cape; Chicken King, a home meal replacement concept has been
    quietly expanding in the countryside; and we have a new player,
    Cottage Chicken.

> Demand for whole chicken has fallen, in favor of pre-cut portions and
> value-added products, indicating an increased interest in convenience.

-   Prospects: The fast food industry has experienced phenomenal growth
    over the last two years, and this is set to continue in future. As
    food trends in South Africa develop, U.S. exporters are well
    positioned to provide South African restaurants with

> innovative products (i.e., seasoned French fries, curly fries,
> cheesecakes, high quality ice cream, lunchmeats made from turkey, and
> scallops, vegetable tortillas, Cajun foods, pickled garlic, spicy
> sausages and quality franks) to entice consumers. Thus, according to a
> local magazine's brief discussions with some of the major chains,
>
> opportunities exist for U.S. exporters to be supplementary suppliers
> of certain new food products.

1.  Distribution Channel

The following table highlights sources of supply to the Restaurant
Industry:

  ------------------------------------------------- ---------------------
  Sources of Supply                                 \% of Total

  Manufacturers/distributors                        20

  Catering wholesalers                              23

  Cash & Carry                                      8

  Specialist retailers                              42

  General retailers                                 5

  Fresh produce markets                             2

  TOTAL                                             100
  ------------------------------------------------- ---------------------

2.  Institutional Contract Food Service

Currently the South African Contract Catering and Institutional sector
is valued at R4.3 billion. State tenders and parastatals alone account
for R1.18 billion with 80% of this market still remaining in-house. This
sector constitutes a very large market for food and beverages and
include various institutions such as Commercial Sector; Institutions and
Services; and Staff Feeding. It is estimated that only 28% of
public-sector and 55% of private-sector catering have been out-sourced
to contract caterers. As with the rest of the South African food
industry, this sector is fairly concentrated and is dominated by a
relatively few large catering companies. Total value of staff catering
market in South Africa is approximately R5.5 billion per annum.
Estimated value of outsourced market between R2.8 and R3 billion.
Contract caterers include Tsebo Outsourcing Group (formerly the Fedics
Group) owned by ICS Holdings, Royal Food Services, Kagiso Khulani
Supervision Food Services owned by Tongaat Hulett, Delmont Caldow
Caterers, Sodexho Southern Africa, and Sixel & Patterson. In general,
they do not import food and beverages but instead purchase food products
directly from the local manufacturers, catering wholesalers and
distributors. By far the most significant of the catering companies is
Tsebo Outsourcing. Tsebo Outsourcing, South African Leader in outsourced
catering, is South Africa's largest black-owned outsourced catering
company, and enjoys a 34% market share of the currently outsourced
catering marked. The catering at all major airports within South Africa
are contracted out to Fedics in-flight catering company, Air Chefs. Air
Chefs prepares a total of 650,000 meals per month of which 450,000 are
manufactured in Johannesburg.

1.  Major Contract Caterer's Profile

The table below provides information on the major businesses involved in
the catering sector.

+---------------+-----------+-----------+--------+---------+----------+
| Name and      | Ownership | Sales     | No. of | L       | Pu       |
| business      |           |           |        | ocation | rchasing |
|               |           | (US\$     | Con    |         |          |
| type          |           |           | tracts |         | Agent    |
|               |           | million)  |        |         | Type     |
+---------------+-----------+-----------+--------+---------+----------+
| Fedics Food   | ICS       | Not       | 650    | nat     | Local    |
| Services      | Holdings  | available |        | ionwide | agents   |
+---------------+-----------+-----------+--------+---------+----------+
| Royal Food    | Rebserve  | Not       | 175    | nat     | Local    |
| Service       |           | Available |        | ionwide | agents   |
|               | Holdings  |           |        |         |          |
|               |           |           |        |         |          |
|               | (         |           |        |         |          |
|               | Wholesale |           |        |         |          |
|               | &         |           |        |         |          |
|               |           |           |        |         |          |
|               | Dis       |           |        |         |          |
|               | tribution |           |        |         |          |
|               |           |           |        |         |          |
|               | Division) |           |        |         |          |
+---------------+-----------+-----------+--------+---------+----------+
| Kagiso        | Compass   | Not       | 703    | nat     | Local    |
| Khulani       |           | available |        | ionwide | agents   |
|               | Southern  |           |        |         |          |
| Supervision   |           |           |        |         |          |
| Food          | Africa    |           |        |         |          |
|               |           |           |        |         |          |
| Services      |           |           |        |         |          |
| (KKS)         |           |           |        |         |          |
+---------------+-----------+-----------+--------+---------+----------+

2.  Entry Strategy

Contract caterers purchase the bulk of their supplies directly from the
manufacturers on a contract basis. Companies running their own canteens
usually buy food as and when needed from catering wholesalers and
localized specialist retailers, as this is more convenient when buying
small quantities.

