PEAR MARKET VALUE CHAIN

1 DESCRIPTION OF THE INDUSTRY

Pears are one of the most important deciduous fruits grown in South Africa, taking into consideration their foreign exchange earnings, employment creation and linkages with support institutions. In 2008, they contributed 15% of the total area planted to deciduous fruits.

The South African pear industry is export oriented with approximately half of pears being absorbed by the export market. Majority of South African pears are available in many northern hemisphere countries during their winter and spring seasons. The bulk of these sales to the consumer are by means of contractual agreements via preferred category suppliers to the large supermarket chains. Furthermore, various export companies or agents conduct business on the basis of consignment sales on behalf of the growers or packers. The industry operates in a deregulated environment were prices are determined by the market forces of demand and supply. The total value of production for pears for the seasons 1998/99 to 2007/08 is shown in Figure 1.

Figure 1: Total value of production for pears, 1998/99 – 2007/08

1400000 1200000 1000000 800000 600000 R'000 400000 200000 0

9 1 3 4 6 8 /00 /02 /0 /05 /07 8/9 0/0 9 99 0 01 03 04 06 9 9 0 0 0 0 1 1 20 2 2002/0 2 2 2005/0 2 2007/0 Years

Source: Agricultural Statistics

The total value of production for the industry has been on a steady increase since 2000/01. That has been mainly due to amongst increasing popularity of healthy living trends and higher income as a result of an increasing middle class’s spending power.

1

1.1 Pear production areas in 2008

South Africa’s main pears producing areas are Ceres, Groenland, Wolseley/Tulbagh (all in the Western Cape) and Langkloof East in the Eastern Cape. The Western Cape province account for more than half of all the pears produced in South Africa.

Figure 2: Pear production areas in 2008 Langkloof West Somerset West 1% 2% Southern Cape Berg River 1% Stellenbosch 2% 1% Others Groenland 1% 13% Klein Karoo 7% Piketberg 2%

Wolseley/Tulbagh 11%

Ceres 38% Villiersdorp 8% Langkloof East 13%

Source: Deciduous Fruit Producers’ Trust

Figure 2 above shows that in terms of the area planted for pears in hectares, Ceres accounted for 38% with 4 355 ha, Langkloof East accounted for 13% with 1 542 ha, Groenland accounted for 13% with 1 452 ha and Wolseley/Tulbagh accounted for 11% with 1 279 ha. Total production area for pears in 2008 was 11 425 hectares. This represents a 1% decrease in production from the 2007 production year.

1.2 Pear production

In determining which pear cultivar to plant, a producer should take the following into consideration:

• The global demand and the demand in specific markets, • His (the producer’s) current infrastructure in respect of being able to cope with pruning, spraying, picking, cold storage and packing of a particular cultivar, and

2 • The availability of natural resources like water, soil types, cold units and slopes.

Figure 3 illustrates total South African production of pears for the years 1998/99 to 2007/08. Generally, the production of pears in South Africa has been fairly stable since the 2002/03 production season.

Figure 3: Total production of pears, 1998/99 – 2007/08

400000

350000

300000

250000

200000 Tons 150000

100000

50000

0

2 00 /01 0 03 05 07 /08 2/ 99/ 01/ 04/ 06/ 003/04 1998/99 19 2000 20 200 2 20 2005/06 20 2007 Years

Source: Agricultural Statistics

Pear production has maintained a relatively constant pattern over the past decade. That has been primarily due to South Africa’s main producing areas. They offer mild Mediterranean climatic conditions that have enabled the country to produce its pear.

1.3 Pear cultivars

South Africa’s main pear cultivars are Packham’s Triumph, Williams Bon Chretien, Forelle and Early Bon Chretien. Figure 4 shows that in 2008, Packham’s Triumph accounted for 29% of the total area planted, followed by Forelle (25%), Williams Bon Chretien (18%) and Early Bon Chretien (9%).

3 Figure 4: Leading pear cultivars in 2008

Abate Fetel Doyenne Du Other 4% Comice 7% Beurre Bosc 2% Packham's 3% Triumph Rosemarie 29% 3%

Early Bon Chretien 9%

Williams Bon Chretien 18% Forelle 25%

Source: DFPT Tree Census 2008

1.4 Employment

Full-time labourers employed on pear farms are primarily employed for a number of specialist tasks such as pruning of trees. Labour is also required to carry out thinning practises during blooming or during first four weeks of fruit growth. Other tasks include harvesting, supervision, operational duties in the pack house, irrigation management, scouting for insects and diseases on a seasonal basis, tractor or forklift driving and grafting.

Seasonal labour is employed on a contractual basis for a fixed period of time with the main purpose of harvesting or fruit packing. The prescribed minimum wage is used as a baseline for determining basic wages in accordance with the legislation governing conditions of service. Much of this labour is drawn from the ranks of the unemployed persons in neighbouring towns. In some cases a system similar to the previous recruitment of migrant labour continues to be used.

The industry makes an important contribution to direct employment in the pear production and processing. It provides indirect employment for numerous support industries in the areas where pears are grown. In 2008, direct employment within the industry was estimated at 14 432 people with 57 729 dependents.

4 2 MARKET STRUCTURE

Over half of the pear crop is normally destined for the fresh pear market. Figure 5 illustrates that pear production in South Africa is primarily aimed at both exports and processing and to a lesser extend, local markets. Dried fruit production is relatively insignificant.

Figure 5: Pear crop distribution, 1998/99 – 2007/08

180000 160000 140000 120000 100000 80000

Tons 60000 40000 20000 0

/00 /02 /04 /06 /08

1998/99 1999 2000/01 2001 2002/03 2003 2004/05 2005 2006/07 2007 Years

Local Exports Dried Processed

Source: Agricultural Statistics

2.1 Domestic markets and prices of pears

Local pear market volumes and general price trends from 1998/99 to 2007/08 are presented in Figures 6 and 7.

5 Figure 6: Local pear sales, 1998/99 – 2007/08

70000 4000 60000 3500 50000 3000 2500 40000 2000

Tons 30000 1500 Rand/Ton 20000 1000 10000 500 0 0

9 0 1 2 3 6 7 8 /0 9/0 0/0 1/0 7/0 9 0 0 9 0 0 1998/9 1 2 200 2002 2003/04 2004/05 2005/0 2006/0 2 Years

Volume in Tons Average price in Rand/Ton

Source: Agricultural Statistics

As illustrated in Figure 6, volumes of pears at local market have generally been constant. The lack of serious growth in the local market may be due to a lack of coordinated marketing. Growth in the sector has been absorbed by the increased exports to the traditional markets.

Figure 7: Pear price trends, 1998/99 – 2007/08

6000

5000

4000

3000

Rand/Ton 2000

1000

0

0 1 5 8 /99 0 0 /03 /04 0 /06 /07 0 9/ 0/ 4/ 7/ 98 9 0 02 03 0 05 06 0 9 0 0 0 0 1 19 20 2001/02 2 2 20 2 2 20 Years

Export Net Realisation Local Market Average price Processed Average price

Source: Agricultural Statistics

6 Pears generally fetch higher prices in exports. Prices at both export and local markets have generally been on the increase. That may have been due to a consistent demand from both the export and local markets. At the same time, processing prices have been fairly stable.

2.2 Pear exports

South Africa is a relatively small pear grower in terms of global hectares. However, the country is a major volume exporter in global terms. Pears sold in the export markets generate a greater unit price than that achieved on the local market. Therefore, a thorough understanding of the rules of the export markets is for success in pear production and marketing.

