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Unclassified AGR/CA/APM(2005)28/FINAL Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 01-Aug-2007 ___________________________________________________________________________________________

English - Or. English DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES COMMITTEE FOR AGRICULTURE

Working Party on Agricultural Policies and Markets

MARKET ACCESS AND PRIVATE STANDARDS: CASE STUDY OF THE SOUTH AFRICAN FRUIT MARKET

JT03230698

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PREFACE

The case study of South Africa is one of four which form the basis for the paper “Private standard schemes and developing country access to global value chains: challenges and opportunities”. It examines the private voluntary standards on selected fruit exports of South Africa. The report has been prepared by Professor André Jooste, Professor Daan Louw and Mr. Ernst Idsardi of the University of the Free State, South Africa.


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TABLE OF CONTENTS

1. Introduction ...................................................................................................................................... 5 2. Background ...................................................................................................................................... 8 3. Sub-sector overviews ..................................................................................................................... 11

3.1 Deciduous fruit industry .................................................................................................................. 11 3.2 Citrus ............................................................................................................................................... 18 3.3 Sub-tropical fruits ............................................................................................................................ 21

4. Regulatory framework and legislation applicable to the South African fruit industry ................... 24 4.1 National Department of Agriculture (DoA)..................................................................................... 26 4.2 Department of Health (DOH) .......................................................................................................... 30

5. Summary of interviews with exporters and producers ................................................................... 31 5.1 Exporters .......................................................................................................................................... 31

6. Growers .......................................................................................................................................... 37 A special case: Small scale farmers ....................................................................................................... 42

REFERENCES ............................................................................................................................................. 45 APPENDIX A ............................................................................................................................................... 48

APPENDIX B ............................................................................................................................................... 47 Tables

Table 1. Overview of interviewed exporters ............................................................................................. 31 Table 2. Number of exporters per private standard scheme required by their buyers ............................... 35 Table 3. Profile of interviewed growers .................................................................................................... 37 Table 4. Overview of compliance with private standard schemes for the interviewed growers ............... 39 Table 5. Estimated Costs of Compliance on Select Farms in South Africa with Select Standards Currently being Applied Externally to Citrus Exports .............................................................................. 41

Figures

Figure 1. Distribution of apple production in South Africa ...................................................................... 12 Figure 2. Historical exports and average prices of apples ......................................................................... 13 Figure 3. Export of apples per week.......................................................................................................... 13 Figure 4. Exports destinations for apples from South Africa .................................................................... 14 Figure 5. Distribution of pear production in South Africa ........................................................................ 14 Figure 6. Historical exports and average prices of pears........................................................................... 15 Figure 7. Export of pears per week ........................................................................................................... 15 Figure 8. Exports destinations for pears from South Africa ...................................................................... 16


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Figure 9. Distribution of table grape production in South Africa ............................................................. 16 Figure 10. Historical exports and average prices of table grapes .............................................................. 17 Figure 11. Export of table grapes per week ............................................................................................... 17 Figure 12. Exports destinations for table grapes from South Africa ......................................................... 18 Figure 13. Distribution of orange production in South Africa .................................................................. 19 Figure 14. Historical exports and average prices of oranges ..................................................................... 19 Figure 15. Exports destinations for oranges from South Africa ................................................................ 20 Figure 16. Distribution of mandarin production in South Africa .............................................................. 20 Figure 17. Historical exports and average prices of mandarins ................................................................ 21 Figure 18. Exports destinations for mandarins from South Africa ........................................................... 21 Figure 19. Distribution of avocado production in South Africa ................................................................ 22 Figure 20. Historical exports and average prices of avocados .................................................................. 22 Figure 21. Exports destinations for avocados from South Africa ............................................................. 23 Figure 22. Distribution of mango production in South Africa .................................................................. 23 Figure 23. Historical exports and average prices of mangoes ................................................................... 24 Figure 24. Exports destinations for avocados from South Africa ............................................................. 24 Figure 25. Regulatory and standards landscape ........................................................................................ 25 Figure 26. Organisations in the South African fruit industry .................................................................... 32


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MARKET ACCESS AND PRIVATE STANDARDS: CASE STUDY OF THE SOUTH AFRICAN FRUIT MARKET

1. Introduction

1. The fruit industry (deciduous, citrus and subtropical fruits) in South Africa is a multi-billion rand industry that could contribute significantly to the well-being of the South African population, directly, and indirectly, through its forward and backward economic and employment multipliers with the rest of the economy. For example, the GDP multipliers for the deciduous, citrus and subtropical fruit sub-sectors are 1.67, 1.43 and 1.55, respectively; this means that for an increase of one rand in the production by the deciduous, citrus and subtropical fruits it will result in an ZAR 1.67, ZAR 1.43 and ZAR 1.55 increase in the GDP of the country, respectively. In terms of employment multipliers, an increase of ZAR 1 million turn over by the respective deciduous, citrus and sub-tropical sub-sectors will result in 51.89, 26.63 and 21.8 more jobs (direct, indirect and induced), respectively (Mullins, 2004).

2. However, fruit growers in South Africa are facing a combination of national and international commercial pressures.

Firstly, there is increasing integration and transformation of the global value chain through which South African fruit producers export. The average size of players in the chain has increased as the total number of players has decreased. The tough marketing environment and the strong rand accelerated the natural process of consolidation (after deregulation and fragmentation after 1997). After deregulation there were more than 300 exporters of fresh fruit. Although there is still a large number, the top 10 exporters exports 90% of the total volume. It is expected that the consolidation process will continue at least in the short to medium run (Louw, 2006).

Secondly, consumer trends are changing. There is a constant demand for new and improved cultivars, which are linked to increasing quality and safety standards (technical, environmental and ethical) in the production of fruit. Consumers are also seeking more transparency, traceability and conformity assurance which resulted in an increase of information flow along the supply chain and the implementation of various private food standard schemes (see below).

Thirdly, South African fruit producers are facing an increasingly competitive market, especially from other competing countries, such as those in South America, where prices are very competitive. In fact, there exists a downward pressure of prices in these countries. The ability to sustain existing markets and penetrate new markets is very important in this regard. South America’s traditional fruit market is the US and North America. However, most of these countries’ currency devaluated against the Euro whilst the Rand strengthened and the European market therefore became more lucrative for South Africa’s major competitors and less for South Africa. Also, it is not foreseen that these countries will give up hard won shelf space even if their currencies strengthen. The continuous shift of power towards the end of the chain, in this case to EU retailers, is also contributing to this pressure. Their economic power in sourcing can not be


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underestimated, for instance the annual turnover of Walmart is for example larger than the total GDP of South Africa, making it both an important client.

3. Private product and process standards form part of the changing economic and environmental conditions, and are largely uncontrollable. The increasing focus on costs and efficiency in production systems can be seen as an integral part of these codes of conduct and business model.

4. On the environmental side it can be said that due to information technologies, media access and lobby groups, end users are more aware of these issues. It has become evident that some production systems are harmful to the environment at large. This, together with the fact that consumers have an increasing choice of products may entail that they consciously demand a product that is less harmful to the environment. To assure this, standard schemes are used to differentiate products and provide for the assurance of an environmentally sound product. Finally, the increasing concentration on the retail side forces retailers to compete by attempting to differentiate their products from other retailers. With fruit, this is extremely difficult, except for exotic packaging mostly at the expense of the primary producer.

5. Various non-legislative private standard schemes have been implemented by the retail industry in the OECD countries. All standards are certified and audited on a regular basis to assure compliance. The most important ones are summarized below1:

• HACCP: HACCP stands for Hazard Analysis Critical control Points and was developed for the aerospace industry in the US. Principles of the food hygiene system have been adopted in legislation in the EU and the US. HACCP is a systematic preventive approach covering all aspects of food safety during processing.

• International Food Safety (IFS): This management system was developed in 2002 by German retailers, and has been implemented in a few other European countries. The system can be applied to all steps of the processing of foods, subsequent to their agricultural production. The following issues are addressed in the standard: management of the quality system, management responsibility, resource management, product realization and measurements, analysis and improvements.

EurepGAP: The working group of mayor European retailers (Eurep) developed a framework for Good Agricultural Practice (GAP). The objective of this widely used framework is to increase food safety based upon reliable agricultural production methods. Various product specific protocols and verification procedures have been developed by the working group. Eurep represents the leading European food retailers, and is therefore a very important international standard.

ISO9000 / ISO14000: The International Organization for Standardization (ISO) is the largest developer of standards. Principally the standards are technical by nature and aimed at a variety of organizations, like businesses and governments. The objective of the standards is to make the development, production and supply of products and services more efficient, safer and cleaner. The ISO 9000 standard specifically targets the development and implementation of a quality management system in an organization. This is achieved by standardizing procedures and working methods of the whole system. The ISO 14000 standard is an environmental management system that is integrated in the policies and goals of the organization. Both standards are certified and audited on a regular basis.

1 Information derived from the Access Guide of the Centre for the Promotion of Imports from developing countries (CBI) [internet]

<www.cbi.nl> [accessed in 2006]


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British Retail Consortium (BRC): In 1998 the BRC developed a standard on food safety, hygiene and quality applicable to the food processing industry. The aim of this system is to set requirements for processed and prepared foods through incorporation of HACCP, ISO 9001, traceability and environmental standards. The standard is mainly required in the UK but some retailers outside the UK are also starting to require BRC from their suppliers.

Safe Quality Food (SQF): This food management system was developed in Australia and was later introduced in the US. The system’s aims at enabling all actors in the food chain to assure food safety, HACCP principles, traceability, quality in a cost effective manner. The system relies heavily on HACCP principles on food hygiene and ISO 90000 principles. Two standards, namely SQF1000 for primary sector and SQF2000 for processed products have been developed.

Organic labels: Apart from legislation that regulates the determination and labeling (EU Organic Farming Label, USDA NOP) of organic produce, various private labels exist, e.g. Demeter, Ecocert, Bio-Siegel, as proof of compliance with organic principles.

SA8000: This is one of the well-known voluntary global standards to ensure social accountability. The codes of conduct define social accountability as well as the requirements for a management system. The standards are based on the conventions of the International Labour Organization (ILO).

Various retail, non-sector or country specific or codes of conduct like: Nature’s Choice, EKO, Max Havelaar, Fair Trade, Business Social Compliance Initiative (BSCI), Agriculture Biologique (AB), Total Quality Management System (TQM), Qualität und Sicherheit (Q &S).

(see also Section 2.5)

6. In addition to the previous paragraph, note should also be taken of the different domestic factors that have a major influence on the way the fruit value chain operates within South Africa. These include, amongst others:

Deregulation of the fruit sector in South Africa in 1997;

Increased internal competition and number of exporters;

Increased costs of imported materials. In a free market environment, input costs should be fixed close to the import parity price of inputs. However, several studies in South Africa found that although input costs flattened out, they did not come down after the Rand strengthened from its all time low during 2001/2002 (Louw & Fourie; 2004-2005) (see also Appendix A: Gross Fruit Income distribution).

