Analysing the competitiveness performance of the South African apple industry

Jafta, Asanda (2014-12)

Thesis (MScAgric)--Stellenbosch University, 2014.

Thesis

ENGLISH ABSTRACT: The South African apple industry is influenced by a number of factors, including increased globalisation of markets, trade liberalisation, advances in information technology and consumer preferences. These factors have a continuous effect on the competitiveness of the industry and force producers and processors to position themselves as capable competitors in the global free-market environment. This study measures and analyse the competitiveness of the South African apple industry, including some aspects in the value chain, in an attempt to address the following research question: What is the global competitive advantage of the South African apple industry relative to its competitors. To adequately address this research question, a five-step methodology was used to direct the study: The first step was to define competitiveness in the apple industry. Due to the diversity of definitions of competitiveness as a concept, this study adopted the following working definition based on how Esterhuizen, 2006; Freebairn, 1986 define competitiveness. In their view competitiveness is defined as the ability of an industry (apple industry) to trade its products successfully in order to achieve sustainable business growth within the global environment, while earning at least the opportunity cost of returns on resources employed” This definition is accepted in this study because it is noted that competitiveness is most often associated with trade performance. With the above in mind, and in view of the importance of open global apple trade, competitive performance in the South African apple industry is strongly linked to trade performance. The second step was to measure competitive performance based on the accepted definition. Data from the Food and Agricultural Organisation of the United Nations and Trade Map was used to examine the competitiveness of the industry. Three internationally recognised indexes were used to calculate the comparative and competitive advantages of the apple industry in South Africa, namely the Revealed Comparative Advantage (RCA#) index, the Net Export index (NXi), and the Relative Revealed Comparative Trade Advantage (RTA) index. The results show that South Africa’s apple industry has sustained a competitive advantage, with most of the recent RCA# and RTA index values moving towards 10. When compared with its competitors, Chile and New Zealand show a strong competitive performance, with RTA index values above 10. However, South Africa has a relatively better global competitive advantage over Italy, Argentina, France, Poland, China and the United States of America and are sustaining a third position on the “international apple podium”. Netherlands and Brazil are internationally uncompetitive in the production of apples In step 3 the Apple Executive Survey (AES) was used to identify the factors that constrain and enhance the competitiveness of the South Africa apple industry so that the industry can improve on those factors that constrain competitiveness in order to improve its competitive performance status. The most important factors that were found to have a negative impact on the competitiveness of the South African apple industry were quality of low-skilled labour, cost of crime, availability of skilled labour, SA labour policy, the cost of infrastructure, trust in the political system, administrative regulations, health-related issues (HIV/Aids), the cost of capital and land reform policy. The findings indicate that much needs to be done in these focus areas to boost the competitiveness of the industry in the international market. Factors that enhance the competitiveness of the industry were growth in the international market, the availability of unskilled labour, the availability of transport, competition in the domestic market, industry expenditure on research and development (R&D), the quality of infrastructure, the availability of storage facilities and South African (SA) competition policy. The industry needs to capitalise on these factors in order to improve its competitiveness. In step 4 the Porter Model was then used to group these factors in to the main determinants for competitiveness to prepare the date for an strategic analyses in step 5 where recommendation were made on actions to enhance and rectify or mitigate some of the challenges that are faced by the apple industry in South Africa – these includes: skills training, development of alternative markets, improved cooperation between the apple industry and the government is necessary in supporting the apple industry through infrastructure development, R&D, globally aligned regulations and support to trade promotion.

