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What SA must do to get in on fresh fruit export growth

Demand is expected to continue growing at an average annual rate of 7.1% over the next two years.

South Africa’s urgent need to create jobs requires that the country take advantage of opportunities in the global economy that it can convert into quick wins. The fruit industry presents such an opportunity. The country’s fresh fruit industry is currently the largest exporter of agricultural products, contributing 52% of the value of South Africa’s agriculture export basket. It also represents 28% of total employment in agriculture.

But there’s a great deal more it can do given that demand for fresh fruit is expected to continue growing at an average annual rate of 7.1% over the next two years. This is being driven by the growth of the middle class in China, Africa and other Asian countries.

South Africa is already an established player in global fruit exports, especially citrus. But it has failed to take full advantage of the rise in demand, especially for high value fruits such as berries and avocados. Countries that have successfully done so, like Mexico and Peru, increased their fruit exports by up to 15% per annum between 2013 to 2018. In contrast, South Africa’s fruit exports only rose by 3% over the same period.

The one success story has been citrus. The country’s share in the top six citrus exporting countries more than doubled from 6.6% to 15.7% between 2001 and 2017. It is now the second largest exporter of citrus globally.

Success of the citrus industry has been largely bolstered by research, innovation and technological developments, driven by the industry association – Citrus Growers Association (CGA) – in collaboration with government. These are critical aspects in maintaining markets, negotiating new markets and complying with sanitary and phytosanitary standards imposed by different importing countries. For example, investment in research and development is so important that it accounts for approximately 80% of CGA’s total annual revenue for the 2017/18 financial year. This has also been the case for other large volume fruit exports such as apples and pears as well as stone fruit.

This success demonstrates what is possible with concerted and coordinated action for fresh fruit. The Public-Private Growth Initiative announced by President Cyril Ramaphosa at Business Unity South Africa’s 2019 Business Economic Indaba suggests that there is an appetite for collaboration between industry and government on targeted initiatives.

As part of the initiative, the agriculture sector proposed a business plan to create 120 000 jobs by 2023. The business plan acknowledges the role that high-value fruit can play in creating jobs but there appears to be no prioritisation of how the different sub-sectors in agriculture will contribute to the overall objective. Research conducted by the Industrial Development Think Tank (IDTT) shows that targeted interventions in high-value fruit alone could create about 100 000 jobs by 2023.

What’s possible

If South Africa is to aggressively find new export markets and grow its exports, it can achieve a conservative 5% export growth per annum over the period 2019 to 2023. Achieving a conservative 5% growth in export volumes (on top of local market demand growth of 3%) implies that production would increase by 34% from approximately 6.5 million tonnes in 2017 to 8.7 million tonnes by 2023.

At such increased level of production, assuming normal weather conditions, the fruit industry could create an additional 100 000 jobs by 2023. The creation of additional jobs is based on moves to higher value crops such as berries and avocados, which are more labour absorbing in production and packaging. These fruits have a higher employment intensity of 2.9 and 2.6 workers per hectare, respectively. On average the fruit industry employs 1.6 workers per hectare. But the recurrent droughts and erratic rains pose a huge risk to production. Good rains could see the industry improve from this position.

Avocados in particular would allow for the realisation of other policy objectives such as creating employment in provinces that have relatively higher levels of unemployment (above the country average of 37.3%, expanded definition). For example, 60% of South Africa’s avocados are grown in Limpopo (41.9% unemployment, expanded definition which includes those that want to work but are not actively searching for a job), 29% in Mpumalanga (43.9% unemployment, expanded definition) and 9% in KwaZulu-Natal (41.4% unemployment, expanded definition).

What’s needed

A number of bottlenecks need to be addressed to realise the job opportunities. These include improving access to export markets, addressing congestion at the ports and improving the rail and logistics infrastructure.

With regard to access to markets, South Africa should prioritise high growth markets in South and East Asia. These include China, Vietnam, Thailand, South Korea and India. In the last five years, Chinese imports of fruit and nuts grew at a compound average growth rate of 38%. However, South Africa can only export citrus, table grapes and apples to China.

The biggest constraint for fresh fruit exports is complying with sanitary and phytosanitary standards in different markets. The process of compliance requires technical and science expertise. This expertise is needed to reassure importing countries that they are not at risk of any pests and diseases. For example, the CGA through its dedicated research and development division has been successful in carrying out cutting-edge research and solutions for pest and disease control. This has enabled the industry to demonstrate to trading partners that their exports do not pose risk to importing countries.

A key example relates to the European Union’s False Codling Moth concern with South Africa’s exports of citrus in 2018. The citrus industry was able to conduct research and provide technical information indicating that there was no risk in their fruit exports. If CGA had not dealt with the False Codling Moth concern, the EU would likely have blocked South Africa’s exports.

