The Dried Grape Industry in Northern Cape, South Africa Are there Opportunities for Market Growth Internationally?
Cabanga Moyo Northern Cape Department of Economic Development and Tourism
TIPS Forum on Regional Industrial Development 29 July 2020 Presentation Outline
• Introduction • Research Methods and Data • International Market Trends • SA Dried Grape Industry, Production Exports and Exports Markets • Global Competition • Traditional Markets • Small Growing Markets (Non-Traditional Markets) • The African Market • Proposals for Market Growth • Conclusion
2020/08/07 2 Introduction and Background
2020/08/07 3 Why Dried Grapes in the NC?
• One of the key export commodities within the national agro-processing sector: • >90% exports & SA is a net exporter • >USD 100M annual export revenue in 2016 (DTI, 2018), >USD 26M in the Q1 2018 alone (Raisins SA) • SA is ranked in the top 5 globally in terms of production and export volumes. • SA is the only global producer in the Continent and the 2nd largest in the S/Hemisphere (out of 4)
• Identified in the NDP (2011, p.223) as one of the agricultural commodities with high employment potential and greater opportunities for market growth
• Prioritised for Policy support by National Treasury: • MTBPS speech (2018) • Economic Policy Paper (2019)
• The Northern Cape (OR region) is the National capital of the dried grape industry in South Africa: • > 90% of national output and exports (Natural endowment + irrigation infrastructure)
• 2020/08/07Efforts are underway in NC to develop new vineyards (Raisins SA, 2019)-hence need for new markets4 Research Methods and Data
2020/08/07 5 • Secondary data analysis: • Analysis of relevant statistical data on production, consumption and international trade (ITC Trade Maps-internet based, easy to access and use, free for developing countries) over 15 year period, 2000-2019
• Document review: • Assessment of strategic and periodic publications by the relevant role players, local, regional and global (International Trade Centre, Food and Agricultural Organisation, International Organisation of Vine and Wine, Global Agricultural Information Network, Raisins SA, DAFF, NAMC, corporate reports, news articles from the internet, etc., routine Municipal reports-ZF Mgcawu DM & Dawid Kruiper LM)
• Key Informants Interviews: • Processors (factory owners and managers) • Industry Association (Raisin SA, located in Upington)
• Can the NC dried grape industry expand its global market? Which countries constitute the target market?
2020/08/07 6 International Market Trends for Dried Grape
2020/08/07 7 World Production in Tonnes and Cumulative Annual Growth Rates for the Major Producing Countries
2020/08/07 8 World Exports in Tonnes and Cumulative Annual Growth Rates for the Major Exporting Countries
2020/08/07 9 The Top Ten Importing Countries account for >60% of the global imports annually, aggregate EU imports are >50% annually
2020/08/07 10 SA (Northern Cape) Production, Exports and Markets
2020/08/07 11 Industry Association 7 Processors (Manufacturing) • Raisin SA Pioneer Foods: Est. in 1924 as SAD Co-op, became a PTY in 1997, taken over by pioneer Foods in 2003. • Formerly DFTS, located in Paarl >300 employees, 40 000 tonnage capacity. (Marketing Act 59 of 1969 & Marketing of Agri. Products Act 47 of 1996) since est. but moved to Upington in 2016 • Interests of farmers & processors: The Raising Co: Est. in 1998, 100% owned by Klinkenberg Holdings, a Dutch fruit and nuts company. • Agric. Research 50 employees, 6 000 tonnage capacity. • International market & industry intelligence Farmers Pride: Est. 2002 as Kalahari raisins, taken over 1st by a Canadian equity investor, 2nd by Carpe • Export markets & requirements Diem Estate. Became Farmers Pride in 2015 with new ownership. Wholly acquired by OR Cellars in (sanitary and phytosanitary measures) 2017. 60 employees, 6 500 tonnage capacity. +/- 1000 Farmers Fruit Du Sud: Est. in 2002. 