Figure 8: Pear exports, 1998/99 – 2007/08

180000 6000 160000 5000 140000 120000 4000 100000 3000

Tons 80000

60000 2000 Rand/Ton 40000 1000 20000 0 0

9 6 /00 /05 1/02 6/07 98/9 99 0 02/03 03/04 04 05/0 0 0 19 19 2000/01 20 2 20 20 20 20 2007/08 Years

Volume in tons Net Realisation in Rand/Ton

Source: Agricultural Statistics

The fresh pear exports have been fluctuating for the past decade according to Figure 8. The 2006/07 as well as 2007/08 seasons were the best in a long time in terms of export volumes as well as prices paid to producers. The increased export volume achieved in 2006/07 was maintained in 2007/08. The increase in exports may have been due to pear size, as well as quality. The season was a big relief on the financial wellbeing of the pear industry that took a strain from 2004/05 to 2005/06.

7 Figure 9: Export destinations for South African pears in 2008

'Canada 'Ireland Other 2% 2% 12% 'Singapore 2% 'United Arab Emirates 'Netherlands 2% 28% 'Portugal 3% 'Italy 3% 'France 'United Kingdom 3% 16% 'Russian 'Malaysia Federation 3% 12% 'Belgium 'Germany 5% 7%

Source: International Trade Centre (ITC)

European Union (EU) countries such as Netherlands, United Kingdom (UK), Belgium, Germany and France as well as the rest of the European countries such as Russia and Switzerland hold a bigger market share of South African pear exports according to Figure 9. Together they constitute over 80% of South African pear exports. There are attempts to expand other markets like the Middle East (United Arab Emirates) and Asia (Malaysia and Singapore). The aim is to increase their current export shares.

Table 1: Leading pear exporters in 2008 Exporter Value Quantity Unit Annual Annual Share exported exported value growth growth in in 2008 in 2008 in US in value in world (US $ $ from quantity exports, thousand) 2004 – from % 2008 2004 – 2008 1304 World 1137 439 956 872 15 6 100 India 214 581 281 669 762 22 13 18.9

8 Exporter Value Quantity Unit Annual Annual Share exported exported value growth growth in in 2008 in 2008 in US in value in world (US $ $ from quantity exports, thousand) 2004 – from % 2008 2004 – 2008 Peru 134 287 94 601 1 420 20 12 11.8 Netherlands 120 057 75 641 1 587 20 13 10.6 Brazil 119 122 133 944 889 15 4 10.5 Mexico 111 214 226 083 492 4 3 9.8 Hong Kong 45 266 42 853 1 056 37 4 4 Thailand 37 368 61 608 607 23 15 3.3 Belgium 27 362 12 973 2 109 35 19 2.4 Philippines 27 055 22 011 1 229 -6 -16 2.4 Pakistan 26 787 62 751 427 3 -5 2.4 Source: International Trade Centre (ITC)

Table 1 shows that globally, India was the biggest exporter of pears in 2008, exporting over $214 million a year and accounting for 18.9% of world export market in pears. Second was Peru with 11.8 market share followed by the Netherlands (10.6%) and Brazil (10.5%). Brazil was the only significant exporter of pears in the Southern hemisphere in 2008.

In terms of annual growth in value between 2004 and 2008, pear exports from Hong Kong increased by 37%. Another country that experienced high growth in value is Belgium. The country increased by its value by 35%. Thailand increased its value and quantity by 23% and 15%, respectively.

In terms of annual growth in quantity between 2004 and 2008, pear exports from Belgium increased by 19%. Second were India and the Netherlands both at 13%. At the same time there were countries like the Philippines and Pakistan who had negative annual growth rates in quantity.

2.3 Provincial and district export values of South African pears

Figure 10 depicts the value of pear exports from each province of the Republic of South Africa.

9 Figure 10: Value of pear exports by provinces, 1999 – 2008

6000000000

5000000000

4000000000

3000000000 Rands

2000000000

1000000000

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Western Cape 1493762294 1226337211 1468603831 2133658514 2507608766 2967931680 2769192275 2733119998 4328593311 5364562079 Eastern Cape 124428 11423926 21235852 40669123 86285875 93576848 99579557 97687468 113130987 134296861 Northern Cape 0 0 0 0 0 98050 0 195060 0 243689 Free State 1954663 3855832 1733086 0 1292828 2365985 0 0 0 0 Kw azulu-Natal 20805562 11603484 13776435 38250928 23502859 40691252 20777616 22050997 43140738 49509345 North Wes t 0 0 0 128081 863114 0 0 0 0 0 Gauteng 257767268 144449330 153448450 290814334 252932275 232939476 174690862 207634204 193234227 239591806 Mpumalanga 616 2926 11542 1856 4060259 2577893 176058 123 1286305 0 Limpopo 826102 131402 80395 977037 49706 6648636 434897 56000 163741 220912 Years

Source: Quantec Easy data

Highlights of the pear exports in Figure 10 were that the province of Western Cape and Gauteng to a lesser extend were consistently the top pear exporting provinces of South Africa over the last decade. Other provinces featured intermittently but usually registered minimal trade. The following Figures (Figures 11-19) show the value of pears exports from the various districts in the nine provinces of South Africa.

It is clear from Figure 11 that exports of pears from the Western Cape are mainly from the City of Cape Town, Cape Winelands, Overberg and West Coast municipalities. High export values for the leading municipalities were recorded in 2008 (for the City of Cape Town, Cape Winelands and West Coast) and 2007 (for Overberg).

10 Figure 11: Value of pear exports by the W estern Cape Province, 1999 – 2008

3500000000

3000000000

2500000000

2000000000

Rands 1500000000

1000000000

500000000

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

West Coast 70183044 79949684 125816910 182939219 297926079 288524859 251372425 210119947 437463952 535034761 Cape Winelands 37628655 86356072 140664926 353411637 292992584 350751562 372705968 283926705 493387633 1099570398 Overberg 194835067 165017273 116771672 301076638 447242965 502356821 460401941 493555173 612847643 520256582 Eden 0 14245119 8521874 13255096 47142782 41290336 15208455 12611170 11286909 17353668 City Of Cape Tow n 1191115528 880769064 10768284491282975923142230435717850081021669503486173290700327736071743192346670 Years

Source: Quantec Easy data

The use of the Cape Town harbour as an exit point may have played a major role in the City of Cape Town being a leader in the export of pears from the Western Cape.

Figure 12: Value of pear exports by Gauteng Province, 1999 – 2008

250000000

200000000

150000000

Rands 100000000

50000000

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Sedibeng 0 213664 0 0 0 0 1409757 1760534 654962 779212 City Of Tshw ane 187231065 74735212 80826892 149471761 164270801 151942955 75662752 86303760 0 132547 Metsw eding 194024 0 231132 554895 391671 532090 2663122 0 0 2091061 West Rand 6148675 99013 3389175 4710239 3071172 1163498 1688618 261956 1475033 7735684 Ekurhuleni 12626150 18481858 17211786 26241741 7971674 2050827 3004157 8721616 36486539 14310326 City Of Johannesburg 51567356 50919582 51789467 109835697 77226957 77250106 90262455 110586338 154617693 214542975 Years

Source: Quantec Easy data

11 In Gauteng Province, there have been fluctuations on the pear export values for the past ten years (see Figure 12). The leading role players are City of Tshwane and City of Johannesburg municipalities. High export values of the leading municipalities were recorded in 1999 (for the City of Tshwane) and 2008 (for the City of Johannesburg).

Figure 13: Value of pear exports by the Kwa-Zulu Natal Province, 1999 – 2008

60000000

50000000

40000000

30000000 Rands 20000000

10000000

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Ugu 0 0 0 0 0 1591228 0 0 0 0 Umgungundlovu 0 0 0 0 383349 0 0 0 613554 0 Uthukela 0 338666 0 0 0 0 0 0 0 0 Umzinyathi 0 0 1483698 0 0 0 0 0 0 0 Uthungulu 0 0 10960 9490 517 4220 30683 47 0 0 Ilembe 0 0 948608 11043895 795717 894377 115854 0 0 0 Ethekw ini 20805562 11264818 11333169 27197543 22323277 38201427 20631080 22050950 42527184 49387620 Years

Source: Quantec Easy data

It is clear from Figure 13 that pear exports from Kwa-Zulu Natal are mainly from Ethekwini municipality. High export values for the leading municipality were recorded in 2008. The use of the Durban harbour as an exit point may have played a major role in Ethekwini being a leader in the export of pears from Kwa-Zulu Natal.