In general, contract caterers do not import food and beverages but
instead purchase food products directly from the local manufacturers,
catering wholesalers and distributors.

3.  Distribution Channel

The following table highlights the source of supply to the Institutions
Caterer's:

  ------------------------------------------------- ---------------------
  Source of Supply                                  \% of Total

  Manufacturers/distributors                        33

  Catering wholesalers                              10

  Cash & Carry                                      2

  Specialist retailers                              46

  General retailers                                 4

  Fresh Produce Markets                             5

  Total                                             100
  ------------------------------------------------- ---------------------

# Section 3. COMPETITION

The following table highlights South Africa (SA) key products and
trading partners between 2003 -- 2005:

+--------------+-----------+----+----+----+----+----+----+------------+
| Product      | Major     | SA |    |    | SA |    |    | Advantages |
| Category and | Supply    | E  |    |    | I  |    |    | and        |
| HS Code      | countries | XP |    |    | MP |    |    | dis        |
|              | and       | OR |    |    | OR |    |    | advantages |
|              | strength  | TS |    |    | TS |    |    | of local   |
|              | of supply | to |    |    | fr |    |    | suppliers  |
|              |           | U  |    |    | om |    |    |            |
|              |           | SA |    |    | U  |    |    |            |
|              |           |    |    |    | SA |    |    |            |
|              |           | Mi |    |    |    |    |    |            |
|              |           | ll |    |    | Mi |    |    |            |
|              |           | io |    |    | ll |    |    |            |
|              |           | ns |    |    | io |    |    |            |
|              |           | of |    |    | ns |    |    |            |
|              |           | US |    |    | of |    |    |            |
|              |           | \$ |    |    | US |    |    |            |
|              |           |    |    |    | \$ |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
|              |           | 20 | 20 | 20 | 20 | 20 | 20 |            |
|              |           | 03 | 04 | 05 | 03 | 04 | 05 |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| Meat and     | Brazil -- | 0. | 0. | 0. | 4. | 0. | 2. | South      |
| Edible meat  | 63%       | 01 | 04 | 04 | 19 | 80 | 40 | Africa is  |
| offal (02)   |           |    |    |    |    |    |    | a net      |
|              | Australia |    |    |    |    |    |    | importer   |
| South Africa | -- 10%    |    |    |    |    |    |    | of meat    |
| net imports  |           |    |    |    |    |    |    | and meat   |
| from the     | Canada -- |    |    |    |    |    |    | products.  |
| World of     | 6%        |    |    |    |    |    |    | The        |
| US\$ 147.23  |           |    |    |    |    |    |    | pattern of |
| million in   | USA minor |    |    |    |    |    |    | imports in |
| 2005 versus  | supplier  |    |    |    |    |    |    | this       |
| US\$ 113.78  | of 0.7%   |    |    |    |    |    |    | category   |
| million in   |           |    |    |    |    |    |    | is         |
| 2004.        |           |    |    |    |    |    |    | variable   |
|              |           |    |    |    |    |    |    | and        |
| South Africa |           |    |    |    |    |    |    | depends    |
| net exports  |           |    |    |    |    |    |    | largely on |
| to the world |           |    |    |    |    |    |    | local      |
| of US\$ 0.95 |           |    |    |    |    |    |    | c          |
| million in   |           |    |    |    |    |    |    | onditions. |
| 2005 versus  |           |    |    |    |    |    |    | Brazil,    |
| US\$ 0.64    |           |    |    |    |    |    |    | Australia  |
| million in   |           |    |    |    |    |    |    | and Canada |
| 2004.        |           |    |    |    |    |    |    | are        |
|              |           |    |    |    |    |    |    | members of |
|              |           |    |    |    |    |    |    | MFN status |
|              |           |    |    |    |    |    |    | countries. |
+--------------+-----------+----+----+----+----+----+----+------------+
| Fish and     | India-    | 3  | 2  | 3  | 1  | 2. | 2. | South      |
| Seafood (03) | 27%       | 0. | 9. | 2. | .0 | 92 | 88 | Africa is  |
|              |           | 61 | 51 | 34 | 50 |    |    | a net      |
| Net imports  | Japan -9% |    |    |    |    | 1. | 1. | exporter   |
| from the     |           | 0. | 0. | 0. | 0. | 93 | 25 | of fish    |
| world of     | Moz       | 10 | 31 | 43 | 90 |    |    | and        |
| US\$ 19.05   | ambique - |    |    |    |    |    |    | seafood    |
| million in   | 8%        |    |    |    |    |    |    | products.  |
| 2005 versus  |           |    |    |    |    |    |    | Imports in |
| US\$ 14.33   | USA-      |    |    |    |    |    |    | this       |
| million in   | Minor     |    |    |    |    |    |    | category   |
| 2004.        | supplier  |    |    |    |    |    |    | have been  |
|              | of 3%     |    |    |    |    |    |    | increasing |
| Net exports  |           |    |    |    |    |    |    | steadily   |
| to the world | Thailand  |    |    |    |    |    |    | over the   |
| of US\$      | -- 36%    |    |    |    |    |    |    | past       |
| 71.46        |           |    |    |    |    |    |    | years, and |
| million in   | Phi       |    |    |    |    |    |    | thus,      |
| 2005 versus  | lippines- |    |    |    |    |    |    | despite    |