AFRIKAANSE OPSOMMING: Die Suid-Afrikaanse appelbedryf word deur ’n verskeidenheid van faktore beïnvloed, waaronder verhoogde globalisering van markte, liberalisering van handel, vooruitgang in inligtingstegnologie en verbruikersvoorkeure. Hierdie faktore het ’n deurlopende effek op die mededingendheid van die bedryf en dwing produsente en prosesseerders om hulleself as bekwame mededingers in die globale vryemarkomgewing te posisioneer. Hierdie studie meet en analiseer die mededingendheid van die Suid-Afrikaanse appelbedryf, insluitende aspekte van die waardeketting, in ’n poging om die volgende navorsingsvraag aan te spreek: Wat is die globale mededingende voordeel van die Suid-Afrikaanse appelbedryf teenoor dié van sy mededingers? Om hierdie navorsingsvraag behoorlik aan te spreek, is ’n vyfstap-metodologie gebruik om hierdie studie te rig: Die eerste stap was om mededingendheid van die appelbedryf te definieer. As gevolg van die verskeidenheid van definisies van mededingendheid as ’n konsep, het hierdie studie die volgende bruikbare definisie aangeneem, wat gebaseer is op hoe Esterhuizen (2006) en Freebairn (1986) mededingendheid definieer. Hulle siening is dat mededingendheid die vermoë van ’n bedryf (die appelbedryf) is om suksesvol met sy produkte handel te dryf om sodoende onderhoubare besigheidsgroei binne die globale omgewing te behaal, terwyl dit ook ten minste die geleentheidskoste verdien van die opbrengs op hulpbronne gebruik. Hierdie definisie word in die studie aanvaar om beslag te gee aan die uitvoergeneigdheid van die appelbedryf en dat dit opgelet is dat mededingendheid in die bedryf sterk verband hou met handelsprestasie. Die tweede stap was om die mededingende prestasie op grond van die aanvaarde definisie te meet. Data vanaf die Verenigde Nasies se Food and Agricultural Organization( vanaf 1961) en Trade Map ( vanaf 2001) is gebruik om die mededingendheid van die bedryf te ondersoek. Drie internasionaal erkende indekse is gebruik om die vergelykende en mededingende voordele van die appelbedryf in Suid-Afrika te meet, naamlik die Revealed Comparative Advantage (RCA#) indeks, die Netto Uitvoer-indeks (Net Export index (NXi)), en die Relative Revealed Comparative Trade Advantage (RTA) indeks. Die resultate toon dat Suid-Afrika se appelbedryf deurlopend ’n posetiewe mededingende voordeel het, met die meeste van die RCA#- en RTA-indekswaardes oor die afgelope dekade stygend na net onder die waarde van 10. In vergelyking met die land se mededingers toon Chili en Nieu-Seeland sterker mededingende prestasie, met RTA-indekswaardes bokant 10. Suid-Afrika het egter ’n relatief beter globale mededingende voordeel oor sy belangrikste mededingers, naamlik Italië, Argentinië, Frankryk, Pole, China en die Verenigde State van Amerika en beklee n konstante derde plek op die “internasionale appel poduim”. Nederland en Brasilië is internasionaal onmededingend in appelproduksie. In stap drie is die Apple Executive Survey (AES) gebruik om die faktore te identifiseer wat die mededingendheid van die Suid-Afrikaanse appelbedryf strem of verhoog. Die belangrikste faktore wat gevind is om ’n negatiewe impak op die mededingendheid van die Suid-Afrikaanse appelbedryf te hê, was die kwaliteit van laag geskoolde arbeid, die koste van misdaad, die beskikbaarheid van geskoolde arbeid, SA arbeidswetgewing, infrastruktuurkoste, lae vertroue in die politieke stelsel, komplekse en tydrowende administratiewe regulasies, gesondheidsverwante kwessies (MIV/Vigs), die koste van kapitaal en sake wat verband hou met die grondhervormingsbeleid. Die bevindinge toon dat veel nog in hierdie fokusgebiede gedoen moet word om die mededingendheid van die bedryf in die internasionale mark te verhoog. Faktore wat die mededingendheid van die bedryf verhoog, was groei in die internasionale mark, die beskikbaarheid van ongeskoolde arbeid, die beskikbaarheid van vervoer, mededingendheid in die binnelandse mark, besteding op navorsing en ontwikkeling, die kwaliteit van infrastruktuur, die beskikbaarheid van opbergfasiliteite en Suid-Afrikaanse (SA) mededingingsbeleid. Die bedryf moet op hierdie faktore kapitaliseer om sy mededingendheid te verbeter. In stap vier is die Porter-model gebruik om hierdie faktore in die vernaamste determinante vir mededingendheid te groepeer om die raamwerk te stel vir ’n strategiese analise in stap 5, waar aanbevelings gemaak is oor optredes om sommige van die uitdagings wat die appelbedryf in Suid-Afrika in die gesig staar aan te pas, te verbeter en reg te stel. Hierdie sluit in verbeterde vaardigheidsopleiding veral in die laag geskoolde groepe, ontwikkeling van alternatiewe markte, en verbeterde samewerking tussen die appelbedryf en die regering, wat nodig is om vertroue te skep en die appelbedryf d.m.v. infrastruktuurontwikkeling, navorsing en ontwikkeling, globaal belynde regulasies en handelsbevording te ondersteun.

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