It is also clear from Figure 14 that pear exports from the Eastern Cape are mainly from Nelson Mandela and to a lesser extend Cacadu municipalities. High export values for the leading municipalities were recorded in 2008 (for Nelson Mandela) and 2004 (for Cacadu).

12 Figure 14: Value of pear exports by the Eastern Cape Province, 1999 – 2008

140000000

120000000

100000000

80000000

Rands 60000000

40000000

20000000

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Cacadu 124428 4743774 8095658 16579094 15288047 32146156 12227070 5421212 14613919 6977083 Amatole 0 0 0 148993 4604982 1762178 328054 1283391 0 0 O.R.Tambo 0 0 0 0 0 270786 0 0 0 0 Nelson Mandela 0 6680153 13140194 23941036 66392847 59397729 87024432 90982865 98517068 1.27E+08 Years

Source: Quantec Easy data

The use of the Nelson Mandela Bay harbour as an exit point may have played a major role in Nelson Mandela metropolitan municipality being the leader in pear exports from the Eastern Cape.

Figure 15: Value of pear exports by the Free State Province, 1999 - 2008

4500000 4000000 3500000 3000000 2500000 2000000 Rands 1500000 1000000 500000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Lejw eleputsw a 00006612300000 Thabo Mofutsanyane 19546633855832 1733086 0 12267052365985 0 0 0 0 Years

Source: Quantec Easy data

13 It is clear from Figure 15 that pear exports from Free State are mainly from Thabo Mofutsanyane municipality. High export value for the leading municipality was recorded in 2000.

Figure 16: Value of pear exports by the Northern Cape Province, 1999 – 2008

300000

250000

200000

150000 Rands 100000

50000

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Siyanda 0 0 0 0 0 98050 0 195060 0 243689 Years

Source: Quantec Easy data

It is clear from Figure 16, that pear exports from the Northern Cape are from Siyanda municipality. High export value for the leading municipality was recorded in 2008.

14 Figure 17: Value of pear exports by the Limpopo Province, 1999 – 2008

7000000 6000000 5000000 4000000 3000000 Rands 2000000 1000000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Mopani 826102 131402 80395 64000 0 6527886 425009 56000 142896 0 Vhembe 0 0 0 864236 49706 0 0 0 20845 0 Capricorn 0 0 0 0 0 120749 9888 0 0 220912 Greater Sekhukhune 00048801000000 Years

Source: Quantec Easy data

It is clear from Figure 17 that pear exports from Limpopo are mainly from Mopani municipality. High export value for the leading municipality was recorded in 2004.

Figure 18: Value of pear exports by the North W est Province, 1999 – 2008

800000

700000

600000

500000

400000 Rands 300000

200000

100000

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Bojanala Platinum 0 0 0 0 128081118754 00000 Dr. Kenneth Kaunda 00000744360 00000 Years

Source: Quantec Easy data

15

It is clear from Figure 18 that pear exports from North West are mainly from Dr. Kenneth Kaunda and Bojanala Platinum municipalities. High export values for the leading municipalities were recorded in 2003 (for Dr. Kenneth Kaunda) and 2002 (for Bojanala Platinum).

Figure 19: Value of pear exports by the M pumalanga Province, 1999 – 2008

4500000 4000000 3500000 3000000 2500000 2000000 Rands 1500000 1000000 500000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Gert Sibande 0 0 0 0 4060259 0 0 0 1286305 0 Nkangala 000002129004 176058 0 0 0 Ehlanzeni 616 2926 11542 1856 0 448889 0 123 0 0 Years

Source: Quantec Easy data

It is clear from Figure 19 that pear exports from Mpumalanga are mainly from Gert Sibande and Nkangala municipalities. High export values for the leading municipalities were recorded in 2003 (for Gert Sibande) and 2004 (for Nkangala).

2.4 Share Analysis

Table 2 is an illustration of provincial shares towards national pear exports. It shows that Western Cape and Gauteng to a lesser extend have commanded the greatest share of pear exports for the past ten years. This is in spite of the fact that Western Cape and the Eastern Cape Province are the leading producers of pears. As explained earlier, this means that the leading export provinces (Western Cape, and Gauteng) derive their advantage from the fact that the registered exporters are based in their provinces and they also have exit points for pear exports.

The above scenario raises concerns about the availability of marketing infrastructure and agro-logistics in the other major pear producing provinces of South Africa like the Eastern Cape because Gauteng is not a

16 pear producing region and yet the sizeable share of South African pear exports are exported through this province.

Table 2: Share of provincial pear exports to the total RSA pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Province

Western 84.1 87.7 88.5 85.2 87.2 88.7 90.3 89.3 92.5 92.6 Cape Eastern 0 0.8 1.3 1.6 2.9 2.8 3.2 3.2 2.4 2.3 Cape Northern 0 0 0 0 0 0 0 0.1 0 0.1 Cape Free State 0.1 0.3 0.1 0 0.1 0.1 0 0 0 0 Kwa-Zulu 1.2 0.8 0.8 1.5 0.8 1.2 0.7 0.7 0.9 0.8 Natal North 0 0 0 0 0.1 0 0 0 0 0 West Gauteng 14.5 10.3 9.3 11.6 8.8 6.9 5.7 6.7 4.1 4.1 Mpumalanga 0 0 0 0 0.1 0.1 0 0 0.1 0 Limpopo 0.1 0.1 0 0.1 0 0.2 0.1 0 0 0.1 South Africa 100 100 100 100 100 100 100 100 100 100 Source: Calculated from Quantec Easydata

The accompanying tables (Tables 3 to 11) show shares of the various districts’ pear exports to the various provincial pear exports.

Table 3: Share of district pear exports to the total Western Cape provincial pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 District

West 4.7 6.5 8.6 8.6 11.9 9.7 9.1 7.6 10.1 10.0 Coast Cape 2.5 7.0 9.6 16.6 11.7 11.8 13.5 10.4 11.4 20.5 Winelands

17 Overberg 13.1 13.5 7.9 14.1 17.8 17.0 16.6 18.1 14.2 9.7 Eden 0 1.2 0.6 0.6 1.9 1.4 0.5 0.5 0.2 0.3 City of 79.7 71.8 73.3 60.1 56.7 60.1 60.3 63.4 64.1 59.5 Cape Town Western 100 100 100 100 100 100 100 100 100 100 Cape Source: Calculated from Quantec Easydata

Table 3 presents the shares of district pear exports to the total Western Cape provincial pear exports for the years 1999 to 2008. The leading pear export districts in the Western Cape are the City of Cape Town and the Cape Winelands. Together, the two districts accounted for over 80% of total Western Cape provincial pear exports in 2008.

Table 4: Share of district pear exports to the total Eastern Cape provincial pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 District

Cacadu 100 41.5 38.1 40.8 17.7 34.4 12.3 5.5 12.9 5.2 Amatole 0 0 0 0.4 5.4 1.8 0.3 1.4 0 0 O. R. 0 0 0 0 0 0.3 0 0 0 0 Tambo Nelson 0 58.5 61.9 58.8 76.9 63.5 87.4 93.1 87.1 94.8 Mandela Eastern 100 100 100 100 100 100 100 100 100 100 Cape Source: Calculated from Quantec Easydata

In the Eastern Cape, the leading district in pear exports is the Nelson Mandela district (see Table 4). The district contributed 95% to total Eastern Cape provincial pear exports in 2008. The remainder was from the Cacadu district.

18 Table 5: Share of district pear exports to the total Mpumalanga provincial pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 District

Gert 0 0 0 0 100 0 0 0 0 0 Sibande Nkangala 0 0 0 0 0 82.6 100 0 100 0 Ehlanzeni 100 100 100 100 0 17.4 0 100 0 0 Mpumala 100 100 100 100 100 100 100 100 100 0 nga Source: Calculated from Quantec Easydata

The shares of district pear exports to the total Mpumalanga provincial pear exports are presented in Table 5. The province did not record any pear exports in 2008.

