The Starch Industry in South Africa 2023

Introduction

Demand for starches and modified starches, which are used in various industrial applications as well as in key ingredients in food and beverages, is growing. The manufacture of starches is dominated by Barloworld subsidiary Ingrain, which had a market share of almost 90% in 2021. Imports account for about 20% of starch demand by value. Industrial customers are concerned about significant price increases driven by record increases in commodities such as maize and wheat which are used to produce starch. There is also concern that the high price of commodities, machinery and research and development act as a barrier to competitors seeking to challenge Barloworld’s near monopoly.

Opportunities

Starch exports to the rest of Africa are expected to grow under the African Continental Free Trade Agreement, which came into effect in January 2021. The development of cassava as a key starch input. The move to more green packaging solutions in the food industry will drive starch demand. There is strong demand from local manufacturers looking to replace imports with locally-sourced starches.

Outlook

The deteriorating local economic outlook will likely result in lower domestic sales, as consumers cut back on starch products. This may be partially offset by a trend by industries to source locally-made ingredients. The outlook for exports is more positive, particularly as economic growth in the rest of Africa is expected to drive starch demand. Growing concerns by industrial customers over significant recent prices increases could drive consumer industries to source replacements to starches. Other challenges such as loadshedding, water availability and cost of maintaining equipment could also curtail profitable growth. In the long term, cassava may provide for the possible entry of new producers to the starch market.

Report Coverage

This report on the manufacture of starch and starch products in South Africa includes information on the size and state of the industry including potato and cassava starch, commodity prices and inputs, notable players, agents and distributors and competition and other issues and trends. There are profiles of 13 companies including dominant player Ingrain and other producers such as Top Products and Pro Corn Mills, and importers and distributors including Cell-Chem, Bragan Ingredients and Ingredon.

Strengths

South Africa has a significant maize crop, which is the key raw material for starches. The country has one of the oldest and biggest starch manufacturers in Africa.

Threats

Commodities prices. Droughts and climate change which affect the size of key crops like maize and wheat, which can affect the price of starch. Global events such as the Russia-Ukraine war could affect the supply and price of imported starches. High starch prices could drive some industrial users to look for chemical alternatives to starch. Increasing price of inputs such as water, electricity and key raw materials. Loadshedding, which adds to costs of production if alternative power sources must be sourced. The volatility of the rand, which affects the cost of imported starches. The weakening domestic economic environment, which threatens to reduce demand.

Weaknesses

Expensive equipment necessary for starch manufacturing makes it difficult for new competitors to enter the market. The industry is characterised by a near monopoly, with Barloworld’s Ingrain claiming it had an 89% market share in 2019.