South Africa looks to diversify exports

South Africa has been exporting its fruit to the European markets for many a year, with the UK often being the lynchpin of this effort. As though, with many of the 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. And for South Africa, it has the added bonus of having a number of quickly developing Africa markets on its (relative) doorstep. As an example, total African imports of apples have grown to almost 600,000 tonnes per annum.

Building a presence in these emerging markets is a real challenge for many, not just in South Africa, in terms of dealing with new markets, new customers, new logistical requirements, and in some cases, a combination of both tariff and non tariff barriers.
Nothing is impossible, however, and with time, effort and resources, 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 will be for South Africa to be able to balance its portfolio of markets to include the best of both worlds – retaining a strong customer base in the UK, EU and other mature markets, as well as at the same time, building business rapidly in more emergent markets.

Looking at how South Africa has fared in terms of exports in the last 7 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:

• Apples – between 2008 and 2014/5, total SA exports of apples have increased, albeit only steadily, from 358,000 to 381,000 tonnes per annum, but peaked in 2011 at over 700,000 tonnes. The UK and the Netherlands are still key export markets for South Africa. Between them, they account for a combined share of c. 20% in 2014/5, but this is down from 40% in 2008. In the meantime, there have been big strides made in the markets such as Malaysia (up to over 40,000 tonnes), Benin, Nigeria, Angola, Mozambique Zimbabwe and Zambia, which between them, accounted for over 100,000 tonnes with other market development in countries such as Tanzania, Uganda, Kenya, Ghana, Senegal and Namibia who now combined account for a further 40,000 tonnes per annum

• Grapes - total SA exports have grown from 260,000 tonnes per annum in 2008 to 298,000 tonnes by 2014/5. The UK, Netherlands and Germany are still all dominant export markets for SA grapes and accounted for 70% of overall exports in 2014. New markets are being developed, however, in a combination of the UAE, Saudi Arabia, Russia, Singapore, China and Malaysia who account for a further 50,000 tonnes between them - a share of some 17%

• Oranges - SA exports have increased from around 970,000 tonnes to over 1.1 million tonnes between 2008 and 2014/5. The UK, Netherlands, Italy and Portugal are all still important export markets per se with a combined 350,000 tonnes between them (around 30% in total). There has also been significant growth in the likes of the UAE (up to 121,000 tonnes by 2014), in Saudi Arabia (90,000 tonnes), Hong Kong (34,000 tonnes), China (33,000 tonnes), Malaysia (28,000 tonnes), the Ukraine (13,000 tonnes), but with Russia as the star market with some 126,000 tonnes. As a result, these emerging markets in the Middle East, the FSU and Asia now account for some 445,000 tonnes per annum - equivalent to 40% between them of overall SA exports

• Soft citrus – SA exports have increased between 2008 – 2014/5 from 110,000 tonnes to over 150,000 tonnes per annum, but the UK and the Netherlands still account for a combined share of some 82,000 tonnes of this volume –some 53% of all exports. Russia, the UAE, the US, Saudi Arabia, Malaysia and Hong Kong between them now account for around another 40,000 tonnes per annum which is equivalent to some 26% of the overall total

The message to SA based exporters might well be - keep on the diversification route and 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.

The above analysis also shows that markets in the EU are still of fundamental importance to the SA 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”.

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 still in the more mature markets. 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 the SA fruit sector.

John Giles is a Divisional Director with Promar International, the value chain consulting arm of Genus plc. He has carried out numerous assignments in the fresh produce sector in South Africa, Chile, NZ, SE Asia, across the EU and in the UK. He can be contacted at the following email address: john.giles@genusplc.com