Introduction of new legislation, for example labour legislation pertaining to minimum wages. Minimum wages in South Africa increases by far more than the CPI (12.1% in 2006) and these affect producer costs in the sector. Simultaneously to this, a property tax on agricultural land and fixed improvements were introduced in 2005. All these costs add to the overall cost of doing business in South African agriculture. During 2006 a Broad Based Black Economic Empowerment (BBBEE) charter and scorecard will be introduced which, will further change the face of the South African fruit industry.

Downward trend in real price of exports; and


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Effects of fiscal, interest and monetary policy on agricultural prices. Asfaha and Jooste (2006) show that agricultural prices in South Africa adjust faster than industrial prices to changes in the money supply, affecting relative prices in the short-run. The high speed of adjustment of agricultural prices in response to monetary changes, to some extent, also explains their higher volatility.

7. Over and above the commercial and regulatory environment that the fruit industry has to contend with as described above, it also has to position itself within the broader agricultural framework set by government and the private sector. In this respect the Strategic Agriculture Sector Plan (SASP) and New Partnership for Africa’s Development (NEPAD), are of vital importance.

8. The SASP is a common agricultural perspective to which government and industry would commit their efforts and resources in its implementation. Moreover, the SASP has as its vision a united, non-racial and prosperous agricultural sector that is based on three strategic goals of:

Equal access and participation;

competitiveness and profitability; and

sustainable resource management.

9. The rest of the report is structured as follows: Section 2 provides a general background of the fruit industry in South Africa. In Section 3 more detail regarding the different fruit sub-sectors are provided. Section 4 gives an overview of the framework around important legislation and regulations applicable to the fruit industry. Sections 5 and 6 summarize the results of interviews with exporters and producers based on OECD questionnaire guidelines.

2. Background2

2.1 Introduction

10. The Republic of South Africa covers an area of 122.3 million ha and has a total population of ±46 million people. About 13% of South Africa’s surface area can be used for crop production. High potential arable land comprises only 22% of the total arable land. Slightly more than 1.2 million ha are under irrigation.

11. Approximately 50 000 medium to large commercial farmers manage 61 000 commercial farms on 82 million ha in South Africa. Furthermore, 240 000 small commercial farmers provide for local and regional markets’ mainly to informal traders; and an estimated 1 – 3 million rural householders produce food primarily to meet their family’s needs. Furthermore, there are an estimated 3 million farmers, mostly in the communal areas of the former homelands, who produce food primarily to meet their family's needs.

12. Primary commercial agriculture contributes about 3.3% to the Gross Domestic Product (GDP) of South Africa and about 7.2% to formal employment. However, there are strong backward and forward linkages into the economy, so that the agro-industrial sector is estimated to comprise 15% of GDP.3

2.2 The dual agricultural sector4

2 Parts of this chapter are based on Louw, Jooste and Pieterse (2004). 3 D.Burgers; South African Yearbook 2005/2006.


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13. The South African agricultural sector can be characterised as dualistic. On one hand there exists an advanced commercial sector and on the other end an underdeveloped (black) emerging farming sector. Despite many efforts by government, the South African society remained characterized by vast racial distortions in the distribution of and access to wealth. Factors such as the lack of access to land, water, markets, finance, communications infrastructure, education, skills development facilities and flows of information and opportunities still prevent Black South Africans from making substantive progress in farming. Furthermore, these factors, and previous policies and power relationships, left black participants sorely under-represented in agribusiness in the entire value chain. These are some of the factors that gave way to a cycle of skills deficit, crushing poverty, underdeveloped markets, low rates of public and private sector investment and a lack of infrastructure that reinforces the cycle by impacting on the ability of black communities to engage in meaningful rural based economic activities. Black Economic Empowerment (BEE), together with land reform initiatives is regarded as vitally important catalysts to address these imbalances.

2.3 Deregulation

14. The South African agricultural sector has emerged from a history of protection and subsidisation at various stages of the marketing chain. This system, however, became obsolete in the face of both local and international pressure, and the result has been a process of deregulation. Moreover, under a new democratic government several processes have taken place to reverse discriminatory legislation and to improve participation, while at the same time several other initiatives have been implemented to liberalize the sector, over and above deregulation. These policy shifts can be summarised as follows:

Changes in the fiscal treatment of agriculture, including the abolition of certain tax concessions that favoured the sector.

A reduction in direct budgetary expenditure on the sector.

Land Reform, consisting of the restitution, redistribution and tenure reform programmes.

Trade policy reform, which included the tariffication of farm commodities and a general liberalization of agricultural trade including free trade agreements.

Institutional reform influencing the governance of agriculture.

The application of labour legislation to the agricultural sector.

15. As with the other agricultural sub-sectors the fruit industry was also affected by these changes. The process of deregulation was accompanied by what industry role players call “chaotic marketing in a free-for-all environment”. For example, before deregulation exports of fruit were mainly handled by Unifruco and Outspan, but deregulation saw the number of exporters of fruit increase, virtually overnight, to more than 300. Exports were uncoordinated and accusations of exporters and producers operating in an unscrupulous fashion were voiced frequently; the result was huge losses by many role players and even bankruptcies. This state of affairs were however not sustainable and the fruit industry collectively started to coordinate their efforts better, and today the industry is in a much better organised position than the period just after deregulation. Although there are still approximately 350 (2005) exporters, a small percentage of these are responsible for the majority of the total exports of fruit.

4 This section is based on Chapter 3 of the Fruit Industry Plan; Research Report (2006).


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2.4 The domestic market

16. About 40% (indicative) of South Africa’s total fruit production is destined for the local market. Fruits are sold through various supply chains ranging from informal markets, local fresh produce markets (there are 17 in total) to state-of-the–art retail outlets. The domestic consumers are following the international trend of becoming more demanding and sophisticated; this is underpinned by the fast growing middle-class in the country. However, it’s believed that the domestic market has not yet developed to its full potential. The domestic market is in many cases still treated as a retreat when things go wrong in the international market, even though local retailers put a premium on quality and are increasingly requiring more advanced product and process requirements.

2.5 Fruit exports

17. The South African fruit industry has been in the privileged position of being one of the major exporters of fresh fruit to the European market. Consumers world-wide have become accustomed to high standards of quality and uniformity of produce. Fruit is also exported to different markets and quality preferences may vary, but South African growers and exporters remain dedicated to serving the needs of their customers and committed to meeting increasingly difficult demands of the international market.

18. Every effort is made to ensure that products meet and exceed established international standards, in order to gain access to new emerging markets and remain competitive in traditional markets. Fruit exports are regulated under an official export inspection and certification system, by the National Department of Agriculture (DoA). Local and export standards are revised annually. Fruit is inspected for uniformity to quality standards, including packaging, marking, labelling and traceability requirements, presence of arthropods and compliance to prescribed export residue limits through residue testing audits. A central agency, the Perishable Products Export Control Board (PPECB), carries out inspection and certification as the government assigned agency, to ensure conformance and compliance to local and international quality standards. (see also sub-section 4.1.4).

19. Traditionally, fruit quality has been the accepted norm in international trade. Food safety has however become a critical priority globally as an increasingly important public health and consumer safety issue. According to the World Health Organisation (WHO), governments world-wide are intensifying their efforts to improve food safety control. Globalisation, increasing human exposure to infectious food borne diseases and an emphasis on the importance of the safety of food crossing national boundaries in international trade has played a major contributing factor. To date, food safety regulations for domestic and import-export markets targeted high-risk commodities, including meat, fish and dairy products, with no mandatory requirements imposed on fresh produce industries, internationally.

20. Various food scares in recent years, linked to increased outbreaks of food-borne illness associated with consumption of contaminated fresh produce, undermined confidence in the safety of fresh and processed products amongst consumers, retailers and public health agencies. Chemical contamination of products or the environment, as well as ethical fair trade principles are impacting on the criteria which growers and exporters have to adhere to regarding exports. Increased consumer pressures and demands have created a strong market-driven food safety control requirement, particularly amongst retailers. Ensuring product safety along the supply chain, through an integrated concept to ensure safety at the source and from “farm to fork”, has become one of the minimum requirements of first-world countries. These new challenges are currently sweeping through the world and industries are faced with changing legislation. The European Union (EU), for instance, requires mandatory food safety controls from 2004, for all domestic and imported products, including fresh produce.


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21. Confidence in quality and safety of South African products has become a priority issue for the fresh produce supply chain. The importance of food safety requirements in the South African fruit industry and the demand to produce safe fresh fruit products of high quality, satisfying consumer expectations and meeting local and export market requirements, is more critical today than ever before.

22. The South African fruit industry continues to make every effort to maintain and improve upon the challenging requirements of export markets. This is done through structured, sustainable and scientific approaches to ensure safe fruit production. A good example in this matter is Citrus Research International (CRI), the main private research institution for the citrus industry. This institution has many linkages with academic research institutions, the Agricultural Research Council (ARC) and other private institutions and is involved in many technology transfer activities. CRI spent about ZAR 10 million on research in 2004, and has invested heavily in building and improving research facilities. The institute operates an extensive post harvest research facility). The South African fruit industry continuously strives to grow products in harmony with the environment and its integrated production practices are among the most advanced in the world. This has become increasingly important due to growing concerns expressed, particularly in the EU, regarding the use of chemicals that in some cases may impact on the safety of food or the integrity of the environment.

23. The South African government and the fruit industry are adopting requirements and guidelines and remaining committed to the observance of internationally agreed core labour standards, addressing global environmental issues and ensuring quality and safety of products through its legislation. Production and handling systems are required to adhere to international standards for the safe cultivation and handling of fresh produce. This is done according to international Codex standards, which provide a generic framework for safe food handling practices. A Quality Assurance System for fresh produce exports includes mandatory food safety regulations to ensure compliance to changing international food safety regulations.

24. Due to the strong market-driven food safety requirement, South African fruit producers supplying international supermarket and retailer groups must also adhere to codes of conduct or good agricultural practices as stipulated by these customers. Codes and quality prerequisites prescribed are typically more stringent than minimum standards required by existing United Kingdom and EU legislation. Producers, packers and exporters exporting to these markets have implemented quality management and food safety systems to address food safety and related customer requirements (the most important have been mentioned in Section 1).

25. Traceability is a fundamental food safety requirement according to the existing export certification system. Developing industry traceability systems throughout the supply chain, according to international trade requirements, is a priority. The implementation process to run pilot projects according to the International Fresh Produce traceability standards has been initiated.

3. Sub-sector overviews5

3.1 Deciduous fruit industry

26. The gross value of capital investment (land, fixed improvements machinery and equipment) in the deciduous fruit industry is estimated at R18 000 million. Approximately 2 500 commercial producers are involved in the industry. It is estimated that there are about 500 table grape, 787 pome fruit and 1 438 stone fruit producers.

5 Parts of this section draw heavily on Louw and Fourie (2004).


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27. In 2002 a survey revealed that there are approximately 104 500 permanent farm labourers employed in the industry (including casual labour, through converting casual labour hours to permanent labourers). If it is assumed that there are four dependents for each labourers then there are 417 000 dependents which are directly dependent on the industry. An unknown number of job opportunities exist in the secondary industries.

3.1.1 Apples

28. There are 20 major apple producing regions in South Africa. The total area planted in 2004 amounted to 21 326 hectares with total production at 756 144 tons. The value of production in the 2003/04 season amounted to R 1657 million. Figure 1 shows the distribution of production from 1991/92 until 2003/04. On average, 35% of the crop was exported over this period.

