Who Owns Whom’s report on the wholesale and retail of food in South Africa highlights critical shifts in the industry amid ongoing debates about VAT increases. With food security and inequality at the centre, private sector innovation and government policies are reshaping the landscape, particularly in township economies and the growing ecommerce sector.
The VAT increase in the latest Budget is considered insensitive to low income earners, and insufficiently offset by an extended exemption of additional food items to avoid the likelihood of deepening poverty, inequality, and injustice.
Challenges in South Africa’s food wholesale market
Food is the most basic need and at the bottom of the Maslow hierarchy, ahead of clothing and shelter. With a stagnating economy and rising cost of living, the plight of lower-income earners and the unemployed, and their daily need for food, cannot be ignored.
Stats SA’s unemployment figures crept up from 26% to over 30% from 2015 to 2020 and have stuck well above 30% since then while real unemployment, using an expanded definition, sits above 40%, which is unacceptably high and deserving to be a primary priority for any government.
Food production and wholesale in South Africa
There has been an increase in small-scale food production, which is not very productive due to supply chain hindrances, making it difficult for small producers to gear up for the export market. Small-scale production is key to improving food security for households.
Some of the biggest retailers such as Shoprite, Pick n Pay, Spar, and Food Lover’s Market have expanded their presence in townships, rural areas and low-income communities. They have also started to form partnerships with informal traders, such as spaza shops, to streamline supply chains and improve product availability, thereby enhancing the food wholesale and distribution network within township economies and making hygienic food more accessible for poor communities
Operational efficiencies, hygienic standards and financial standing are enhanced through these partnerships and contribute to lowering food prices. These initiatives were mostly spurred by the entry of foreign wholesalers mainly from Pakistan, Somalia and Ethiopia introducing cheap foodstuffs into the community, challenging incumbent retailers to find innovative ways of remaining profitable while serving this huge market, which is estimated in the billions of rands.
Regulation in the food retail sector
For the longest time, spaza shops operated informally and did not have to comply with regulations, mainly because they are spaza, meaning miniature or imitation of the real thing. The R638 Food Regulations introduced in 2018 to help ensure that all food products are safe for human consumption, has not been adequately monitored and enforced to the extent that fatal casualties occurred. Government reactively decided to introduce further regulations that call for each spaza shop owner to rezone their home or place of business and register it as a business within a short timeframe. It however then displayed woeful incapacity to deal with the applications. This new regulation has been costly for applicants and does not address hygiene and food safety issues that were plaguing the industry.
Private sector resilience and self-regulation
South Africa’s continued development of new shopping centres is testimony to the private sector’s ability to find ways to thrive in a stagnant economy. Despite years of declining GDP/Capita, food consumption is increasing, indicating that nutritional intake is improving to some extent.
An example of how the private sector self regulates is how Pick n Pay’s shareholders, who paid a heavy price for poor management, supported a turnaround plan, subscribed to a rights issue and changed management. No taxpayer funds were involved in this “business rescue” as at a critical stage, Pick n Pay was technically insolvent. If it had no reasonable prospects, bankruptcy and liquidation would have ensued, at no cost to taxpayers.
Growth of ecommerce grocery sales South Africa
As articulated in the Who Owns Whom report on the retail of food in South Africa, the rapid growth of ecommerce and home delivery services has seen retailers increasingly adopting sophisticated technologies and fulfilment models.
There are great successes and innovations in this sector despite some challenges pertaining to food security, inequality and affordability for millions of South Africans.
The status of travel and tourism in South Africa
The drastic COVID-19 lockdown measures were devastating for tourism industries all over the world, as illustrated in the graph below on South African tourist accommodation revenue, sourced from Who Owns Whom’s report on Travel and Tourism Trends in South Africa.
It is devastating that four years on, South Africa has not really caught up with pre-pandemic tourism levels in terms of numbers of tourists and revenue. Statistics do not always convey the magnitude of the loss for a country, particularly for small tourism operators, employment, foreign exchange inflows and even fiscal revenues. In 2020 alone, more than R20bn evaporated.
