As SA’s citrus industry faces a challenging 2023, a collaborative approach is needed for long-term sustainability, says an economist.
South Africa’s citrus industry has been a major contributor to the country’s agricultural sector, and its overall gross domestic product (GDP), for many years. Despite facing numerous challenges in recent times, the sector has managed to achieve a steady annual compound growth rate of 11% in gross production value over the past five years, allowing it to not only continue to bolster South Africa’s economic recovery but also continue to provide close to 150 000 employment opportunities.
However, despite this success, the industry continues to face several challenges that threaten its sustainability and, as it enters the 2023 export season, these challenges are falling under a very bright spotlight.
That’s according to Paul Makube, senior agricultural economist at FNB, who points to a combination of domestic and global headwinds as presenting something of a perfect storm for the country’s citrus industry.
“The global economy, including declining grow prospects and rapidly rising inflation and interest rates, are starting to bite hard into the profitability of the citrus industry worldwide,” Makube says. “When you couple these fiscal pressures with the sharp rises seen in the costs of logistics, particularly the prices of reefer containers, citrus exporters’ margins have been shrinking rapidly, since 2021.”
Makube also points to a number of other challenges that SA’s citrus producers have faced, and will likely continue to battle in 2023, not least the deterioration of infrastructure, the impact of energy insecurity and loadshedding on farming, storage and cooling processes, increasing competition in many markets and the still slow progress that is being made in terms of expanding global market access.
“In addition to rapidly increasing production costs, which have risen by more than 25% in the past three years, local citrus producers are also having to deal with rising costs associated with getting their produce to global marketplaces,” Makube explains. “The situation has now been exacerbated by changes in the EU’s cooling protocols, combined with the steady increase in the costs of sanitary and phytosanitary (SPS) protocols across the food chain management process.”
Makube says that, while these cost increases are, in themselves, a significant challenge for local citrus producers, they are compounded by a variety of operational problems ranging from ongoing domestic port and logistical crises that raise the risks of delays and consequent quality claims. He also points to cold-chain interruptions due to loadshedding as presenting a massive risk to both the quality of fresh produce and the costs of storage in chilled environments.
“To top it all, while freight rates are showing signs of normalising, they are largely still higher than pre-pandemic rates,” he says. “Input costs in terms of fertilizers and labour are also still presenting headaches for many farmers.”
Despite these challenges, Makube is positive about the potential that still exists for the country’s citrus industry to grow in the coming years, and even become more sustainable.
“While the challenge of slowing exports is likely to remain in place for some time, the local industry is able to adapt, and there is evidence that it is already doing so,” he explains, “as evidenced by the gradual consolidation of the planted area due to the removal of marginal orchards and more carefully considered orchard expansion.”
Makube emphasises that there is no simple solution or quick fix to the challenges facing the sector, but he believes that a carefully coordinated response by all stakeholders can, and will, lead to long-term positive outcomes, particularly for farms, which are the cornerstone of the sector’s sustainability.
“Although 2023 is likely to be another challenging year for the industry, and it is unlikely to see the record-breaking export prices that were seen over the past five years, from next year it is expected to see a gradual settling of the various factors that are contributing to the volatility and uncertainty in the citrus markets,” he says. “After which, it is hoped that steady improvements will once again take place as all the industry players work together to secure its sustainability and set it firmly back on an expansionary path.”