An analysis of the competitive performance of the South African citrus industry

Dlikilili, Xolela (2018-03)

Thesis (MCom)--Stellenbosch University, 2018.

Thesis

ENGLISH SUMMARY : The main objective of this research was to measure and analyse the competitive performance of the South African citrus industry. With this purpose in mind, a five-step analytical framework used in competitiveness studies by Ismea (1999),Esterhuizen (2006), Van Rooyen, Esterhuizen and Stroebel (2011), Jafta (2014), Boonzaaier (2015), Angala (2015), and Boonzaaier and Van Rooyen (2017) was adapted and modified to meet the requirements of this study and to accommodate the available database. The first step in the applied analytical framework deals with defining the term “competitiveness” in the context of the South African citrus industry. Consequently, having reviewed the relevant literature and situating the South African citrus industry, in particularly as it is as highly integrated into global trade, competitiveness in this study is defined as: ‘the ability of the local citrus industry to produce and trade citrus fruit on a maintainable basis, in the global markets given the current economic structures and trade regimes, whilst earning returns that are equal or greater than the opportunity cost of scarce resources engaged’. The second step deals with measuring the competitive performance of this industry over time and based on trade performance as per the definition; and comparing such performance with that of its major direct competitors. In order to do this, internationally recognised technique was considered reflecting comparative and competitive advantages, giving preference to measuring competitive advantage through Relative Trade Advantage (RTA) (Vollrath, 1991). Secondary trade data obtained from two data sources, namely the Food and Agriculture Organization (FAO) for the period 1961 to 2013 and the International Trade Centre (ITC) for the period of 2001 to 2016, was used for these measurements. Results from the analysis of both datasets (i.e. FAO and ITC) showed that SA had positive figures throughout the period and has maintained such positive figures since the early 1960s (RTA of 4.6 in 1961(FAO); increasing to a RTA of 15.2 in 2005(ITC); and showing a gradually increasing trend over recent years (with a RTA of 18.6 in 2016, ITC data). From a global comparison perspective (using ITC data), SA - with RTA of 18.6 - is the most globally competitive when compared to Southern Hemisphere-producing regions, which enjoy similar production seasons. When compared to the Northern Hemisphere producing regions – which enjoy counter-seasonal production – SA is outperformed by Egypt (RTA of 30.2) and Morocco (RTA of 18.8). In the analysis of individual citrus fruits, they all showed positive figures throughout the studied years, with oranges (RTA 27.6) being the most competitive citrus fruit type, followed by grapefruits (RTA 26.8), lemon & limes (RTA 16.3) and soft citrus (RTA 9.6) in 2016. In value-adding activities there was an observable decline in the competitive performance as one moves down the value chain for citrus juice (RTA 2.38) and orange juice (RTA 3.9), whereas the grapefruit chain showed increased competitive performance, with grapefruit juice recording maximum RTA values of 30.34 in 2016. Step three involved determining the factors that influence (positively or negatively) the competitiveness status of the local citrus industry. With the view of accommodating a smaller database, the conventional framework was adapted with a two-round Delphi technique. In the first round, experts were served with a questionnaire (the citrus industry survey), developed and tested through interaction with the Citrus Growers Association and designed in the form of the Porter Competitive Diamond model, to rate the impact of factors using a Likert scale (with 1 – constraining; 3 – neutral; and 5 – enhancing). A total of 101 factors were identified, listed and rated in the citrus industry survey, of which 94 were found to be affecting the competitive success of the industry. The enhancing factors included factors such as economies of scale and availability of competitive local input suppliers, whilst constraining factors included opportunism in trade and quality of unskilled labour. The fourth step grouped these factors into the six Porter competitive diamond determinants. Principal component analysis (PCA) was undertaken to pinpoint differences and consensus in the views of experts with regard to the current impact of factors identified for each determinant. The results reveal that there was consensus (similarity) in opinions with regard to 29 factors influencing the industry’s competitive performance. These correlated factors (consensus factors) were further subjected to Cronbach’s alpha analysis to assess their levels of internal reliability. The results show that there was no internal reliability in five of the factors and they were consequently removed, leaving 24 final factors. These 24 final factors were then subjected to the round two Delphi analysis. In this round, experts were asked to rate and discuss the relevance of these factors as determinants of competitiveness. The results reveal that most of these final factors, such as market development, infrastructure improvements, trade policy, labour policy and administrative regulations (red tape), are relevant to the future competitive success of this industry. The final step (Step 5), derived from the findings and analysis in step 4, involved proposing industry-wide strategies to enhance the industry’s global competitive performance. Based on the X-Y scatterplot of impact rating (Round 1) and relevance rating (Round 2), critical factors were identified that aided the formulation of strategies. The most important proposed strategies include effective marketing of citrus fruits domestically; development of foreign markets, improved logistics and distribution infrastructure; continued engagement with government regarding key industry issues (e.g. labour policy, trade policy, development of new markets, etc.).

