Sweet or sour? Determining SA’s fresh fruit future

The story of SA’s fresh fruit industry has been a sweet one. Year after year of strong production of some of the highest quality fruits in the world has catapulted the country to be the largest exporter of fresh fruit in the southern hemisphere, generating about $3bn in foreign exchange for SA a year and creating more than 400,000 employment opportunities across the value chain.

But the next chapter of this story may yet sour. Major infrastructure deficiencies, bottlenecks at ports and rising shipping costs, on top of electricity and water crises and the lingering effects of the Covid pandemic, are set to uproot SA’s global competitiveness.

While the country has a wide export reach — Russia and the EU are our biggest buyers of fresh fruit, followed by the Far East and Asia, the Middle East, the UK and then the rest of Africa — and our prices are competitive. Pressure from fellow southern hemisphere producers Chile and Peru, which share the same winter window, are threatening to grab market share. Should our production slip, or our relationships with key buyers fray, these competitors will be ready to step into the gap.

Navigating a challenging terrain

To continue to punch at the top of the heavyweight division SA’s fresh fruit industry will have to navigate some challenges ahead, including improving logistic efficiencies, policy predictability and port reliability.

Last year millions of boxes of oranges sat spoiling in containers stranded at European ports while SA and the EU argued over new plant, health and safety requirements, threatening the trading relationship between producers and consumers. It all centred on tackling the potential spread of an insect called the false codling moth, a pest native to Sub-Saharan Africa.

EU officials demanded special extreme cold treatment to the citrus fruit, keeping it near 0°C for 25 days. But SA’s Citrus Growers’ Association (CGA) lamented the expensive and unnecessary extra measure, pointing to the country’s own, more targeted way of preventing infestation.

These kind of additional demands put further commercial pressure on an industry that is also battling rising fertiliser costs due to the war in Ukraine and high shipping costs, to say nothing of the country’s fraying logistics infrastructure. CGA CEO Justin Chadwick says the ongoing decay of public infrastructure and an erratic electricity supply have added to industry woes, with particular concern over SA’s ports.

The Container Port Performance index (CPPI), released by the World Bank and S&P Global Market Intelligence, assesses ports around the world and determines their performance “based on [the] time vessels needed to spend in port to complete workloads” — otherwise known as total port time. Out of 370 facilities Cape Town ranked 365th, Durban one better at 364, with Gqeberha ranked highest in SA at 312.

This is a significant reason, for example, despite SA’s overall citrus success, which makes up 59% of the country’s total fresh fruit exports, only one in five growers made a positive return in 2022. This year exports could fall as much as 14% year on year, dropping from 164.8-million cartons to just 142.5-million.

Growing great fruit is not enough

Fortunately, over many years of battling the odds SA’s industry players are strong and resilient, and they have managed to continue to find a way to grow and export quality fruit in difficult circumstances. However, just growing great fruit and being resourceful may not be enough going forward. New research carried out by Henley Business School in collaboration with the Gordon Institute of Business Science and Stellenbosch University suggests that in a tightening global environment it is likely that managing relationships with foreign buyers will become ever more important as exporters look not only to expand into new markets, but also to deepen and entrench long-standing relationships with old ones.

The research, which surveyed 65 leading fresh fruit exporters in SA, found that each had on average 35 foreign buyers they were exporting to directly each year. Exporters typically devote about 14 hours per week to business affairs and communication with their largest foreign buyers. The length of these trading relationships spans from as little as eight months to as long as 40 years — the average being about 12 years.

Though this research showed that most growers perceive their export performance as satisfactory and believe they have relationships with their foreign buyers that are sustainable, many pointed to the need for more time and energy to be devoted to the largest buyers, which invariably enjoy a sizeable market share and may hold the key to long-term export sustainability.

Another tried-and-tested strategy could be to diversify their relationship management and trading relationships. The EU has proved time and time again that it is quick to pencil in new bureaucratic laws that make full compliance costly and time-consuming. Opportunity lies in opening up the East and the US, where demand is high. However, trade to the US is dependent on the African Growth & Opportunity Act (Agoa). Should SA be sanctioned over its relationship with Russia, this opportunity will quickly dissipate.

The research also recommends that exporters prioritise the economic viability of their exporter-buyer relationships, which would require a willingness and ability to engage with buyers to frankly discuss minimum order quantities and frequency of orders, for example. Such engagements could test exporters’ relationships with their buyers, but if the partnership is built on common ground and mutual interests such engagements could help strengthen and grow these connections.

Whatever SA fresh fruit producers decide to do to shore up their success, some fundamentals are required for sustainable success. Commitment to the long term, open communication, and co-operation are key drivers of sustainable exporter-importer relationships that lead to strong export performance. Building such relationships requires long-term planning and investment both in financial assets and in human capital.

In a country battling negative news story after negative news story, it’s refreshing to celebrate the success of an industry battling the odds to perform at the highest level. An approach that foregrounds the importance of building and maintaining relationships could help keep these odds in our favour. 

• Prof Petzer is head of research at Henley Business School and extraordinary professor in the department of marketing management at the University of Pretoria. Prof Matthee is director of research at the Gordon Institute of Business Science. Dr Kühn is at Stellenbosch University and De Villiers at Henley Business School. They co-authored the white paper Fresh fruit industry: optimising export performance and securing sustainable exporter-importer relationships.