21 August 2020
While the covid-19 pandemic caused great financial strain on the economy, the environmental challenges experienced had a direct impact on the fresh produce market of South Africa, says a panel of experts who concluded this year’s Fresh Connections: Southern Africa conference.
These experts deliberated on challenges and solutions to rebuild a sustainable fresh produce market and pivot businesses within this industry. The focus was on strengthening the industry for the next 10 to 15 years.
Presented by the Produce Marketing Association, the three-day conference consisted of a series of webinars which provided attendees with global perspectives on how to navigate today’s unpredictable environment with new insights to grow their businesses.
According to the director of the Bureau for Food and Agricultural Policy, prof. Ferdi Meyer, the last five years brought extreme environmental challenges, such as climate change and prolonged drought that led to water shortages in the country.
Meyer says, “Climate change has always been bearable, but the question is, ‘How do we mitigate that and how do we change that, especially in industries like fresh produce where you are so depended on water?’”
His proposed solutions to the water challenges in South Africa are greater research on how to use water efficiently, using shade netting and building tunnels to mitigate the challenges brought about by extreme weather conditions.
Dr Sifiso Ntombela, chief economist at the National Agricultural Marketing Council, believes that efficiency and better management of water is only possible to a certain extent, but there comes a time where diversification and innovation in producing is needed.
“We need to find new production areas that can produce the same quality of products – even if we have to look into our neighbour countries and see if we can find better ways of producing.”
Ntombela adds that climate change is detrimental to the future of food production in the country and that “we have dropped the ball” in terms of investing, researching, and creating new technology and innovation to mitigate these issues.
“That means the state needs to start planning ahead and play a lead role so that we can adapt to this new climate environment. And, of course, that needs to be very closely monitored by the private sector as they have the skills and, in certain areas, they have practical understanding of what the market requires.”
Opportunities for the fresh produce sector
Ntombela believes the fresh produce industry can capitalise on population migration from rural to urban areas in the next three to five years, but if it is not handled properly can also be the biggest threat for the sector.
“The current migration or population in the country is a jobless migration. So, it is people who move from their work areas trying to find better opportunities in urban areas, like in the township. What actually ends up happening because there are no jobs in these cities, you see these increasing squatter camps and the increasing frustration of people and the pressures on our infrastructure. And that, on its own, is a boiling point in the country. It becomes a threat to the economy and the social system.”
He advises that we build a new rural middle class that are able to consume and expand the domestic market. “If we can get that right in the next ten years it will be the biggest achievement which will expand production and drive investment in the sector. For that to happen, government really needs to start being honest about the misfortune regarding the assumptions and decisions that have been made which have guided the current system.”
Covid-19 impact on fresh produce market
Free State economics professor Philippe Burger says many countries’ economies will shrink between eight and ten percent this year due to disruptions triggered by the covid-19 crisis. He explains that this will translate to business where fewer salaries will be paid, and fewer sales will be made. “Once that spills over to markets, like the fresh produce markets, it means less demand.”
Burger warns if recovery isn’t swift, markets will be disrupted, companies will become bankrupt and industries will be forced to rebuild supply chains.
“We know from experience it is quite a difficult thing to do. If you have a supply chain with six players from input to final output, if player three, four and six go out of business you know you can’t just replace them easily. It takes the building of trust between business partners and so on. So, that is something specifically that needs attention.”
Burger adds there should be a specific discussion among various industries with government regarding the R200 billion loan guarantee scheme. The money needed to recuperate the players in the industry should be fast-tracked, he believes.
According to Burger urbanisation and population growth bring enormous opportunities for the fresh produce market. “Within the next 15 years, we will see between 12 and 14 million people being added to the urban population. Those would be people who need to eat. They need food. They need clothing. They need homes and they need consumer goods.”
Meanwhile Meyer adds that South Africa’s productivity outweighs the impact of input costs on the economy when the rand declines in value. “Productivity is a decisive factor that can help you benefit from a weakening exchange rate and that’s why the agricultural sector has a lot of exporters. But then we should be carefully taking a look at these inputs and the input cost as they are rapidly rising. “
As an example, up to 85% of fertiliser used is currently imported and Meyer believes that South Africa has an opportunity to do more locally since the resources are here.
Source: Food For Mzansi