SOUTH AFRICAN CITRUS INDUSTRY REVIEW – FEBRUARY 2023
Listen to the Lucentlands Podcast with CGA CEO Justin Chadwick, about current issues and future planning for the South African citrus industry.
While the past two years have been particularly tough for the South African citrus industry, the industry is gearing up for the new season with good expectations and proactively planning for significant growth and expansion over the next decade. Role players in the citrus industry are collectively undertaking initiatives on several fronts to mitigate challenges where possible and these are starting to bring positive results.
THE PAST SEASONS HAVE BEEN SOME OF THE TOUGHEST TO DATE
The South African citrus industry has started the New Year and preparation for the next harvest, growers are hoping for a better season than what they experienced during 2022. This tough 2022 season was the result of a wide range of challenges, including the increased production costs, port inefficiencies, exorbitant logistics costs, and lack of demand due to reduced consumer buying power in international markets. In addition, new phytosanitary regulations for the entry into the EU for South African oranges have significantly hampered exports to this destination, one of South Africa’s largest and oldest trading partners.
Justin Chadwick, CEO of the South African Citrus Growers’ Association (CGA) explained that while the 2020 year had presented very good results for South African citrus growers, the last two years had been extremely difficult. He added that research had shown that during 2022, four out of five citrus growers in the country had not returned a profit. This situation is of grave concern to the industry, particularly with reference to the long-term economic sustainability of the industry.
For the South African economy, there is a great deal at stake in securing the sustainability of the citrus industry as the industry is a significant economic force within the South African economy and a big player in the international fruit industry. After Spain, South Africa is the biggest international exporter of citrus and during 2022, South Africa exported 164 million 15kg cartons of citrus. The citrus industry is the number one South African agricultural exporter and top agricultural employer, creating around 140 000 jobs, many of which are in poor rural areas where the industry is often the only significant employer.
Although the 2022 season was particularly difficult, production volumes for export still increased, and far steeper increases are expected in the decade ahead. The initial export forecast for the 2022 South African citrus export season was close to 170 million cartons, but the final figures showed that growers packed only 164.8m cartons for shipment to global markets, around 5.7m cartons less than initially expected. This still showed an increase of 3.2m cartons from 2021.
While the past two years have been particularly tough for the South African citrus industry, the industry is gearing up for the new season with good expectations and proactively planning for significant growth and expansion over the next decade. Role players in the citrus industry are collectively undertaking initiatives on several fronts to mitigate challenges where possible and these are starting to bring positive results.
THE PAST SEASONS HAVE BEEN SOME OF THE TOUGHEST TO DATE
The South African citrus industry has started the New Year and preparation for the next harvest, growers are hoping for a better season than what they experienced during 2022. This tough 2022 season was the result of a wide range of challenges, including the increased production costs, port inefficiencies, exorbitant logistics costs, and lack of demand due to reduced consumer buying power in international markets. In addition, new phytosanitary regulations for the entry into the EU for South African oranges have significantly hampered exports to this destination, one of South Africa’s largest and oldest trading partners.
Justin Chadwick, CEO of the South African Citrus Growers’ Association (CGA) @CGA explained that while the 2020 year had presented very good results for South African citrus growers, the last two years had been extremely difficult. He added that research had shown that during 2022, four out of five citrus growers in the country had not returned a profit. This situation is of grave concern to the industry, particularly with reference to the long-term economic sustainability of the industry.
For the South African economy, there is a great deal at stake in securing the sustainability of the citrus industry as the industry is a significant economic force within the South African economy and a big player in the international fruit industry. After Spain, South Africa is the biggest international exporter of citrus and during 2022, South Africa exported 164 million 15kg cartons of citrus. The citrus industry is the number one South African agricultural exporter and top agricultural employer, creating around 140 000 jobs, many of which are in poor rural areas where the industry is often the only significant employer.
Although the 2022 season was particularly difficult, production volumes for export still increased, and far steeper increases are expected in the decade ahead. The initial export forecast for the 2022 South African citrus export season was close to 170 million cartons, but the final figures showed that growers packed only 164.8m cartons for shipment to global markets, around 5.7m cartons less than initially expected. This still showed an increase of 3.2m cartons from 2021.
VISION 260 – PREPARING FOR 260 MILLION CARTONS
Chadwick explained that based on the hectares of citrus orchards already planted across South Africa, the industry is expected to grow by around 10 million cartons annually, reaching 260 million cartons by 2033. He added that the CGA board has created the concept of Vision 260 (260 million) and along with the broader citrus industry, has identified nine projects to drive capacity development. Together, they have taken the decision to work closely with service providers throughout the entire supply chain in encouraging and assisting them to prepare their capacity to handle this steep and rapid increase in production volumes over the next decade. In the runup to the Citrus Congress in March 2023, CGA is meeting with industry stakeholders to formulate a clearer vision for the plan of action and of how the industry intends to tackle these challenges.
SPECIFIC CHALLENGES
Markets
One of the key focus areas vital for the growth of South African citrus exports is accessing new markets and maintaining existing ones. “The CGA remains committed to working closely with the South African government in this regard. Along with Fruit South Africa, we proactively working closely with government, striving to secure, develop and retain as many market access opportunities as possible to assist our growers to export their fruit profitably,” explained Chadwick. Markets that currently provide good potential for market access and further development are the USA, China, Japan, Vietnam, India, and the Philippines.
Profitability
The global increases in production costs, such as fertilizer, labour and fuel, as well as massive spikes in shipping tariffs have created disastrous consequences for profitability in the sector. During the past two years, price increases in shipping rates of up to 150% have placed many citrus growers under severe financial constraints. While shipping freight rates are currently on a downward trend and expectations are that this trend is expected to continue into 2023, the fact remains that during the past two years, the massively elevated shipping prices have been severely detrimental to the South African industry’s profitability.
Domestic Port productivity
During the past year closer co-operation between Fruit South Africa and CGA with Transnet, the South African Port Authority has resulted in some infrastructural improvements, increased efficiencies and better working relationships between stakeholders within South Africa’s ports. However, South African ports will require investment in infrastructural improvements to improve port efficiencies sufficiently to cope with the expected annual increase in containers of fruit being shipped from South Africa over the next few years. Transnet has recently announced plans for significant port upgrades and expansion, but whether this will be realised remains to be seen. Currently, negotiations to introduce public-private partnerships to facilitate investment in infrastructural improvements on South African ports are underway, and the conclusion of these developments have the potential to bring significant positive results.
EXPECTED GROWTH PROVIDES SIGNIFICANT POTENTIAL FOR ECONOMIC SUCCESSES
“While the industry is keenly aware of the considerable challenges it faces with respect to this rapid growth, the sooner we address these and mitigate them, the better for the industry going forward, says Chadwick. “On the upside, if we are able to successfully deal with these challenges, the South African citrus industry has the potential to sustain a further 100,000 jobs and generate an additional R20bn in annual revenue, increasing the industry’s contribution to the South African economy to 240,000 jobs and R50 billion in revenue.”
Article by Louise Brodie
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