AFRIKAANSE OPSOMMING : Die vernaamste doelwit van hierdie navorsing was om die mededingendheid van die Suid-Afrikaanse sitrusbedryf te meet en te ontleed. Met hierdie doel is ’n vyf-stap analitiese raamwerk, gebruik in studies soos die van ISMEA (1999), Esterhuizen (2006), Van Rooyen, Esterhuizen en Stroebel (2011), Jafta (2014), Boonzaaier (2015), Angala (2015) en Boonzaaier en Van Rooyen (2017), aangepas om aan die vereistes van hierdie studie te voldoen en die beskikbare databasis te akkommodeer. Die eerste stap in die konvensionele raamwerk het te doen met die definiëring van die term “mededingendheid” in die konteks van die spesifieke bedryf. Ná ’n hersiening van die relevante literatuur en met inagneming dat die Suid Afrikaanse sitrus bedryf besonder suksesvol is in die internasionale handelsomgewing, is mededingendheid gevolglik vir hierdie studie gedefinieer as: “die vermoë van die plaaslike sitrusbedryf om sitrusvrugte op ’n volhoubare basis, in globale markte te produseer en mee handel te dryf, gegewe die huidige ekonomiese strukture en handelstelsel, en om terselfdertyd opbrengste te verdien wat groter is as of gelyk is aan die geleentheidskoste van die skaars hulpbronne wat gebruik word”. Die tweede stap in die studie het te doen met die meting van die mededingende prestasie van hierdie bedryf oor tyd en die vergelyking van hierdie prestasie met dié van sy vernaamste mededingers. Om dit te kan doen, is die internasionaal erkende tegniek wat vergelykende en mededingende voordele weerspieël, oorweeg naamlik die Relatiewe Handelsvoordeel (RTA) (Vollrath, 1991). In hierdie meting is sekondêre handelsdata vanaf twee bronne verkry en gebruik, naamlik die Food and Agriculture Organization (FAO) vir die tydperk vanaf 1961 tot 2013 en die International Trade Centre (ITC) vir die tydperk vanaf 2001 tot 2016. Die resultate van die analise van beide datastelle (m.a.w. FAO en ITC) toon dat die bedryf deur al die studiejare positiewe syfers getoon het en dat hierdie positiewe syfers sedert die vroeë 1960’s volhou is (RTA van 4.6 in 1961-FAO, wat toegeneem het tot ’n RTA of 15.2 in 2005-ITC data) en in onlangse jare ’n geleidelik toenemende tendens getoon het (met ’n RTA van 18.6 in 2016). Vanuit ’n globaal vergelykende perspektief is die bedryf (gebruik van ITC data), met ’n RTA van 18.6 in 2016, die globaal mees kompeterend wanneer dit vergelyk word met produksiegebiede in die Suidelike Halfrond, wat eenderse produksieseisoene het. Wanneer dit met produksiegebiede in die Noordelike Halfrond vergelyk word – wat teen-seisoenale produksieseisoene het – lê dit slegs agter Egipte (RTA van 30.2) en Marokko (RTA van 18.8). Analise van individuele sitrusvrugte het almal positiewe waardes oor die bestudeerde jare getoon, met lemoene (RTA 27.6) wat die mees mededingende sitrusvrug is, gevolg deur pomelo (RTA 26.8), suurlemoen en lemmetjies (RTA 16.3) en sagte sitrus (RTA 9.6) in 2016. M.b.t. waarde-toevoegende aktiwiteite was daar ’n waarneembare afname in mededingende prestasie laer af in die waardeketting vir sitrussap (RTA 2.38) en lemoensap (RTA 3.9), terwyl