Figure 1. Distribution of apple production in South Africa

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Source: DoA, OABS, PPECB.

29. Figure 2 shows the historical export volumes and average prices. There is a clear upward trend in the volumes exported since the 1999/2000 season. Average prices also increased over this period.


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Figure 2. Historical exports and average prices of apples

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30. Figure 3 shows apple exports per week. It is clear that exports usually peek from week 13 until 30 after which exports drop considerably. The marginal deliveries at the end of the season (week 41 – 49) are due to controlled atmosphere technology.

Figure 3. Export of apples per week

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31. Figure 4 shows apple exports per destination. The United Kingdom and Northern Europe are the main export destinations accounting for 63% of all exports of apples from South Africa. Following distantly in third place is the Far East with 12% of apples being exported there.


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Figure 4. Exports destinations for apples from South Africa

Canada2%

Southern Europe2%

Russia3%

East Africa1%

United States1%

Asia1%

Middle East5%

Indian Ocean Island3%

West Africa6%

Far East12%

Northern Europe27%

United Kingdom36%

Mediterranean1%

Source: PPECB.

3.1.2 Pears

32. There are 18 major pear producing regions in South Africa. The total area planted in 2004 amounted to 12 130 hectares with total production at 324 644 tons. The value of production in the 2003/04 season amounted to R 841 million. Figure 5 shows the distribution of production from 1991/92 until 2003/04. On average, 42% of the crop was exported over this period.

Figure 5. Distribution of pear production in South Africa

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Source: DoA, OABS, PPECB


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33. Figure 6 shows the historical export volumes and average prices. There is a clear upward trend in the volumes exported since the 1998/1999 season, but in 2003/04 exports experienced a substantial decline. Average prices increased from 1999/2000 after moving more or less sideways over the preceding period.

Figure 6. Historical exports and average prices of pears

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34. Figure 7 shows pear exports per week. The number of cartons exported show a steady increase from week 1 to week 11 after which exports drop back substantially to week 15. From week 15 exports increase again, levels out and drops again from week 24 onwards.

Figure 7. Export of pears per week

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35. Figure 8 shows pear exports per destination. Northern Europe is the main export destination accounting for 54% of all exports of pears from South Africa. The United Kingdom follows at 20%. Following distantly in third place is the Far East with 7% and fourth place is shared by Southern Europe and Russia with 6% each.

Figure 8. Exports destinations for pears from South Africa

Northern Europe54%

Canada2%

United States1%

West Africa0%

Middle East1%

Asia0%

East Africa0%


Russia6%

Mediterranean2%

Far East7%

Southern Europe6%

United Kingdom20%

Source: PPECB

3.1.3 Table grapes

36. There are 19 major table grape producing regions in South Africa. The total area planted in 2004 amounted to 21 439 hectares with total production at 427 491 tons. The value of production in the 2003/04 season amounted to ZAR 2 113 million. Figure 9 shows the distribution of production from 1991/92 until 2003/04. On average, 43% of the crop was exported over this period.

Figure 9. Distribution of table grape production in South Africa

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37. Figure 10 shows the historical export volumes and average prices. There is a clear upward trend in the volumes exported over the depicted period. Average prices also show an increasing trend over the whole period.

Figure 10. Historical exports and average prices of table grapes

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R 0R 1,000R 2,000R 3,000R 4,000R 5,000R 6,000R 7,000R 8,000R 9,000R 10,000



38. Figure 11 shows table grape exports per week. The Orange River area enters the market from week 46 and exits the market around week 8. The Berg River region enters the market in week 52 and exists around week 14. The Hex Valley enters the market in week 2 and exists around week 21. On aggregate table grape exports are the highest between weeks 1 and 10.

Figure 11. Export of table grapes per week

0500,000

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,000

44 46 48 50 52 2 4 6 8 10 12 14 16 18 20 22 24

Weeks

4.5K

g Eq

uiva

lent

Car

tons

BERG RIVER HEX VALLEY NORTHERN PROVINCE ORANGE RIVER OTHER

Source: PPECB.

39. Figure 12 shows table grape exports per destination. Northern Europe is the main export destination accounting for 62% of all exports of table grapes from South Africa. The United Kingdom follows at 23%. Following distantly in third place is the Far East with 6%, fourth place is Southern Europe with 3% and in the fifth place is the Middle East with 2%.


18

Figure 12. Exports destinations for table grapes from South Africa

Russia1%

United States1%

Southern Europe3%

United Kingdom23%

Asia<1%

East Africa<1%Canada

1%

Far East6% Middle East

2%

Northern Europe62%


West Africa<1%

Source: PPECB.

3.2 Citrus

40. The South African citrus industry is the 2nd largest exporter of citrus in the world, despite being placed 13th in the world citrus production rankings. The estimated value of the annual crop is ZAR 2.8 billion of which exports account for ZAR 2.5 billion, or approximately 90%. Approximately 1 550 farmers produce the South African citrus crop of which approximately 1200 are involved in exports to 60 countries worldwide. It is estimated that there are approximately 60 000 permanent labourers with a further 40 000 employed in pack-houses. The number of people dependent on the citrus industry approaches 1 million people.

41. The total area planted with Citrus in South Africa is 56 962 ha, with the Eastern Cape, Limpopo, the Western Cape and Mpumalanga having the largest areas under citrus.

3.2.1 Oranges (Valencia’s and Navels):

42. The total area planted with Valencia’s in South Africa is 22,834 ha with the Limpopo, Mpumalanga and Eastern Cape representing the largest areas. The total Navel area in South Africa is 13 650 ha with the Eastern Cape, Western Cape and Mpumalanga representing the largest areas. Total production in 2003/04 amounted to 1 341 609 tons with a gross value of ZAR2 417 million. Figure 13 shows the distribution of production of oranges from 1991/92 until 2003/04. On average, 53% of the crop was exported over this period.


19

Figure 13. Distribution of orange production in South Africa

0200,000400,000600,000800,000

1,000,0001,200,0001,400,0001,600,000

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

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/200

0

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/200

1

2001

/200

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/200

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/200

4

Ton s

Local markets Exports Processing




43. Figure 14 shows the historical export volumes and average prices. There is a clear upward trend in the volumes exported over the depicted period. Average prices also show an increasing trend over the whole period.

Figure 14. Historical exports and average prices of oranges

0100,000200,000300,000400,000500,000600,000700,000800,000900,000

1,000,000

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

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Tons

R 0

R 500

R 1,000

R 1,500

R 2,000

R 2,500

Exports Avg Price/ton


44. Figure 15 shows orange exports per destination. Northern Europe is the largest destination followed by the Middle East (21%), Russia (14%), Southern Europe (10%), the Far East (10%) and the United Kingdom (8%).


20

Figure 15. Exports destinations for oranges from South Africa

Middle East 21%

Russia14%

Southern Europe10%

Far East10%

Canada2%

Optional3%

USA4%

Japan1%

United Kingdom8%

Northern Europe27%

Source: PPECB.

3.2.2 Mandarins

45. The total area planted to mandarins in South Africa is 5,366 ha with the Western Cape and the Eastern Cape representing the largest areas (49% and 36% respectively). Total production in 2003/04 amounted to 183 415 tons with a gross value of ZAR 530 million. Figure 16 shows the distribution of production of mandarins from 1993/94 until 2003/04. On average, 55% of the crop was exported over this period.

Figure 16. Distribution of mandarin production in South Africa

0

50,000

100,000

150,000

200,000

250,000

300,000

1993

/94

1994

/95

1995

/96

1996

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21

46. Figure 17 shows the historical export volumes and average prices. There is a clear upward trend in the volumes exported until 1999/2000 after which export decline and levels out. Average prices also show an increasing trend.

Figure 17. Historical exports and average prices of mandarins

020,00040,00060,00080,000

100,000120,000140,000160,000180,000200,000

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/200

0

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1

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/200

4

Tons

0500

1,0001,5002,000

2,5003,000

3,5004,000

Exports Avg Price/ton


47. Figure 18 shows mandarin exports per destination. The United Kingdom receives 53% of mandarin exports by South Africa followed by the Far East (13%), Northern Europe (9%), the US (8%) and the Middle East (7%).

Figure 18. Exports destinations for mandarins from South Africa

O ptio na l 3%

R us s ia 4 %

M idd le Eas t 7 %

In dia n O c e an Is la nds

2 % EU1%

Afric a<1 % So uthe rn E uro pe

<1%

F a r E as t1 3 %

N orthe rn Euro pe 9 %

U SA 8 %

U nite d K ing do m 53 %

Source: CGA

3.3 Sub-tropical fruits

48. The estimated value of the annual crop is ZAR 971 million. The total area planted under sub-tropical crops are approximately 48 300 hectare. The main production areas of subtropical fruit in South Africa are parts of the Limpopo, Mpumalanga and KwaZulu-Natal provinces.


22

3.3.1 Avocados

49. The total area planted to avocados in South Africa is 12 000 ha. The major avocado producing areas in South Africa are Letaba (39%), Soutpansberg (18%), Nelspruit (18%) and Kiepersol (17%). Total production in 2002/03 amounted to 77 006 tons with a gross value of ZAR 264 million. Figure 19 shows the distribution of production of avocados from 1990/91 to 2002/03. On average, 60% of the crop is exported.

Figure 19. Distribution of avocado production in South Africa

010,00020,00030,00040,00050,00060,00070,00080,00090,000

1990

/91

1991

/92

1992

/93

1993

/94

1994

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1995

/96

1996

/97

1997

/98

1998

/99

1999

/200

0

2000

/01

2001

/02

2002

/03

Tons




Source: DoA.

50. Figure 20 shows the historical export volumes and average prices. Exports moved more or less sideways from 1990/91 to 1997/98 where after it increased and have been moving sideways since then. Average prices also show an increasing trend.

Figure 20. Historical exports and average prices of avocados

0

10,000

20,000

30,000

40,000

50,000

60,000

1990

/91

1991

/92

1992

/93

1993

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2002

/03

Tons

R 0R 500R 1,000R 1,500R 2,000R 2,500R 3,000R 3,500R 4,000R 4,500

Exports Average price



23

51. Figure 21 shows exports per destination. The EU is by far the largest market for South African avocados. The United Kingdom accounts for 28% of avocado exports by South Africa.

Figure 21. Exports destinations for avocados from South Africa

EU72%

United Kingdom28%

Americas<1%

Far East & Asia<1%

Middel East & Mediterranean

<1%

Source: PPECB.

3.3.2 Mangoes

52. The total area planted with mangoes in South Africa is 7 747 ha with Messina / Louis Trichardt / Tzaneen, Hoedspruit and Malelane / Komatipoort representing the largest areas. Total production in 2002/03 amounted to 66 075 tons with a gross value of ZAR 163 million. Figure 22 shows the distribution of production of mangoes from 1990/91 to 2002/03. On average, 20% of the crop was exported over this period.

Figure 22. Distribution of mango production in South Africa

020,00040,00060,00080,000

100,000120,000140,000160,000180,000

1990

/91

1991

/92

1992

/93

1993

/94

1994

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/200

0

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/01

2001

/02

2002

/03

Tons

Local markets Exports Processing Dried



Source: DoA


24

53. Figure 23 shows the historical export volumes and average prices. Exports gradually increased over the depicted period. Average prices also show an increasing trend.

