On the first Friday of November in 2017 a small Cape Malay choir welcomed 180 guests at the spectacular KWV Cathedral Cellar in Paarl, to celebrate 20 years of free market trade: The deregulation of the deciduous fruit industry.
Celebrity chef Mynhardt Joubert and his team served up an array of gastronomic delights while industry role players reminisced about “the good old times”.
Special guests included former Ministers of Agriculture, Derek Hanekom, and Dr Kraai van Niekerk, while the architect of the free market system, Prof Eckart Kassier, also reflected on that period of history. (See pictures of the evening here: https://www.hortgro.co.za/twenty-year-celebration/)
Veteran journalist Jean du Preez spoke to three industry leaders about the future of deciduous fruit – Nicholas Dicey (Hortgro board chairperson), Anton Rabe (Hortgro’s executive director), and André Smith (Hortgro board member and South African Stone Fruit Producers’ Association chairperson). Here is their story.
Meet us halfway
Twenty years after deregulation, South Africa can boast with a fruit industry that survived the 1997-revolution and has since then blossomed into a highly successful world player. However, now new obstacles have emerged. Potholes of a unique nature that the industry cannot overcome without an agriculture-friendly government.
The conversation takes place in the heart of Tulbagh. All three agree that the South African fruit industry has developed into a fit competitor that holds its own against the big players on world markets. There is undoubtedly a bright future for this industry. Not only for fruit farmers themselves, but it also has an important role to play in the country’s economy and the transformation of the sector.
But in order to unlock that potential, a condition as heavy as lead holds true, and here the finger points to the government: The industry itself can only do so much to unlock international markets, the big responsibility lies with the state. Trade agreements and export protocols are negotiated between governments, not between producers and foreign governments.
According to Dicey the history of the fruit industry is full of pioneers who had to find ways around obstacles. The generation of ’97 had to wrestle with the consequences of deregulation. Now there is a new generation that must manage other changes. “Whether you are part of the industry structures or out on the farm, there are huge challenges in the whole socio-economic environment that we work in. And in that environment the state is practically not present anymore.”
“Before deregulation there were structures in place that took care of virtually everything. Now we have to maintain these structures ourselves, and intervene where needed to ensure the wheel keeps turning and that we keep up with our overseas competitors.”
According to Dicey a vacuum (on government’s side) was created after the old industry structures fell away. “Today industry structures have a mighty role to play to fill those voids. Hence the importance of Hortgro.”
But what are these so-called voids?
Smit looks to history for answers. He summarises the modern fruit industry in three parts: The first was the pioneer phase to bring the deciduous fruit industry into modern agriculture with new technology, deregulation was the second phase, and the present socio-politico-economical stage is the third phase.
“During deregulation, industry had to unbundle itself from a one-channel system. It had to find its place in a new era, and it had to figure out how to positition itself and make farmers market-ready. Farmers were use to a ‘big brother’ in single channel marketing who did everything for them, then everything changed.
“This middle phase was a sharp learning curve for producers about what the market actually requires of them, and how to position themselves therein and to become market-driven and compliant.
“The last and current phase, the socio-politico-economical and transformation phase, in essence is about the decreasing capacity of the state’s role insofar as it involves infrastructure and guardianship over a number of things in agriculture, especially in export agriculture.
“While having to fill that void, there is also additional pressure because it’s expected of us as an industry to take responsibility for transformation and the integration of black farmers into the deciduous fruit industry value chain.
“Even though we don’t really have the authority to enforce transformation, we must create an environment of consultation and enticement in which commercial farmers and black farmers as businessmen (and women) come together to make transformation work. We don’t have the financial means to do it ourselves, it’s about influencing policy, to cast the image of agriculture in a positive light for government, so they see and experience agriculture as a strategic asset and partner.
“This means that current industry roleplayers have to possess a skill set completely different to that of our predecessors. And we are not naturally trained or always prepared for that.”
The conversation flows from Smit’s statement:
Dicey: “Farmers are excited and ready to integrate throughout the entire value chain. But we sorely miss the role that the state must play in this regard. This makes it quite challenging, but it made us fitter and more efficient. We have positioned ourselves to pick up the slack very quickly, and it makes us a much more self-reliant and agile industry.”
Smit: “We can’t manage without the state’s negotiations. We can’t simply go and build an export harbour, and we can’t just go and talk to Russia. We operate in a highly technological environment, and you can quickly fall behind. As far as cultivars are concerned, we have to keep up – the world only wants the best, with the focus on eating quality as well as cosmetic appearance. It is an ongoing journey, there isn’t a final destination.”