| US\$ 66.18   | 19%       |    |    |    |    |    |    | the fact   |
| million in   |           |    |    |    |    |    |    | that South |
| 2004.        | Zimbabwe  |    |    |    |    |    |    | Africa is  |
|              | -- 8%     |    |    |    |    |    |    | a net      |
| Prepared     |           |    |    |    |    |    |    | exporter,  |
| Meat, Fish   | USA --    |    |    |    |    |    |    | opp        |
| (16)         | Minor     |    |    |    |    |    |    | ortunities |
|              | supplier  |    |    |    |    |    |    | do exist.  |
| Net imports  | of 3% in  |    |    |    |    |    |    | The        |
| from the     | 2005 from |    |    |    |    |    |    | majority   |
| world of     | 5% in     |    |    |    |    |    |    | of imports |
| US\$ 30.39   | 2004.     |    |    |    |    |    |    | are        |
| million in   |           |    |    |    |    |    |    | c          |
| 2005 versus  | US        |    |    |    |    |    |    | rustaceans |
| US\$ 27.37   | imports   |    |    |    |    |    |    | and other  |
| million in   | of (0306) |    |    |    |    |    |    | seafood    |
| 2004.        | cr        |    |    |    |    |    |    | (squid)    |
|              | ustaceans |    |    |    |    |    |    | and fish   |
| Net exports  | declined  |    |    |    |    |    |    | meat.      |
| to the world | from US\$ |    |    |    |    |    |    |            |
| of US\$      | 4 million |    |    |    |    |    |    | Mozambique |
| 13.94        | in 2004   |    |    |    |    |    |    | and        |
| million in   | to US\$   |    |    |    |    |    |    | Zimbabwe   |
| 2005 versus  | 3.6       |    |    |    |    |    |    | are        |
| US\$ 12.15   | million   |    |    |    |    |    |    | amongst 14 |
| million in   | in 2005.  |    |    |    |    |    |    | members of |
| 2004.        | Category  |    |    |    |    |    |    | the        |
|              | (0307)    |    |    |    |    |    |    | Southern   |
|              | Molluscs  |    |    |    |    |    |    | African    |
|              | have      |    |    |    |    |    |    | D          |
|              | shown the |    |    |    |    |    |    | evelopment |
|              | most      |    |    |    |    |    |    | Community  |
|              | growth    |    |    |    |    |    |    | (SADC).    |
|              | from US\$ |    |    |    |    |    |    | SADC       |
|              | 1.3       |    |    |    |    |    |    | committed  |
|              | million   |    |    |    |    |    |    | itself to  |
|              | in 2004   |    |    |    |    |    |    | the        |
|              | to US\$   |    |    |    |    |    |    | creation   |
|              | 1.8       |    |    |    |    |    |    | of a free  |
|              | million   |    |    |    |    |    |    | trade area |
|              | in 2005.  |    |    |    |    |    |    | (FTA) when |
|              |           |    |    |    |    |    |    | a Protocol |
|              | US        |    |    |    |    |    |    | on Trade   |
|              | imports   |    |    |    |    |    |    | was signed |
|              | of (0306) |    |    |    |    |    |    | at the     |
|              | cr        |    |    |    |    |    |    | SADC       |
|              | ustaceans |    |    |    |    |    |    | Summit in  |
|              | declined  |    |    |    |    |    |    | 1996.      |
|              | from US\$ |    |    |    |    |    |    | South      |
|              | 4 million |    |    |    |    |    |    | Africa     |
|              | in 2004   |    |    |    |    |    |    | joined     |
|              | to US\$   |    |    |    |    |    |    | SADC in    |
|              | 3.6       |    |    |    |    |    |    | August     |
|              | million   |    |    |    |    |    |    | 1994.      |
|              | in 2005.  |    |    |    |    |    |    | Japan and  |
|              | Category  |    |    |    |    |    |    | P          |
|              | (0307)    |    |    |    |    |    |    | hilippines |
|              | Molluscs  |    |    |    |    |    |    | are        |
|              | have      |    |    |    |    |    |    | classified |
|              | shown the |    |    |    |    |    |    | as Most    |
|              | most      |    |    |    |    |    |    | Favored    |
|              | growth    |    |    |    |    |    |    | Nations    |
|              | from US\$ |    |    |    |    |    |    | (MFN)      |
|              | 1.3       |    |    |    |    |    |    | status.    |
|              | million   |    |    |    |    |    |    |            |
|              | in 2004   |    |    |    |    |    |    | MFN        |
|              | to US\$   |    |    |    |    |    |    | members    |
|              | 1.8       |    |    |    |    |    |    | pay duty   |
|              | million   |    |    |    |    |    |    | on goods   |
|              | in 2005.  |    |    |    |    |    |    | imported   |
|              |           |    |    |    |    |    |    | into South |
|              | The       |    |    |    |    |    |    | Africa for |
|              | United    |    |    |    |    |    |    | certain    |
|              | States    |    |    |    |    |    |    | categories |
|              | enjoys a  |    |    |    |    |    |    | of goods.  |
|              | dominant  |    |    |    |    |    |    | South      |
|              | position  |    |    |    |    |    |    | Africa and |
|              | in the    |    |    |    |    |    |    | Indica     |
|              | canned    |    |    |    |    |    |    | 1996       |
|              | salmon    |    |    |    |    |    |    | bilateral  |
|              | market    |    |    |    |    |    |    | trade      |
|              | holding a |    |    |    |    |    |    | agreement. |