Table 6: Share of district pear exports to the total Free State provincial pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 District

Lejwelepu 0 0 0 0 5.1 0 0 0 0 0 tswa Thabo 100 100 100 0 94.9 100 0 0 0 0 Mofutsan yane Free State 100 100 100 0 100 100 0 0 0 0 Source: Calculated from Quantec Easydata

The Free State province never recorded any exports of pears since 2005 (see Table 6).

19 Table 7: Share of district pear exports to the total Gauteng provincial pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 District

Sedibeng 0 0.1 0 0 0 0 0.8 0.8 0.3 0.3 City of 72.6 51.7 52.7 51.4 64.9 65.2 43.3 41.6 0 0.1 Tshwane Metsweding 0.1 0 0.1 0.2 0.2 0.2 1.5 0 0 0.9 West Rand 2.4 0.1 2.2 1.6 1.2 0.5 1.0 0.1 0.8 3.2 Ekurhuleni 4.9 12.8 11.2 9.0 3.2 0.9 1.7 4.2 18.9 6.0 City of 20.0 35.3 33.8 37.8 30.5 33.2 51.7 53.3 80.0 89.5 Johannes burg Gauteng 100 100 100 100 100 100 100 100 100 100 Source: Calculated from Quantec Easydata

In 2008 the biggest contributor to total Gauteng provincial pear exports was the City of Johannesburg, which contributed almost 90% (see Table 7). Another consistent contributor is the Ekhuruleni district (6.0% in 2008).

20 Table 8: Share of district pear exports to the total North West provincial pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 District

Bojanala 0 0 0 100 13.8 0 0 0 0 0 Platinum Dr. 0 0 0 0 86.2 0 0 0 0 0 Kenneth Kaunda North West 0 0 0 100 100 0 0 0 0 0 Source: Calculated from Quantec Easydata

The North West province never reported any exports of pears since 2004 (see Table 8).

Table 9: Share of district pear exports to the total Limpopo provincial pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 District

Mopani 100 100 100 6.9 0 2.0 95.9 100 87.3 0 Vhembe 0 0 0 93.1 100 0 0 0 12.7 0 Capricorn 0 0 0 0 0 1.8 2.2 0 0 100 Greater 0 0 0 0 0 96.2 1.8 0 0 0 Sekhu khune Limpopo 100 100 100 100 100 100 100 100 100 100 Source: Calculated from Quantec Easydata

In 2008 all exports of pears recorded in the Limpopo province were from the Capricorn district (see Table 9).

21 Table 10: Share of district pear exports to the total Northern Cape provincial pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 District

Siyanda 0 0 0 0 0 100 0 100 0 100 Northern 0 0 0 0 0 100 0 100 0 100 Cape Source: Calculated from Quantec Easydata

All recorded exports of pears in the Northern Cape province in 2008 were from the Siyanda district (see Table 10).

Table 11: Share of district pear exports to the total Kwa-Zulu Natal provincial pear exports (%), 1999 – 2008

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 District

Ugu 0 0 0 0 0 3.9 0 0 0 0 Umgungu 0 0 0 0 1.6 0 0 0 0.2 0 ndlovu Uthukela 0 2.9 0 0 0 0 0 0 0 0 Umzinyathi 0 0 10.8 0 0 0 0 0 0 0 Uthungulu 0 0 0.1 0.1 0 0.1 0.1 0.1 0 0 Ilembe 0 0 6.9 28.8 3.4 2.2 0.6 0 0 0 Ethekwini 100 97.1 82.2 71.1 95.0 93.8 99.3 99.9 99.8 99.8 Zululand 0 0 0 0 0 0 0 0 0 0.2 Kwa-Zulu 100 100 100 100 100 100 100 100 100 100 Natal Source: Calculated from Quantec Easydata

The shares of district pear exports to the total Kwa-Zulu Natal provincial pear exports are presented in Table 11. In 2008 the Ethekwini district contributed almost the entire pear exports recorded in Kwa-Zulu Natal. The remainder were from the Zululand.

22 2.5 Processing

The volumes of pears available for processing in South Africa fluctuate yearly, depending on the crop size and the percentages of exportable fruit. In 2007/08, the processing industry absorbed approximately 35% of all pear production. This figure represents direct purchases from growers and quantities of pears purchased from the National Fresh Produce Markets (NFPMs). The volumes processed and prices received are shown in Figure 20.

23 Figure 20: Pears purchased for processing, 1998/99 – 2007/08

160000 1000 140000 900 800 120000 700 100000 600 80000 500 Tons 60000 400 300 Rand/Ton 40000 200 20000 100 0 0

04 05 98/99 03/ 04/ 05/06 19 1999/00 2000/01 2001/02 2002/03 20 20 20 2006/07 2007/08 Years

Volume in Tons Average price in Rand/Ton

Source: Agricultural Statistics

Pears are consumed fresh, canned, as juice or dried. The juice can also be used in jellies and jams, usually in combination with other fruits or berries. Fermented pear juice is called perry. Pears will ripen faster if placed next to bananas in a fruit bowls. They stay fresh for longer if kept in a fridge. Pears are the least allergic of all fruits. Along with land and soya formula, pears form part of the strictest exclusion diet for allergy sufferers.

Pear wood is one of the preferred materials in the manufacture of high quality woodwind instruments and furniture. It is also used for wood carving, and as firewood to produce aromatic smoke for smoking meat or tobacco.

24 3 MARKET INTELIGENCE

3.1 Competitiveness of South African pear exports

Competitiveness is described as an industry’s capacity to create superior value for its customers and improved profits for the stakeholders in the value chain. The driving force in sustaining a competitive position is productivity that is output efficiency in relation to specific inputs with regard to human, capital and natural resources. In 2008, South African pear exports represented 4.7% of world exports and its ranking on the world exports was number 8.

As depicted on Figure 21 below, South African pear exports are growing faster than the world imports in Norway, Iran, Russia, Ireland and Indonesia markets. South Africa’s performance in those markets can be regarded as gains in dynamic markets.

South African pear exports are growing while the world imports are declining in Portugal, Germany, Hong Kong, Italy, and Singapore markets. South Africa’s performance in those markets can be regarded as gains in declining markets and should be viewed as achievement in adversity.

South African pear exports have declined faster than world imports in Belgium, France, Canada, UK, and Greece market. South Africa’s performance into that market can be regarded as loss in a declining market.

South African pear exports are declining while the world imports are growing in India and Malaysia. These markets are dynamic and South Africa’s performance should be regarded as an underachievement.

25 Figure 21: Growth in demand for the South African pears in 2008

Source: TradeMap of the International Trade Centre

26 Figure 22 below illustrates prospects for market diversification by South African exporters of pears. Netherlands UK, Germany and the rest of Europe hold a bigger market share of South African pear exports.

In terms of market size, Russia was the largest pear market in 2008 with just over $328 million worth of pear imports, or roughly 12.7% of the world pear market. Second was Germany with just over $249 million worth of pear imports, or roughly 9.7% market share followed by UK with just over $201 million worth of pear imports, or roughly 7.8% market share and France with just over $181 million worth of pear imports, or roughly 7.0% market share.

Whilst four countries dominate world pear imports, it is interesting to note that countries like Iran, together with Russia and Indonesia have experienced higher annual growth rate in terms of imports from 2004 – 2008. Iran experienced an annual growth rate of 203%. Second was Russia with 35% annual growth rate followed by Indonesia (27%). It is important to note that growth by all these mentioned countries (except Russia and Indonesia) has been off a low base. These countries represent possible lucrative markets for South African pear producers.

27 Figure 22: South African pears’ prospect for market diversification in 2008

Source: TradeMap of the International Trade Centre

28 3.2 South Africa vs. Southern hemisphere production

Figure 23 presents Southern hemisphere production of pears for the period 1998 to 2008.

