Cherry-pick high-value exports by supporting fresh fruit farmers
State policy should encourage partnerships between established and small-scale producers
Smart industrial policy design that identifies and supports high-value agricultural sectors, such as fresh fruit, is an easy win for the government to truly transform agriculture, drive economic growth and create jobs.
As then finance minister Malusi Gigaba noted in the 2018 budget, agriculture led the economic recovery following 2017’s recession. Echoing what President Cyril Ramaphosa had said in his state of the nation address, Gigaba added that agriculture is among the sectors in which the country has a competitive advantage and has the potential to become world class.
Since 2002, the fruit industry has become the largest export contributor within the agriculture sector. Linkages across the value chain multiply this figure in the form of service industry jobs in packaging, logistics and cold-chain facilities.
Technology has also allowed the production and preservation of higher-valued crops so that they arrive on shelves in stores in overseas markets in pristine condition. Fruit value chains have grown in sophistication and complexity to rival manufacturing, a sector many people erroneously equate with industrialisation. Yet advanced capabilities and technologies are required to take high-quality fresh fruit from SA to international markets. This is the value-addition process in the export of fruit, the conservation of freshness. It is a significant contributor to the value of fruit exports.
Advanced technologies are required to take high-quality fresh fruit from SA to global markets
The process has been dubbed "the industrialisation of freshness" by School of Oriental and African Studies professor Christopher Cramer. He suggests that investments into activities such as packaging, temperature and disease control and computerised logistics extend the shelf life and increase the value of fresh produce. These processes and activities also bring substantial employment opportunities beyond the immediate farming process.
For example, the export of fresh strawberries generates more value than the export of strawberry jam. Fresh fruit also commands a higher price than most variants of processed fruit juice. The sector generates the highest returns per unit of land cultivated compared with other agricultural activities. And it employs an average of 1.6 workers per hectare, whereas field crops and animal products employ on average just 0.02 people per hectare, according to a study by the Bureau for Food and Agricultural Policy.
In terms of overall contribution, the fruit sector employed about 179,948 people directly in fruit farming in 2015, about 19% of the total of 934,343 employment in agriculture in that year.
Stems Fruit and Unlimited Group, two companies based in the Western Cape, were among a contingent of 25 local companies to display their produce at the Fruit Logistica trade fair in Berlin, Germany. Their attendance at the fair, which recognises excellence and innovation in the fresh produce business, was supported by the Department of Trade and Industry to promote South African exports.
Fresh fruit has become the pinnacle of the agricultural products value chain. The sector has much to contribute to the National Development Plan’s goal of creating a million jobs in the agricultural sector by 2030. But it requires an appreciation that industrialisation and manufacturing are separate and distinct, but still intimately linked, to ensure that public policy supports high-value activities that create jobs and boost exports.
However, the growth of the sector, especially the participation of smaller fruit farmers, has been limited by inadequate infrastructure, particularly transport and logistics, pack-houses and cold storage facilities. This causes costly delays and breaks in the cold chain and limits entry and expansion into export markets. Industry association Fruit SA has been proactive in negotiating favourable policy and regulation for members in the five producer organisations that it represents. It has also played an instrumental role in facilitating access to export markets for its members.
Deepening structural transformation and further unlocking the contribution of fresh fruit to industrialisation calls for more co-ordinated partnerships between established fruit exporters, smaller players and the government.
Successful fruit-exporting nations such as Mexico and Chile have shown that building public institutions that monitor compliance and facilitate accreditation and access to new markets is also necessary.
This is crucial in a global trade context where developed markets have stringent and complex safety and quality standards, which make exporting to these countries difficult.
The R40m that the 2018 budget allocated to the Department of Agriculture, Forestry and Fisheries over the next three years to upgrade infrastructure and equipment for analytical services laboratories could make a significant difference in this regard.
The case of Mexico has shown that small-scale intensive farmers can be important participants in fruit value chains, given appropriate private-public partnership support. The government can help small producers in building capacity and skills, and by providing support and regulatory services.
Local small-scale farmers need assistance to access supermarkets, obtain accreditation, invest in cold chain capabilities, pack-houses, and efficient transport and logistics. The expansion of supermarkets in the Southern African region also provides a route to market for smaller fruit farmers.
An amount of R581.7m is set to be reallocated to the black producer commercialisation programme over the next five years, Gigaba said. Evidence suggests that part of this should support small black producers of fruit. But fragmentation across different departments and institutions undermines the implementation of practical initiatives.
Realising the "industrialisation of freshness" requires improved co-ordination across departments dealing with retail policy, land use, agricultural development, small business development and access to international markets. The government should create a policy environment that ensures the creation of economic value in the fruit industry does not come at the expense of the environment, labour and other inputs in the production process.
Finally, incentives to encourage partnerships between established and small-scale producers ought to form part of the policy mix, as should Mexican-style technological and research and development investment for small producers.
Without such interventions, the fruit industry will not live up to its economic potential, and places small-scale farmers and agricultural workers at risk of being left out in the cold.
• Chisoro-Dube, Das Nair and Nkhonjera are researchers with the industrial development think-tank at the University of Johannesburg’s Centre for Competition, Regulation and Economic Development