Figure 23. Historical exports and average prices of mangoes

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,000

1990

/91

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

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1997

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1998

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/03

Tons

R 0R 500R 1,000R 1,500R 2,000R 2,500R 3,000R 3,500R 4,000R 4,500R 5,000

Exports Avg price/ton


54. Figure 24 shows mango exports per destination. The EU is by far the largest market for South African mangoes. The Middle East accounts for 11% of mango exports by South Africa followed by the UK at 10%.

Figure 24. Exports destinations for avocados from South Africa

Africa1%

C/Europe76%

United Kingdom10%

M/East & Mediterranean

11%

F/East & Asia2%

Source: PPECB.

4. Regulatory framework and legislation applicable to the South African fruit industry6

55. The South African regulatory framework and standards system comprises various role players. Figure 25, on the next page, shows the regulatory and standards landscape, as well as linkages between different role players in South Africa and internationally.

6 This section draws heavily on Jooste et al. (2003).


25

Figure 25. Regulatory and standards landscape

Consultation

SOUTH AFRICAN STANDARDS, QUALITY, ACCREDITATION & METROLOGY LANDSCAPE

CODEX Alimentarius

ILO

ITU

Department of Health

Department of Labour

Department of Telecommunications

Government Minister of Trade

& Industry

Standards Act (no.29 of 1993)

Science Council

Budget

Department of Trade & Industry

SADC Co-operation – SADCMEL, SADCA,

SADCSTAN

SABS Standards

South African Bureau of

Standards - Standards Division

(SABS)

World Trade Organisation

Public Consultation

International Electro-technical Commission (IEC)

Member Committee Secretariat Governance Board

ISO Standards

International Organisation for Standardisation (ISO)

Member Committee Secretariat

Governance Board

IEC Standards

Technical Committee System

MemberNational Department of

AgricultureCODEX Alimentarius FAO, IPPC, OIE

South African National

Accreditation System (SANAS)

National Metrology Laboratory

(NML)

International Bureau of Weights and

Measures (BIPM)

International Laboratory Accreditation

Cooperation (ILAC)

International Accreditation Forum (IAF)


26

4.1 National Department of Agriculture (DoA)

4.1.1 Introduction

56. The DoA has several functions in respect of setting and policing of regulations and standards pertaining to agricultural products. Ultimately it’s the DoA’s duty to harmonize the South African product and process requirements with the world minimum standards (Codex) All these functions are under the National Regulatory Services (NRS), which was recently established as a result of organisational changes within the DoA. Four directorate’s fall under this division, namely Plant Health (DPH), Food Safety and Quality (DFSQ), Animal Health (DAH) and the SA Agricultural Food, Quarantine and Inspection Services (SAAFQIS).

57. The DFSQ is the most important unit with regard to food safety and quality assurance and can be seen as the policy section. The DPH acts as the National Plant Protection Organisation (NPPO) and is responsible for the phytosanitary requirements and protocols. The SAAFQIS monitors the inspection procedures and serves as a dispute settlement body.

4.1.2 Legislation and framework

58. The NRS administers parts of the following Acts that relate to plant health, food safety and quality control:

Agricultural Pests Act, 1983 (Act No. 36 of 1983): The Act regulates the importation of controlled goods, inter alia, plants, plant products, exotic animals, insects and pathogens, honey and used apiary equipment. It is administered and enforced by the DPH.

Agricultural Product Standards Act, 1990 (Act No. 119 of 1990). This Act covers mandatory standards for 220 different commodities. It controls and promotes specific product standards (e.g. meat, dairy products, cereals, certain canned products, fruit and vegetables) for local, as well as, export purposes. Furthermore, the Act set compositional, as well as, quality, packaging, labelling, chemical and microbiological standards in respect of a variety of other foodstuffs such as fruit, fruit juices, vegetables, cereals and eggs. The norms are based on the specific needs of the South African market and are usually harmonised with international standards. The Act is administered and enforced by the DFSQ. Various assignees such as the Perishable Products Export Control Board (PPECB) are however also appointed and authorised to do the physical inspections in terms of this Act.

The Fertilizers, Farm Feeds, Agricultural Remedies and Stock Remedies Act (Act No. 36 of 1947). It is administered and enforced by the Directorate: Agriculture Production Inputs of the DoA. Animal feeds, stock remedies and agricultural remedies (pesticides, etc.) are registered in terms of this Act.

The Plant Breeders’ Rights Act, 1976 (Act 15 of 1976).

The Plant Improvement Act, 1976 (Act 53 of 1976) .

The Act on Genetically Modified Organisms, 1997 (Act 25 of 1997).

59. The NRS administering and enforcement of the legislation is conducted in co-operation with various role players, namely:


27

Customs officials who in terms of their legislation give instructions for the detention of imported articles regulated by the Agricultural Pests Act.

The South African Police Service and customs officials who guard against the illegal entry of regulated articles.

Spoornet, Portnet, Post Offices, South African Airways, container depots, international cargo agents, international courier services, etc. who are responsible for the physical detention of regulated articles.

Importers or their agents who have to present regulated articles to the executive officer of the Act for the necessary control.

Farmers and other land users who must apply for the movement of certain plants and other regulated articles.

Land users and other regulatory institutions which must inform the executive officer of the Act of the presence of pests.

Perishable Products Export Control Board (PPECB) – Inspections on perishable products (fruits, vegetables, grains, etc.) for export in terms of IPPC principles and standards.

60. South African export legislation furthermore requires that:

Only chemical remedies registered in terms of The Fertilisers, Farm Feeds, Agricultural Remedies and Stock Remedies Act (Act No. 36 of 1947) be used on the specific crop;

Crops or agricultural products exported should not exceed the maximum chemical residue limits of the importing countries;

Record is kept of the chemical remedies used in spray/fumigation programs and as post harvest treatment; and

To ensure compliance with legislation monitoring samples are drawn during the quality inspections and analysed.

61. The NRS together with other Government Departments and Divisions is responsible for the government-to-government liaison with regard to MRLs on export products or rejection of consignments by importing authorities.

62. Exporters and producers have the responsibility to:

Comply with the requirements on the correct, approved use and application of pesticide remedies in terms of the Fertilisers, Farm Feeds, Agricultural Remedies and Stock Remedies Act (Act No. 36 of 1947);

Keep record of the chemical remedies used in spray programs and as post harvest treatment and to provide this information on request to the responsible authorities;

Verify the MRLs with their importer or agent in the relevant country;


28

Keep up with the registration and re-registration processes of pesticides within South Africa as well as in importing countries; and

Inform the NRS of any rejections by importing country authorities due to residues.

63. The DPH has established Special Markets Programmes for the following markets: US, China, Japan, Korea, Mexico, New Zealand, Israel, Chinese Taipei and the EU. These Special Markets Programmes are developed in cooperation with the NPPO’s of the importing country. The programmes contain phytosanitary protocols for export of specific South African produce destined to the mentioned countries. The following programmes have been established:

China: oranges, lemons, grapefruit, mandarin

EU: all produce (including GMO)

Israel: fresh grapes

Japan: oranges, lemons, grapefruit

South Korea: oranges

Mexico: apples, pears

Chinese Taipei: apples

US: citrus fruit (only from Citrus Black Spot free area’s),deciduous fruit (excluding apricots)

64. In terms of phytosanitary measures it’s very difficult to open up new markets; these programmes should thus give some assurance to stay in these markets.

65. The sub-directorate Agricultural Production Inputs (part of DFSQ) is responsible for the registration of all pesticides, insecticides (including household and industrial insecticides), fungicides, herbicides, adjuvants, plant growth regulants, all animal feeds and pet food, all organic and inorganic fertilizers, all pest control operators, all sterilizing units and certain animal medicines. It also renders an inspection service and investigates criminal offences regarding aspects of the Fertilizers, Farm Feeds, Agricultural Remedies and Stock Remedies Act country wide.

66. The sub-directorate: Agricultural Production Inputs administers the following Acts on behalf of the Minister for Agriculture and Land Affairs:

The Fertilizers, Farm Feeds, Agricultural Remedies and Stock Remedies Act, 1947 (Act No. 36 of 1947). The regulation prohibits, except for certain circumstances, the sale, acquisition, disposal or use of an agricultural remedy or a stock remedy, other than in the container and with the label as approved by the Registrar.

Fertilizers, Farm Feeds, Agricultural Remedies, Stock Remedies, Sterilising Plants And Pest Control

Operators, Appeals And Imports: Amendment No. R. 1475, 2003. The Act provides for the registration of fertilizers, farm feeds, agricultural remedies, stock remedies, sterilizing plants and pest control operators, appeals and imports.

Pesticide Residue Trial Requirements Act (No. 36 of 1947)


29

4.1.3 Inspections, testing and traceability

67. The functions of the NRS also include auditing fruit, vegetables, grain and some other specific products for compliance with maximum residue limits (MRLs). These are either prescribed by South African legislation, internationally agreed standards or are specific requirements set by individual importing countries. This regulatory analysis is in compliance with international agreements. Pesticide detection is done by multi residue analysis and the monitoring is focused on a wide spectrum of substances that includes pesticide residues from:

registered spraying programmes (listed in the requirements of importing countries), banned / illegal substances.

68. Phytosanitary inspections are conducted separately from quality inspections; the latter is conducted by the PPECB. However, the PPECB include a visual phytosanitary inspection when this is included in the standard. Whenever this is not the case, as with products which are not regulated, a separate phytosanitary inspection is conducted.

69. MRLs are a quality requirement and are the responsibility of the DFSQ. MRL testing takes place on the first consignment at farm level. If the MRLs are non-compliant the consignment is recalled and the second consignment may not leave the country before the testing results are satisfactory. The testing for quality purposes at the farm and pack house can be done by private laboratories, and the two departmental laboratories are involved in multi residue testing and testing for banned products. The sampling method is laid down in certain procedures (risk assessment) and is destination specific, for instance the USDA requires opening every carton. Other quality requirements aspects that are inspected include: size, colour, and grading.

70. The DPH mandates the phytosanitary inspections. These inspections include a visual and interior inspection of the produce. The type of inspection depends on the export destination. The US, for instance, has its own inspectors working in the South African ports.

71. Traceability makes everybody in the food supply chain responsible for food safety. To enhance the traceability of produce within the South African agricultural sector a tracing system called Food Business Operator (FBO) codes have been implemented. Each player in the chain can be identified by this code, which is also used with regard to labelling.

4.1.4 Perishable Product Export Control Board (PPECB)7

72. PPECB is the control body for all exports of perishable products. About 90% of the controlled products are fruit, 5% are vegetables and the rest comprises maize, rice, groundnuts, dairy products and meat. PPECB is assigned by DoA to carry out mandatory regulations and standards. The PPECB work pertains to two Acts, namely the PPECB Act (Act 9 of 1983) and the Agricultural Products Standards Act (Act 119 of 1990).

73. The board has a well-developed infrastructure to carry out its functions and has established offices all over the country. The inspection services offered by PPECB are ISO 9001 certified. This ensures that the service offered is of a good standard and that business is conducted according to internationally accepted standards.