Figure 23: Southern hemisphere production of pears, 1998 – 2008

800000 700000 600000 500000 400000 Tons 300000 200000 100000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Argentina 537458 536549 513554 585249 537297 639029 589429 748727 510000 520000 520000 Australia 152877 156714 156369 168916 144885 135919 138548 151442 142400 150000 131845 Brazil 16755 16474 16970 21502 19696 19790 19894 19746 18161 18200 18600 Chile 275000 265000 210000 205000 203000 205000 210000 212000 215000 220000 160000 New Zealand 41000 44000 42000 33571 42307 39896 40000 32000 33000 35000 35000 South Africa 264842 283943 307516 259467 308392 309589 305676 312838 316133 325000 345296 Years

Source: FAOSTAT

It is clear that South Africa was the second largest (27% in 2008) producer of pears in the Southern Hemisphere after Argentina. Majority of these countries are vying for the lucrative European and North American markets.

South Africa’ main competitors from the Southern Hemisphere in the EU and the rest of European markets for pear exports are Chile and Argentina. The main impact of the Southern Hemisphere pears into the European market is that it drives prices down. Market coordination by the Southern Hemisphere can reduce the pressure on price by controlling the supplies into the European markets.

New Zealand and Australia produces primarily for local markets and exports very little. Both these countries pose no serious threat in the European markets.

29 4 MARKET ACCESS

Barriers to trade can be divided into tariff barriers (including quotas, ad valorem tariffs, specific tariffs and entry price systems) and non tariff barriers (sanitary and phytosanitary measures, labels, etc). The main markets for fruit (including pear) employ various measures, both tariff and non tariff to protect the domestic industries. Whilst many of the non tariff measures can be justified under the auspices of issues such as health and standards, the tariff measures are increasingly under the scrutiny of the World Trade Organization (WTO), and as such are gradually being phased out. Nevertheless, exporters need to be aware of all the barriers that they may encounter when trying to get their produce onto foreign shelves.

4.1 Tariffs, quotas and the price entry system

Tariffs are either designed to earn government revenue from products being imported or to raise the price of imports so as to render local produce more competitive and protect domestic industries.

Quotas can be used to protect domestic industries from excessive imports originating from areas with some form of competitive advantage (which can therefore produce lower cost produce). Tariffs and quotas are often combined, allowing the imports to enter at a certain tariff rate up to a specified quantity. Thereafter, imports from that particular region will attract higher tariffs, or will not be allowed at all. This phenomenon is referred to as tariff-rate quotas (TRQs).

The entry price system, which is used in many northern hemisphere markets, makes use of multiple tariff rates during different periods when domestic producers are trying to sell their produce, and lower the tariffs during their off-season. Alternatively, the tariff rate can be a function of a market price – if the produce enters at a price which is too low (and therefore likely to be too competitive), it qualifies for a higher tariff schedule.

Whilst tariff regulations can be prohibitive and result in inferior market access, it is often the non tariff barriers that restrict countries like South from successfully entering the large developed markets. Many of these barriers revolve around different types of standards, including sanitary and phytosanitary standards (SPS), food health and safety issues, food labelling and packaging, organic produce certification, quality assurance and other standards and grades. Table 12 presents tariffs applied by various export markets to pears originating from South Africa.

30 Table 12: Tariffs applied by various markets to pears originating from South Africa COUNTRY PRODUCT TRADE APPLIED TOTAL AD DESCRIPTION REGIME TARIFFS VALOREM EQUIVALENT TARIFF EU Fresh pears. (Excl. perry MFN duties 8.00% 8.00% pears in bulk from 1 Aug to 31 Dec): Of the variety Nashi (Pyrus pyrifolia), Ya Pryus bretscheideri) If the declared price is higher than or equal to 51 EUR/100kg EU Fresh pears. (Excl. perry MFN duties 13.10 $/Ton 9.54% pears in bulk from 1 Aug to 31 Dec): Of the variety Nashi (Pyrus pyrifolia), Ya Pryus bretscheideri) If the declared price is higher than or equal to 50 EUR/100kg EU Fresh pears. (Excl. perry MFN duties 26.21 $/Ton 11.08% pears in bulk from 1 Aug to 31 Dec): Of the variety Nashi (Pyrus pyrifolia), Ya Pryus bretscheideri) If the declared price is higher than or equal to 49 EUR/100kg EU Fresh pears. (Excl. perry MFN duties 40.62 $/Ton 12.77% pears in bulk from 1 Aug to 31 Dec): Of the variety Nashi (Pyrus pyrifolia), Ya Pryus bretscheideri) If the declared price is higher than or equal to 47.9 EUR/100kg EU Fresh pears. (Excl. perry MFN duties 53.73 $/Ton 14.30% pears in bulk from 1 Aug to 31 Dec): Of the variety Nashi (Pyrus pyrifolia), Ya Pryus bretscheideri) If the declared price is higher than or equal to 46.9 EUR/100kg EU Fresh pears. (Excl. perry MFN duties 311.88 44.59% pears in bulk from 1 Aug $/Ton to 31 Dec): Of the variety Nashi (Pyrus pyrifolia), Ya Pryus bretscheideri) If the declared price is higher than or equal to 0 EUR/100kg

31 COUNTRY PRODUCT TRADE APPLIED TOTAL AD DESCRIPTION REGIME TARIFFS VALOREM EQUIVALENT TARIFF Russia Fresh pears and quinces Preferential 7.50% 7.50% tariff for GSP countries Norway Apples, pears and Preferential 15.62% 15.62% quinces, fresh.: Pears and tariff for GSP quinces: Pears: from 1 countries Dec to 10 Aug Switzerland Fresh pears and quinces Preferential 41.51% 41.51% tariff for GSP countries USA Pears and quinces, fresh, Preferential 0.00% 0.00% if entered during the tariff for period from 1 July AGOA through the following countries March 31, inclusive Canada Fresh pears and quinces: MFN duties 0.00% 0.00% Pears for processing Canada Fresh pears and quinces: MFN duties 0.00% 0.00% Other pears: Other Mexico Fresh pears and quinces MFN duties 20.00% 20.00% Brazil Fresh pears and quinces MFN duties 10.00% 10.00% Columbia Fresh pears and quinces MFN duties 15.00% 15.00% Saudi Apples, pears and General tariff 0.00% 0.00% Arabia quinces, fresh.: Pears and quinces: Pears UAE Apples, pears and MFN duties 0.00% 0.00% quinces, fresh.: Pears and quinces: Pears Indonesia Apples, pears and MFN duties 5.00% 5.00% quinces, fresh.: Pears and quinces Thailand Fresh pears and quinces MFN duties 30.00% or 60.95% 381.83 $/Ton whichever is the greater Singapore Pears and quinces fresh MFN duties 0.00% 0.00% Hong Kong Apples, pears and MFN duties 0.00% 0.00% quinces, fresh.: Pears and quinces Taiwan European pears (Pyrus General tariff 10.00% 10.00% communis), fresh Malaysia Fresh pears and quinces MFN duties 5.00% 5.00%

32 COUNTRY PRODUCT TRADE APPLIED TOTAL AD DESCRIPTION REGIME TARIFFS VALOREM EQUIVALENT TARIFF Viet Nam Fresh pears and quinces General tariff 40.00% 40.00% Philippines Fresh pears and quinces MFN duties 7.00% 7.00% New Zealand Fresh pears and quinces MFN duties 0.00% 0.00% Australia Fresh pears and quinces MFN duties 0.00% 0.00% Mozambique Fresh pears and quinces MFN duties 0.00% 0.00% Angola Fresh pears and quinces MFN duties 10.00% 10.00% Senegal Fresh pears and quinces MFN duties 20.00% 20.00% Cameroon Fresh pears and quinces MFN duties 30.00% 30.00% Ghana Fresh pears and quinces MFN duties 20.00% 20.00% Nigeria Fresh pears and quinces MFN duties 20.00% 20.00% Kenya Fresh pears and quinces MFN duties 25.00% 25.00% Tanzania Fresh pears and quinces Preferential 25.00% 25.00% tariff for South Africa Morocco Fresh pears and quinces MFN duties 49.00% 49.00% Algeria Fresh pears and quinces MFN duties 30.00% 30.00% Tunisia Fresh pears and quinces MFN duties 150.00% 150.00% Libya Fresh pears and quinces General tariff 0.00% 0.00% Egypt Fresh pears and quinces MFN duties 20.00% 20.00% Source: Market Access Map

South Africa has a preferential trading agreement (PTA) with Tanzania. Furthermore, South Africa can access Russia, Switzerland and Norway markets through a Generalized System of Preference (GSP). This system gives developing countries like South Africa a margin of preference in the tariff rates that their goods will face in the developed countries. South Africa can also access the USA market under the AGOA which significantly lowers the tariff barriers for South African pears.

