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Crunch Time for China Boosts South African Fruit Industry

Crunch Time for China Boosts South African Fruit Industry

Charles Hughes, Managing Director of Fruit Marketing, Tru-Cape

After 23 years in South Africa’s R6bn fruit industry—many of them as Managing Director of Fruit Marketing for Tru-Cape, South Africa’s biggest producer of apples and pears—Charles Hughes, 60, is retiring without having fulfilled his ambition of gaining access to China’s vast market. He blames it on the South African government.

Over the past 17 years, Hughes has made 54 trips to China. Along the way, he devised three cardinal rules for doing business there: eat the food, drink the "dreadful" wine and never complain.

"Being a South African, the drinking wasn’t a problem," jokes Hughes, who could be mistaken for a farmer in his casual outdoor gear, even though he is being interviewed in the Tru-Cape boardroom in Somerset West.

A robust character, Hughes developed lifelong friendships in China and such high-level contacts that, at one stage, he was hosting up to three senior Chinese government delegations to South Africa per year.

However, the Chinese were not that interested in investing in South Africa’s commercial agriculture, he discovered; their interest lay mostly further north in developing the African continent as a bread basket and source of raw materials to fuel China’s rapid growth.

Still, this has brought huge spin-offs for the South African fruit industry and the country’s economy in general.

China’s willingness to improve African road and port infrastructure to aid its investments on the continent have made it easier for other firms, including South African supermarket chains, to follow. By reinforcing the rise of the African middle class, this has helped raise employment and boost disposable income and consumption.

Over the past five years, Africans have been able to afford to buy food they didn’t consume before, and imported apples are near the top of the list.

Six years ago, Tru-Cape was exporting fewer than 250,000 cartons of apples to Africa. This year, it should be 10 times that—around 2.4 million cartons. Hughes expects demand from Africa to grow by 15–20 percent per year for the next three to five years, driven by China’s activity on the continent. But this doesn’t mean that South Africa can ignore other markets…especially China, as one of the world’s biggest importers of fruit.

"South Africa needs to be in as many markets as possible to diversify risk and to raise foreign exchange and protect the balance of payments," Hughes explains.

South Africa’s apple producers are also geared more toward the Asian market, having heavily planted new varieties like Fuji and Royal Gala over the past decade, while African palates are still focused on older varieties.

South Africa’s apple industry fell far behind the rest of the world during the sanctions era. Once the markets opened up, the industry found itself burdened with unpopular, older varieties.

However, over the past 10 years, the industry has replanted with newer strains that are more resistant to disease, achieve better color and produce a far higher ratio of export-quality fruit (what farmers call higher pack-outs). This makes farming that much more profitable, which is just as well since farmers are facing rapidly rising input costs, including higher labor, electricity and shipping charges.

Most farmers also import their fertilizer, chemicals and farm implements, so the weak rand makes these more expensive. In addition, the industry fears that Sappi plans to cease producing paper for fruit packaging, so that may have to be imported as well.

Over the past year, the industry has managed to pass on an additional $3.50 per carton (U.S.) on the export price of apples and R8,60 per carton in the South African market (about R1 per bag). These increases were absorbed without any dent in demand, even in soft economic conditions.

Despite rising input costs, Hughes is bullish about the future of the industry because he says, “You can fix the higher input costs by achieving higher pack-outs.” He feels that about 70 percent of the industry is in a good position and that South Africa has massive growth potential in some of the new apple varieties.

The industry is even experimenting with the bright yellow Opal apple from the Balkans. A cross between a Golden Delicious and a Topaz, it is naturally pest-resistant and doesn’t turn brown once cut.

“The industry has done well, but it could have done even better with a bit more government help,” Hughes says.

For instance, New Zealand, Chile, France, Belgium and North America have all managed to obtain access to the Chinese market for apples. South Africa, despite being part of the Brics grouping with China and having long provided its authorities with all the phyto-sanitary risk assessment information they require, has achieved nothing since obtaining access for citrus in 2005 and grapes in 2007.

Hopes were high that the final paperwork would be signed at the Brics summit in Durban earlier this year, but once again, “bureaucratic inertia” on the side of South Africa’s Department of Agriculture, Forestry & Fisheries (DAFF) caused the matter to be stalled indefinitely.

In addition, South Africa’s apple and grape exports have been shut out of Thailand for the past five years thanks to bungling by the South African government, which failed to update phyto-sanitary information on the sector in 2008.

Last year, South Africa obtained access for its citrus fruit to be exported to the Thai market for the first time. It was a golden opportunity to resolve the issues around apples and grapes, but nothing was done at the time. A year later, the paperwork involving apples finally seems close to being finalized.

According to Hughes, things have finally started to turn around. The industry credits this to its appointment earlier this year of South Africa’s former agricultural attaché to Beijing, Mono Mashaba, as a private consultant to act as its liaison with DAFF and to assist the industry in gaining better access to Asian markets.

Hughes is optimistic that with Mashaba’s involvement, China will open its doors in due course. Mashaba recently returned to South Africa from a trip to Thailand, Indonesia, China and Vietnam, where he went with an industry delegation to seek solutions to South Africa’s access problems.

“Because of Mashaba, South African embassies in all these countries are now much more aware of the issues we’re facing as fruit exporters,” Hughes says. “So well see, but at least now somebody’s pushing our interests.”

 

About Crunch Time for China Boosts South African Fruit Industry

Charles Hughes, the Managing Director of Tru-Cape Fruit Marketing, was born in Zambia, Africa. Hughes worked as a sales representative for various companies between 1972 and 1981, before taking up a series of marketing positions between 1982 and 1989. The following year Charles became the Group Marketing Manager of the Two-a-Day Group and was eventually promoted to Managing Director in 1995. He moved to Tru-Cape Fruit Marketing in 2001 where he still currently serves.

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