|              | market    |    |    |    |    |    |    |            |
|              | share of  |    |    |    |    |    |    |            |
|              | 95.6%,    |    |    |    |    |    |    |            |
|              | and       |    |    |    |    |    |    |            |
|              | Canada    |    |    |    |    |    |    |            |
|              | 4%. For   |    |    |    |    |    |    |            |
|              | shrimp    |    |    |    |    |    |    |            |
|              | and       |    |    |    |    |    |    |            |
|              | prawns,   |    |    |    |    |    |    |            |
|              | horse     |    |    |    |    |    |    |            |
|              | mackerel  |    |    |    |    |    |    |            |
|              | and       |    |    |    |    |    |    |            |
|              | snoek,    |    |    |    |    |    |    |            |
|              | demand is |    |    |    |    |    |    |            |
|              | for       |    |    |    |    |    |    |            |
|              | frozen    |    |    |    |    |    |    |            |
|              | products. |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| Dairy        | New       | 0. | 0. | 0. | 0. | 1. | 0. | South      |
| Products     | Zealand   | 03 | 11 | 01 | 27 | 03 | 72 | Africa is  |
| (04)         | -- 20%    |    |    |    |    |    |    | a net      |
|              |           |    |    |    |    |    |    | exporter   |
| Net imports  | France -- |    |    |    |    |    |    | of dairy   |
| from the     | 19%       |    |    |    |    |    |    | products.  |
| world of     |           |    |    |    |    |    |    |            |
| US\$ 11.49   | Ireland   |    |    |    |    |    |    | New        |
| million in   | -- 11%    |    |    |    |    |    |    | Zealand is |
| 2005 versus  |           |    |    |    |    |    |    | a member   |
| US\$ 9.74    | USA a     |    |    |    |    |    |    | of MFN     |
| million in   | minor     |    |    |    |    |    |    | status     |
| 2004.        | supplier  |    |    |    |    |    |    | countries. |
|              | of 0.9%   |    |    |    |    |    |    |            |
| Net exports  |           |    |    |    |    |    |    | France and |
| to the world |           |    |    |    |    |    |    | Ireland    |
| of US\$ 0.42 |           |    |    |    |    |    |    | are        |
| million in   |           |    |    |    |    |    |    | members of |
| 2005 versus  |           |    |    |    |    |    |    | European   |
| US\$ 0.72    |           |    |    |    |    |    |    | Union      |
| million in   |           |    |    |    |    |    |    | (EU). The  |
| 2004.        |           |    |    |    |    |    |    | EU and     |
|              |           |    |    |    |    |    |    | South      |
|              |           |    |    |    |    |    |    | Africa     |
|              |           |    |    |    |    |    |    | signed a   |
|              |           |    |    |    |    |    |    | Free Trade |
|              |           |    |    |    |    |    |    | Agreement  |
|              |           |    |    |    |    |    |    | (FTA) in   |
|              |           |    |    |    |    |    |    | 1999. The  |
|              |           |    |    |    |    |    |    | agreement  |
|              |           |    |    |    |    |    |    | will be    |
|              |           |    |    |    |    |    |    | phased in  |
|              |           |    |    |    |    |    |    | over a ten |
|              |           |    |    |    |    |    |    | to twelve  |
|              |           |    |    |    |    |    |    | year       |
|              |           |    |    |    |    |    |    | period and |
|              |           |    |    |    |    |    |    | will       |
|              |           |    |    |    |    |    |    | e          |
|              |           |    |    |    |    |    |    | ssentially |
|              |           |    |    |    |    |    |    | liberalize |
|              |           |    |    |    |    |    |    | 86% of     |
|              |           |    |    |    |    |    |    | South      |
|              |           |    |    |    |    |    |    | Africa's   |
|              |           |    |    |    |    |    |    | imports    |
|              |           |    |    |    |    |    |    | from EU    |
|              |           |    |    |    |    |    |    | and about  |
|              |           |    |    |    |    |    |    | 95% of EU  |
|              |           |    |    |    |    |    |    | imports    |
|              |           |    |    |    |    |    |    | from South |
|              |           |    |    |    |    |    |    | Africa.    |
|              |           |    |    |    |    |    |    | The        |
|              |           |    |    |    |    |    |    | overall    |
|              |           |    |    |    |    |    |    | agreement  |
|              |           |    |    |    |    |    |    | meets WTO  |
|              |           |    |    |    |    |    |    | re         |
|              |           |    |    |    |    |    |    | quirements |
|              |           |    |    |    |    |    |    | of 90%     |
|              |           |    |    |    |    |    |    | coverage.  |
+--------------+-----------+----+----+----+----+----+----+------------+
| Edible Fruit | Turkey -- | 3  | 4  | 54 | 3. | 5. | 7. | South      |
| and Nuts     | 15%       | 7. | 1. | .6 | 29 | 30 | 58 | Africa is  |
| (08)         |           | 50 | 74 |    |    |    |    | a net      |
|              | United    |    |    |    |    |    |    | exporter   |
| Net imports  | States -  |    |    |    |    |    |    | of dried   |
| from the     | 14%       |    |    |    |    |    |    | fruits and |
