Browsing by Author "Sibulali, Ayabonga"

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    Analysing the competitive performance of the South African subtropical fruit industry
    (Stellenbosch : Stellenbosch University, 2018-12) Sibulali, Ayabonga; Van Rooyen, Johan; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Agricultural Economics.
    ENGLISH SUMMARY : The main purpose of this study was to investigate the competitive performance of the South African subtropical fruit industry in the global markets in view of recent general findings that the industry showed a declining trend of competitiveness (refer to the Agric-Competitiveness Matrix by Van Rooyen; Boonzaaier, 2017; BFAP, 2018). To determine the competitive performance of the industry and to arrive at the conclusions of the study, a five-step analytical and a systematic framework , applied in agri-business competitiveness studies by Esterhuizen (2006), Van Rooyen, Esterhuizen and Stroebel (2011), Jafta (2014), Boonzaaier (2015), Angala (2015), Boonzaaier and Van Rooyen (2017), Abei (2017) and Dlikilili (2018) was used. This framework was adapted and extended to accommodate the nature of the industry and to introduce Delphi-based consultative processes and statistical methods, such as principal component analysis (PCA) and Cronbach’s alpha analysis. In this study, competitiveness is defined as the: “ability of the South African subtropical fruit industry to trade products in both domestic and international markets on a sustainable basis; and to attract resource investment such as land, labour, technology, management skills and talent, and capital from other competing economic activities while earning at least the opportunity cost of returns on such resources employed” (adapted from Freebairn,1987). This definition, together with the Porter Competitive Diamond of enquiry, shifts the analysis away from a comparative advantage to a competitive advantage focus. Competitive performance of the South African subtropical industry was measured over time, based on its global trade orientation, and compared to the performance of the industry relative to that of its direct major international rivals. To achieve this, the Relative Trade Advantage (RTA) formula, developed by Vollrath (1991), was considered as appropriate to quantitatively measure competitive performance. Trade data from the Food and Agriculture Organization (FAO), available for the period 1961 to 2013, and from the International Trade Centre (ITC) for the period 2001 to 2016, was used. The results of the FAO RTA analysis show that the industry consistently recorded RTA values below one throughout the studied years (1961 to 2013), i.e. only marginally competitive performance. However, when using the ITC datasets, it showed a stronger marginally competitive trend, with RTA values around 1 in most of the years, and with that in 2010 (RTA of 1.55) being comparatively greater than in the other periods, followed by a decreasing trend over recent years to a RTA of -0.08 in 2016. The reason for differences in FAO and ITC RTA trends is found in the details of the respective databases used– with the FAO excluding mangos and macadamias. These are two of the most important competitive subtropical product groups for South Africa. The ITC based results, which included these products (i.e. mangos and macadamias), were thus used in the analysis, as confirming a generalised declining trend in competitive performance by the industry since 2011. As to individual products, great variation was however registered. The macadamia nut industry, with its high competitive performance – RTA >120 in 2014/15, proves to be the top-performing South African subtropical fruit industry, followed by avocado industry and mangos, all consistently recording RTA values above one. Banana, papayas and kiwi fruit were trading uncompetitive in the global markets. In relation to the value-adding activities of this industry, only pineapple juice was considered (due to no data being available for other processed subtropical fruit products), and while juice is rated competitively, there is an observable decline for fresh pineapples. The South African avocado industry, when compared to the other major Southern Hemisphere production regions to which it enjoys similar production seasons, had a relatively low rate of performance and was outperformed by all the competing countries. Chile had the highest RTA value for avocados, of 93.98, in 2003. In comparison to the Northern Hemisphere production regions – where the industry enjoys counter-seasonal production – the South African avocado industry, with RTAs of 3.13, outperformed Spain, with RTAs of 1.32 in 2016. The macadamia nut industry, which leads the competitive performance stakes in the South African subtropical fruit industry when compared to the other major Southern Hemisphere production regions to which it enjoys similar production seasons. It outperformed Australia and Zimbabwe, with an RTA value of 124.1 in 2014. When South African macadamia nuts are compared to the other major Northern Hemisphere production regions – in relation to which it enjoys counter-seasonal production. The local macadamia nut industry, with a RTA value of 128.3 in 2015, outperformed Hong Kong, China (with a RTA of -3.30 in 2015) and Guatemala (with a RTA of 52.1 in 2015). The next step in the analysis, involved a survey that was conducted among expert industry-level role players to determine the factors that influence (positively or negatively) the competitive performance of the SA subtropical fruit industry. A two-round Delphi method was introduced, using respondents to the first survey as the focus group. In the first round of the Delphi process, such participants were requested to rate the impact of identified factors on a Likert scale. A total of 101 factors were found to be positively or negatively affecting the competitive success of the industry. The enhancing factors included the use of advanced technologies, the use of labour-saving machines, economies of scale, and the availability of competitive local input suppliers, while constraining factors included the cost of skilled labour, the quality of unskilled labour and the cost of the new, specialised technologies. The role of the political process was viewed as highly constraining, together with administrative “red tape” and administrative/compliance factors impacting on the industry. The Porter Competitive Diamond model was next applied and fitted the 101 factors into the six Porter Competitive Diamond determinants, again illustrating constraining and enhancing determinants. Principal component analysis (PCA) was performed, showing interesting pointers to differences and consensus in the views of industry participants with regard to the impact of factors identified for each determinant. The results reveal that there was strong consensus (similarity) in opinions regarding 30 factors influencing the industry’s competitive performance. These correlated factors (consensus factors) were subjected to Cronbach’s alpha analysis to assess their levels of internal reliability. From the results, only three of the 30 factors showed no internal consistency reliability and they were removed, leaving 27 final factors. These 27 final factors were subjected to the round two Delphi analysis. In this round, the same participants were then again asked to rate and discuss the long run relevance of these factors as determinants of competitiveness. The final step in the analysis involved proposing industry-wide strategies to enhance the industry’s declining global competitive performance. Based on the X-Y scatterplot of impact rating (from Delphi round 1) and the long run relevance rating (from Delphi round 2), critical factors to be improved and maintained were identified that aided the formulation of strategies. A strategic agenda of 19 actions were proposed. These included, amongst others: innovation through value chain collaboration; the establishment of a Subtropical Fruit Industry Strategy Plan (SFISP), as a basis of collaboration between industry role players; and government; industry-specific human resource development; effective domestic marketing; the further development of foreign markets; improved logistics and efficient distribution infrastructure; and continued engagement with government through strategic planning regarding key industry issues such as labour policy, trade policy, development of new markets, and technological innovation support.