Today I will look at starting a business that will import fresh produce, meat, poultry dry and canned food (and even sweets and chocolates) from foreign markets while adopting a low-cost business model and why you should be starting this business.
The majority of South Africans live in poverty and this number is increasing on a daily basis. Food is a necessity and takes up a significant part of lower-income people’s salary. Importing lower-cost food products that are available locally will help lower-income earners money stretch further. Locally we often have more exotic food get imported which sells at a premium. Despite the ZAR/USD exchange rate in recent years, there is still money to be made by importing low-cost foods.
Fresh Produce, Meat & Poultry
Fresh produce is fruit and vegetables that have not been processed in any way, while meat and poultry are from animals. These are stuff that has been farmed. Unlike locally most countries around the world subsidise their farmers, this makes it not only cheaper to produce but oftentimes (because they are subsidised per hectare or livestock, seeds feed etc.) subsidised farmers produce more than what they can sell within their markets which leads to “dumping” (when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter’s domestic market). This is sometimes seen as a negative thing, and anti-globalization protesters like to chide “rich” countries over subsidies especially within the context of trade agreements. I personally have no sympathy for African countries like South Africa who instead of supporting their local industry, the money is
pilfered away stolen due to corruption and incompetence. It is a great way for entrepreneurs to take these “excess” products off foreign hands and sell it in local markets (and help the local poor). It’s not our fault that the government don’t want to subsidise the local industry to bring down the cost of food. Subsidies make a lot of sense, it encourages farmers to grow more, which creates more employment, cheaper food and export revenue, taxes but no they don’t want to. So let’s make money.
Dry goods are sugar, flour, uncooked rice, pasta. These are processed and manufactured. They are often imported by the ton and then repackaged locally.
These are processed and manufactured food that has been canned. While the food will be imported the canning may happen internationally or locally.
Sweets & Chocolates
Don’t forget confectionary. Even this market in SA is an expensive mess. Shrinkflation has made the bland Cadbury smaller and more expensive over the years. IT costs almost R15 for 100g of sweets. Madness. It does not make sense that jelly sweets, can be as expensive as it is locally, gelatin, sugar, colouring, flavouring. How much can it really cost to make per kg?
Fresh produce is seasonal and a lot is already imported, at the moment there is an opportunity with regards to dry goods and sweets, with most popular sources being Poland and Turkey. China is a popular source of canned foods. These countries have efficient supply chains; they don’t have the nonsense that you will see below.
Now you are probably thinking why do we need to import food? Food in SA is more expensive in South Africa than in its peer countries. However due to policies of the government, and these are party (ANC) policies (I will get into why this is important in a bit) the price of food is way above what it should be. And this cannot be driven down much further than current prices due as the high cost is driven by macro factors out of our control:
- Manufacturing – High electricity cost due to Eskom
- Logistics – High fuel cost due to fuel levies
- Manufacture, Logistics Retail – Security and insurance costs due to high crime
- Lack of farming subsidies driven by politics
- Onerous labour laws making hiring and employing people more expensive
I am also convinced that our agricultural industry will eventually be destroyed by the government, save for a few niche farming here and there, I no longer recommend farming as a business. I will go into detail at a later stage but if you thinking it won’t happen because we have so much fertile land I would like to point you to our mining industry where despite the advantage of having an abundance of virtually any commodity the government has destroyed it with their policies.
Importing Good or Bad?
A lot of negative things have been said about importing, especially in the food industry, the local poultry industry for example; despite injecting their chicken with lots of salt water or “brine” they still can’t compete with imported chicken. Let that be an indication of how crazy the situation is when the Germans can sell their (superior) chicken here cheaper than the locals. Now even if you want to manufacture locally you can’t do anything about cheap imports, South Africa is bound by various trade agreements, they cannot just tariff or quota cheaper imports without facing repercussions. This is why our manufacturing capacity is disappearing.
Remember what I said about high food prices being driven by ANC party politics? The principles that are above all else (above party politics and industry lobby): the constitution, says that all South Africans have a right to food [PDF]. The government is taking that right away. By importing cheaper food than what is available locally you are enforcing the constitution (and making money).
Do you know where is even more money to be made? Short-dated imports.