Competitiveness analysis of the South African avocado value chain.

Abstract

The economic sustainability of the South African avocado industry is highly dependent on its trading performance, with approximately 50-55% of its total production consistently being exported since the 1990s. About 95% of the avocados in South Africa are exported to the EU, the UK, and Russia markets. The South African avocado industry faces potential intense competition from Peru, Mexico Spain, Israel, and Kenya, in these markets. Due to the significant contributions in terms of economic returns the supplying of avocados to the export markets has on this industry and the GDP of the country, and also considering the higher levels of competition this industry has been experiencing from its global rivals, there is a greater need to transport this commodity with fewer rejections, and less inefficiencies and damages to the fruit quality. In 2018, the South African avocado export industry was ranked number nine worldwide, contributing to 1,7% of the total avocado exports in the global markets. By 2020, the industry experienced a major decline which resulted in it falling to number 12. It has been noted that South African exports are increasing, but its share of the world market is decreasing. This is because exports from other countries, primarily South and Central America, including Peru, Colombia, and Mexico, have grown at a greater rate. For example, between 2012 and 2017, South African avocado export volumes grew only by 3% per annum while major competitors such as Mexico and Peru grew by 8% and 15%, respectively. Many factors could be contributing to this phenomenon, and one of the most significant factors could be the competitiveness of the South African avocado value chain. A review of the literature identified a significant gap in the local research when it comes to the understanding of the structure, actors, processes and the flow of avocados in the South African avocado value chain, the competitiveness of the South African avocado value chain, and the factors which are influencing the competitiveness of the South African avocado value chain. Moreover, it also identified that competitive analyses of value chains can provide information and strategies for agribusiness managers to improve value chain competitiveness. This study will try to close this gap by providing a detailed competitiveness analysis of the South African avocado value chain in order to have a better understanding of the state of competitiveness of this value chain.

The general objective of this study was to conduct a detailed competitiveness analysis of the South African avocado value chain in order to recommend strategic actions that the value chain participants could use to improve the competitiveness of this value chain, especially in relation to export markets. More specifically, the objectives are to identify the key players involved in the value chain, identify factors which are negatively affecting the competitiveness of this chain, and analyse this information to provide an improved understanding of the business trends, challenges, and transport and logistic processes of this industry. To achieve the main objective of this study, a 7-steps-6-analyses analytical framework was designed and used to provide a much-detailed competitiveness analysis of the South African avocado value chain. Analyses one and two served as an inquiry part of this study were knowledge regarding the structure of the South African avocado value chain, the number and the type of actors in this value chain, flow of avocados, processes within this value chain, relationships between actors in this value chain and how these relationships are developed and maintained, and the factors which are responsible for the inefficiencies within this value chain were identified by these analyses. Analysis two also had a quantitative part, were some of the relationships that actors have within and outside this value chain were quantified using the concept of Social Network Analysis in order to determine how these relationships influence the functioning as well as the competitiveness of some of the actors in the South African avocado value chain. Analyses three, four, five and six were analyses that analysed different components/parts of the South African avocado value chain in order to understand the competitiveness state of the overall value chain and recommend strategies to improve it. The final step (seventh step) involved a critical analysis of all the findings from the six analyses in order to provide the state of competitiveness for the South African avocado value chain. Moreover, during this step that is where the strategic actions to alleviate the constraints/factors negatively affecting the competitiveness of this value chain were developed. The overall findings of this study suggested that the South African avocado value chain is struggling to keep up with competition from its global competitors, mainly Peru, Mexico and Kenya. Moreover, this study was able to conclude that the cause of this was the overall continuous decline in the competitive advantage which is being experienced by this value chain. The overall finding also suggested that this decline in competitiveness is as a result of a number of factors. These factors include supply of nursery trees, relatively lower yields than other competing origins around the world, higher transportation costs, port inefficiencies, low

supply of skilled labour, one major export destination, lack of value chain collaborations, higher input costs, increased plantation of avocados by global rivals, and government policies. This study gave rise to 13 strategic actions that could be used by the most important players in the South African avocado value chain, such as agribusiness managers, producers, exporters, seaports and SAAGA in order to improve the competitiveness of this value chain. Some of those strategies include collaborations between different types of value chain actors, understanding of the value chain relationships and systems, attracting and training of new skilled workforce, development of late varieties, economic research, and access to new markets. Keywords: Avocado, Competitiveness, Export markets, Global rivals, Strategic action, Value chain