| world of     |           |    |    |    |    |    |    | a net      |
| US\$ 15.62   | Brazil -  |    |    |    |    |    |    | importer   |
| million in   | 9%        |    |    |    |    |    |    | of nuts.   |
| 2005 versus  |           |    |    |    |    |    |    | However, a |
| US\$ 12.63   | The       |    |    |    |    |    |    | small      |
| million in   | United    |    |    |    |    |    |    | market     |
| 2004.        | States is |    |    |    |    |    |    | exists for |
|              | a major   |    |    |    |    |    |    | dried      |
| Net exports  | supplier  |    |    |    |    |    |    | exotic     |
| to the world | of        |    |    |    |    |    |    | fruits,    |
| of US\$      | almonds   |    |    |    |    |    |    | and        |
| 486.34       | with a    |    |    |    |    |    |    | opp        |
| million in   | market    |    |    |    |    |    |    | ortunities |
| 2005 versus  | share of  |    |    |    |    |    |    | exist for  |
| US\$ 461.95  | about     |    |    |    |    |    |    | shelled    |
| million in   | 86.9%.    |    |    |    |    |    |    | hazelnuts, |
| 2004.        |           |    |    |    |    |    |    | desiccated |
|              | USA       |    |    |    |    |    |    | coconut,   |
|              | imports   |    |    |    |    |    |    | cashew     |
|              | of US\$   |    |    |    |    |    |    | nuts and   |
|              | 7.2       |    |    |    |    |    |    | shelled    |
|              | million   |    |    |    |    |    |    | almonds.   |
|              | versus    |    |    |    |    |    |    |            |
|              | US\$ 4.8  |    |    |    |    |    |    | Brazil is  |
|              | million   |    |    |    |    |    |    | a member   |
|              | in 2004.  |    |    |    |    |    |    | of MFN     |
|              |           |    |    |    |    |    |    | status     |
|              |           |    |    |    |    |    |    | countries. |
+--------------+-----------+----+----+----+----+----+----+------------+
| Coffee, Tea, | Malawi -- | 2  | 2. | 2. | 0. | 0. | 0. | South      |
| Mate and     | 19%       | .5 | 03 | 84 | 10 | 08 | 16 | Africa is  |
| Spices (09)  |           |    |    |    |    |    |    | a net      |
|              | Vietnam   |    |    |    |    |    |    | importer   |
| Net imports  | -- 15.9%  |    |    |    |    |    |    | of spices. |
| from the     |           |    |    |    |    |    |    | Local      |
| world of     | India --  |    |    |    |    |    |    | production |
| US\$ 7.80    | 9.5%      |    |    |    |    |    |    | of tea,    |
| million in   |           |    |    |    |    |    |    | coffee is  |
| 2005 versus  | US minor  |    |    |    |    |    |    | in         |
| US\$ 8.52    | supplier  |    |    |    |    |    |    | sufficient |
| million in   | of 0.15%  |    |    |    |    |    |    | to meet    |
| 2004.        |           |    |    |    |    |    |    | local      |
|              | Category  |    |    |    |    |    |    | demand.    |
| Net exports  | 0902      |    |    |    |    |    |    | Malawi is  |
| to the world | (pepper)  |    |    |    |    |    |    | a member   |
| of US\$ 7.64 | have      |    |    |    |    |    |    | of MFN     |
| million in   | shown     |    |    |    |    |    |    | status     |
| 2005 versus  | growth    |    |    |    |    |    |    | countries. |
| US\$ 7.61    | from US\$ |    |    |    |    |    |    |            |
| million in   | 4.334 in  |    |    |    |    |    |    |            |
| 2004.        | 2004 to   |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 26.322 in |    |    |    |    |    |    |            |
|              | 2005;     |    |    |    |    |    |    |            |
|              | category  |    |    |    |    |    |    |            |
|              | 0904      |    |    |    |    |    |    |            |
|              | (tea)     |    |    |    |    |    |    |            |
|              | growth    |    |    |    |    |    |    |            |
|              | from US\$ |    |    |    |    |    |    |            |
|              | 20.814 in |    |    |    |    |    |    |            |
|              | 2004 to   |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 64.690 in |    |    |    |    |    |    |            |
|              | 2005.     |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| Sugars and   | Brazil -  | 1  | 10 | 2  | 3. | 6. | 6. | South      |
| Sugar        | 42%       | 1. | .9 | 1. | 29 | 43 | 63 | Africa is  |
| C            |           | 71 |    | 35 |    |    |    | a net      |
| onfectionery | USA --    |    |    |    |    |    |    | exporter   |
| (17)         | 7.5%      |    |    |    |    |    |    | of sugar.  |
|              |           |    |    |    |    |    |    | The        |
| Net imports  | Colombia  |    |    |    |    |    |    | majority   |
| from the     | -- 7.2%   |    |    |    |    |    |    | of imports |
| world of     |           |    |    |    |    |    |    | are in the |
| US\$ 19.82   | USA       |    |    |    |    |    |    | category   |
| million in   | imports   |    |    |    |    |    |    | of other   |
| 2005 versus  | decline   |    |    |    |    |    |    | sugar      |
| US\$ 17.40   | from US\$ |    |    |    |    |    |    | products   |
| million in   | 5.9       |    |    |    |    |    |    | in solid   |
| 2004.        | million   |    |    |    |    |    |    | form, such |
|              | in 2004   |    |    |    |    |    |    | as cane    |
| Net exports  | to US\$   |    |    |    |    |    |    | and beet   |
| to the world | 5.7       |    |    |    |    |    |    | sugar.     |
| of US\$ 275  | million   |    |    |    |    |    |    |            |
| million in   | US\$ in   |    |    |    |    |    |    | January    |
