The volume of fresh fruit exported by South Africa to emerging markets outside Europe and North America has overtaken shipments to those two regions for the first time, according to new research unveiled at the Eurofruit Congress Southern Hemisphere, held last week in Cape Town.
Archie Swanson, managing director of export company Migratus, said the South African industry stood at a major crossroads in terms of its international markets and faced some tough decisions about where to focus its energies over the coming years.
Drawing on work carried out with Johann Boonzaaier of the University of Stellenbosch, Swanson gave delegates attending the annual conference and networking event a detailed view of how South Africa's fruit export trade has evolved over the past couple of decades, revealing that the country sent a total of 1.3m tonnes of fruit markets outside Europe and North America last year – predominately to Asia, Russia, the Middle East and other parts of Africa, overtaking for the first time the 1.28m tonnes shipped to those two traditional destinations combined.
'At the time of deregulation, there was an 80:20 policy in favour of our traditional markets, but deregulation has been key to our success in penetrating new markets. From a situation where 80 per cent went to Europe and North America, now there are really strong alternatives.'
Having multiple operators that specialised in different markets would offer South Africa's export industry an advantage in the coming years, said Swanson, but he also warned that consolidation was inevitable.
'We have 230 exporters, which will consolidate over the next 10 years by which time there might be 100,' he predicted. 'It needs to consolidate as there are probably a few too many at the moment.'
Productivity challenge
Hein Deprez, chairman of Univeg Group, spoke to delegates about the future development of international fresh produce markets, warning that increased productivity would be an essential ingredient in the future success of South Africa's fruit export business.
Highlighting the importance of cost when it came to South Africa growing its exports to international markets, Deprez insisted that cost price would be the key factor in the country's future competitiveness.
'Labour costs here are four times lower than Argentina's,' he observed. 'It's not finding new markets that will save us – it's being competitive on costs.'
Low labour costs ran counter to increased productivity and competitiveness, he argued, and ran the risk of discouraging innovation in South Africa and therefore making it harder for its products to compete on the world stage.
'Local production in Europe and North America will become more important in these markets and Europe and the US will become more competitive in producing product even on the most expensive land in the world,' he predicted.
Cost and competition
Elsewhere during the conference, Andy Connell of Dole South Africa pointed to a significant gulf in logistics costs between Europe and Asia as a key driver of change in product flows out of South Africa.
Reefer container rates to Europe are currently reckoned to be around twice as much as those to Asian markets, delegates were told.
'The barriers in Europe are growing tougher and that is what is driving the push into Asia, not the pursuit of the rising sun,' Connell suggested. 'There are less hoops to jump through and lower freight rates – we’re now doing more to the Far East than to North America and Europe.'
Speaking in the final session, Craig Lavender of UK supermarket group Morrisons said his company was pressing ahead with importing more and more of its overseas-sourced fresh produce through Global Pacific, which now acts as a dedicated, single-channel supplier to the retailer.
As a result, he said, Morrisons remained confident it would be able to withstand increased competition from customers in other markets over the next few years and source the product it needed.
'It's something we're aware of, certainly,' he remarked when asked about the emergence of new, competing markets around the world. 'Around 70 per cent of the produce we buy direct now comes through Global Pacific, the benefits of which are that it takes cost out, shortens that supply chain, brings us closer to suppliers and enables us to manage seasonal changeovers effectively.'
