Strategy: Free market shackles It has the potential to be a thriving dynamic economy attracting inward investment, and it can build on a reputation for supplying quality products, but can South Africa overcome a set of unique and complex problems inherited from its chequered political past? Its massive agricultural industry has found the going tough. The canning business is beset by the difficulties of supplying a static ­ if not stagnant ­ world market for its goods. This intense global competition, particularly from within Europe, means prices are rock bottom and the margins are tight. Many growers supplying it have gone out of business and the ones that remain are having to adapt to grow the right varieties at competitive rates. At the same time the fresh fruit business was thrown into turmoil by deregulation forced on it by a government determined to introduce free market competition. The new-found freedom led to an explosion in the number of exporters. In the short term this scramble had the effect of forcing the price down and reducing the quality. As a result, some exporters made a rapid exit. From 150 routes to market, the number is likely to come down to 10. The pressure forced some of the growers to rethink their strategies and switch to producing grapes for wine. There they came up against another set of problems. The lifting of sanctions in 1994 led to an explosion of interest in all things South African, particularly wine. Demand from around the world rocketed and tough talking buyers descended on the Cape and bought vast quantities at low prices. The winemakers thought they had never had it so good, but the long term effect of this pillaging was profound. The majority of the wine was average or low quality based on white varieties such as Chenin Blanc and Colombard. And it was sold to consumers at attractive prices and in the UK that meant less than £4. This gave a reasonable profit for the SA industry but left no room for manoeuvre or constructive marketing support. By the late 1990s consumers were beginning to shed the politically correct ideals which motivated the wine purchasing, and they turned to other New World wine countries producing better quality wines. The upshot is that while SA wine sales in the UK are still growing it is at nothing like the rate at which Australia, Chile or Argentina have been expanding. Nor are they at the same price levels. The task for the industry is to provide a better reason for UK consumers to purchase. This can only be done by ramping up the quality to a point where it exceeds expectations raised by its price. At the same time the prices have to go up, no easy task in the UK trading environment where every day low pricing is putting pressure on the entire supply chain. Underlying all the pressures for change are fundamental political issues. Deregulation has already brought about major changes and the cultural shift away from the old apartheid regime is sweeping away old methods. The call for black empowerment from central government goes a long way beyond political correctness and affects the structures of businesses. The countryknows it cannot follow in the footsteps of its neighbour Zimbabwe. The need for senior experienced business leaders is recognised but so also is the need to involve the black and coloured populations. Businesses are required to draw up a plan which will integrate all sectors of the community into their operations. Failure to do so leads to heavy financial penalties. The trick will be to ensure the integration is not a drain on resources but will, in the medium and long term, improve the bottom line. {{Z SUPPLEMENTS }}