| 2005 versus  | 2005.     |    |    |    |    |    |    | 2006 saw   |
| US\$ 223.71  |           |    |    |    |    |    |    | customs    |
| in 2004.     | Category  |    |    |    |    |    |    | duty on    |
|              | (1704)    |    |    |    |    |    |    | sugar      |
|              | shown     |    |    |    |    |    |    | con        |
|              | most      |    |    |    |    |    |    | fectionery |
|              | growth    |    |    |    |    |    |    | not        |
|              | from US\$ |    |    |    |    |    |    | containing |
|              | 280.000   |    |    |    |    |    |    | cocoa      |
|              | to        |    |    |    |    |    |    | cl         |
|              | 529.000   |    |    |    |    |    |    | assifiable |
|              | in 2005.  |    |    |    |    |    |    | under the  |
|              |           |    |    |    |    |    |    | tariff     |
|              |           |    |    |    |    |    |    | subheading |
|              |           |    |    |    |    |    |    | 1704.90    |
|              |           |    |    |    |    |    |    | increased  |
|              |           |    |    |    |    |    |    | from 25%   |
|              |           |    |    |    |    |    |    | ad valorem |
|              |           |    |    |    |    |    |    | to 37% ad  |
|              |           |    |    |    |    |    |    | valorem.   |
|              |           |    |    |    |    |    |    | Brazil and |
|              |           |    |    |    |    |    |    | Columbia   |
|              |           |    |    |    |    |    |    | are        |
|              |           |    |    |    |    |    |    | members of |
|              |           |    |    |    |    |    |    | MFN status |
|              |           |    |    |    |    |    |    | countries. |
+--------------+-----------+----+----+----+----+----+----+------------+
| Preserved    | China --  | 24 | 1  | 1  | 1. | 1. | 2. | China      |
| Food (20)    | 21%       | .2 | 9. | 1. | 44 | 31 | 29 | supplies   |
|              |           |    | 68 | 73 |    |    |    | price      |
| Net imports  | Argentina |    |    |    |    |    |    | c          |
| from the     | -- 17.3%  |    |    |    |    |    |    | ompetitive |
| world of     |           |    |    |    |    |    |    | products.  |
| US\$ 12.54   | Italy --  |    |    |    |    |    |    |            |
| million in   | 16.2%     |    |    |    |    |    |    | Argentina  |
| 2005 versus  |           |    |    |    |    |    |    | is a       |
| US\$ 8.54    | USA --    |    |    |    |    |    |    | member of  |
| million in   | Minor     |    |    |    |    |    |    | MFN status |
| 2004.        | supplier  |    |    |    |    |    |    | countries; |
|              | of 3.4%.  |    |    |    |    |    |    | whereas    |
| Net exports  |           |    |    |    |    |    |    | Italy is a |
| to the world | USA       |    |    |    |    |    |    | member of  |
| of US\$      | imports   |    |    |    |    |    |    | EU states. |
| 128.3        | increased |    |    |    |    |    |    |            |
| million in   | from US\$ |    |    |    |    |    |    |            |
| 2005 versus  | 1.3       |    |    |    |    |    |    |            |
| US\$ 95.94   | million   |    |    |    |    |    |    |            |
| million in   | to US\$ 2 |    |    |    |    |    |    |            |
| 2004.        | million   |    |    |    |    |    |    |            |
|              | in 2005.  |    |    |    |    |    |    |            |
|              | Category  |    |    |    |    |    |    |            |
|              | 2008      |    |    |    |    |    |    |            |
|              | jumped    |    |    |    |    |    |    |            |
|              | from US\$ |    |    |    |    |    |    |            |
|              | 0.60      |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    |            |
|              | in 2004   |    |    |    |    |    |    |            |
|              | to US\$   |    |    |    |    |    |    |            |
|              | 1.4       |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    |            |
|              | in 2005.  |    |    |    |    |    |    |            |
|              | Other     |    |    |    |    |    |    |            |
|              | c         |    |    |    |    |    |    |            |
|              | ategories |    |    |    |    |    |    |            |
|              | that have |    |    |    |    |    |    |            |
|              | shown     |    |    |    |    |    |    |            |
|              | growth is |    |    |    |    |    |    |            |
|              | 2001,     |    |    |    |    |    |    |            |
|              | 2005 and  |    |    |    |    |    |    |            |
|              | 2007.     |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| M            | USA --    | 3. | 2. | 4. | 1  | 1  | 2  | South      |
| iscellaneous | 16%       | 68 | 73 | 17 | 3. | 9. | 1. | Africa is  |
| Edible       |           |    |    |    | 82 | 19 | 36 | a net      |
| Preparatio   | Ne        |    |    |    |    |    |    | exporter   |
| ns/Processed | therlands |    |    |    |    |    |    | of         |
| Fruit & Veg  | -- 14%    |    |    |    |    |    |    | processed  |
| (21)         |           |    |    |    |    |    |    | fruits and |
|              | Germany   |    |    |    |    |    |    | v          |
| Net imports  | -- 12%    |    |    |    |    |    |    | egetables. |
| from the     |           |    |    |    |    |    |    | Opp        |
| world of     | USA       |    |    |    |    |    |    | ortunities |
| US\$ 96.52   | imports   |    |    |    |    |    |    | exist for  |
| million in   | jumped    |    |    |    |    |    |    | canned     |