25% owned by an individual investor and 75 % by BKB. • >90 % produced in the NC along the Orange R >140 employees, 20 000 tonnage capacity. • 8.5tt in the WC along the Oliphant R Carpe Diem: Est. in 2006, 50-50% owned by KLK and Carpe Diem Estate. • 3tt in Namibia >250 employees, 11 000 tonnage capacity. • >16 000 hectares under cultivation The Lower OR Dried Fruit Initiative Northern Cape Raisins: Est. in 2005, smallest factory. • Boost production, 11 new vineyards in the around 1500 tonnage capacity and >10 employees. pipeline (Blocuso, Silver Moon, Lemoendraai, Eksteenskuil, Coboob, Riemvasmark, Styerkraal, Onseepkans, Richtersveld) Red Sun Raisins & nuts: Est. in 2009, 90% owned by US private equity firm since 2015. • New processing plant >140 employees, 13 000 tonnage capacity. 2020/08/07 12 Production in SA is expected to increase to around 95 thousand tons in 2025 and 125 000 in 2030 (higher yielding cultivars, investment in new vineyards, shift from wine grapes to dried grapes)
2020/08/07 13 Market Composition for SA Dried Grape Exports 40 350 % Share of Total Exports: 2017 % G in Exports:2012-17 35 300
250 30
200 25 150 20 100 15 50
10 0
5 -50
0 -100
UK
USA
UAE
Italy
Auss
Israel
Spain
Brazil
Egypt
Nway
Japan
Dnmk
Namb
Belgm
Russia
Ethpia
France
Swden
Fnland
Algeria
Gmany
Slvenia
Portgal
Canada
NZLand
Malysia
S/Arabia
Nthlands
Swtzland CzechRp. 2020/08/07 14 Geographic Distribution for Tariffs Applied by all Countries Importing Dried Grapes from South Africa for the 2018 Trade Year (ITC Trade Maps)
2020/08/07 15 The Traditional Market
2020/08/07 16 • There are 10 major countries competing with South Africa in the traditional market for dried grapes: Turkey, United States, Iran, Chile, Afghanistan, China, Uzbekistan, Greece, Argentina, and Australia. • The top twenty (20) importing countries, mostly in the EU, account for >75 percent of global imports annually • USA, China, India are major producer nations with big national markets
Share in SA share in Share in SA share in Country global national Country global national imports (%) imports imports (%) imports 1 UK 12.4 3.9 11 Italy 2.5 1.1 2 Germany 10.2 19.5 12 Spain 2.4 1.5 3 Netherlands 6.1 7.6 13 Brazil 2.4 3.5 4 Japan 5.8 0.6 14 Kazakhstan 2.2 0.0 5 Canada 3.8 13.5 15 USA 2.1 18.8 6 France 3.7 12.5 16 Australia 2.1 7.1 7 China 3.5 0.3 17 Poland 1.9 1.6 8 India 3.3 0.0 18 UAE 1.7 1.8 9 Russia 2.9 1.1 19 Sweden 1.4 10.7 10 Belgium 2.5 4.7 20 Algeria 1.2 40.4 2020/08/07 17 70 UK: 12.4% Share in Global imports, 0% Tariff for SA, R=4 German: 10.2% Global Import Share, 0% Tariff for SA, R=1 60 35 30 50 25 40 20 30 15 20 10 10 5
0 0 Turkey USA Greece Chile China SA Turkey SA USA Belgium NthLands Uzbstn
Netherlands: 6.1% Share Global Imports, 0% Tariff for SA Japan: 5.8% Share Global Imports, 0% Tariff for SA, R=19 R=3 60 90 80 50 70 40 60 50 30 40 20 30 20 10 10 0 0 Turkey Chile Greece SA USA China USA China Turkey Australia Chile SA
2020/08/07 18 Canada: 3.8% Share Global Imports, 0% Tariff for SA, R=2 France: 3.7% Share Global Imports, 0% Tariff for SA, R=6 60 60
50 50
40 40
30 30
20 20
10 10
0 0 USA Turkey SA Iran China Chile Turkey SA Belgium NthLands Chile Gemny
Russia: 2.9% Share Global Imports, 0% Tariff for SA, Belgium: 2.5% Share Global Imports, 0% Tariff for SA, 40 R=18 40 R=11 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 Iran Chile India Afghan. Turkey SA 0 Turkey NthLands Spain China Iran SA 2020/08/07 19 Italy: 2.5% Share Global Imports, 0% Tariff for SA, R=21 Spain: 2.4% Share Global Imports, 0% Tariff for SA, R=16 40 80 35 70 30 60 50 25 40 20 30 15 20 10 10 5 0 0 Turkey Australia Chile Germany Iran SA Iran Turkey Chile USA Agentna SA
USA: 2.1% Share Global Imports, 0% Tariff for SA Brazil: 2.1% Share Global Imports, 10% Tariff Disc. for SA R=7 R=10 50 100 40 80 30 60 20 40 10 20 0 0 Chile Agentna SA Mexico Australia Canada Agentna Turkey SA Iran USA Chile 2020/08/07 20 Australia: 2.1% Share Global Imports, 5% Tariff for SA, UAE: 1.7% Share Global Imports, ?% Tariff for SA, R=29 60 R=8 70
50 60 50 40 40 30 30 20 20 10 10 0 0 Turkey China SA Iran Greece USA Iran India China Chile Afghan. SA
Sweden: 1.4% Share Global Imports, 0% Tariff for SA, Algeria: 1.2% Share Global Imports, 30% Tariff for SA, 60 R=9 60,0 R=5