South Africa’s tourism industry challenges
External events over which the country has little, or no control can create havoc. Natural causes like volcanic eruptions in Iceland have the potential to direct tourism to far flung destinations like South Africa, while others like the pandemic can have devastating effects. Draconian visa regulations on international travel can seriously damage tourism. For example, the recent US-Canada tariff war is resulting in a significant drop in Canadian tourists crossing into the US. According to the Caribbean News Digital website, An Ipsos poll found that 65% of Canadians plan to avoid travelling to the United States. This shift can result in several billions of dollars loss in revenue for the US hospitality sector.
Geopolitical tensions or power struggles between countries or regions that affect international relations, economic stability and global security can lead to a drop in tourism.
The impact of regulation on the travel and tourism industry
Regulations can be burdensome, and compliance requires time, funds, and resources that can sometimes constitute an insurmountable barrier for small startups to get off the ground.
According to a Stanlib article on business regulation scores, South Africa was ranked last with the highest number of regulations for doing business. Looking at the impact of tourism illustrated below, the need for less regulation is clear.
Examples of cumbersome regulations include training requirements for the tourism industry which state that a tour guide must be registered with provincial tourism authorities and must complete a training course through a training provider accredited by the Culture, Arts, Tourism, Hospitality, and Sport Sector Education and Training Authority (CATHSSETA).
It is questionable whether this profession needs to be overregulated. In a freer business environment, competent competition would wipe out a bad tour guide, as demand is driven by discerning tourists and intermediaries like travel agents. There is no need to force a training course on a tour guide.
Opportunities and future growth
Despite the country’s economic and recent geopolitical hiccups, South Africa’s tourism industry has great potential for growth. The country is endowed with excellent climatic conditions and tourist attractions such as game reserves and national parks, nature reserves, botanical gardens, wildlife sanctuaries, cultural and natural heritage sites, wine farms, craft breweries and distilleries, museums, historical landmarks, art galleries, beaches and aquariums.
Rethinking the approach to increasing regulation is becoming urgent in a country with sky-high unemployment. A freer operational environment in the tourism industry help to attract potential tourists locally and internationally.
As tourism is one of the most labour-intensive industries globally, more support and less regulation can unlock this powerful driver of employment. Its ability to generate various opportunities in numerous industries such as transport, entertainment, retail and wine tourism demonstrates the importance of this industry.
Now that Spain and other popular destinations are protesting against the influx of tourists, perhaps South Africa can use this as leverage and show that it welcomes tourists any time.
The South African agribusiness sector is a backbone of the economy, driving growth and providing food security and employment.
Who Owns Whom’s report on the agricultural sector in South Africa reported that the sector grew by 17.2% in the fourth quarter of 2024, saving the country from a technical recession. The GDP was 0.6% in the 4th quarter, which was higher than the third quarter when it shrank by 0.1%.
That illustrates the importance of agriculture to the economy. It is equally important for food security and people’s livelihoods.
Land is an inseparable aspect of any discussion on agriculture. This blog was written as the US halted USAID funding to South Africa, citing land grabs as the reason for the decision.
Competitive advantage of South African agriculture
South Africa has a more modern and diverse agricultural economy than other African countries. Its resilience will be helpful as many factors are impacting the South African agricultural industry – including lack of progress with land reform, the volatile exchange rate, electricity supply shortages and ongoing climate change concerns.
Who Owns Whom’s report indicates that the country’s advanced infrastructure and technological adoption enable it to compete effectively on the continent.
The state of agribusiness in South Africa
The farming industry’s gross revenue reached R452bn in 2023/24, up 1.4%, despite an overall 5% decline in farming production.
Due to the stagnating and poorly managed economy, the country faces several challenges. The one that most contributes to food insecurity is inadequate infrastructure, particularly in rural areas, making it difficult to deliver fresh produce on time to vulnerable communities.
The agriculture sector supports millions of livelihoods and significantly contributes to national exports. However, despite its importance, the sector does not adequately feed all South Africans, and food waste is the biggest contributor to food insecurity.
Challenges and industry pain points
Government has introduced several initiatives aimed at transforming the sector. Some had unintended consequences, such as the Micro-Agricultural Financial Institutions of South Africa (MAFISA) to expand production funding to small farmers, particularly in communal land areas and on smallholdings with a variety of tenure systems.
Intermediaries used MAFISA loans to finance production on communal or smallholder land by paying contractors for production. In effect, MAFISA funds were used to rent land, and the objective of empowering emerging farmers and growing their capacity to engage in the agricultural sector was not achieved.
