John Giles, the divisional director at Promar International – the value chain consulting arm of Genus plc – assesses what South Africa’s increasing focus on emergent consumer markets means for the key fresh fruit export lines traditionally absorbed by the UK and the European Union
South Africa has been exporting fruit to the European market for many a year, with the UK often representing the lynchpin of this effort. However, like many other leading fruit producers and exporters around the world, the opportunities in the emerging markets of Asia, the Middle East and the Former Soviet Union (FSU) are looking increasingly attractive.
For South Africa, the country has the added bonus of having a number of quickly developing African markets on its (relative) doorstep too. As an example, total African imports of apples have grown to almost 600,000 tonnes (t) per annum. South Africa has already gained a more than respectable share in many of the key African countries, whereas other exporters such as the US, Chile and those from within the European Union (EU), are still to work out their game plan for the African continent.
Building a presence in these emerging markets is a real challenge for many suppliers, not just South Africa. They must deal with new markets, new customers, new logistical requirements, and, in some cases, a combination of both tariff and non-tariff barriers. And for some markets, it represents coming to terms with new levels of commercial risk in the face of a lack of transparency as to how some of these really operate.
Nothing is impossible, however, and with time, effort and resource, the opportunities are potentially huge. At the same time, any sense of 'throwing the baby out with the bath water' is unlikely to pay dividends.
The real challenge for South Africa will be to balance its portfolio of markets to include the best of both worlds – retaining a strong customer base in the UK, the EU and other mature markets, as well as, at the same time, building business rapidly in more emergent markets. For some products, the UK and EU markets are still of key strategic importance and will be for some time to come.
Looking at how South Africa has fared in terms of its exports over the last seven years gives some indication of what has been achieved to date vis-a-vis the diversification process and the scale of the challenge that still faces the fruit industry. Here is a breakdown by product type:
Between 2008 and 2014 total South African exports of apples have increased, albeit only steadily, from 358,000t to 381,000t per annum, but peaked at over 700,000t in 2011. The UK and the Netherlands are still key export markets for South African apples. Between them, they accounted for a combined share of approximately 20% in 2014, which is down from 40% in 2008. In the meantime, big strides have been made in markets such as Malaysia (up to over 40,000t), Benin, Nigeria, Angola, Mozambique, Zimbabwe and Zambia, which combined account for over 100,000t. Other market development has taken place in countries such as Tanzania, Uganda, Kenya, Ghana, Senegal and Namibia, who now jointly absorb a further 40,000t per annum.
Total South African grape exports have grown from 260,000t per annum in 2008 to 298,000t in 2014. The UK, Netherlands and Germany are still all dominant export markets for South African grapes and accounted for 70% of overall exports in 2014. New markets are being developed, however, with a combination of the UAE, Saudi Arabia, Russia, Singapore, China and Malaysia, who account for a further 50,000t between them – a share of some 17%.
South African orange exports have risen from around 970,000t to over 1.1 million tonnes between 2008 and 2014. The UK, Netherlands, Italy and Portugal all remain important export markets per se; receiving a combined 350,000t between them (around 30% in total). There has also been significant growth in the likes of the UAE (up to 121,000t by 2014), Saudi Arabia (90,000t), Hong Kong (34,000t), China (33,000t), Malaysia (28,000t) and the Ukraine (13,000t), with Russia as the star market receiving some 126,000t. There are also traditional markets like the US and Canada, which represent some 70,000t between them. As a result, these emerging markets in the Middle East, the FSU and Asia now account for 445,000t of South Africa’s orange exports annually, which is equivalent to 40% of overall sendings.
Between 2008 and 2014 South Africa’s soft citrus exports have increased from 110,000t to over 150,000t per annum, but the UK and the Netherlands still account for a combined share of some 82,000t of this volume – or 53% of all exports. Russia, the UAE, the US, Saudi Arabia, Malaysia and Hong Kong combined now account for around another 40,000t per annum, which is equivalent to 26% of the overall sendings, with a plethora of much smaller markets such as Canada, France, Germany, Malaysia, Singapore and Vietnam taking much of the rest of the volume.
The path forward
The message to South Africa-based exporters might well be to keep on the diversification route and to look for this balance between traditional and non-traditional markets. There have been some notable successes, it would appear – not least, in some African countries, the Middle East, Russia and parts of Asia.
At the same time, there is still plenty of room for further export development, especially in the negotiation of those all-important Free Trade Agreements. These have seen the likes of Chile and Peru increase rapidly their exports, particularly to Asia.
The above analysis also shows that markets in the EU are still of fundamental importance to the South African fruit export sector and will be for some time to come. With globally-based retailers looking to move into emerging markets themselves, a strategy of 'follow the customer as much as the country' might well be a sensible one to follow as US, French, German, Dutch and some UK retailers look to strengthen their position in these markets and take their best suppliers with them.
Achieving the correct portfolio of export markets around the world is one of the real challenges that all fresh produce exporters face. Adopting a balanced approach based on genuine market insight and not just for now, but in the future too, is critical to getting this right. There are so many potential markets for South African growers and exporters that could be targeted, not just in Asia and Africa, but in the more mature markets too. Getting the right ones, in the right order, over a period of time, when export priorities might well change, will be key to the successful future development of South Africa’s fruit sector.
John Giles has carried out numerous assignments within the fresh produce sectors in Chile, South Africa, New Zealand and South East Asia, as well as across the EU and in the UK. He can be contacted via: [email protected]
Read other articles in PBUK’s Sourcing Spotlight on South Africa:
Improved South African quality helps to put value back into UK produce aisles
Horizons expand for South Africa's ZZ2 as UK market loses supply appeal
Beyond survival: Capespan's MD Dique on how to turn disruptions into opportunities
South African fruit finds favour with London chef Rowen Darlow Why South Africa has achieved a permanent and sustainable promotional impact