50 50,0
40 40,0
30 30,0
20 20,0
10 10,0
0 0,0 USA Turkey SA NthLands Germany Denmark Iran SA Turkey Chile India
2020/08/07 21 The Small Growing Market (Non-Traditional Market)
2020/08/07 22 • Realized individual growth in imports ranging between 10% and >1000% over 5 years (2012 -2017) • Tend to be very tiny importers individually (min.=5 hundred tons, max.=5.6 thousand tons->1% of global imports)-so growth is off a very low base • About 35 countries out of the 208 countries importing dried grapes annually • BUT quite big in aggregate, > 270 thousand tonnes imports annually worth > US$100 000 000 • Mostly located in South-Eastern Europe, South-East Asia, and South America – growing middle class and health awareness is driving demand • Imports expected to continue growing: growing middle class and household incomes; increasing awareness of the health benefits of dried fruits • The participation of SA as a source of imports is limited despite a zero tariff regime for SA dried grapes in some of the countries • It is costly to supply small geographically scattered -regional distribution centers could be a solution • Cultural barriers e.g. language of business-use of export agencies
2020/08/07 23 Pakistan: 0.5% Share Global Import, 1283% G: 2012-17 Iran: 0.08% Share Global Imports, 351% G:2012-17 100 50 90 80 40 70 60 30 50 40 20 30 20 10 10 0 0 Afghanistan Iran UAE USA UAE India Afghan. Austria
Azerbajain: 0.25% Share Global Imports, 332% G:2012-17 Bangladesh: 0.2% Share Global Imports, 153% G: 2012-17 60 120
50 100
40 80
30 60
20 40
10 20
0 0 Iran Uzbek. Turkey SA UAE India Singapore Malaysia
2020/08/07 24 Jordan: 0.24% Share Global Imports, 71% G:2012-17 India: 3.3% Share Global Imports, 68% G:2012-17 40 100 35 80 30 25 60 20 15 40 10 20 5 0 0 Iran USA UAE Turkey Afghan. China Greece USA
Romania: 0.38% Share Global Imports, 64% G:2012-17 Thailand: 0.8% Share Global Imports, 58 % G: 2012-17 35 70 30 60 25 50 20 40 15 30 10 20 5 10 0 0 Iran Turkey India Hungary USA China Iran Hong Kong
2020/08/07 25 The African Market
2020/08/07 26 • About 49 Countries importing 18.9 thousand tons (>25% of SA exports) valued at USD36.4m annually-but markets are individually tiny & scattered • Around 2% of global imports in terms of both value and quantity • Quick calculation indicated that exports to Africa are mostly industrial grade mainly used as input in the food industry • Dominated by two countries-Algeria and Egypt (account for >75% of the imports into the Continent) but still very small in Global standards (1.2 & 0.3 % respectively) • The top ten importing countries account for >90% of the imports (SA, Ethiopia, Sudan, Morocco, Tunisia, Mauritius, Kenya and Libya-range between3.3 & 1.1% individually) • African markets expanded over the recent past albeit from very low bases (mostly the smaller ones) • SA has a limited foot print in Africa (only in SACU and some SADC and E. African countries) as a source of imports-Re-exporters (EU and UAE) dominate in West and North Africa • Multilateral & bilateral trade agreement could be exploited to expand markets in the Continent (AfCFTA, SADC- EAC-COMESA Tripartite Free Trade Area, African Union on Trade and Industry) • The African market is expanding (growing middle class and house hold incomes and a low hanging fruit for SA relative to competition (geo-political ties, regionalism and trade agreements)
2020/08/07 27 Africa Market (1) 70 3000 % Share in Aggregate Africa Imports: 2017 % Growth in Imports: 2012-17 60 2500
50 2000
40 1500
30 1000
20 500
10 0
0 -500
SA
CAR
Mali
Togo
Chad
Libya
Niger
DRCo
Egypt
Benin
Kenya
Sudan
Congo
Ghana
Gabon
Liberia
Angola
Algeria
Tunisia Guinea
Nigeria
Zambia
Malawi
Uganda
Gambia
Senegal
Lesotho
Somalia
Burundi
Djibouti
Rwanda
Ethiopia
Namibia
Morocco
Tanzania
Mauritius
Botswana
Swaziland
Seychelles
Cameroon
Zimbabwe
Mauritania
Ivory Coast Ivory
Cape Verde Cape
Madagascar
Sierra Leone Sierra Burkina Faso Burkina
2020/08/07 Mozambique 28 Equat. l l Guinea Equat. African Market (2 ) 120 70 % Share of SA in Partner Country Imports % Share in Aggregate Africa Imports 60 100
