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Industry Overview – Food, Beverage and Hospitality Publication

South Africa ranks in the 25 top tourist destinations in the world and continues to grow in popularity. Tourism is South Africa’s fastest growing industry, with Eco Tourism as the fastest growing segment.

Tourism currently ranks third in foreign exchange earnings and job creation and is regarded as the future top earner in these areas. The current employment figure of 7% of South Africa's workforce is expected to grow to over 1,2 million people by 2010.

The food industry accounts for the largest section of the South African manufacturing industry. Consolidation and associations with international companies have been trends in the industry, creating access to new technology and expertise, while allowing the foreign companies access into the South African market.

The local beverage industry supports 32 independent microbreweries, but continues to be dominated by South African Breweries (SAB). The soft drink industry is dominated by Coca-Cola, who operates through Amalgamated Beverages Industries (ABI).

South Africa is the 7^th largest producer of wine in the world. The local alcoholic market is dominated by beer, followed by sorghum beer, natural wine, brandy, cane and grain spirit, whisky, fortified wine, sparkling wine and alcoholic fruit drinks.

In the hospitality industry, bed and breakfast is the fastest growing sector and creates great opportunities for suppliers as well as for job creation.

There is a growing interest in South Africa's tourism and leisure industry, especially from offshore investors, looking for hotel, guesthouse and country hotel investment opportunities. In addition, major hotel operators in Cape Town and Johannesburg reported an increase averaging between 25% and 35% in revenue per available room in 2002.

Challenges

The current strength of the rand makes South Africa less attractive to overseas visitors. An additional concern is the perception that the entire Southern Africa region is one entity and that instability in one country affects all the others.

The food industry, in particular, has been affected by globalisation and the lowering of trade tariffs. Although this has increased South Africa’s competitiveness in the world markets, a further consequence is greater competitor pressure for food prices. The food industry is also beleaguered by fragmentation of legislation and control. The responsibilities are divided among the Department of Health (food safety), the Department of Agriculture (quality) and the SABS (compulsory regulations). The industry will benefit from a single food authority to reduce costs and bureaucracy.

The beverage industry has high entry barriers, due to the domination of corporate groupings. A large portion of alcoholic beverage production is exported, while in the domestic market, private household consumption dominates demand and is steadily increasing. This is good news for the beverage industry as South Africa’s domestic demand is fairly low compared to international standards.

Global instability has also placed global hotel operators under pressure, but the South African hospitality industry has weathered the storms well.

Advantages

Any visitor to South Africa will be impressed with the excellent value for money available. Despite the strengthening of the rand against the foreign currencies, tourists are still able to enjoy the best of the first world luxuries, in a spectacular environment, at costs far lower than those charged in more developed countries.

South Africa also offers a great variety of tourist attractions. The variety of environments, extremely diverse flora, the Big Five and a vast array of bird species make eco-tourism a South African specialty. Hunting and game viewing is a rapidly growing industry. Some of the most heart-stopping adventure options in the world are found in South Africa. In addition, the country has a rich cultural and historic heritage, extending to the beginning of mankind at several archeologically significant sites.

The combination of first-world infrastructure and a spectacular environment, further lends itself to the conference industry and currently, 80 to 100 international conference events are hosted each year. South Africa has also proved its ability to host international sports events. Tourism statistics show that in excess of 10% of all foreign tourists come to watch or participate in sport events, with spectators accounting for 60% to 80% of these arrivals.

The food industry in South Africa enjoys several competitive advantages, including a world-class infrastructure, a developed financial sector, counter-seasonality to Europe, a diversity of climates, which allows for a vast and varied array of agricultural products. The country also has marine resources suitable for conventional harvesting as well as mariculture and aquaculture. Competitive input costs are another advantage, especially in terms of electricity and labour.

High import tariffs, as well as international licencing and distribution agreements protect the domestic liquor market. As such, imports of alcoholic beverages are limited, although the market has been opened up to imported beer and wine by the GATT/WTO agreement.

In addition, domestic demand for beer and wine is increasing due to higher income levels and westernisation of customs.

South Africa’s hospitality industry has some of the world’s top hotels and resorts, with excellent conference facilities and unique environments. The hospitality industry is benefiting from the government incentive of up to 30% rebate on capital expenditure for the construction of new buildings or the expansion of existing operations in the industry. There is a trend towards the construction of new buildings and the boutique niche hotel concept, popular in Europe and the US, is also finding a niche in South Africa. Foreign investors include both owner/manager investors looking for a guest house or country hotel investment opportunity and corporate investors who are considering investments in excess of R20 million rand.

Conclusion

South Africa offers tourists great value for money, combined with spectacular scenery, a wide array of attractions, all in addition to world-class facilities in accommodation, restaurants and travel.

The industry faces many challenges, but these are outnumbered by the competitive advantages in the country. Turning tourism into South Africa’s biggest economic sector will require a great deal of collaboration, knowledge-sharing and networking by all the players involved in the food, beverage, hospitality and tourism industries. Through a unified approach the country can position itself as the top tourist destination in the world.