Lullu Krugel, PwC South Africa Chief Economist and Vinesh Maharaj, PwC South Africa Smart Manufacturing Leader

South Africans are buying less food as their spending power declines alongside elevated inflation. Precision agriculture, smart manufacturing and retail planning can contribute to greater domestic food supply which, in turn, should result in more affordable food. 

PwC South Africa is pleased to share its fifth South Africa Economic Outlook report for 2024. In this edition, we focus on how the country’s long-term food security needs to be addressed at the farm, factory, and retail level. There is a need to explore sustainable solutions to adequately feed South Africa’s population, which is expected to grow by another four million people by the year 2030.

In 2023, the volume of food and beverages sold per capita at South African grocery stores and supermarkets declined by 3.2%. This can be attributed to several factors, including the inflation-adjusted buying power of salaries and wages declining by 1.0%. Also, household spending was reprioritised as home loan repayments were at least 40% higher compared to three years ago due to higher interest rates. This year, El Niño could cause a 25% drop in local white maize production – if this happens, it will increase the cost of staple maize meal products.

Lullu Krugel, PwC South Africa Chief Economist, says:

“South Africans are buying less food because of pressure on household finances. As a society, we need to make better use of our resources to ensure that food production is increased and that improved nutrition is available to more people at affordable prices. This requires agricultural players to produce more food crops in a sustainable manner, manufacturers to make food and beverage products more efficiently, and for retailers and consumers to cause less loss and waste at the consumption level.”

PwC’s research has identified several levers that the broader food industry can pull to meet the current and expected future demand for nutrition in a sustainable way, as well as how to do so without significantly increasing food prices. These levers are:

• Precision agriculture to increase farm production and sustainability;
• Smart manufacturing making better use of resources; and
• Reducing food waste at the retail and consumption level.

Our assessment of the sector has also indicated that agricultural production will be different going forward: Farming will increasingly be supported by technology and big data which will result in a farmer’s productivity increasing, and their environmental footprint being reduced. By collecting real-time data on weather, soil and air quality, crop maturity, equipment and labour availability, predictive analytics can be used to make smarter farming decisions. This is known as precision agriculture.

Precision farming tools support the improved utilisation and outcomes of agricultural assets, including:

• A reduction in water use by e.g., smart water management software and remote irrigation monitoring;
• Land management supported by e.g., data collection, robotic planting and harvesting, and regenerative agriculture;
• Crop yields being boosted by e.g., farm management software and predictive analytics; and
• The wellbeing of livestock being improved by e.g., remote health monitoring and automated feeding systems.

Demand planning is a process that involves forecasting and planning to meet future customer demand for products. This, in turn, informs their supply planning: how much raw materials should be ordered, how production should be scheduled, and how orders should be allocated across the supply network. However, demand forecasts can regularly be wrong by a very significant amount.

Weak demand forecasting accuracy can cause a surplus in food inputs if actual factory production is curtailed due to low sales, and a large surplus in food outputs if demand is less than what was anticipated when production was planned. At present, some 5.4 million tonnes of food is lost and wasted at the processing and packaging stage of the food supply chain due to these and other production challenges. This volume is around half of total food loss and waste across the value chain.

Manufacturers need to improve demand forecasting to take into account actual resource usage and client orders. Smart manufacturing makes use of demand-driven material requirements planning (DDMRP) systems that improve on traditional demand planning by being more responsive to real-time demand fluctuations. This reduces inventories and surplus food items in the supply chain. A more advanced version of this is ‘demand sensing’, which uses artificial intelligence (AI), real-time supply chain data, and different mathematical models to predict demand dynamically.

Vinesh Maharaj, PwC South Africa Smart Manufacturing Leader, says:

“As one of the most unequal societies in the world, we need to make better use of our food resources. With half of food loss and waste occurring during the manufacturing process, it is imperative that food producers apply modern techniques to better plan their operations in order to minimise wastage. Modern technologies allow for better demand forecasts, production planning and input sourcing, thereby reducing surplus inputs and outputs at the factory level and the ultimate waste of food products.”

The South African Food Loss and Waste Initiative is working with food manufacturers, distributors and retailers to halve the country’s food waste by 2030. Progress has already been made: South Africa’s food waste at the retail level declined from 15.8kg per capita in 2019 to 15.4kg in 2022. While this small progress is certainly good news, the local retail industry has a long way to go to reducing per capita food waste by 50% by 2030.

Reducing food waste at the retail and consumption level can be achieved through improved retail planning. There are several options, including:

• Upgrade demand planning systems: Implementing advanced technology in inventory management can revolutionise the way planners understand consumer demand trends. A better view on actual demand improves the deployment of stock across stores. This not only minimises waste but also streamlines operations.
• Modify store and marketing practices: Moving away from promotions like ‘buy one, get one free’ can help prevent over-purchasing and subsequent waste at the consumption level. Elsewhere, advocating for clearer product labelling can assist consumers in making informed decisions.
• Engage consumers: Through targeted social media campaigns, businesses can raise awareness about the importance – from both a financial and sustainability perspective — of minimising waste.

Key content in this report includes:

• Deteriorating food security: Deteriorating food security: South Africans are buying less food as their spending power declines.
• Precision agriculture: Technology is at the core of farming’s second green revolution.
• Smart manufacturing: Improved demand forecasting can reduce surplus inputs and waste in food production.
• Retail planning: Better inventory management and marketing practices can minimise shop and consumption wastage.
• How PwC assists our clients with precision agriculture, smart manufacturing, and retail planning.

ENDS