In reality, the tariffs are likely to be far lower for South Africa when considering the preferential agreements, but at the same time, most tariff structures are particularly complex, with quotas, seasonal tariffs and specific tariffs (an amount per unit than rather than a percentage of value) all contributing to many different tariff lines and often higher duties payable than one might have anticipated initially. One must also bear in mind that most tariffs are designated to protect domestic

33 industries, and as such are likely to discriminate against those attempting to compete with the domestic producers of that country.

One can also see that certain countries wishing to protect their local industries (presumably in which they feel vulnerable or where large number of farmers are employed) will raise prohibitive levels. African countries (such as Algeria, Egypt, Tunisia, Kenya, Ghana, Nigeria, Cameroon and Senegal), North American countries (such as Mexico), South American countries (such as Columbia) and Far East countries (such as Thailand) have reasonably high tariffs for pears originating from South Africa.

4.2 European Union (EU)

The EU has a seasonal tariff structures which are highest during the European peak harvesting seasons (the price entry system), quotas and specific tariffs, and various policies that allow, amongst other things, government organizations to purchase produce should supply rise too quickly (and thereby maintain prices), and then release this excess back onto the market as and when supply drops again. The immediate implication of these policies for South Africa is that an opportunity exists to supply apples to the European market in the off season periods, as the produce will not compete directly with the European producers and thus would not be liable to a whole array of tariffs and other protective mechanisms.

There are other non-tariff barriers, including the phytosanitary and food health regulations laid down by the EU legislation, marketing standards and certificates of conformity, and the ever changing demand patterns of the EU consumers.

4.2.1 Tariff barriers.

The EU applies a system known as entry price system. With this system, the EU establishes an ‘entry price’ at which produce may enter the EU market, which is not only based on the market price for the current year (demand and supply) and for previous years, but also on the prices of the domestic producers (prices they need to maintain profitability). It is calculated by the regulatory authorities so that it can be used in combination with tariffs and quotas to aid EU’s attempts at protecting its agricultural system. The entry price is the minimum price at which produce may enter the market. If the price of the produce is lower than its calculated price, it is liable to have duties imposed upon it over and above any duties/quotas it might originally attract. Agricultural duties are applied as follows:

34 • When the value of the imported party is between 92% and 94% of the entry price, 8% of the entry price will be added to the normal customs duty. • When the value of the imported party is between 94% and 96% of the entry price, 6% of the entry price will be added to the normal customs duty. • When the value of the imported party is between 96% and 98% of the entry price, 4% of the entry price will be added to the normal customs duty. • When the value of the imported party is between 98% and 100% of the entry price, 2% of the entry price will be added to the normal customs duty.

There are tariffs applicable over and above the entry price tariffs, depending on the produce, where it originates from and whether that country has any preferential trading agreements with the EU.

4.2.2 Non tariff barriers.

Non tariff barriers can be divided into those that are mandatory and laid out in the EU Commission’s legislature and those that are a result of consumers, retailers, importers and other distributors’ preferences.

4.2.2.1 Legal requirements i) Product legislation: quality and marketing

There are number of pieces of EU legislation that govern the quality of produce that may be imported, marketed and sold within the EU. They are as follows: General Food Law which covers matters in procedures of food safety and hygiene (micro-biological and chemical), including provisions on the traceability of food (for example, Hazard Analysis and Critical Points, or HACCP), and it is laid out under regulation EC 178/2002.

EU Marketing Standards which govern the quality and labelling of fruit are laid out in the Common Agricultural Policy (CAP) framework under regulation EC 2200/96. These regulations include diameter, weight and class specifications, and any produce that does not comply with these standards will not be sold on the EU markets.

Certificate of Conformity must be obtained by anyone wishing to export and sell fruits in the EU, if that fruit falls under the jurisdiction of the EU marketing standards.

35 Certificate of Industrial Use must be obtained if the fruit is to be used in further processing.

Maximum Residue Limits (MRL) of various pesticides allowed. ii) Product legislation: phytosanitary regulations

The international standard for phytosanitary measures was set up by the International Plant Protection Committee (IPPC) to protect against spreading of diseases or insects through the importation of certain agricultural goods. The EU has its own particular rules formalized under EC 2002/89, which attempts to prevent contact of EU of crops with harmful organisms from elsewhere in the world.

The crux of the directive is that it authorizes the Plant Protection Services to inspect large number of fruit products upon arrival in the EU This inspection consist of physical examination of a consignment deemed to have a level of phytosanitary risk, identification of any harmful organisms and certification of the validity of any phytosanitary certificate covering the consignment. If the consignment does not comply with the requirements, it may not enter the EU although certain organisms can be fumigated at the expense of the exporter. iii) Product legislation: packaging

The EU Commission lays down rules for materials that come into contact with food and which may endanger people’s health or bring about an unacceptable change in the composition of the foodstuffs. The framework legislation for this is EC 1935/2004. Recycling packaging materials are also emphasized under 94/62/EC, whereby member states are required to recycle between 50% and 65% of packaging waste. If exporters do not ship produce in packaging which is reusable, they may be liable for the costs incurred by the importing companies. Wood packaging is subject to phytosanitary controls and may need to undergo heat treatment, fumigation, etc.

4.2.2.2 Non-legal requirements

To access the market, importers must not only comply with legal requirements set out above, but must also with market requirements and demands. For the most part, these revolve around quality and the perception of European consumers about environmental, social, health and safety aspects of both the products and the production techniques. Whilst supplying fruit that complies with these issues may not be mandatory in the legal sense, they are becoming increasingly important in Europe and cannot be ignored by existing or potential exporters.

36

i) Social accountability is becoming important in the industry, not only amongst consumers, but also for retail outlets and wholesalers. The Social Accountability 8000 (SA 8000) certification is a management system based on International Labour Organization (ILO) conventions, and deals with issues such as child labour, health and safety, and freedom of association, and requires an on-site audit to be performed annually. The certificate is seen as necessary tool for accessing any European market successfully.

ii) Environmental issues are becoming increasingly important with European consumers. Consumer movements are lobbying against purchasing non-environmentally friendly or non-sustainable produce. To this end, both governments and private partners have created standards (such as ISO 14001 and EUREGAP) and labels to ensure that produce adhere to particular specifications.

Although eco-labels (for example, the EU Eco-label, the Netherlands Milieukeur, the German Blue Angel and the Scandinavian White Swan) are voluntary, they can afford an exporter a marketing edge, as consumers wishing to purchase environmentally sound produce demand products that are easily recognizable.

Another important emerging label is Fairtrade, and includes those labels offered by Max Haavelaar Foundation, TransFair International and the FLO (Fairtrade Labelling Organization). Recently a ‘universal’ logo was adopted based on international fair trade standards developed by FLO, which covers amongst other things, minimum quality and price, various processing requirements, compensation of small farmers that covers sustainable production and living standards, and contracts that allow for long term planning and development.