Rabe: “Thus far BRICS hasn’t meant anything for deciduous fruit, not a single thing. We don’t have preferential access in Russia, India or China. Yes, maybe a niche market or product here and there, but I am talking about meaningful new strides forward. Why does it take ten years to sort out a new product protocol? It took eight years to get apples into China, since then three more years have elapsed and the pear protocol still isn’t finalised for the same product type!
“It’s hard to explain these slow and difficult processes to a producer who is used to tangible things, like: you plant a year-old tree, it has to be this deep in the soil, when it has grown this high you cut it back to that height, and you give it this much fertilizer and water. These are tangibles, a lot of the things we are wrestling with aren’t tangible, and a lot of it is beyond our control.
“Officials come and go. How many DG’s of Agriculture have we had in the past few years? How many ministers from Thoko Didiza till now? That makes it very difficult to build trust relationships.
“You get along with some officials, but others are simply obstructive. It’s frustrating when you don’t get things ticked off the list. But failure isn’t an option, we’ll continue to engage and try to unlock the constraints.
“We nee a political will to make this happen. Competitors such as Australia, Peru and Chile are running circles around us given the partnership they have with their governments.
“And yes, it is about trust and networks and complex and inter-linked issues, but just meet us halfway. We’re willing to walk that road, just meet us halfway!”
Dicey: “The reality is that we are consolidating on production level. It’s becoming an industry where the units have to become increasingly bigger in order to farm profitably, and this in itself presents a challenge to transformation, as well as the existing commercial sector.”
Smit: “The industry’s future lies in growth – driven by maintaining current markets and accessing new markets – which will enable us to integrate transformation successfully.”
Dicey: There is great pressure for transformation from government’s side, but no clear model to follow. This transfers the pressure to the industry to find the right formula. From a social perspective, if agriculture is a catalyst for economic growth, it will not only benefit the country, but it will also be good for the farmer’s future to help create stability in the country. If agriculture goes down, rural areas go down.”
Smit: “For us, transformation is about more than land ownership. Transformation is about creating economic opportunities throughout the whole value chain. Not all black roleplayers want to be farmers, but they do want to share in the value chain. And that is where a mind shift has to take place. Land is a valuable asset, but the real value lies in the business that is on the land.”
Dicey: “You can create a lot more opportunities off-farm than by just giving everyone a piece of land and saying now you are empowered. To create profit and real opportunities you have to work the land.”
Smit: “The government needs to see transformation as actual economic empowerment, and not where land is used as an emotional plaything for political gain. For that to happen you need statesmanship, not politicking.”
Rabe: “Our point of view is, you can’t drive transformation in an environment where there isn’t economic sustainability and policy certainty. We have made great progress with the things that are within our control, but we haven’t made progress with the things that fall outside our control because we do not have authority over the environment (the government) within which it has to happen.
“That is part of the frustration. For me it’s simple: Open markets for us, and create the potential for the growth with a stable policy environment within which entrepreneurs have the confidence to invest. Link that growth to transformation and give recognition where it happens.”
The conversation turns to how much progress has been made within the transformation process.
Dicey: “Not enough, but there are various reasons for that. For instance, due to differences in production practices and the economy of each agricultural sector, there isn’t a one-size-fits-all transformation model for the whole of agriculture. Each sector should have it’s own transformation models. In the deciduous fruit industry there are many positive private initiatives. That is why we need both the commercial and emerging sector to buy into our industry to move in the right direction together. We need to convince the state, and get their buy-in, for a model or models that works for our industry.”
Smit: “It is also necessary for us to introduce our industry and its unique heartbeat to the decision-makers and thoughtleaders. We have to share knowledge as others don’t understand our industry. There is a big responsibility to lobby and to influence.”
Dicey: “Private transformation initiatives are in motion, but the cooperation and buy-in from officials aren’t there. Water is a very sensitive issue, but getting a permit to raise a dam wall in order to plant another 500 ha for an empowerment project, can’t be done. It’s red tape like this, that unfortunately hampers essential growth.”
The three leaders then discuss the value of a ‘Hortgro’.
Dicey: “Coordination of issues and challenges, whether on the market, research or production side, is vital. Hortgro as an industry organisation is well positioned to take notice of the challenges, and give attention thereto in a collective way. This makes it possible for the producer, whose primary interest is production, to focus on just that, production, and be able to deliver the best possible product for profit.
“In that sense Hortgro is an enabler – to help growers sell their product in any market of choice. There are so many issues out there that have to be addressed, which the farmer doesn’t have time or necessarily the knowledge for. They just want to farm.”
Smit: “What would happen if we close Hortgro tomorrow – that is the question one should ask to justify the organisation. I think, we can possibly keep the industry running on momentum for another two or three years, and after that industry will feel the consequences of lack of capacity.
