Food & Beverage

Inflation, competition and rand volatility challenges for industry.

- Johane Turkstra

Unstable inflation and rand volatility, coupled with global competition, have been the biggest challenges for the food and beverage industry in South Africa in recent times, says derivatives brokerage Intrepid Capital derivative dealer head Tarryn Wright. She explains that, as local inflation rises, the competitiveness of South African local goods is affected.

This can have a substantial impact on both the demand for locally produced goods as well as the exchange rate.

Wright explains to Engineering News that, if a country’s finished product imports are greater than its exports, it is a sign that local manufacturers are having to increasingly compete with mass-producing global manufacturers. If the rand is stronger, import demand increases as foreign goods become cheaper, therefore, negatively affecting local manufacturers in the both domestic and foreign markets.

A weaker rand generally enhances the price competition of South African goods in export markets, as well as provides some protection against import competition as imports become more expensive.

When the rand is stronger, Wright says, local manufacturers can benefit by importing raw products as inputs and using these locally; however, South Africa imports an excess of finished products, impacting negatively on local manufacturers.