7 Perishable Products Export Control Board (PPECB) [internet] < www.ppecb.co.za > [Accessed 2005].


30

74. PPECB does not devise new standards to producers and producer organisations, as this is done by the export agents and/or commodity boards. Furthermore, PPECB only has an indirect influence in the standard setting procedure, but if PPECB considers it to be necessary to change certain mandatory standards and regulations, it applies to the DoA.

75. The board issues export certificates at the end-point inspection system. These certificates can either be hardcopy or electronic. The export certificate contains information like: quantities, product description, FBO codes, country of origin, destination and details of inspection.

76. The PPECB is assigned to administer the South African Pesticide Initiative Program (SA-PIP). The aim of the program is to assist horticulture export producers to comply with EU requirements for food safety and consumer protection, in particular related to pesticide regulations.

77. The PPECB receives no government funding or subsidies, but instead generates its entire funding from commercial entities, like operating as a certification body. The levies offered by PPECB are considered competitive in relation to other certification agencies involved in HACCP and EUREPGAP accreditation, like the South African Bureau of Standards (SABS) and Societé Général de Surveillance (SGS).

4.2 Department of Health (DOH)8

78. Where the DoA is responsible for food safety and exports, the DOH is responsible for food safety and the local market. The latter is the responsibility of the Directorate Food Control. The main functions of the directorate include: compile and publish legislation regarding food safety and food labelling, coordinate food monitoring programmes, support provinces and local authorities with food law enforcement, inform, educate and communicate food safety and related matters to stakeholders, act as the National Contact Point for the Codex Alimentarius Commission and evaluate agricultural remedies, chemicals and food by using biotechnology.

79. For the purposes of its regulatory activities the Directorate is advised by the Food Legislative Advisory Group (FLAG). This non-statutory body is composed of representatives of academic and research institutions, the food industry, consumer and professional organisations, other government departments and provincial health authorities.

80. The directorate administers the following acts:

Cosmetics and Disinfectants Act (Act 54 of 1972: Food): This Act addresses the manufacture, sale and importation of foodstuffs.

The Health Act (Act 63 of 1977): This act entails regulations related to the hygienic handling of food and the inspection of food premises.

81. A number of economy wide regulations and acts also affect the functioning of the fruit industry directly and indirectly. A summary of these are provided in appendix B.

8 Department of Health (DOH) [internet] < www.doh.gov.za > [Accessed 2005].


31

5. Summary of interviews with exporters and producers

82. This section presents the results of interviews with exporters and producers on the challenges and constraints which the implementation of private standards may have for market access. The interviews were based on guideline questionnaires provided by the OECD Secretariat.

5.1 Exporters

83. Firms exported an array of fruits, including: avocados, apples, pears, table grapes, oranges, mandarins, grapefruit, mangoes and other stone fruits. All of the firms interviewed have been exporting for less than 10 years, except for one that have been exporting since 1905. The size of firms in terms of annual sales, ranged from ZAR 40 million to ZAR 8 billion. The main export markets that were identified were: UK, France, Spain, US, Malaysia, Hong Kong, Germany, Netherlands, Far East and the Middle East.

84. There were no significant differences in destination between smaller and larger firms, however the number of destinations did however increase as the size of the firm increased. Also because of gains in market access and the exploitation of niche markets that were not part of South Africa’s export destinations during the years of regulation. Also, there is a trend for some exporters to specialise in certain markets.

85. Most exporters dealt with a range of fruit in order to supply a large product range and to spread risk. However, two companies focussed on exporting one fruit only.

86. Most of the exporters have less than 40 employees, one has 300 and another has 1 200 employees. The average growth of these firms over the last three to five years ranged between fifteen and sixteen percent per annum. The majority indicated that it will stabilise, but indicated a desire to increase the number of customers in a given market or increase supplies to current buyers/importers. A brief overview of all export companies interviewed is given in Table 1.

Table 1. Overview of interviewed exporters

Employees Turnover* Average growth ** Size Company A 5 (1 million boxes) Stabilized medium Company B 15 (8 million cartons) 20% large Company C 3 ZAR 40.000.000 20% small Company D 6 ZAR 55.000.000 60% small Company E 1200 ZAR 100.000.000 20% medium Company F 20 ZAR 160.000.000 15% medium Company G 32 ZAR 200.000.000 45% large Company H 300 ZAR 8.000.000.000 30% large

Notes:

*Turnover: Not all companies were willing to provide this information

**Average growth: Estimation of the average growth over the last five years

87. In terms of procurement (access to suppliers), the distance between exporters and producers varied greatly. Fruit is sourced from different production regions all over the country, some of the exporters operated one or two regional offices.

88. In the decision to sign a contract with a specific grower the most important grower characteristics were: capability level of record keeping, business attitudes, in addition to the product variety grown. Communication with growers generally takes place by means of e-mail, fax and phone as well as on site visits and meetings. In addition, exporters employ staff whose responsibility is mainly to monitor the


32

production and procedures at farm level to ensure conformity with the applicable standard and packing requirements. Technical assistance and management advice are the most common form of support to growers offered by exporters. The assistance normally links the procurement of fruit from farmers for specific customers, e.g. Waitrose (this retailer demands a specific quality and has its own packing requirements). Exporters will provide producers throughout the season with advice; before harvest this is mainly technical (e.g. fertilizer programmes) and during harvest management advice is given to assure the quality and packaging and labelling requirements.

89. The different industry organisations, like: the Fresh Produce Exporters’ Forum (FPEF), the Deciduous Fruit Producers’ Trust (DFPT), the Citrus Growers’ Association (CGA), the South African Table Gapes (SAT), the South African Avocado Growers’ Association (SAAGA) the South African Mango Growers’ Association (SAMGA), the South African Apple and Pear Producer’s Organisation (SAAPPA) and FruitSA also play a role in informing the industry about shifting specifications in the international trade landscape. An overview is given in Figure 26 below.

Figure 26. Organisations in the South African fruit industry

Source: FPEF, 2006

90. The general tasks of these industry associations are to organise and represent their sub-sector of the fruit industry. Among others, the following tasks are conducted by these association: lobby for the industry with various stakeholders, assuring and developing market access, providing technical assistance, collect, analyse and disseminate industry information, marketing and promotional activities, initiate and manage R&D and educational programmes.

91. The general consensus is that government can be more active with regards to certain activities, e.g. facilitation and market promotion; similar to what the Chilean government is doing for their fruit exporters (Chile is one of South Africa’s main competitors in South Africa’s main markets).

92. Exporters noted the following important changes in the supply chains they service over the past five to ten years:

• Shortening of the chain. Profit margins decreased substantially since the 2001/2002 season and this forced everybody in the supply chain to cut costs and to become more efficient.

• Greater consolidation on the supply side. There are less and larger players throughout the supply chain. A shift in power towards the buyer side has already taken place in the past. Most of the large retailers prefer to buy from a smaller number of suppliers (exporters). On the farm level

Fruit SA

DFPTSubtrops CGA

SAAGA SAMGA SALGA SAAPPA SAT SASPA CRI

FPEF


33

insolvencies decreased the number of farmers. Some of these farms were bought for land reform but in most cases they were purchased by more efficient farmers.

• Increased use of containers in logistics, as a result of standardization and efficiency of logistics in the supply chain.

• Increased flow of information within the supply chain. There’s simply more information available facilitated by developments in ICT (driven by the increasing need for information), therefore the acquisition and analyses of relevant information has become a main driver to reduce risk (at all stages in the chain) and to stay competitive. Cognisance should be taken that after deregulation of the fruit industry it was almost impossible to attain accurate information because of a one channel system that was virtually fragmented overnight. These event forced farmers and exporters to set up so called “Joint Marketing Forums” to attempt to rectify the information gap. Currently most of the organisations mentioned in Figure 26 are involved information gathering and dissemination to producers.

93. The impacts of the changing economic and business environment on exporters and the ways in which they do business (see also point above) can be summarised as follows:

• Improving quality, with a focus on non-physical quality aspects, where physical quality requirements are more consistent.

• There is an increasing demand from large efficient fruit producers for exporters to either share in the substantial risks involved for the producer with the consignment marketing system or to be side stepped by producers that directly engage in exporting there own fruit.

• Cutting costs; due to market pressure margins have declined.

• Becoming more competitive in order to shape an environment for the industry to improve the ability to produce and increase the overall performance compared to competitors. In the fresh fruit supply chain it means that the entire supply chain of South Africa, from farm to fork, must be more efficient (lower cost, higher quality) than those of especially Chile, Brazil and Argentina.

• Greater focus on international standards, voluntary as well as mandatory

94. In order to be successful within the changing environment exporters emphasised the critical role of good management capacity. Interestingly enough the majority of the respondents argued that the smaller firms has the advantage of being more flexible and can therefore effectively compete in the chain. Value chain integration was also seen as an option to improve value chain management, and different strategies in this regard are employed. The larger exporters are more involved in forward integration; in one case the exporter is also involved in category management for a retailer. Other exporters interviewed are not at all integrated and operate solely as an export agent or export service provider.

95. With regard to the above and the smaller emerging firms in the sector one specific case should be highlighted. One of the interviewed exporters, Capespan, has established a social investment programme. This programme, called Thandi, is aimed to provide empowerment to farm workers and establish new black-owned ventures in the fruit industry. The programme focuses on land reform and skills development. Five projects throughout South Africa have been established in the fruit sector growing a wide range of fruit on about 900ha in total. The produce is branded as Thandi, marketed through Capespan’s extensive network and carries the Fair Trade label. (see also www.thandi.com )


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96. Opinions regarding product and process requirements did not differ significantly between different firm sizes, however the cost implications of compliance were regarded a burden especially by the smaller firms.

• Quality was highlighted as the most important requirement when exporting to the Western markets. Quality related issues include: size, shape, colour, texture, taste, skin marks, hardness and consistency. Exporters sourcing from many growers or grower groups had the most problems with consistency.

• Food safety was identified as the second most important product- and process requirement. The necessity to comply with food safety requirements were emphasized by all exporters interviewed. The limited number of testing facilities that can be used to check for, for example Maximum Residue Levels (MRL’s), could be regarded as potentially problematic.

• Exporters regard the UK requirements as the most stringent as far as product and process requirements are concerned.

• Chemical use is regarded as an area where mandatory and private standards create stumbling blocks, especially when exporting to Europe and the UK. This is mainly due to the fact that through differences in growing conditions in South-Africa, compared to conditions abroad, dissimilar types of chemicals and pesticides are used. The time-consuming registration process for new chemicals and pesticides, in order to get approved by the South African authorities, is also seen as on impeding on trade.

• Testing procedures for the UK and the US are regarded more stringent. I.e. the testing procedures for compliance (with MRL’s, banned products) are more extensive and tolerances are in general lower.

• Environmental issues are considered becoming more and more important, with the UK market at the forefront. The voluntary standard schemes in place for this market (BRC and NC) also include conformity with environmental standards.

97. Other requirements that were regarded difficult to meet evolved around: traceability, the “stery cold procedures” that is demanded by the USDA; grower resistance to implement and comply; and cost effects of certification and auditing. The fact that there is low variation in requirements among OECD countries was seen as positive.