4.2.2.3 Consumer health and safety requirements

Increasing consumer conscience about health and safety issues has prompted a number of safety initiatives in Europe, such as EUREPGAP on good agricultural practices (GAP) by the main European retailers, the international management system of HACCP, which is independently certified and required by legislation for European producers as well as food imported into Europe (EC 852/2004), and the ISO 9000 management standards system (for producers and working methods) which is certified by the International Standards Organization (ISO).

4.3 United States of America (USA)

4.3.1 Tariff barriers.

37

South African exporters have completely free access to the USA markets under the Generalized System of Preference (GSP), the GSP for LCDs (Least Developed Countries) or the African Growth and Opportunity Act (AGOA). South African exporters must always compare with what Chile (the main supplier of fruit to the USA and South Africa’s potential rival) must pay in terms of tariff duties when exporting fruit to the USA. Chile’s access to the USA fruit market is considered to be highly preferential under its own Preferential Trade Agreement (PTA). As illustrated on table 23, tariff requirements on apple between South Africa and Chile are equal.

Table 23: Most Favoured Nation (MFN) rates and preferential tariffs on pears between South Africa versus Chile into the USA market

MFN rates Preferential Agreement Preferential for South Africa and Agreement other SADC members for Chile Description Tariff Advalorem Tariff Preferential of fruit equivalent Agreement Fresh pears 0.00% 0.00% 0.00% AGOA 0.00%

Source: Market Access Map

4.3.2 Non tariff barriers.

The USA’s phytosanitary regulation is conducted by Animal and Plant Health Inspection Service (APHIS), which is divided into nine sub- sections. Plant Protection and Quarantine (PPQ) and Veterinary Services (VS) are responsible for issuing permits for commodities and determining whether a commodity can be imported. The Policy and Program Development (PPD) division works with both these divisions in determining long term plans and procedures.

Some products can get pre-clearance from international Services (IS) personnel stationed in the country of origin, either at exporting terminals of site inspections. The PPQ’s main focus is to prevent the spread of diseases and pests into the USA’s agriculture resources, and it has personnel stationed at all airports, seaports and border stations that check imported cargo and oversee the quarantine process. Exporters or importers must make a request to export/import a commodity, provide as much information as possible on the product, its region of origin and its status that is whether there are restrictions or regulations governing that particular product from that particular region before a permit is issued, along with the conditions of importation (disinfestations

38 treatment) or mitigation measures. Denials can be challenged and governments and companies can request a change in the status of a prohibited commodity (an investigation must be performed by the PPQ scientific team), as long as sufficient conditions have changed or a risk assessment has not been conducted within the last 10 years.

Most approved commodities can enter with inspection alone, but some may have to undergo mitigating measures including post-harvest treatments (hot/cold temperature treatments, irradiation or fumigation, depending on the requirements and which particular treatment is least harmful). The establishment of specifically and maintained pest-free areas in a country (which obviously requires extensive co-operation between the country’s plant health services and APHIS IS division) or systems approaches (field surveys, random inspections or various on site treatments.

In addition to phytosanitary regulations, the USDA Food Safety Inspection Services (FSIS) regulates sanitary practices in the packing of food products, while the Food and Drug Administration (FDA), which is part of the US Department of Health, regulates packaging and labelling. The HACCP protocol is used extensively. The USDA quality standards for fruits and vegetables provide basis for domestic and international trade and promote efficiency in marketing and procurement.

4.4 Japan

Japan’s agricultural sector is heavily protected, with calculations from the Organization for Economic Co-operation and Development (OECD) estimating that almost 60% of the value of Japan’s farm production comes from trade barriers or domestic subsidies. Japan uses tariff rate quotas (TRQ) to protect its most sensitive products, and reserves the right for trading many of these products (within the quota) for one or two state trading enterprises. However, these extremely protective measures apply only to some products; others are able to compete more effectively with outside competition, often on the grounds of higher quality.

Perhaps the biggest barrier to trade with Japan in fruit markets is its strict phytosanitary requirements, which have often been challenged in the WTO as having little or no scientific justification. Other measures that are being challenged include Japan’s use of fumigation on agricultural products when cosmopolitan pests (already found in Japan) are detected.

Japan is also increasing its labelling requirements. It now requires fresh food, including fruit, to be labelled with the place of origin, whilst new technological (‘smart’) labels that have embedded semi-conductors and

39 information on just about everything are being adopted in various agricultural sectors.

Food containing genetically modified organisms (GMOs) need to be assessed for environmental food safety by the MAFF or the Ministry of Health, Labour and Welfare (MHLW). At the same time, the MHLW tests food imports for maximum residue levels from pesticides and as of May 2006, any food with pesticides not on approved list, regardless of the residue levels, are not allowed entry.

Japanese organic definitions changed in 2001 (they roughly corresponded to world standard definitions), and any foreign producers wishing to enter the Japanese market must be certified under the Japanese standards (not general world standards).

4.5 China

China has a massive system of government support for farmers and generally rural dwellers (who are lagging behind urban dwellers). To this end, most of the agricultural sectors are protected and promoted through a series of subsidies, tax cuts and infrastructure spending policies (as well as low cost loans, research, land use protection, market stabilization measures, etc). Part of the protection of its massive farming population, which for most part consists of small farmers not benefiting from economies of scale, necessarily occurs in the form of high tariffs and other restrictions. However China is obliged to reduce tariff levels as a condition of being a member of WTO. It therefore remains to be seen just what policies will be adopted going forward, but the general consensus is that it is a vitally important market to watch, and endeavour to enter.

40 5. DISTRIBUTION CHANNELS

There are roughly three distinct sales channels for exporting fruits. One can sell directly to an importer with or without the assistance of an agent (usually larger, well established commercial operations). One can supply fruits combined, which will then contract out importers/marketers and try to take advantage of economies of scale and increased bargaining power. At the same time combined fruits might also supply large retail chains. One can also be a member of a private or cooperative export organization which will find agents or importers and market the produce collectively. Similar to combined fruits, an export organization can either supply wholesale market or retail chains, depending on particular circumstances. Export organizations will wash, sort and package the produce.

They will also market the goods under their own name or on behalf of the member, which includes taking care of labelling, bar-coding, etc. Most of the time, export organizations will enter into collective agreements with freight forwarders, negotiating better prices and services (more regular transport, lower peak season prices, etc). Some countries have institutions that handle all the produce (membership compulsory) and sell only to a restricted number of selected importers.

Agents will establish contacts between producers/export organizations and buyers in the importing country, and will usually take between 2% and 3% commission. In contrast, an importer will buy and sell his/her own capacity, assuming the full risk (unless on consignment). They will also be responsible for clearing the produce through customs, packaging and assuring label/quality compliance and distribution of the produce. Their margins lie between 5% and 10%. The contract importers of fruit combines market and distribute the produce of the combines, clear it through customs and in some cases treat and package it.

Only few exporters have long term contracts with wholesale grocers who deliver directly to retail shops, but with the increasing importance of standards (EurepGap, etc) and the year round availability of fruit, the planning of long term contractual relationship is expected to increase.

41 6. LOGISTICS

6.1 Mode of transport

The transport of fruits falls into two categories namely ocean cargo and air cargo. Ocean cargo takes much longer to reach the desired location but costing considerably less. The choice of transportation method depends, for most parts on the fragility of the produce and how long it can remain relatively fresh. With the advent of technology and container improvements, the feasibility, cost and attractiveness of sea transport have improved considerably. With the increased exports by South Africa, the number and the regularity of maritime routes have increased. These economies of scale could benefit South Africa if more producers were to become exporters and take advantage of the various ports which have special capabilities in handling fruit produce (for example Durban’s new fruit terminal).

6.2 Cold chain management

Cold chain management is crucial when handling perishable products, from the initial packing houses to the refrigerated container trucks that transport the produce to the shipping terminals, through to the storage facilities at these terminals, onto actual shipping vessels and containers, and finally on to the importers and distributors that must clear the produce and transport it to the markets/retail outlets. For every 10 Degree Celsius increase above the recommended temperature, the rate of respiration and ripening of produce can increase twice or even thrice. Related to this are increasing important traceability standards which require an efficient controlled supply chain and internationally accepted business standards.