die pomelo-ketting toenemende mededingende prestasie getoon het, met pomelosap wat ’n RTA-waarde van 30.34 in 2016 gelewer het. Stap drie het die bepaling van die faktore wat die mededingendheidstatus van die plaaslike sitrusbedryf beïnvloed (hetsy positief of negatief). In ’n poging om ’n kleiner databasis te akkommodeer, is die konvensionele raamwerk aangepas met ’n Delphi-tegniek van twee rondtes. In die eerste rondte is kundiges ’n vraelys gegee (die sitrusbedryfsoponame) wat ontwikkel en getoets is deur interaksie met die Sitruskwekersvereniging en ontwerp is in die vorm van ’n Porter mededingende diamantmodel om die impak van die faktore te skat m.b.v. ’n Likert-skaal (met 1 – beperkend; 3 – neutraal; en 5 – verbeterend). ’n Totaal van 101 faktore is geïdentifiseer, gelys en in die sitrusbedryfsopname gegradeer, waarvan 94 gevind is om die mededingendheidsukses van die bedryf te beïnvloed. Die verbeterende faktore het faktore ingesluit soos ekonomieë van skaal en beskikbaarheid van plaaslike insetverskaffers, terwyl beperkende faktore handelsopportunisme en gehalte van ongeskoolde arbeid ingesluit het. Die vierde stap het die Porter diamantmodel gebruik om hierdie faktore in ses Porter mededingendheidsdiamant-determinante te groepeer. Hoofkomponent-analise (PCA) is onderneem om die verskille en konsensus in die sienings van die kundiges te bepaal m.b.t. die huidige impak van die faktore wat vir elke determinant geïdentifiseer is. Die resultate toon dat konsensus (eendersheid) in opinies was m.b.t. die 29 faktore wat die bedryf se mededingende prestasie beïnvloed. Hierdie gekorreleerde faktore (konsensusfaktore) is verder onderwerp aan Cronbach se alfa-analise om hulle vlak van interne betroubaarheid te assesseer. Die resultate toon dat daar geen interne betroubaarheid in vyf van die faktore was nie en hulle is gevolglik verwyder, wat 24 faktore gelos het. Hierdie finale 24 faktore is teruggestuur aan die kundiges vir die tweede ronde van die Delphi-analise. In hierdie rondte is die kundiges gevra om die relevansie van hierdie faktore as determinante van mededingendheid te gradeer. Die resultate toon dat die meerderheid van hierdie finale faktore, soos mark ontwikkeling, infrastruktuur verbetering en arbeidsbeleid en administratiewe regulasies, relevant was vir die toekomstige mededingende sukses van hierdie bedryf. Die finale stap het die voorstel van bedryfswye strategieë behels om die bedryf se globale mededingendheid te verhoog. Op grond van die X-Y spreidiagram (scatterplot) van impakbeoordeling (Delfi rondte 1) en relevansiebeoordeling (Delfi rondte 2), is kritiese faktore geïdentifiseer wat gehelp het met die formulering van strategieë. Die voorgestelde strategieë sluit die volgende in: doeltreffende plaaslike bemarking van sitrusvrugte; bevordering van verbeterde logistieke en verspreidingsinfrastruktuur; en voortgesette betrokkenheid by die regering m.b.t. sleutel bedryfskwessies (bv. Infrastruktuur ontwikkeling, arbeidsbeleid, handelsbeleid, ontwikkeling van nuwe markte, ens.)

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