Dicey: “We test this question – Hortgro’s relevance – with producers all the time. We have to stay in touch with producers’ needs. That is why we still consider ourselves a producer organisation, but because the value chain has expanded rapidly we also have to test ourselves against the entire industry.”
Smit: “Because agriculture is co-dependent, challenges are increasingly double-edged. If a producer in another agricultural branch does something wrong that causes a food safety problem or violates an ethical labour practice, then it cuts across all fruit sectors, across the deciduous fruit landscape, across farmers and across South African agriculture as a whole. For that reason we changed our mandate to include non-deciduous crops, like figs, pomegranates, and blueberries, and address challenges collectively.
“We reaffirm our relevance as industry organisation by making ourselves available to other commodities that need similar services. In this way we want to protect our industry and manage the risks, and image of the ‘product of South Africa’.”
Dicey: “Hortgro is active in all the relevant areas to support producers and other stakeholders in the value chain. Take information, and the role which that alone plays. If there wasn’t a Hortgro, there would be no industry information. Nothing. The international fruit community admires the unifying role that Hortgro plays in the South African fruit industry and the one-stop-shop services it provides to the whole customer spectrum. A producer only has to place one call to get all the necessary support. That is a real asset.”
Smit: “We have been blessed with capable people and a good industry organisation. We must cherish and build on that asset in order to overcome the challenges of the future. Our organisation and its human resources should never be taken for granted.”
Smit: “The priority focus remains on gaining access to new markets, as we can’t achieve the growth we’re hoping for with the existing markets alone. Europe, which was our traditional market, is only so big. The same with the Middle East. We need other markets, and for that government negotiations are required. But especially negotiations that are fuelled by competency, a political will, and the ingenuity to have it succeed.
“Our future lies in the consumer’s eating experience of what we produce and export. If you consider what the table grape industry has achieved with new cultivars that are competing with junk food… They are successful because their new cultivars have a novel ‘wow’ taste.
“We must give our market that ‘wow-experience’ with our fruit. Take something like the citrus industry’s Nadotcott, it is one of the few products of which the volume and price have increased because it is such a good eating experience for the consumer.
“Creating awareness of the South African product in the market is of paramount to our ability to grow our share of the market. For example, Chile has launched a market development project for cherries, and its government has made $10 million available in support. We’re struggling to compete with our few pennies!”
Dicey: “We have to look at new markets that can still grow. After all, we know where the population growth and hopefully also economic growth will be – the East. The rest of Africa also remain important as we already see huge growth for our apples in that market. The Middle and Far East will be just as important, especially for stone fruit.”
Smit: “Market development is a much more complex question than it looks on the surface and a specific strategy needs to be put in place for each commodity, and sometimes even on a per cultivar basis.
“While opportunity awaits in Middle East and Far East, there are the restrictive phytosanitary protocols and trade agreements. To enter those markets therefore presents technical and regulatory challenges. But, Europe remains a core market and we see an opportunity to increase our footprint there. Our challenge is to regain access to markets that have shown a decline in the last ten years, such as France, through a re-introduction and redeployment of our product. There definitely still remains opportunity in some of our traditional markets.
Rabe: “At Hortgro we have a specific strategy that we call “GRO”. It stands for Gain, Retain and Optimise. And is managed in coordination with the other fruit exporting industries within FruitSA. Gain refers to new markets, Retain to those we have, and Optimise is about both. A lot of the gain and retain rest between governments, and that is where expertise and the will to be part of the solution, unfortunately remain absent.”
“Every market is rife with opportunities. We have a set of norms for each fruit group, based on a priority matrix which periodically gets tested with the industry stakeholders. This matrix is based on for example: there is so many hundred million people with money, the technical challenge around protocol, the tariff, the logistics and shipping regime, and the product profile they want.
“Then ultimately we must say okay, what is going to make the biggest difference to a product on industry level. It isn’t always easy because you have to weigh an apple, plum or pear against each other. Then we’re not even talking about citrus and table grapes because we have to do that together on a collective level.”
Dicey: “The role Hortgro plays in identifying and researching these opportunities is of crucial importance. We still have so many technological opportunities that we can utilise, just look at what we are already doing in terms of climate change, and what producers are doing with the little water available to them. Despite the negatives, we have an extremely dynamic and positive industry. We make plans, and won’t give up.
“I am always worried about the next generation, but youngsters are coming in. There is immense re-investment in our industry, with positive attitude and positive growth.
“The challenges are there. But it makes us fitter. And yes, some of those challenges also make us fed-up, but we are unstoppable. We are delivering good products, and we want to transform. We want to make sure that the next generation of farmers are rooted in the industry, and that industry will look different in the future. This will be to the benefit of the whole country.”