An inquiry into the competitiveness of the South African stone fruit industry

Boonzaaier, Johann Du Toit Loubser (2015-12)

Thesis (MAgricAdmin)—Stellenbosch University, 2015.

Thesis

ENGLISH ABSTRACT: The purpose of this study was to undertake an inquiry on the competitive performance of the South African stone fruit industry since the early 1960s, with an emphasis on the more recent years since the mid-1990s, when the industry was deregulated. A comprehensive approach was applied in reaching conclusion in this study by employing a five-step analytical framework, built on well-established approaches by Balassa (revealed comparative advantage, RCA), Vollrath (relative trade advantage, RTA) and the Porter Diamond Model, adapted to accommodate innovative statistical methods to reflect differences in opinions and views more accurately. Competitiveness in this study is defined to give effect to the global trade orientation of the industry as the sustained ability of the South African stone fruit industry to attract investment by trading its produce competitively within the global marketplace, whilst continuously striving to earn returns greater that the opportunity cost of scarce resources engaged. Five phases were identified in the competitive performance of the South African stone fruit industry since 1961, showing the fluctuating nature of the performance of this industry: - Phase I (1961-1982): Increasingly regulated competitiveness - Phase II (1983-1990): Politically constrained competitiveness - Phase III (1991-1999): Economic deregulation and internal rivalry - Phase IV (1999-2007): Towards international competitiveness - Phase V (2007 – present): Increasingly sustained competitiveness The RTA calculations, including both exports and imports, showed that the industry is highly competitive, both internationally – in the Southern Hemisphere where this industry is only out-performed by Chile and locally – compared to other South African (SA) horticultural crops, with plums consistently claiming the top position when individual stone fruit types in the SA deciduous fruit category are analysed. Through the Stone Fruit Executive Survey (SFES), views and opinions of prominent industry role-players were critically employed to interrogate the topic under discussion. A total of 84 factors affecting the competitiveness of the industry were identified, and these were rated on a five-point Likert scale (where 5 were most enhancing and 1 was most constraining). This study expanded the analytical framework used in recent agri-competitiveness studies to verify and cross-check the results and findings through statistical procedures, such as cluster analyses, principle component analyses and Cronbach’s alpha. This broadened the scope of analysis by accommodating the variance in opinion statements from the respondents. As different cluster groupings based on functional value chain positions were analysed, it became clear that there were significant differences between the respondents involved in the primary production and packing/processing of stone fruit and the respondents involved in activities lower down the value chain, such as in pack houses/processors and exporters/marketers. Further down the value chain the respondents expressed more optimistic views and positive statements on competitiveness than those exposed to primary production risks and uncertainties. This confirms the importance to expand competitive analysis to different points in the value chain The rated factors were grouped into Porter’s six determinants and the general scored ratings yielded the two most enhancing determinants, being business strategy, structure and rivalry (3.55 out of 5) and related and supporting industries (3.14 out of 5). Production factor conditions (2.81 out of 5) and demand/market factors (2.76 out of 5) were identified as being less enhancing determinants. Chance factors (2.66 out of 5) and government support and policy (2.35 out of 5) were identified as the two most constraining determinants. The current approach is that the framework of Esterhuizen (2006) is applied to agriculture-related competitiveness studies. This study, however, investigated the extension of the conventional model by adapting the Porter diamond model within the frameworks of the Institute for Management Development’s World Competitiveness Yearbook (WCY) and the World Economic Forum’s Global Competitiveness Report (GCR), which generally focus on the macro-economic situation. It was confirmed that the stone fruit industry is integrated into and forms part of the ‘broader economic picture’. The results and findings of this study were discussed in a number of focus sessions with industry role players. A strategic planning framework was drafted, which consisted out of eleven industry level strategic proposals. Some of the most important strategic improvements to enhance competitive performance argued for in this study are improved industry-based lobby discussions, i.e. to build and strengthen the necessary communication between industry role players and government agencies through an improved strategic intelligence database, by focusing on aspects such as trade agreements, international market development and policy development.

