Government subsidies, accommodative financing drive South Africa’s agricultural equipment market
14-11-2019 07:45:00 | by: Bob Koigi | hits: 3352 | Tags:

 South Africa Agricultural Equipment Market recorded a CAGR of close to 6% in terms of revenue during 2012-2018 according to a recent study by Research and Markets.

The market was fuelled by increasing government subsidies for farm mechanization, accommodative financing, growth in the agricultural industry and increased awareness towards farm machine mechanization in the space.

The market, however, showcased a slow pace growth owing to low purchasing power & high cost, consistent adverse climatic shocks and dependence on import of agricultural machinery.

South Africa has a dual-agricultural economy, with both well-developed commercial farming being carried out by commercial farmers & cooperatives in large estates along with subsistence-based agriculture production being done by peripheral farmers in smaller rural areas. The market is currently in its recovery stage after witnessing major decline in 2016 owing to drought.

 Domestic demand is principally being met through imports which are sourced primarily from India and China. The major stakeholders in the market have been international OEMs, domestic distributors & importers and domestic OEMs.

Prominent business strategies adopted by major players include forming extensive dealer networks, farmer-magazine advertisement; new product launches, product innovation and improved after sales services.

The market registered a CAGR of close to 3.0% in terms of sales volume of machinery during 2012-2018. The growth factors in the market include increasing government support in terms of subsidies, declining input costs and increased technological developments.

The report also covers future industry analysis (by sales volume and revenue), future market segmentation, SWOT analysis, growth opportunities, upcoming trends, government regulations and analyst recommendations.

The report is useful for existing agricultural equipment companies, potential entrants, investors and other stakeholders to align their market centric strategies according to ongoing and expected trends in the future.

Tillage Equipment captured the highest sales share in terms volume of agricultural machinery sold followed by Planters & Seeders.

Tractors held the third highest share followed by sprayers, precision farming equipment, combine harvesters and others (balers, rakes and more) respectively. Tillage equipment is low cost machinery complementing tractors and are thus exposed to higher wear & tear resulting in higher recurring demand & hence high sales volume in 2018.

The market is clearly driven by imports from countries such as India and China extending cheap labor & manufacturing cost. Hence, all major international OEMs have their international distributors selling their products by importing SKU's to South Africa.

Free State has the highest market share in terms of sales volume, followed by Mpumalanga and Kwa Zulu Natal. This was followed by Western Cape, Northern Cape and Others (Gauteng, Eastern Cape, Limpopo and North West). Free State has accounted for a huge number of large equipment sales since it provides the apt conditions for agriculture and thus accounts for maximum crop production.

Mpumalanga is adept with intensive farming and thus has a higher mechanization rate whereas Kwa Zulu Natal experiences ample rainfall & agriculture produce thus resulting in high sales volume of machinery.

The overall competition stage of the market has been concentrated wherein the landscape is extensively dominated by 3-4 international manufacturers in 2018 in tractors and harvesters market respectively.

There are 3 major domestic manufacturers namely Bell Equipment, Falcon Equipment and Radium Engineering in 2018. International manufacturers include 5 major names including John Deere, Landini, Case IH, CLAAS and Massey Ferguson.

The international manufacturers conduct operations in South Africa through a distribution and dealership network that consists of 3 major players namely BHBW, Northmec and ARGO Industrial (Pty) Limited.

South Africa Agricultural Equipment Market is likely to experience an upward trend in terms of sales volume as well as revenue owing to rising agriculture produce, increasing prices of agricultural equipment, accelerating concept of multifunctional machinery, increased financing options and increase in penetration of driverless tractors in South Africa.

With the government support policies such as New Growth Path and National Climate Change, the sector is expected to help the agricultural sector showcase growth and hence the demand for agricultural equipment.

In terms of sales volume, the market is expected to showcase a CAGR of close to 2% during 2018-2025.