| 2005 versus  | from US\$ |    |    |    |    |    |    | peas, and  |
| US\$ 75.22   | 17.7      |    |    |    |    |    |    | import of  |
| million in   | million   |    |    |    |    |    |    | grape and  |
| 2004.        | to US\$   |    |    |    |    |    |    | apple      |
|              | 19.3      |    |    |    |    |    |    | juice      |
| Net exports  | million   |    |    |    |    |    |    | which are  |
| to the world | in 2005.  |    |    |    |    |    |    | used as a  |
| of US\$ 6    | C         |    |    |    |    |    |    | base for   |
| million in   | ategories |    |    |    |    |    |    | other      |
| 2005 versus  | (2106)    |    |    |    |    |    |    | fruit      |
| US\$ 4.01    | food      |    |    |    |    |    |    | juices,    |
| million in   | pre       |    |    |    |    |    |    | prepared   |
| 2004.        | parations |    |    |    |    |    |    | and        |
|              | shown     |    |    |    |    |    |    | preserved  |
|              | most      |    |    |    |    |    |    | tomatoes,  |
|              | growth    |    |    |    |    |    |    | and fruit  |
|              | from US\$ |    |    |    |    |    |    | pulps.     |
|              | 15.9      |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    | N          |
|              | to US\$   |    |    |    |    |    |    | etherlands |
|              | 17.7      |    |    |    |    |    |    | and        |
|              | million   |    |    |    |    |    |    | Germany    |
|              | in 2005;  |    |    |    |    |    |    | are        |
|              | and       |    |    |    |    |    |    | members of |
|              | category  |    |    |    |    |    |    | EU states. |
|              | 2102 from |    |    |    |    |    |    |            |
|              | US\$ 0.34 |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    |            |
|              | to US\$   |    |    |    |    |    |    |            |
|              | 0.42      |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    |            |
|              | in 2005.  |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| Beverages    | UK -- 49% | 3  | 4  | 6  | 6. | 1  | 2  | South      |
| (22)         |           | 2. | 7. | 2. | 31 | 8. | 8. | Africa is  |
|              | US -- 12% | 21 | 86 | 51 |    | 75 | 63 | a net      |
| Net imports  |           |    |    |    |    |    |    | exporter   |
| from the     | Austria   |    |    |    |    |    |    | of         |
| world of     | -- 9.7%   |    |    |    |    |    |    | alcoholic  |
| US\$ 178.31  |           |    |    |    |    |    |    | beverages. |
| million in   | USA       |    |    |    |    |    |    | This       |
| 2005 versus  | imports   |    |    |    |    |    |    | market is  |
| US\$ 144.33  | jumped    |    |    |    |    |    |    | dominated  |
| million in   | from US\$ |    |    |    |    |    |    | by well    |
| 2004.        | 17        |    |    |    |    |    |    | known      |
|              | million   |    |    |    |    |    |    | brands     |
| Net exports  | in 2004   |    |    |    |    |    |    | from the   |
| to the world | to US\$   |    |    |    |    |    |    | UK.        |
| of US\$      | 25.7      |    |    |    |    |    |    |            |
| 596.12       | million   |    |    |    |    |    |    | The South  |
| million in   | in 2005.  |    |    |    |    |    |    | African    |
| 2005 versus  | Category  |    |    |    |    |    |    | appetite   |
| US\$ 537.96  | (2208)    |    |    |    |    |    |    | for        |
| million in   | Ethyl     |    |    |    |    |    |    | American   |
| 2004.        | alcohol   |    |    |    |    |    |    | spirits    |
|              | shown     |    |    |    |    |    |    | has grown  |
|              | most      |    |    |    |    |    |    | over the   |
|              | growth    |    |    |    |    |    |    | last three |
|              | from US\$ |    |    |    |    |    |    | years.     |
|              | 16.6      |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    | UK and     |
|              | in 2004   |    |    |    |    |    |    | Austria    |
|              | to US\$   |    |    |    |    |    |    | are        |
|              | 25        |    |    |    |    |    |    | members of |
|              | million   |    |    |    |    |    |    | EU states. |
|              | in 2005.  |    |    |    |    |    |    |            |
|              | Other     |    |    |    |    |    |    |            |
|              | c         |    |    |    |    |    |    |            |
|              | ategories |    |    |    |    |    |    |            |
|              | that have |    |    |    |    |    |    |            |
|              | shown     |    |    |    |    |    |    |            |
|              | growth    |    |    |    |    |    |    |            |
|              | are 2201  |    |    |    |    |    |    |            |
|              | from US\$ |    |    |    |    |    |    |            |
|              | 28.944 to |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 83.503 in |    |    |    |    |    |    |            |
|              | 2005;     |    |    |    |    |    |    |            |
|              | 2204 from |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 37.854 to |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 70.324 in |    |    |    |    |    |    |            |
|              | 2005; and |    |    |    |    |    |    |            |
|              | category  |    |    |    |    |    |    |            |
|              | 2209 from |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 3.928 to  |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 9.224 in  |    |    |    |    |    |    |            |
|              | 2005.     |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+

