There has been a loss of optimism in South Africa’s agricultural sector with the fruit industry describing it as one of the most challenging years to date.
After remaining in optimistic territory for nearly three years, the Agbiz/IDC Agribusiness Confidence Index (ACI) fell by four points in the fourth quarter of this year to 49.
This is the first reading below the neutral 50 point since the second quarter of 2020, and implies that agribusinesses are slightly downbeat about business conditions in South Africa.
According to Fhumulani Ratshitanga, CEO of Fruit SA, 2022 has been “tough year”. She said those who have been in the industry for decades agree, adding that it has been the most challenging year in the recent past.
“The [fruit] iindustry is seriously concerned by the current business conditions and the confidence is low. Many producers will go out of business if these challenges persist, and solutions are not found soon enough,” she said.
There are very high levels of concern around the sustainability of large segments of the blueberry industry, Ratshitanga explained, due to the number of economically debilitating conditions currently impacting the local industry.
She is of the view that key reasons behind reducing farm returns to unsustainable margins include exorbitant input costs, load shedding, spiking diesel prices, shipping costs, annual container terminal disruptions, and tapering return prices.
Farmers have been squeezed
Justin Chadwick, CEO of the Citrus Growers Association, said that citrus growers have had to endure an extremely tough season.
He explained that the industry managed to pack 164.8 million (15kg) cartons for export to global markets in 2022. While this is an increase of 3.2 million cartons when compared to 2021, it is 5.7 million cartons less than what was predicted at the start of the season.
“[This] has negatively impacted their returns and the volumes they were able to export and threatens the future sustainability of the industry, which sustains over 140 000 jobs and brings in R30 billion in revenue to South Africa each year,” Chadwick said.
The challenges faced by the industry this season include a surge in farming input prices and transport costs, as well as “astronomical shipping price hikes”, which made the cost of getting fruit to market commercially unviable for many growers, Chadwick explained.
He also pointed to the “unjustified and discriminatory new false coddling moth (FCM) regulations passed by the European Union (EU) mid-season that placed further financial strain and risk on growers”.
“These challenges were coupled with ongoing decay of public infrastructure such as roads, rail and port operations; erratic electricity supply, and a decline in real export prices.”
This means that already tight margins for citrus producers were squeezed to the point where only one in five farms are likely to make a positive return this season.
When we’ll see a turnaround
The decline in fruit being shipped this season, Chadwick added, is a particular concern in light of the current forecast predicting that fruit produced and available for exports will continue to grow by 10 million cartons per year (on average) for the next decade.
This could lead to the industry hitting 200 million cartons in the next five years and growing up to 260 million in the next ten years.
“Potentially, this means that the industry could sustain a further 100 000 jobs and generate an additional R20 billion in annual revenue.
“If successful, this could bring its total contribution to 240 000 jobs and R50 billion in revenue, as long as key markets and logistical infrastructure are secured and optimised in order to absorb this increased growth,” Chadwick said.
But it will be a while before Mzansi’s fruit industry sees the tables turning, Ratshitanga pointd out.
The fruit industry expects global trading conditions, logistics and high input costs to remain a key cause for concern for at least the next two to three years.
“We also do not see the energy crisis improving in the short to medium term. Some industries like the blueberry industry has been engaging across the value chain to determine when price pressures will ease.
“2023 may see some mild relief, however meaningful recovery may only take place from 2024 onwards,” said Ratshitanga.
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