Competitiveness of the South African citrus fruit industry relative to its southern hemisphere competitors

Abstract

The South African citrus fruit industry faces enormous challenges in the global markets, such as an increasing demand for higher quality citrus fruits, as well as increasing fierce competition from the southern hemisphere citrus producing countries. Its long history of global integration makes it highly sensitive to international developments, as well as domestic ones. The purpose of the study is to investigate the competitiveness of the South African citrus fruit industry relative to its southern hemisphere competitors – namely, Argentina, Australia, Uruguay, Chile and Peru. Both local and international literature on the citrus fruit industries was used as part of the analysis. In addition to this, a variety of methods and techniques were applied. These included the three well-recognised indices which were used to calculate the competitive indices of various citrus fruit product categories – namely, the Balassa Revealed Comparative Advantage (RCA#) index, the Net Export index (NXi) and the Relative Revealed Comparative Trade Advantage (RTA) index. Time series data on South African and southern hemisphere major producing countries’ citrus fruit imports and exports were used to calculate the competitiveness indices using Excel spreadsheets. A structured questionnaire was also used to collect both qualitative and quantitative data of expert views from key industry stakeholders. Data collected were analysed using Excel spreadsheets and the Porter methodology. The competitiveness analysis of this study clearly pointed out that the South African citrus fruit industry reveals more competitive advantage in some citrus fruit products than its southern hemisphere counterparts. The results of the RCA#, NXi and RTA indices analyses clearly showed that the domestic industry has a stronger and relatively higher revealed competitive advantage in three citrus fruit product categories – namely, oranges, grapefruit and grapefruit juice than its southern hemisphere competitors. However, its orange competitiveness decreases when moving from primary orange to orange juice. This means that the value-adding opportunities are still lacking in the orange sub-sector. One possible reason for this could be the high rates of return recorded for farm-level applications of technology for most primary orange commodities. This study identified the availability of skilled employees, quality of unskilled labour, cost of doing business in the industry, services from financial institution, electricity supply, land reform and some other government policies, such as trade policy, labour policy, BEE policy iv and tax system as the major factors impeding the competitiveness of the industry. The list also included the current climatic conditions, high incidences of HIV/AIDS and crime, economic instability and the cost of technology and infrastructure in the industry. Despite the challenges mentioned above, quality of skilled labour; general level of development and quality of infrastructure and technology in the industry; quality of soils; the availability of scientific research institutions and the collaboration of the industry with these institutions; availability and quality of local suppliers of primary inputs; and market information flow were found to have a positive influence on the competitiveness of the industry. In order for the industry to enhance its competitiveness, a number of recommendations and strategies are suggested at the end of this study.