98. In an attempt to comply with the various different requirements and standards firms adapted the following strategies: establish good business procedures, working with accredited suppliers, creating awareness within the company and at grower level, training of growers and implementation of Integrated Crop Management Systems (ICMS).

99. The eight exporters that were interviewed indicated that their buyers require specific private standard schemes as shown in Table 2.


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Table 2. Number of exporters per private standard scheme required by their buyers

Organic labels: 3

EUREPGAP 8

HACCP 6

IFS 3

ISO9000 1

SA8000 2

ISO22000 1

100. Most of the exporters have been working with these schemes for a couple of years. Other private standard schemes that were mentioned include: Nature’s Choice, Fair Trade, BRC, Field to Fork and ICMS.

101. Accreditation of compliance with the various standard schemes are conducted by Check Mark International (CMI), Perishable Export Control Board (PPECB), the South African Bureau of Standards (SABS) or the Société Général du Surveillance (SGS).

102. The greatest difficulties in complying with the requirements of the private standards schemes are:

• Recordkeeping by growers;

• fertilizer and pest management by growers;

• mindset of the farmers to comply;

• chemical inputs;

• managing the different standards systems - some growers and exporters have to comply with various schemes at the same time;

• costs of certification - the direct cost are carried by grower (indirectly the whole chain);

• costs of audits for smaller growers; and

• SPS requirements - especially to manage these.

103. Very strict rules on fruit quality, exceptional internal management systems, chain integration (forward and backward), ability to satisfy customer needs (a broad spectrum of preferences evolving around fitness for use, freshness, and health), technical expertise and logistic facilities abroad are seen as strengths by the exporters.


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104. On the other hand, the large number and spectrum of growers, climate and biological conditions, short production windows to fit into supermarket programmes and cost of using support services in foreign markets are regarded as weaknesses.

105. As far as food safety is concerned all firms were confident in meeting the required standards. Having a food safety system was regarded as crucial. In addition to food safety, traceability was identified as being adequate, since firms that are exporting have computerized tracing systems in place.

106. Opinions regarding public goods and infrastructure and services are summarised as follows:

• Telecommunication systems: the majority of exporters is satisfied

• Energy supplies and stability: the majority of exporters is satisfied

• Laboratory testing facilities: the majority responded “could be improved” (it’s viewed there is too little capacity at the two government laboratories, but the capacity at private laboratories for soil and leaf testing is seen as adequate)

• Transport system: a number of respondents expressed their dissatisfaction with the capacity of the port system.

• Other area’s of improvement: logistics to the Far East, the phone system (landline), upgrading skills of labour force, industry information.

107. Awareness in terms of documentation pertaining to regulations and standards, and its contents can be summarised as follows:

• EurepGAP regulations on fruit and vegetables: all exporters have seen this document

• HACCP Regulations (Dept. of Health, Act 54 of 1972): all, but one, exporter have seen this document

• Agricultural Products Standards Act on Food Safety and Hygiene (NDA Act 119 of 1990): all exporters have seen this document

• EC Regulation 178/2002 (food safety): some exporters have seen this document

• South Africa Food Safety Standards Checklist (Processing, off farm pack house facilities): some exporters have seen this document.

108. In terms of compliance with private standards, certification and yearly audits take place. Only growers and exporters who physically handle the fruit are certified and they pay the cost for compliance. The conformity with voluntary standards must be proven by verification of certification. This entails, amongst other things, being able to provide MRL testing results and spraying records. The certification and audit costs are usually valued at less than three percent of total value of exports. In cases where shipments did not meet standards and requirements the main reasons were stated as incorrect temperature regimes, improper handling of the fruit and packaging problems.


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6. Growers

109. All growers (farms) interviewed (14) are located close to main roads (between 2 to 6 km), if not next to main road. The larger growers have their own pack houses, whilst those that make use of other pack houses are located between 3 km and 25km from such pack houses. The farm sizes range from 25 to 1 700 ha. Most growers have expanded the area utilised for fruit production on existing farms. The commercial growers indicated that they have the necessary equipment and implements to produce fruit, whereas the small-scale growers indicated that this is not the case. The number of years growers were involved in growing fruit ranges between 2 and 60 years, with the majority growing fruit for more than 8 years. The share produced for the local market varies from 15% to 40%. The average receipts ranged from ZAR 400 000 to ZAR 28 million.

110. Table 3 provides a profile of the growers that were interviewed.

Table 3. Profile of interviewed growers

Farm name / company name Crops Size in ha.*

Employees** Distance to the road (km.)

Internet

Grower A Avocado’s 25 6 2 yesGrower B Avocado’s 1.200 400 0 yes Mango’s 500 Citrus 100 Grower C Mango’s 820 160 4 yes Citrus 60 Grower D Mango’s 22 42 5 yes Citrus 95 Grower E Mango’s 63 45 0 yesGrower F *** Apples 110 4 2 yesGrower G Apples 15 30 6 yes Pears 64 Grower H Citrus 10 3 0,3 yesGrower I Table grapes 23 63 0 yes Soft citrus 20 Grower J Apples 37 35 0.5 yes Pears 3 Grower K Apples 16,5 7 0.5 yes Soft citrus 9 Grower L Apples 150 300 3 yes Pears 30 Grower M Apples 485 400 2 yes Pears Citrus 90 Grower N Table grapes 160 81 0.5 Yes Soft citrus 60 Notes:

* Size: area under production

** Employees: permanent labour (pack house included if applicable)

*** Consists of 94 HDI part-time farmers


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111. The number for permanently hired labour range between 6 and 400 workers. Growers make use of hired temporary labour during peak season which range from 30 to 1500 workers. Wages ranged from minimum wage to as high as ZAR 5 000 per month. After the introduction of minimum wages there is a tendency for farmers to make use of less labour. Most of the growers provide other benefits such as housing, transport, schooling and/or medical care.

112. On average growers indicated that infrastructure are mostly adequate, i.e. roads, telecommunications, electricity and laboratory facilities. The recent regular blackouts in the power supply that occurred in Cape Town and surrounding regions are however of great concern to local fruit growers. Concerns were also expressed in terms of the handling capacity at harbours during certain peak periods of the year.

113. Growers indicated that their fruit are either sold directly or indirectly through exporters. Exporters send fruit to, e.g. Aldi, Tesco, Sainsbury, ASDA, Waitrose, Ahold, Coop, Migros, Carrefour and locally to Fruit and Veg City, Spar, Woolworths, fresh produce markets, market agents and hawkers (informal market). The large forward integrated producers sell to their own representatives in markets like the Far East and also directly to European retailers; the latter are through special retail supply contracts. The more integrated growers were, the more satisfied they were with their buyer-supplier relationship. The smaller producers, on the other hand, are dependent on other role players in the value chain to sell their fruit. It was mentioned that dependence on other role players increases transactions costs and risk if down stream role players are inefficient, impede on the dissemination of information and lowers bargaining power. This in turn affects the ability of smaller producers to meet buyer requirements.

114. Growers regard minimum quantities and fixed delivery times as a very important requirement for selling to their buyers. However, they also stated that buyers do alter quantities just before delivery, which put pressure on growers to market surpluses that were not originally foreseen. Remedial action usually entails the repacking of fruit and then rerouting it to the local market.

115. In terms of private standards growers are informed about buyer requirements via either their overseas office or fax, phone and / or e-mail. Growers also indicated that they are properly informed about changing requirements and that they have a very good understanding of the requirements stipulated by the private standard schemes they have to comply with. Concerns were raised that private standards schemes have little regard for local circumstances and due to this increase the cost of implementing and maintaining such schemes. Noteworthy is that most growers have seen documents on and are aware of the most important mandatory and voluntary standards. The details are however not always known. The buyer’s requirements to comply with the different regimes are summarized in Table 4.


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Table 4. Overview of compliance with private standard schemes for the interviewed growers

116. In terms of product and process requirements most growers feel that they largely comply. Compliance with EurepGap and SPS requirements were the main issues of importance to them. Quality, according to the respondents, mainly refers to texture, colour, marks and good packing. Hygienic requirements at harvesting and MRL’s set by Tesco’s Nature’s Choice are the main issues pertaining to food safety. In terms of traceability and record keeping, tracing to orchard level and the labelling of crates when harvesting are perceived as crucial. As far as worker’s safety is concerned, protection when using chemicals is seen as very important.

117. Chemical inputs and their administration, as well as traceability requirements are regarded as the most difficult to satisfy. Most growers were required to invest mainly in chemical storage, waste disposal, toilets, chemical and fertilizer storage in order to meet the requirements, which were largely funded from own resources.

118. Growers listed the following as the most difficult to meet in terms of standards:

• Food quality: for most growers the physical quality of the fruit was not seen as a problem, but variable weather conditions and handling (picking, transport, maintaining the cold chain) play an important role in guaranteeing quality aspects.

• Food safety: MRLs, hygienic issues, HACCP compliance, micro-biological compliance, approval and registering of new pesticides and chemicals and recordkeeping ;

• Testing: The testing procedures and techniques are more advanced in the overseas markets than in South Africa.

Private Standard scheme % percentage of compliant growers

Organic labels 14%

EurepGap 79%

Safe Quality Food-SQF1000; 7%

BRC (British Retail Consortium) 36%

IFS (International Food Safety) 7%

HACCP 43%

ISO- 9000 (quality control) 29%

ISO 14000 (environment) -

SA8000 (social accountability) 7%

Other Other: Nature’s Choice, Fair Trade, Westfalia Organic, Farm to Fork, Leaf,

Woolworths ethical audit


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• Record keeping / traceability: cost of recordkeeping - the unpractical nature of Production Unit Code (PUC), training personnel on this issue as well as traceability at the pack house;

• Labour safety and hygiene: AIDS, hygienic mindset of the farm workers and recognition of influenza.

119. As far as compliance is concerned the majority of growers had deliveries rejected in the past because fruit did not meet quality requirements. They attributed this largely to poor temperature monitoring during the logistical process.

120. Forward integration, economies of scale, commitment to quality, proper marketing and orchard management, product quality and management competencies are regarded as strong points in meeting standards; whereas inflexibility, low productivity and insufficient labour skills, outdated machinery, land claims which bring about uncertainty (and hence poor maintenance) are seen as factors that impede on the ability of growers to comply with standards.

121. In terms of cost of compliance a study by Jooste, Kruger and Kotze (2003) estimated the cost of complying with the new CBS9 and EurepGap regulations based on feedback they received from three different citrus companies in the Eastern Cape: Whyte Citrus in the Kirkwood region, Riverside Enterprises in the Kat River area and Patensie Citrus in the Patensie area. These costs are shown in Table 5. It shows that the cost of compliance in the sample of grower-exporters selected is about 4% of the revenue for CBS prevention and EUREPGAP regulations. If foregone trade opportunities are used as a basis, the percentage cost could be in the region of about 10%.

122. Another example of compliance costs are citrus exporters that have to comply with EUREPGAP and HACCP that was estimated at ZAR 1 million for a new bar coding machine, ZAR 170 000 for a pack house upgrade and ZAR 120 000 for shifting the workshop to comply with EurepGap. This brings the total amount to comply to ZAR 1 290 000 (Jooste et al. 2003).