Source: World Trade Atlas

# Section 4. BEST PRODUCTS PROSPECTS

A. Products Present in the market Which Have Good Sales Potential

-   Preserved food

-   Processed fruit and vegetables

-   Beverages

-   Sugars, Sweetners & Beverage Bases

-   Edible fruits and nuts

\- Canned salmon

B. Products Not Present In Significant Quantities but Which Have Good
Sales Potential

The hotel-restaurant and institutional sector continue to expand and
restaurant chains are rapidly becoming the dominant sector. Finding
shows that the following products have good sales potential.

-   Pulses

-   Breakfast Cereals and Pancake Mix

-   Eggs & Products

-   Dairy products

C. Products Not Present Because They Face Significant Barriers

In July 2000, South Africa imposed prohibiting anti-dumping duties on
U.S. frozen chicken leg quarters, an action that virtually cut off U.S.
chicken exports to South Africa for the past 6 years. In 2005, the South
African government announced that the anti-dumping duties on U.S.
chicken meat would expire under the "sunset review" clause, but the
South African Poultry Association applied to have the duties extended.

On March 2, 2006, the International Trade Administration Commission
(ITAC) of South Africa released its preliminary decision that "the
expiry of the anti-dumping duties would not likely lead to the
recurrence of material injury" and that therefore the ITAC had decided
to recommend to the Minister of Trade and Industry that the anti-dumping
duties be withdrawn. Nevertheless, the Commission has given all parties
the final opportunity to comment on the "essential facts" of the case by
March 16, 2006. ITAC will make its final recommendation to the Minister
after considering any additional comments received.

The USDA is working with the South African department of Agriculture to
permit the importation of apples, grapes, and fresh pomegranates from
the United States.

# Section 5. 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: 011-27 12 431 4235

Fax: 011-27 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/)

**WE ACKNOWLEDGE THE FOLLOWING SOURCES: INDUSTRY WEBSITES SUCH AS
EUROMONITOR, WORLD TRADE ATLAS, STATISTICS SOUTH AFRICA (STATSSA), SOUTH
AFRICAN TOURISM, DELLOITTE, GRANT THORNTON, HOTELBENCHMARK, DEPARTMENT
OF ENVIRONMENTAL AFFAIRS AND TOURISM, AND LOCAL FOODSERVICE INDUSTRY
PUBLICATIONS.**