AFRIKAANSE OPSOMMING: Die doelwit van hierdie studie was om ’n ondersoek van die mededingende prestasie van die Suid-Afrikaanse steenvrugbedryf sedert die vroeë 1960’s te onderneem, met die klem op die meer onlangse tydperk sedert die middel-1990’s, toe die bedryf gedereguleer is. ’n Omvattende benadering is ingespan deur gebruik te maak van ’n vyfstap- analitiese raamwerk wat geskoei is op die goed gevestigde benaderings van Balassa (onthulde vergelykende voordeel – revealed comparative advantage - RCA), Vollrath (relatiewe handelsvoordeel – relative trade advantage - RTA) en die Porter-diamantmodel, wat aangepas is om innoverende statistiese metodes te akkommodeer om verskille in gesigspunte beter te weergee. Mededingendheid in hierdie studie word gedefinieer om effek te gee aan die globale handelsoriëntasie van die bedryf as die volhoubare vermoë van die Suid-Afrikaanse steenvrugbedryf om belegging te lok deur sy produkte mededingend in die globale mark te verhandel, terwyl daar voortdurend gestreef word om opbrengste te verdien wat groter is as die geleentheidskoste van die skaars hulpbronne gebruik. Vyf fases in die mededingendheid van die Suid-Afrikaanse steenvrugbedryf is sedert 1961 geïdentifiseer en toon die wisselende aard van die prestasie in hierdie bedryf: - Fase I (1961-1982): Toenemend gereguleerde mededingendheid - Fase II (1983-1990): Polities beperkte mededingendheid - Fase III (1991-1999): Ekonomiese deregulering en interne mededinging - Fase IV (1999-2007): Op weg na internasionale mededingendheid - Fase V (2007 – vandag): Toenemend volhoubare mededingendheid Die RTA-berekenings, wat uitvoere en invoere insluit, het aangetoon dat die bedryf hoogs mededingend is, beide internasionaal – waar die industrie slegs die Chili oortref word en plaaslik – in vergelyking met ander Suid-Afrikaanse (SA) hortologiese gewasse, met pruime wat voorop staan wanneer individuele steenvrugsoorte in die SA sagtevrugtebedryf geanaliseer is. Deur die Steenvrug Uitvoerende Opname (Stone Fruit Executive Survey (SFES)) is die sienings en opinies van vooraanstaande rolspelers krities gebruik om die onderwerp te ondervra. ’n Totaal van 84 faktore wat die mededingendheid van die bedryf beïnvloed, is geïdentifiseer, en hierdie is op ’n vyfpunt-Likertskaal geëvalueer (met 5 as die mees versterkend en 1 as die mees stremmend). Hierdie studie het die analitiese raamwerk wat in onlangse agri-mededingendheidstudies gebruik is, uitgebrei om die resultate deur middel van statistiese prosedures te verifieer en te kruiskontroleer, naamlik deur bondelanalises, hoofkomponent-ontledings (principle component analyses) en Cronbach se alfa. Dít het die strekking van die analise verbreed deur die verskillende opinies van die respondente te akkommodeer. Soos verskillende bondels op grond van funksionele posisies in die waardeketting geanaliseer is, het dit duidelik geword dat daar noemenswaardige verskille was tussen die respondente in die primêre produksie en verpakking/verwerking van steenvrugte en die respondente betrokke in aktiwiteite laer af in die waardeketting, soos in pakhuise/verwerkers en uitvoerders/bemarkers. Verder af in die waardeketting het die respondente meer optimistiese opinies en positiewe stellings oor mededingendheid uitgespreek as dié wat aan primêre produksierisiko’s en onsekerhede blootgestel was. Dit bevestig die belangrikheid daarvan om mededingende analise na verskillende punte in die waardeketting uit te brei. Die gemete faktore is in Porter se ses determinante verdeel en die algemeen aangetekende skattings het die twee mees versterkende determinante opgelewer, naamlik sakestrategie, struktuur en mededinging (3.55 uit 5) en verwante en ondersteunende bedrywe (3.14 uit 5). Produksiefaktortoestande (2.81 uit 5) en vraag/markfaktore (2.76 uit 5) is geïdentifiseer as minder versterkende determinante. Toevallige faktore (2.66 uit 5) en regeringsondersteuning en -beleid (2.35 uit 5) is geïdentifiseer as die twee mees stremmende determinante. Die huidige benadering is dat Esterhuizen (2006) se raamwerk op landbou-verwante mededingendheidstudies toegepas word. Hierdie studie het egter die uitbreiding van die konvensionele model ondersoek deur die Porter-diamantmodel binne die raamwerke van die Institute for Management Development se World Competitiveness Yearbook (WCY) en die World Economic Forum se Global Competitiveness Report (GCR) aan te pas. Hierdie dokumente fokus oor die algemeen op die makro-ekonomiese situasie. Daar is bevestig dat die steenvrugbedryf in die ‘breër ekonomiese situasie’ geïntegreer is en daarvan deel is. Die resultate en bevindings van hierdie studie is in ’n aantal fokussessies met bedryfsrolspelers bespreek. ʼn Strategiese beplanningsraamwerk was opgestel wat bestaan uit elf industrie-vlak strategiese voorstelle. Van die belangrikste strategiese verbeterings om mededingende prestasie te verhoog, waarvoor daar in hierdie studie geargumenteer is, is verbeterde “drukgroepgesprekke”, m.a.w. om die nodige kommunikasie tussen bedryfsrolspelers en die regering te bou en te verstrek deur ’n verbeterde strategiese intelligensie- databasis wat o.a. fokus op aspekte soos handelsooreenkomste, internasionale markontwikkeling en beleidsontwikkeling.

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