The Manufacture of Paper and Paper Products in South Africa 2022

Introduction

South Africa is a major player in key pulp and paper segments in the region and globally. The country is one of the world’s largest producers of dissolving wood pulp and is the largest producer of pulp, paper and paper products on the continent. Demand for most pulp and paper grades is strong and business appears to be booming. The shift away from single-use plastic packaging and the growth of online retailing and food delivery are driving demand for recyclable/renewable paper bags, corrugated boxes and lightweight and thermal paper-based packaging. Demand for writing paper and newsprint has declined due to digital migration, leading some industry players to diversify to focus on higher-margin products with more sustainable revenue streams such as packaging, pulp, tissue and speciality papers. Anti-plastic sentiment has created a growing market for sustainable packaging. Panic-buying and stockpiling of toilet paper and other products has moderated, while online shopping continues to fuel demand for packaging. Tight market conditions and supply and demand imbalances continue to drive up prices. Opportunities

Commercialising alternative sources of nonwood fibre such as sugar cane waste, bamboo and sisal.

Conversion of recoverable waste paper into recycled paper fibre. Developing paper-based product innovations to replace plastic. Exporting packaging and tissue products to sub-Saharan Africa. Production of lightweight packaging. The harnessing of biowaste and conversion of pulp mills into biorefineries.

Outlook

The rapid growth of ecommerce continues to drive demand for lightweight packaging. The migration from plastic packaging to paper alternatives is expected to accelerate. The local tissue market is expected to remain relatively subdued. Digital formats are steadily replacing print and the newsprint segment remains in decline. Given the current COVID-19 lockdown in China and trade sanctions against Russia, the global pulp market is expected to be volatile.

Major players have healthy order books and appear well-positioned to capitalise on opportunities.

Report Coverage

This report focuses on the manufacture of paper, pulp and paper products, and includes comprehensive information on the size and state of the industry, production and consumption, recycling, trends, the performance and development of major players and corporate actions.

There are profiles of 35 companies including Mondi and Sappi, both recognised players internationally, multinationals such as Kimberly-Clark and notable local companies such as Mpact, Corruseal Group, Neopak and Tetra Pak.

Strengths

Over 80% of South Africa’s commercial plantations are internationally certified by the Forest Stewardship Council.

South Africa is ranked amongst the largest dissolving pulp producers in the world. South Africa’s paper recovery rate is well above the global average and 54% of locally-manufactured paper products contain recycled paper/paper products. The industry is globally and regionally competitive, with Sappi and Mondi regarded as major players in Europe and North America, Nampak and Mpact commanding major shares of sub-Saharan Africa’s packaging market and Twinsaver dominating the regional tissue market. The paper industry is carbon neutral. The pulp and paper sector is one of the largest producers of renewable biomass fuel in South Africa. The South African pulp and paper industry is established and well-regulated, and provides around 165,000 jobs. There is a high level of research and development.

Threats

Cheap paper imports undermine locally-produced goods.

Civil unrest. Climate change-related shocks, notably floods, wildfires and droughts. Economic pressures. Global supply chain disruptions. New COVID-19 variants and mutations. Policy uncertainty on land expropriation and land restitution. The impact of the Russia-Ukraine war on global security, energy prices and food security. Variables such as exchange rate fluctuations and the volatility of raw material prices.

Weaknesses

For small growers, certification and the procurement of water licences are complex and lengthy processes. High transportation costs due to inadequate road and rail networks and port inefficiency. Pulp and paper mills are water and energy intensive. Suitable forestry land is in short supply. Most of the land that is appropriate for the development of new plantations either belongs to traditional authorities, or is the subject of land claims. The Sappi-Mondi duopoly dominates domestic pulp production. The sector has a shortage of skilled personnel, particularly graduates with technical expertise.