A decade after emerging from the shadows of apartheid, South Africa’s food and drink industry is undergoing a radical transformation.
The euphoria of 1994 has given way to a more pragmatic approach as Nelson Mandela’s Rainbow Nation seeks to establish its identity on the world economic stage. Despite the challenges of a soaring Aids epidemic, lack of housing and high unemployment, the country remains upbeat about its future and there is a sense of excitement as it enters its second decade of democracy.
The radical changes brought about by the creation of an open market are particularly evident in the farming sector, where it has created both opportunities and challenges. South Africa’s fruit farmers are finding the transition especially painful as they contend with increased competition from South American countries, a strong rand, decreasing margins and growing production costs. This has inevitably resulted in casualties.
On the other hand, hard times have increased the efficiency of many players and the sector is getting its act together on training, innovation and marketing. A generic campaign by the South African Avocado Growers’ Association has achieved success in encouraging more Brits to eat ripe-and-ready avocados.
Fruit represents a significant part of total agricultural production and South Africa has managed to increase its export volumes steadily. For historical, cultural and geographical reasons, South Africa has traditionally seen the UK as its most important market for wine, fresh produce and canned fruit, but this could be changing as exporters begin exploring new markets in China and the Far East.
Many growers say the UK retailer price wars and increasing supermarket-specific demands are making it difficult to survive. The main challenge in the UK, according to trade leaders, is to maintain value. Tesco’s recent profit announcement was headline news in South Africa, and trade groups and farmers have said the demands of UK retailers are squeezing them to breaking point.
Dr Marius Huysamer, industry manager of the Stone Fruit Producers’ Association, says: “The biggest problem we are facing is the £2bn profit Tesco makes. It’s a buyers’ market, and while production and shipping costs have gone up and demands from the supermarkets have increased, the price of a punnet of plums hasn’t increased from 99p for several years. Retailers are making exorbitant profits and the risk is being carried primarily by the producer.”
A winter drought in the Western Cape has hit the apple and table grape sectors hard. Deregulation in 1997 meant a change from a system where produce was pooled and farmers were paid an average price, and some smaller producers complain of feeling abandoned. However, new trade groups such as the Fresh Produce Exporters’ Forum and Fruit South Africa are rallying the industry to launch generic trade campaigns and explore innovations and new markets.
Greater efficiency has been welcomed by those who say it will mean a better
reputation for South African produce. Stuart Symington, FPEF chief executive, says: “There is consolidation to come among producers, many of whom were protected in the days of regulation. It means weaker farming practices will not be tolerated. Those who don’t have the right yields, have not put away money for bad times or have overgeared their businesses will not survive.”
The South African wine sector is booming in the UK, with sales rising 12% last year, and it hopes to increase its average bottle price through a generic campaign focusing on the diversity of its wines. While South African producers face the same challenges as other global players -over-production and falling prices - there is optimism the campaign will raise the image of their wines.
A new generation of dynamic young winemakers is helping to create more brands and drive sales of bottles priced above £4.99 in the UK. An increasing awareness of South African cuisine and a growing restaurant culture are also benefiting wine producers.
Jacques Roux, marketing and sales director at Graham Beck, says: “The industry has challenges with price but generally it’s in a very buoyant state.
“We have a whole bunch of fantastic young winemakers coming through and a real story to tell.”
The canning industry also expects to outgrow its current instability, after losing some suppliers who have not been able to survive the prevailing market conditions.
A booming tourism industry is boosting smaller specialist producers, such as barbecue sauce producer Ukuva Africa, as well as benefiting larger players such as Nando’s, one of SA’s biggest success stories.
Black Economic Empowerment is a contentious issue in the new South Africa and one that will increasingly impact on the operations of food and drink suppliers. However, the wine and farming industry is at the forefront of some of most successful Black Economic Empowerment partnerships with local communities.