Improving compliance with sanitary and phytosanitary standards set by different importing countries means that the key institutions involved in agricultural and trade policies must have the necessary skills to negotiate market access and carry out regulatory functions and services effectively.

The high levels of congestion and delays at South Africa’s main ports remains a constraint to growing fresh fruit exports. Addressing such bottlenecks require investments in integrated digital systems to assist with planning and avoid product overload at the main ports.

Such digital solutions should be able to link growers and producers in-house systems to ports, logistics companies and shipping lines, which will create timeous and speedy supply chains. Digital solutions that also reduce the logistics costs and ease the process of exporting will increase the value of exports and also facilitate entry of new players into export markets.

Complementary investments in rail and logistics infrastructure are critical to aid with faster movement of products from the farm and through the ports.

Lastly, fruit farmers would also need to make changes. Workers would need re-skilling to meet the growing demand for digital skills, using advanced machinery and equipment as well as research and technology development.The Conversation

Shingie Chisoro – Dube, Economist/Researcher, University of Johannesburg and Pamela Mondliwa, Researcher, Centre for Competition, Regulation and Economic Development, University of Johannesburg

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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All about water

We still think like colonized people. There is much more value in value added agri processing than exporting boxes of produce.

A HUGE proportion of our exports does not get purchased as the raw product. after being processed to for especially some of our botanicals the value is 10X or in pharma 100X.

While there are many examples where your idea is correct, with fruit you are a bit off the mark.

Fresh fruit exports are significantly more profitable than any of the processed items we export.

Due to the nature of dealing with a product grown on a tree, not all of the fruit can be sold as fresh fruit, largely due to cosmetic issues. This defective fruit is then sent to the juice factories for processing (juice, oil, etc).

The money derived from the processing side is most accurately described as a ‘grudge sale’ as the input cost to grow the fruit is larger than the income derived. Unfortunately, the only alternative is to throw away the defective fruit so the farmers would rather get something than nothing.

If we truly want to increase our income from the growth in production we need market access. The difference between selling an orange in Russia or in China is around R4/kg for an orange. More so for other crops.

Armchair:

We do well in fruit when our timing is good for overseas markets relative some of our competitors, but I was thinking more along lines of advanced extraction. As in start with 10,000kg citrus and end up with 20 products that are very high value.

Market access is a problem, especially considering state subsidies that mean a Spanish citrus grower can out-compete against an SA grower despite his actual cost before subsidies being multiple of ours. Shipping is also becoming problematic cost.

So make all the changes, spend the money and then the ANC decides to take it all away and dish it out to non farmers who will wreck it in a year. No thanks we will wait and see, even if we lose. It will be less that losing it all.

Rubbish, your entire analysis should be torn up. THE number one reason avocado production and increasingly all fruit in SA is hampered is the theft of the fruit while still on the tree. Did you even speak to a single SA avocado farmer? Concerning Mexico and Peru, are interesting examples how cartels have moved from drug business into farming, production has taken off but its come at cost of extreme bloodshed.

Always wonder where MW gets these feel good but basically meaningless articles.

I agree; it is a pretty childish and simplistic article, written from a few press releases it seems. Avos missed a massive opportunity with countries like NZ (with a few ex South Africans) doing very well indeed. As for citrus, the black spot debacle of a few years ago where government agriculture did not even respond to letters from the EU and the more recent port uselessness have not helped much at all. Then, as noted in the comments, who is going to plant trees that take years to bear fruit when your land could be EWC’s tomorrow? Not me.

Add EFF / BLF race hatred, rampant crime / theft, farm murders and labour / union militancy and intransigence and it is a tough road to hoe (pardon the pun).

Saddest of all is if the writers extended themselves a little they could imagine how say, eco friendly and organic crops could create a big demand for labour. Pity the ANC has targeted the farmer as the enemy to be vilified and dispossessed.

hereshoping
I was with five large farmers here in KZN the other day, They have bought a large farm in Tanzania on the Ruha river and are buisy clearing a couple of thousand acres of land to grow avos for the export market. They are there because the labour is much cheaper and more productive there.
They say a few hundred worker arrive every day looking for work and they really earn their money. So that is another five farmers who have left for a better life.

1st thing…………get guvmunt out of the way as much as possible.

The whole process must be private sector managed with guvmunt jumping as high as they are required to as and when the private sector says.

It is mainly about lazy ,militant and incompetent workforce and of course an interfering government with bbeee compliance.
latest news is that factories are 20% idle.
me thinks other than large corporate farming concerns most small to medium farmers in SA are eyeing the exit.

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