9 Citrus Black Spot


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Table 5. Estimated costs of compliance on select farms in South Africa with select standards currently being applied externally to citrus exports

Costs and Other Details Whyte Citrus

Riverside Enterprises

Patensie Citrus Average

Tons of citrus grown (2001) 2 700 11 000 15 000 9 567Hectares used 40 150 200 130Revenue received per ton (2001)---rand 2 520 1 675 1 525 1 907

Per year costs of compliance per ton (2001--2002) with CBS---rand 19 68 27 38

Per year costs of compliance per ton (2001--2002) with EUREP GAP regulations---rand

37 9 47 31

Percentage of Revenue lost due to costs incurred in compliance with CBS and EUREP GAP regulations

2.2% 4.6% 4.9% 3.9%

A foregone earnings per year estimate of the cost of U.S. CBS regulations (Percentage of total revenue)

--- ---

ZAR 10 million

(10%)

---

Sources: Based on responses of Whyte (2002); Painter (2002); and Grieb (2002) cited in Jooste et al. (2003).

123. Audits are regarded as vital and are generally conducted once a year. Audits are performed by the following companies: Procert, Check Mark International CMI, BCS Őko Garantie (organic), PPECB for EurepGap. Audit cost was reported to be in the region of ZAR 3500 per audit. Growers indicated that the audit/certification procedure assisted them to increase efficiency in using chemicals, spray procedures and hygiene. Compliance however did not necessarily result in increased profitability and increased demand, but are seen as a crucial prerequisite to enter the export market. Overlapping in standards pertaining to specific characteristics have resulted in growers not seeing different product and process requirements for their product as a major constraint for market access. However, the costs of duplicate certifications and audits were seen as a constraint.

124. To manage the different set of product and process requirements one of the interviewed growers has implemented his own integrated management system. The company is working with a wide range of standards since: it operates its own pack house, it is involved in marketing and logistics, it produces a wide range of produce including organics. All product and process standards, mandatory and private, are addressed in this dynamic management system to ensure, e.g. food safety and quality, workers’ wellbeing, sustainability, reducing environmental impacts and reducing risks.

125. As far as size is concerned most growers are of the opinion that small/medium sized farms or cooperatives are more likely to be excluded from the export market for failure to meet private standards than larger farms/cooperatives. Reasons for this can be attributed to meeting on farm technical requirements, management capacity and infrastructure provision (economies of scale).

126. With regard to the above, one of the interviewed small, emerging growers suggested that special markets should be identified and analysed. These special markets should be supplied by the South African emerging farming and export sector. Trade agreements should be established, to provide assurance for the sector as a preferred supplier. The markets identified should have the following two characteristics:


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• no extensive framework of mandatory and voluntary standards,

• the markets should be small to medium sized.

127. This process should enhance the skills and knowledge of the emerging sector with regard to export, but avoids the risk and compliance costs when exporting to the advanced Western markets. According to the farmer the DoA should initiate such a project.

A special case: Small scale farmers

128. According to Reardon et al. (2003), the rapid spread of supermarkets is driving many traditional food retailers, such as small corner stores, out of business and taking business from others, such as street markets. The inevitable result is fewer marketing outlets for those farmers that do not have access to the “modern-supermarket-controlled” supply chains. This view is also echoed by Senauer (2004). He states that the evidence suggests that smallholder farmers, who compose one of the largest low-income groups, are largely being excluded from the supermarket supply chain. The reason for this is that supermarkets want to deal with only a small number of large, reliable suppliers and not a multitude of small fragmented producers. This in turn resulted in a redesign of procurement systems, i.e. procurement contracts and “preferred” suppliers are replacing traditional wholesale markets and sourcing has become regional or even global (Senauer, 2004). Moreover, Neven and Reardon (2003) state that in comparison to traditional markets, supermarkets demand: (i) a higher, consistent quality, that satisfies food safety standards, (ii) reliable year-round supply of large volumes, (iii) modernized logistics practices, such as truck transportation and chilled storage, (iv) strict delivery conditions in terms of grading, packaging, labelling, and timing, etc., (v) a high level of efficiency resulting in low prices and transaction costs, and (vi) advanced management and information technology systems. Compliance with the aforementioned is difficult by any standard, let alone from a small-scale emerging farmer’s perspective.

129. It is with the above international experience that experiences of small-scale farmers are summarised below.

• Available land not used; in fact plantings only comprise a small part of the total land available in many cases due to the lack of amongst others of financial resources as well as extension and technical support.

• If non-family labour is used minimum wages apply which are difficult to meet due to financial constraints (lack of credit).

• Sales are to established exporters, but indications were given that exports will stop due to some farmers not being able to comply with standards such as EurepGap. It was also noted that mentorship in terms of technical practises/expertise and of marketing is needed and is supplied in a variety of ways. For example, in some cases big commercial estates provide mentorship, in other cases mentorship is provided by commercial farmers, in other cases by contracted consultants and in some other cases by personnel of producer organisations. A serious concern is that few fixed commitments exist between small-scale producers and buyers and in many cases agreements between small-scale producers and buyers is not formal.

• Buyers communicate information regarding standards to producers from whom they source fruit, usually at the beginning of the season. Problems are identified throughout the season and communicated accordingly. Information is communicated in various ways, including phone, internet (where such access exist), attendance of farmers’ days and personal contact. .


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• Small-scale farmers feel that requirements/standards set by downstream role players is done without regard to small-scale producers’ capacity to comply. It was mentioned that the impact of requirements/standards are often only evaluated for large/medium farms. In addition, a major problem to comply with standards is the lack of financial means necessary to do so. Small-scale producers felt that government definitely has a role to play in this regard.

• When farmers was asked whether they have seen regulations and standards applicable to exports (e.g. exports standards set by government, EurepGap, HACCP, Agricultural Exports Standards Act) they indicated that they have not seen most of them and are only aware of some of the contents of these documents. This is not withstanding the fact that buyers require from producers to comply with some of these regulations and standards. It was furthermore indicated that benchmarking with other buyers are difficult since such information is not readily available.

• Standards pertaining to labour and facilities were indicated as the most difficult to meet.

• Small-scale farmers that are currently involved in fruit farming, on average, did not experience major problems to acquire their land (in some cases they bought the land from own financial sources and in others they acquired the land through LRAD grants). The major difficulty is sourcing sufficient finances to establish trees or maintain existing orchards. This is not withstanding the fact that the Comprehensive Agricultural Support Program (CASP) was recently introduced. Another major impediment is the lack of management capacity.

• Although small-scale farmers indicated that standards and requirements to which they must comply probably improve their efficiency, there is no clear evidence that it has improved their profitability or the demand for their products. Those small-scale farmers that are not able to comply lose out on the market as a whole.

130. Examples where problems pertaining to standards were experienced are10:

• The costs to become EurepGap accredited are a source of concern. This is due to the fact that many small-scale emerging farmers still experience problems to obtain enough financial resources to maintain production, let alone channelling such resources to obtain EurepGap accreditation. In many cases such farmers are not able to provide liquid assets for security to obtain credit, while in the old homelands farmers still have unpaid loans. Moreover, the lack of access to credit is a major constraint.

• The Masalal pack house in Letsitele (Limpopo) that provides services to the emerging commercial farmers in the area experienced no limitations to export to Europe the previous season, but it was clearly stated that this was due to the fact that EurepGAP implementation was postponed (Low prices were the main problem experienced by the farmers). However, should EurepGap come into effect now no emerging commercial farmer would be able to export. Several pack houses that provide services to emerging commercial farmers also need to be upgraded to be compliant with EU standards. This may also impede on the ability of this group of farmers to export. The National Agricultural Marketing Council (NAMC) has however committed itself to assist these farmers with the assessment for EurepGAP compliance.

• Thekwane farm in Mpumalanga lost market share in Europe due to Citrus Blacks Spot (CBS). In 2000 only 34% of the crop (out of an estimated 200 000 export cartons – 15kg equivalent) was suitable for exports to the EU, while complete consignments to the Middle East and Russia had to

10 According to Transformation Manager, CGA


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be cancelled. The result was re-establishment of trees; this in turn resulted in lifting of the export ban.

131. Clearly the aforementioned calls for pro-active action, but cognizance should be taken that, according to Senauer (2004), simply letting markets and the private sector work will not be sufficient to address the challenge to smallholder farmers and they may be pushed deeper into poverty than many already are. Reardon et al. (2003) is of the opinion that government has an important role to play to assist this group of farmers to participate in “modern” supply chains. Dorward et al. (2004) adds by stating that institutional innovation will almost certainly be the most critical element of linking smallholder farmers to supermarket supply chains and will require the formation of strategic alliances among the key stakeholders.

132. In conclusion, failure to recognize the potential impact of small-scale farmers not being able to comply for more and more stringent international, and even domestic standards, in South Africa could result in government not reaching its development objectives. There is thus a clear need to better understand the potential impact of supermarket development on the rural poor and use this information to revisit current policies and programs to (i) ensure that they will address the needs of the rural poor and (ii) create an enabling environment for smallholder farmers to increase their participation in more advanced supply chains.

133. There is a need for a much stronger partnership between the DoA (both national and provincial) and industry bodies to support small suppliers in terms of extension and the facilitation of stronger links between these small suppliers and agribusiness. This implies for example strong communication links between small-scale farmers’ extension services and industry bodies to ensure that small-scale farmers have the same knowledge/information available than there commercial counterparts. There is also a need to coordinate efforts between government and private sector extension services since in most cases these services are not programmed towards the end objective, to be internationally competitive. For example, there is no financial support from provincial DoA’s to support producer associations to provide an effective extension service (for which they are much better positioned since they know the industry best) to small-scale producers. The private sector is to a large degree best positioned to provide specialised services to the small-scale sector with institutional and financial support from government.


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REFERENCES

ASFAHA, T.A. & JOOSTE, A. (2006). Monetary policy effects on relative agricultural prices. Submitted to Agrekon, Accredited journal of the Agricultural Economics Association of South Africa.

DORWARD, A., KYDD, J., MORRISON, J. & UREY, I. (2004). A Policy Agenda fro Pro-Poor Agriculture Growth. World Development 32 (1).

FPEF, (2006). Submission to the NAMC on the impact of deregulation on the SA fruit industry. Cape Town.

JOOSTE, A., KRUGER, E. & KOTZE, F. (2003). Standards and trade in South Africa: Paving pathways for increased market access and competitiveness, Chapter 4: 235 - 370. In Wilson, J.S. & Abiola, V.O. (eds). Standards and global Trade: A voice for Africa. The World Bank, Washington DC. ISBN 0-8213-5473-6

LOUW, D., JOOSTE, A. & PIETERSE, N. (2004). Citrus, Deciduous and Sub-tropical Fruit Think Pieces. Fruit Industry Plan for South Africa, Fruit SA.

LOUW, D. & FOURIE, M. (2004). Review of citrus, deciduous and sub-tropical fruit – Chapter 16. In Groenewald, J.A. (Ed). South African agricultural sector review – Evaluation of changes since 1994. National Department of Agriculture, Pretoria.

MULLINS, D. (2004). Economic Multipliers – Chapter 13. In Groenewald, J.A. (Ed). South African agricultural sector review – Evaluation of changes since 1994. National Department of Agriculture, Pretoria.