50 80
40 60 30
40 20
20 10
0 0
CAR
DRC
Mali
Togo
Chad
Niger
Benin
Libyia
Kenya
Sudan
Congo
Gabon
Egypty
Liberia
nigeria
Algeria
Tunisia
Guinea
Zambia
Malawi
GHANA
Ethopia
Uganda
Gambia
Senegal
Nambia
Lesotho
Somalia
Burundi
Djibouti
Rwanda
Morroco
Tanzania
Mauritius
Botswana
Swaziland
Seychelles
Cameroon
Zimbabwe Mauritania
2020/08/07 Ivory Coast 29
Madagascar
South Africa South
Carpe Carpe Verde
Sierra Sierra Leone
Burkina Faso Burkina
Mozambique Equat. Guniea Equat. Proposals for Global Market Growth
2020/08/07 30 Areas Interventions Activities Market retention & growth in existing markets National Pavilions Programme of the DTI & Product promotion alongside the Target markets: EU (largest importer globally >50% of world imports) , Pavilions-focus on the superior quality & competitive price of SA raisins USA and Canada, Japan. On going promotion in foreign country markets. Case study: The success of The shift in the USA from vineyards to almonds & the continued decline of California Raisin Marketing Board in promoting US globally through publicly Greece as major producer will create a supply gap in the US, Canada, initiatives (marketing offices in the major importing countries): in-store Sweden, China, Thailand and Japan and Europe. promotions, food festivals, baking promotion highlighting U.S. raisins & New Product Development Contest promoting US raisins. Development of new markets Trade outbound missions and leveraging on existing trade & economic Target markets: China, India, Kazakhstan, Brazil, Other markets in Europe cooperation agreements, regional integration and geographic proximity & Asia (e.g. Pakistan, Thailand, Romania, Azerbaijan, Poland, Latvia, and particularly for the African Continent Jordan) and Africa Increase awareness of South African export products abroad e.g. Incentives such The Chinese & Indian market have both been historically closed to trade as the Export Marketing Schemes for South African dried grapes but imports have seen exponential growth in the past decade. Growing incomes in Africa, the growing Ramadan market in N. Africa and Closer collaboration between the Government and Raisins South Africa the middle east, Increasing health awareness globally
Expansion of production & processing (exporter base) The ZF Mgcawu Agri- Park & the Lower Orange River Dried Fruit Initiative Proposed processing facilities: (1) Raisin processing facility at Eksteenskuil & Lemoendraai under the ZF Mgcawu Agri-park initiative (2) Raisin Closer collaboration between the Government and Raisins South Africa processing plant under the Lowe Orange River Dried Fruit Initiative.
FDI opportunity Some of the large dried fruit processing firms in Europe are investing in developing countries by building processing facilities. E.g. The Raisin Co. and Red Sun Raisins 2020/08/07 31 Conclusion
2020/08/07 32 • There is scope for market growth for the Northern Cape dried grape processing industry
• BUT: Growth opportunities are to be found not only in the big traditional markets in the EU, N. America AND East Asia (Japan) but also in the smaller growing markets in SE Europe, SE Asia and Africa.
• Trade agreements (e.g. EU-SADC Group EPA, SACU-MERCUSOR, AfCFTA), duty free-treatment in advanced country markets (e.g. AGOA of the USA Government, GSP of the WTO) and aggressive international marketing are some of the instrument that could be used to gain global market share
• However need to be cognisant of some factors that could limit market access internationally: • Regionalism & Regional trade Agreement in key regional markets that also host major producer nation(s), e.g. Turkey in the European market (EU-Turkey Customs Union, EFTA-Turkey FTA), USA in the North American America (NAFTA), Chile and Argentina in the South American market (MERCUSOR) • Geographic proximity of some major producers to the big markets • Big country markets (including some traditional markets) with huge dried grape industries e.g. USA, China, India, Australia, Turkey)
2020/08/07 33