Competitiveness analysis of the South African avocado value chain.
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Date
2022
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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
Description
Masters Degree. University of KwaZulu-Natal, Pietermaritzburg.