NEVEN, D. & REARDON, T. (2003). The Rapid Rise of Kenyan Supermarkets: Impacts on the Fruits and Vegetables System. Paper presented at the FAO technical workshop on “Globalization of the Food System: Impacts on Food Security and Nutrition”, October 8-10, Rome.

REARDON, T., TIMMER, C.P., BARRETT, C.B. & BERDEGUE, J. (2003). The Rise of Supermarkets in Africa, Asia and Latin America. American Journal of Agricultural Economics, Vol 85 (5).

SENAUER, B. (2004). The Spread of Supermarkets and the Impact on Poor in Developing Countries, Especially Small Farmers. Working Paper. Department of Applied Economics, University of Minnesota.

SYMINGTON, S. (2006). Personal communication. Fresh Produce Export Forum, Cape Town.


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APPENDIX A

Source: Symington, 2006


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APPENDIX B

BROAD-BASED BLACK ECONOMIC EMPOWERMENT ACT No. 53 of 2003 “Broad-based black economic empowerment” means the economic empowerment of all black people including women, workers, youth, people with disabilities and people living in rural areas through diverse but integrated socio-economic strategies that include the:

(a) Increasing the number of black people that manage, own and control assets; (b) Facilitating ownership and management of enterprises and productive assets by communities, workers,

cooperatives and other co1lective enterprises; (c) Human resource and skills development; (d) Achieving equitable representation in all occupational categories and levels in the workforce; (e) Preferential procurement; and (f) Investment in enterprises that are owned or managed by black people. The Act establishes a legislative framework for the promotion of black economic empowerment; it empowers the Minister to issue codes of good practice and to publish transformation charters; it establishes the Black Economic Empowerment Advisory Council, which is responsible for the implementation of the measures of the Act; and provides for matters connected therewith.

http://www.info.gov.za/gazette/acts/2003/a53-03.pdf

“MINIMUM WAGE AND WORKING CONDITIONS” IN AGRICULTURE ACT: BASIC CONDITIONS OF EMPLOYMENT ACT (No. 75 of 1997) − SECTORAL DETERMINATION 8: FARM WORKER SECTOR No. R. 1499, 2002

With effect from 1 March 2003 an employer must pay a farm worker at least the minimum wage prescribed in this clause. The minimum wage of the worker is determined according to the area where the farming takes place, the hours of weekly employment, the age of the worker. The clause provides for the calculation of the remuneration of the farm worker.

Besides the minimum wage, this act provides for the details of working conditions in agriculture, such as:

the particulars of employment,

− the hours of work, − the leave, − the prohibition of child-labour and forced labour, and − the termination of the employment. http://www.labour.gov.za/docs/legislation/bcea/Farmdocs/farmworkers%20Sectoral%20Determination%208.doc


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CODE OF GOOD PRACTICE: PREPARATION, IMPLEMENTATION, AND MONITORING OF EMPLOYMENT EQUITY PLANS, No. R. 1394, 1999

The objective of this code is to provide guidelines of good practice, in terms of the requirements of the Employment Equity Act, 1998 (Act No 55 of 1998), for the preparation and implementation of an employment equity plan.

The plan reflects a designated employer’s employment equity implementation programme and represents the critical link between the current workforce profile and possible barriers in employment policies and procedures, and the implementation of remedial steps to ultimately result in employment equity in the workplace.

http://www.labour.gov.za/docs/legislation/eea/code-practice.html SKILLS DEVELOPMENT ACT, NO. 97 OF 1998

The Act provides an institutional framework to devise and implement national, sector and workplace strategies to develop and improve the skills of the South African workforce.

It provides for: − learnerships that lead to recognised occupational qualifications; − the financing of skills development by means of a levy-grant scheme and a National Skills Fund; − employment services and regulates them; and − matters connected therewith. It establishes the National Skills Authority, and the Sector Education and Training Authorities.

http://www.labour.gov.za/docs/legislation/skills/act98-097.html

EMPLOYMENT EQUITY ACT No. 55 of 1998

The act was established in order to:

- promote the constitutional right of equality and the exercise of true democracy; - eliminate unfair discrimination in employment; ensure the implementation of employment equity to

redress the effects of discrimination; - achieve a diverse workforce broadly representative of our people; - promote economic development and efficiency in the workforce; and - give effect to the obligations of the Republic as a member of the International Labour Organisation.


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The purpose of this Act is to achieve equity in the workplace by:

- promoting equal opportunity and fair treatment in employment through the elimination of unfair discrimination; and

- implementing affirmative action measures to redress the disadvantages in employment experienced by designated groups, in order to ensure their equitable representation in all occupational categories and levels in the workforce.

http://www.labour.gov.za/docs/legislation/eea/act98-055.html

OCCUPATIONAL HEALTH AND SAFETY ACT 85 OF 1993

The objective of the Act is to provide for the health and safety of persons at work and for the health and safety of persons in connection with the use of plant and machinery; the protection of persons other than persons at work against hazards to health and safety arising out of or in connection with the activities of persons at work; to establish an advisory council for occupational health and safety; and to provide for matters connected therewith.

http://www.acts.co.za/OHS/ohs_act.htm#occupational_health_and_safety_act_1993.htm

HAZARDOUS SUBSTANCES ACT (NO. 15 OF 1973) The Hazardous Substances Act provides for the control of substances which may cause injury or ill-health to or death of human beings by reason of their toxic, corrosive, irritant, strongly sensitising or flammable nature and for the control of certain electronic products. The Act also provides for the division of such substances or products into groups in relation to the degree of danger. The Act prohibits and controls the importation, manufacture, sale, use, operation, application, modification, disposal or dumping of such substances and products.

http://www.acts.co.za/haz_sub/index.htm

RESTITUTION OF LAND RIGHTS ACT, 22 of 1994

The purpose of the Act is to provide for the restitution of rights in land in respect of which persons or communities were dispossessed under or for the purpose of furthering the objects of any racially based discriminatory law; to establish a Commission on Restitution of Land Rights and a Land Claims Court; and to provide for matters connected therewith.

http://www.info.gov.za/gazette/acts/1994/a22-94.htm


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LAND REFORM ACT, 3 of 1996 The purpose of the Act is to provide for security of tenure of labour tenants and those persons occupying or using land as a result of their association with labour tenants; to provide for the acquisition of land and rights in land by labour tenants; and to provide for matters connected therewith.

http://www.lwo.co.za/land_1_e.htm

EXTENSION OF SECURITY OF TENURE ACT, 62 OF 1997

The purpose of the Act is to provide for measures with State assistance to facilitate long-term security of land tenure; to regulate the conditions of residence on certain land; to regulate the conditions on and circumstances under which the right of persons to reside on land may be terminated; and to regulate the conditions and circumstances under which persons, whose right of residence has been terminated, may be evicted from land; and to provide for matters connected therewith.

http://www.lwo.co.za/land_2_e.htm

PROVISION OF LAND AND ASSISTANCE ACT, 126 of 1993

The purpose of the Act is to provide for the designation of certain land; to regulate the subdivision of such land and the settlement of persons thereon; to provide for the rendering of financial assistance for the acquisition of land and to secure tenure rights; and to provide for matters connected therewith.

http://land.pwv.gov.za/legislation_policies/acts/_docs/PROVISION%20OF%20LAND%20AND%20ASSISTANCE%20ACT%20126%20OF%201993.doc

MARKETING OF AGRICULTURAL PRODUCTS ACT, 47 of 1996

The purpose of the Act is to authorise the establishment and enforcement of regulatory measures to intervene in the marketing of agricultural products, including the introduction of levies on agricultural products; to establish a National Agricultural Marketing Council; and to provide for matters connected therewith.

http://www.info.gov.za/gazette/acts/1996/a47-96.htm

AGRICULTURAL RISK INSURANCE BILL

The Bill provides for a system of agricultural insurance in order to improve the economic stability of agriculture; enhance the income of those farmers and producers most vulnerable to losses of agricultural crops and livestock due to natural disasters; for the financial assistance in establishing the system; for the control of certain activities of agricultural insurers and intermediaries; and for other matters thereto.

The system would work through a risk transfer, which will assist farmers in managing production risk. This tool will assist farmers to recover from natural disasters. The insurance-based risk management programme allows the farmer, government and the private sector to share the risk involved in agricultural production.


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CONSERVATION OF AGRICULTURAL RESOURCES ACT NO 43 OF 1983

The objectives of this Act are to provide for the conservation of the natural agricultural resources of the Republic by the maintenance of the production potential of land, by the combating and prevention of erosion and weakening or destruction of water sources, and by the protection of the vegetation and the combating of weeds and invader plants.

http://www.dwaf.gov.za/wfw/Legal/Docs/doc/Prom%20080301%20Eng.doc

NATIONAL WATER ACT (Act No 36 of 1998)

The purpose of this Act is to ensure that the nation's water resources are protected, used, developed, conserved, managed and controlled in ways which take into account amongst other factors:

– meeting the basic human needs of present and future generations; – promoting equitable access to water; – redressing the results of past racial and gender discrimination; – promoting the efficient, sustainable and beneficial use of water in the public interest; – facilitating social and economic development; – providing for growing demand for water use; – protecting aquatic and associated ecosystems and their biological diversity; – reducing and preventing pollution and degradation of water resources; – meeting international obligations; – promoting dam safety; – managing floods and droughts; and – for achieving this purpose, to establish suitable institutions and to ensure that they have appropriate

community, racial and gender representation. http://www.gov.za/acts/1998/a36-98.pdf.

WATER SERVICES ACT (Act 108 of 1997)

The main objects of the Act are to provide for – the right of access to basic water supply and the right to basic sanitation necessary to secure sufficient

water and an environment not harmful to human health or well-being; – the setting of national standards and norms and standards for tariffs in respect of water services; – the preparation and adoption of water services development plans by water services authorities; – a regulatory framework for water services institutions and water services intermediaries; – the establishment and disestablishment of water boards and water services committees and their duties

and powers; – the monitoring of water services and intervention by the Minister or by the relevant Province; – financial assistance to water services institutions; – the gathering of information in a national information system and the distribution of that information; – the accountability of water services providers; and – the promotion of effective water resource management and conservation. http://www.gov.za/gazette/acts/1997/a108-97.pdf.


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NATIONAL ENVIRONMENTAL MANAGEMENT ACT (ACT NO. 108 OF 1998)

The National Environmental Management Act (NEMA, Act No. 108 of 1998) establishes a set of principles, which all authorities (organs of State) have to consider when exercising their powers, for example during the granting of permits. These include the following:

– Development must be sustainable; – Pollution must be avoided or minimised and remedied; – Waste must be avoided or minimised, reused or recycled; – Negative impacts must be minimised; – Responsibility for the environmental consequences of a policy, project, product or service applies

throughout its life cycle. http://www.gov.za/acts/1998/a107-98.pdf.

SOIL CONSERVATION ACT, 1986

The purpose of the Act is to consolidate and amend the law relating to the conservation of soil resources and to facilitate the implementation of soil conservation measures by landholders for the mitigation of soil erosion.

http://www.legislation.qld.gov.au/LEGISLTN/CURRENT/S/SoilConservA86_01A.pdf

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