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Past avo export season to EU will be remembered for many years

Ebullience at Subtrop 2017 marketing symposium

Subtrop, representing around 1,200 avocado, lychee, mango and, for the moment, macadamia growers, has just concluded its annual marketing symposium in White River, Mpumalanga. 

The past avocado export season to the EU will be remembered for many years, said Zac Bard, vice-chairman of the World Avocado Organisation and executive manager of Westfalia Fruit in Africa. “South Africa will remember it because of its lower crop and the higher price returns. Why was it such a fantastic season? There was a lot of growth in traditional EU markets and new markets emerged even faster than expected. The increase in China and other Asian markets clearly illustrates the aforementioned. Ripe-and-ready is becoming more and more of a norm in Europe as well as other markets and that is clearly growing consumption. In conjunction with the health benefits, avocados are becoming a staple for which people are prepared to pay a premium."

He continued: “The Peruvians had both a very good crop and very high returns for their fruit, so they’ll remember it even more than South Africa. The past season’s success is likely to attract further plantings in the future and hence one of the reasons why it’s so important to promote the consumption of avocados in the EU – now the second largest market in the world for imported avocados after the US.”

Vice-chairman Bard added that the World Avocado Organisation’s 2017 inaugural promotional campaigns definitely played a role in boosting consumer demand and awareness of avocados.

WAO promotional campaign in London during the summer of 2017

The avocado and macadamia industries are in expansionist mood, with much talk about new plantings moving into areas like Haenertsburg (Limpopo) and the Southern Cape, as well as infrastructure like new nurseries and cooling facilities. One grower told FreshPlaza that the waiting list for avocado trees is five years.

Another theme that comes up, however, is the extent of avocado and macadamia theft, particularly in Limpopo Province. 

South African economy vulnerable to political risks
Thanda Sithole, economist at Standard Bank, sketched a sobering picture of the South African economy which has moved out of recession on the back of the agricultural sector. “The agricultural sector outperforms the entire economy.” The fiscal outlook is deteriorating in a sphere of political instability and profligate government spending which has breached the expenditure ceiling by R3.9 billion in its repeated bailouts of state-owned entities like South African Airways. He put forward the expectation that South Africa’s debt-to-GDP ratio could be over 60% by 2021/2022.

Investors are awaiting the outcome of the African National Congress’ elective congress in December. At the 24 November meeting of some ratings agencies it is not expected that South Africa would be further downgraded, but it is expected that we could be put on credit watch. However, a further downgrade might be somewhere in the near future with the concomitant outflow of money from the country. He presented a forecast of the Rand of R14.75 to the US$ by June next year, “but the Rand is at risk of deteriorating more than forecast”.

Barry Christie, operational manager for macadamias at Subtrop with Lizette de Wet, SAAGA administrator and symposium organiser and Derek Donkin, Subtrop CEO.

Less ebullience in mango industry
While a weaker Rand does favour exporting, South African production is heavily dependent on input imports. According to the Bureau for Food and Agricultural Policy, as quoted in the latest Landbouweekblad, South Africa’s nitrogen and potassium are the most expensive in the world; phosphates fourth most expensive. 

There are anecdotal reports of producers like maize (corn) and even dairy farmers, who import inputs but can only recoup costs in Rand terms, who are tentatively looking into export crops like avocados and macadamias. A number of growers at the symposium talked of mango orchards being replaced with avocado or macadamias; the past mango season has been called ‘chaotic’.

Douglas Hoets (Insect Science), Zylon McGaffin (DuRoi Nursery), Danie Vaughan (Growmac Nursery), Gerhard Duvenhage (Houers Koöperatief), Martin van Nierkerk (Insect Science) and Scott McKenzie (Cederberg tree nursery)

Future of retail
Derek Donkin, Subtrop CEO who visited Beijing last week as part of a Fruit South Africa market access delegation, told the audience about the operations of, third largest online retailer with 250 million customers, primarily in China. They visited the Beijing headquarters where 14,000 employees work. The company has 355 warehouses in 40 cities.

“So you look at these numbers and you ask: where are we going to sell the extra two or three thousand hectares of macadamias we’re planting or the extra thousand or two thousand hectares of avocados? When you look at these numbers you see there’s a huge opportunity there. They’re not only into retail but they also do the delivery logistics. In the next few years they’re hoping to do deliveries to homes using drones. That’s just an indication of what is to come.”

Delegates from East Africa: Eric Kimutai and Gilbert Kimutai of the Kenya Nut Company

Bonnie Buthelezi of Subtrop and Morongwa Seabela (Protactic) presented an overview of their avocado promotional campaigns and programmes throughout the year, to a large degree aimed at enlarging the consumer base among black South Africans. Thabiso Dubazana of Minanawe marketing agency discussed the promising opportunities to do just that.

Elizabeth van Renen of the Department of Trade and Industry explained the principles governing South Africa’s trade policy, with reference to, inter alia, South Africa’s recently concluded Economic Partnership Agreement (EPA) with the European Union.

She said that South Africa was hoping for a seamless continuation of trade with the post-Brexit United Kingdom.

The South African subtropical fruit and nut industry covers approximately 55,000ha of area planted, employs 23,000 people in primary agriculture and is worth roughly R5.5bn to the economy.

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