6.3 Packaging

Packaging can also play an important role in ensuring safe and efficient transport of a product and conforming to handling requirements, uniformity recyclable material specifications, phytosanitary requirements, proper storage needs and even attractiveness for marketing purposes.

42 7. ORGANIZATIONAL ANALYSIS

7.1 Producer and associated organizations

Grower participation and control of their interests in the industry are structured by means of fruit type producer associations (Section 21 companies), as illustrated on Figure 24.

Figure 24: Structure of the producer interest in the deciduous fruit industry

Canned PRODUCERS Fruit Producers Association

SAAPPA SAT (Section SASPA DTD (Section 21 21 (Section 21 (Section 21 Company) Company) Company) Company)

DFPT Joint Management Marketing Service (Pty) Forum Ltd Deciduous Fruit Fresh Research Producers Produce Management Trust (DFPT) Exporters (Section 21 Forum Company) (FPEF)

Deciduous Statutory DFPT FIN Fruit funding (Section 21 Industry Company) Dev Trust

South African Plant Improvement Organization Trust

43 The main association responsible for the pear industry is the South African Apple and Pear Producers Association (SAAPPA). It is a Section 21 company and its objectives are as follows:

• To rationalize and promote the production and marketing of apples and pears, apple and pear products.

• To support and assist the development of the Association’s decision-making systems and structures.

• To encourage and pursue constructive dialogue and mutual cooperation with government and other role players in order to promote the interest of the Association and its members.

• To foster mutual trust and long term relationships among role players and stakeholders.

• To establish and promote a reciprocal information system and promote the maintenance of responsible and sustainable production and marketing practices.

7.2 Strengths, Weaknesses Opportunities and Threat analysis

Some of the strengths, weaknesses, threats and opportunities of the pear production sector in South Africa are the following:

Strengths Weaknesses

• The industry’s export operations • Production is largely dependent and leading players who on climatic conditions which account for approximately 80% can only be partially of the overall exports are well manipulated by man through established. irrigation. • An efficient export • Deteriorating research infrastructure exists and infrastructure and capacity may market access has been limit new technology improved. development in the future. • The South African pear industry • Saturation of traditional export is known for excellent overall markets. quality for fruit (strong • Reliance on the UK and EU as reputation in major main export market. international markets).

44 • Sound communication • Relatively high input and mechanisms to majority of capital costs. industrial participants. • An element of fragmentation in • High level of investment in the industry. current technology within pack • Lengthy supply chain beyond houses and cold chain facilities. the pack house. • Industry has all traceability • Lack of industry control on systems in place, as required by efficiency and productivity in accreditation protocols. supply chain beyond farm gate and pack house door. • Poor skills and knowledge of the new entrants. • Delays due to degradation of the supporting infrastructure within the supply chain (handling facilities at ports, roads and energy supply).

Threats Opportunities

• Increased competition from the • Market access initiatives to the Southern Hemisphere Middle East, Asia (India, counterparts like Chile, Brazil, Indonesia) and China. Argentina and Australia. • Increasing demand for fresh • Oversupply of fruit into apples in Africa. established export markets. • Potential for increased local • Availability and cost of market consumption. irrigation water. • Impact of climate change especially in the Western Cape. • Inflation rate with regard to cost of labour and farming and also packing prerequisites. • Currency variability.

45 7.3 Strategic challenges

7.3.1 Labour markets

The critical need for labour at harvest time offers seasonal work to unemployed persons in the immediate vicinity of plantations. In most countries, workers migrate from one region to another as the harvest season progresses from early to late. However, in the local scenario, labourers lack mobility as well as skills to find work outside crop harvesting.

A major challenge in terms of labour is the lack of skilled labour. At the same time, farm wage levels do not attract skilled or qualified people to undertake menial and hard work. Smaller producers, who pay comparatively lower wages, are more exposed than the larger producers to the threat of labour shortages.

7.3.2 Infrastructure

Some of the infrastructural challenges are as follows:

• Lack of storage capacity at certain times of the year, when apples and other fruits are being harvested (mid January until end of February). • Hygiene and micro-bacterial quality of water available for use in pack houses and domestic purposes on farms. • Poor or no communication between the agricultural sector and service providers in terms of planning and future expansion on issues such as energy and transport. • Transport from the pack house to the market – road, ship or rail. • Logistical systems which are not applied at full efficiency. • Inefficient handling operations at South African ports, giving rise to costly delays and breaks in the cold chain.

7.3.3 Other challenges

Producers are being confronted with more regulations to control the production from farm to fork. These include regulating soil, air, water, chemical, labelling and safety. On the retailing side pressure mounts to introduce measures for increased traceability of products. The consumer wants a safe product produced with socially acceptable and environmentally friendly production methods. Combined with this many consumers are up in arms about GMO’s and the USA government is introducing a bio terrorism act that will put even more pressure on exporters to the USA.

46

Competition for scarce natural resources (land and water) is putting continued pressure on good farmland that can otherwise be used for agricultural purposes.

There is a threat of climate change particularly in the Western Cape Province. Production of apples and other fruits could be adversely affected by the warming of the winter season due to rising average temperatures and subsequent loss in chilling hours. Lack of winter chilling gives rise to delayed foliation and the problem of small fruit of poor quality. Increased average maximum temperatures in January and February may result in poor colour development. The risk of sunburn is also increased.

7.4 Empowerment issues and transformation in the sector

According to Fruit South Africa, progress in this area has been slower than expected mainly because of lack of understanding on how the Black Economic Empowerment (BEE) strategy should be applied. Attempts to establish BEE owned companies have failed and that has impacted negatively on the perceptions of the future participants in the industry.

8. PEAR SUPPLY VALUE CHAIN

The supply value chain is a complex linkage of various production and operational role-players (see Figure 25). Other key stakeholders are the producer organizations, organized labour, NGOs, financial institutions and government.

47 Figure 24: Pear supply value chain

Research Breeding Plant Nursery developme t

Productio Orchard

Packing Cold storage

Export Fresh local kt Pi Sea freight Air freight

Cold stores, Wine/ Canning Juice Dry Siit Containerized, Fresh Retailer/ Conventional Shipping produce Informal Process Cold stores, terminals & Local Export Consumer kt kt Importer, Receiver

Distribution, Pre-packing

Distribution

Consumer Shelf

48 9. ACKNOWLEDGEMENTS

The following industries/organizations are acknowledged.

9.1 South African Apple and Pear Producers Association P. O. Box 163 Paarl 7622 Tel: (021) 870 2900 Fax: (021)870 2915 www.dfpt.co.za

9.2 Department of Agriculture, Forestry and Fisheries Directorate: Agricultural Statistics Private X 246 Pretoria 0001 Tel (012) 319 84 54 Fax (012) 319 8031 www.daff.gov.za

9.3 Optimal Agricultural Business Systems (OABS) P. O. Box 163 Paarl 7622 Tel: (021) 890 2953 Fax: (021) 890 2915 www.oabs.co.za

9.4 Trade and Industrial Policy Strategies (TIPS) P. O. Box 11214 Hatfield 0028 Tel (012) 431 7900 Fax (012) 431 7910 www.tips.org.za

9.5 National Agricultural Marketing Council (NAMC) Private Bag X 935 Pretoria 0001 Tel (012) 341 1115 Fax: (086) 626 4769 www.namc.co.za

49 Disclaimer: Disclaimer: This document and its contents have been compiled by the Directorate Marketing Department of Agriculture, Forestry and Fisheries for the purpose of detailing pear industry. Anyone who uses this information does so at his/her own risk. The views expressed in this document are those of the Department of Agriculture, Forestry and Fisheries with regard to agricultural industry, unless otherwise stated. The Department of Agriculture, Forestry and Fisheries therefore, accepts no liability that can be incurred resulting from the use of this information.

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