When you’re in the export game, currency fluctuations are always something of a gamble. Sometimes they work in your favour, other times they do not.
In the case of South Africa however, there are a lot of people beginning to question their luck.
Justin Chadwick, chief executive officer of the Citrus Growers’ Association of South Africa, says: “There’s been a considerable strengthening of the rand in the last two to three years and that’s a big challenge. It has meant the returns to the growers have been significantly affected.”
When 60 per cent of your production is exported, making up around 80 per cent of your revenue, exchange rates that are not in your favour are a bitter pill to swallow.
“There was an expectation that the strong trend would end this year, but most of our crystal ball gazers are saying that the rand will continue to strengthen for at least another year. Our economy is very strong, and there’s no sign of that changing,” Chadwick says.
“Growers are having to face the reality that the position is unlikely to change anytime soon. It’s something we’ve learned to live with though, and we’re adapting to it, finding ways to deal with it.”
Of course, the simplest way to tackle the problem is to address your costs and improve efficiency, and that’s something the South African industry has been hard at work on.
Chadwick says: “There is a big emphasis within the industry to drive our costs down. We’ve been looking at how to get efficiencies throughout the chain, from the farm onwards. A lot of growers have been getting together in groups to gain critical mass to cut costs.”
Gerrit Booyens, chief executive of grower co-operative Citrus SA, says information technology and improved communications is playing a major role in cutting back costs.
“An encouraging factor is that I think our information systems are now on a par with the best in the world. There’s a renewed focus on channel management, to make sure we drive out costs, become more transparent and I think we’re now comparable with the best,” he says.
“With improved IT systems we have excellent information visibility throughout the supply chain.”
He says the co-operative is now looking to improve communications with its trading partners, and will be providing them with internet access to information on the product throughout the supply chain.
“The website will give our trading partners access to information about volumes and costs and they can highlight particular areas they are interested in. We’ve been working on it for three years now and we’re ready to open it up.”
Traceability has become increasingly important in South Africa and all players in the citrus industry were expected to have a system in place by January 2005. The CGA says it would not be endorsing any particular system for traceability as long as each company’s procedures conformed to the legal requirements.
South African production is also on the rise, with new plantings and increasing yield giving a considerable boost to volumes.
However, with increased volumes comes the need to increase your outlets and Chadwick says that is something the industry has been working hard on.
“We’ve seen amazing growth in the last four years and that’s set to continue for the forseeable future. Planting is taking place and younger trees are coming into full production.
“One of our major tasks now is to improve market access, looking for new markets around the world.”
He says the Far East is providing a particular opportunity for growers: “We see the future in China for our production expansion.
“Obviously the UK market and Europe will always be important for us, we’ve got an established relationship with those markets, but they are not going to be able to absorb the extra volumes our industry is generating.
“The UK is a very important market, in fact its critical for soft citrus, but there’s not much growth there, the market is very mature and stable.”
Booyens says there is a feeling within the industry that there needs to be a change as well: “I think there is a need to become less dependent on certain markets. Around 65 per cent of our volumes go to the traditional markets, and I’d like to see a little more balance.
“The new access to China augers well for the industry, and that will give us an opportunity. The majority of growth in recent times has come from our non-traditional markets, and that is likely to continue.”
However, even in a mature market, there are still ways to grow your business, and Chadwick says the South African industry is hard at work, looking to bring new varieties into play.
“As well as keeping an eye on what’s going on around the world, we’ve got our own breeding programmes.
“There’s a fair amount of product that’s going through the breeding stages at the moment and there’s some exciting things there, but at the same time, I don’t think we’ve made any world shattering discoveries yet.”
In fact, when it comes to varieties, it’s easy to get carried away with the search for the new, and forget about what you’ve already got, says Booyens.
“We had a very good year with Valencia last year, which goes to show even with the older varieties, you can have good results if you manage them well.”
Chadwick says a large part of the industry’s research is looking into maintaining and improving fruit quality: “We need to maintain our quality image in the market, so we’re putting a lot of emphasis on that side of things.”
A big challenge facing the South African industry over the coming years will be how it responds to the government’s moves for black economic empowerment (BEE).
“It’s a major structural change, and something the government is putting significant emphasis on,” says Chadwick.
“A lot of businesses have to meet various targets when it comes to black empowerment, and that puts a lot of strain on farmers, particularly considering the majority of farmers are family owned businesses - it’s difficult for them to adapt.”
He says the finer details of BEE targets are still under discussion, with issues such as the need to employ black employees from top to bottom and provide training and skills forming a major part of the policy. Companies will then be accredited on whether they meet the correct requirements.
Another issue, he says, will be the likelihood there will be a need for companies to source their materials from BEE compliant companies.
“It’s difficult, because it’s not how anyone else does business and its going to have an impact on our efficiency. But we understand where we come from, and we understand where we need to get to, so we’re working with the government to make that happen so that it doesn’t impact on our ability to compete in the global market,” says Chadwick.
The industry is also involved in a major fruit sector initiative to draw up a planned strategy for the future. It is aiming to create a united, non-racist and prosperous industry.
A draft strategy has been formed and the industry was going through a consultation phase to finalise the details. The strategy is aimed at helping the industry to achieve the broad objectives of the governments aims for agriculture.
Chadwick said the citrus industry has been involved in the project and had contributed considerably. “We’re had a great deal of input in that, and we’ll be taking part in further workshops as well. That will help provide a plan for the next five years which will ensure the industry remain competitive.”