Opportunities and future growth
With the global challenges associated with climate change, it is important for the industry to adopt new farming methods. The graph shows that horticulture is continuing to grow, indicating that South African farmers are already utilising techniques such as organic farming, permaculture, and agroforestry, which improve soil health, reduce water usage, and minimise the need for chemical inputs. These practices contribute to more resilient agricultural systems that can better withstand climate change impacts.
The government should play its role by improving infrastructure such as roads, rail, and ports to ensure the timely delivery of produce to key locations, avoiding wastage. Small farmers play a key role in addressing food insecurity, which calls for technical assistance and training in sustainable methods to improve resilience.
The call for land by communities is sometimes misunderstood and usually assumed to be for farming, while it is a combination of residential, subsistence and mainstream agriculture. For as long as the issue of land ownership and its use for livelihood is not adequately addressed, the majority of South Africans will remain on the periphery of economic activity.
Deregulation and removing government red tape can go a long way towards incentivising the private sector to invest in the sector and in turn, create much-needed employment, increase productivity and minimise dependence on exports.
Regulation and oversight increase the level of certainty essential for fairness and stability, particularly in the accounting profession. Clearly defined regulations prevent malfeasance, fraud, corruption, and injustice. The costs of increased regulation, and whether these exceed estimated benefits, is an issue that requires some evaluation.
With respect to the effectiveness of additional regulation in the accounting industry, additional regulation does not always assist in achieving the desired outcome. While there has always been a fair amount of regulation in the accounting industry, some scandals became public as far back as 2001, leading to Arthur Andersen’s demise related to the Enron scandal. A raft of additional regulation followed.
Twenty years later in South Africa, there were several breaches of regulations by big accounting firms in the private and public sector spaces. They suffered reputational damage and some lost clients and had to reduce staff. In the private sector sphere, as in the case of Steinhoff and VBS, shareholders and depositors who invested in those companies, took losses. In the public sector as in Eskom, taxpayers are carrying the can while they did not choose to invest in the company. This is further elaborated on in the Who Owns Whom report on the accounting industry in South Africa.
Public vs private sector accountability
There is a discrepancy between the consequences faced by private and public sector operators for being caught for wrongdoing. Every year, the Auditor-General (A-G) flags a litany of fraud and corruption in public sector entities. Were those irregularities committed by listed private sector companies, the consequence would be dire and they would face delisting or sanctions. This is not the case in the public sector.
Enhanced powers of the Auditor General
It was encouraging that the A-G’s powers were enhanced by the Public Audit Amendment Act (PAAA) which came into effect in 2019. This legislation allows the AGSA to issue debt recovery orders to recover financial losses due to misconduct, refer material irregularities to law enforcement agencies and fine auditors found guilty of transgressions up to R25m. This has strengthened audit quality and integrity in the accounting industry.
Government has all the tools in terms of regulations required to enforce corrective actions.
The importance of trust contributes to economic growth
The role of auditors is so important because they confirm that financial information can be trusted as accurate and correct, which is the foundation for decisions to invest in companies.
A study by Standard Bank found a collation between the decline in trust in the rule of law and slower economic growth, as businesses are reluctant to invest capital to expand their operations over the long term when they lack confidence in the regulatory framework. It stated that the rule of law is vital for a modern economy to prosper, and declining trust could prove fatal for economic growth.
Public Trust and economic performance indicators
Addressing the skills gap in Accounting
The accounting profession is operating in a continuously changing environment due to additional regulation that is challenging and demanding, a situation that is not helped by the growing skills gap as illustrated in this graph.
Because of the important role of auditors in instilling public confidence and trust in their findings, it would be advisable to facilitate career orientation towards this profession.
The future of the accounting industry in South Africa
As indicated in the Who Owns Whom report on the accounting industry in South Africa, the use of digital tools and technologies such as cloud-based accounting software, AI-driven analytics, and blockchain technology, is improving efficiency and providing insights for strategic decision-making.
South African firms increasingly use digital tools to automate financial data processing, lower operating costs and automate risk assessment and data analysis for greater productivity and efficiency. Blockchain technology is becoming a useful accounting tool for securely integrating financial and non-financial information.
The future of accounting in South Africa depends on the balance between regulatory efficiency, innovation, and growing the skills base of accounting professionals.
