a profile of the south african potato …nda.agric.za/doadev/sidemenu/marketing/annual...

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A PROFILE OF THE SOUTH AFRICAN POTATO MARKET VALUE CHAIN

2014

Directorate Marketing Private Bag X15

ARCADIA 0007

Tel: 012 319 8455/6 Fax: 012 319 8131

Email: [email protected] www.daff.gov.za

mailto:[email protected]

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TABLE OF CONTENTS 1. DESCRIPTION OF THE INDUSTRY 3

1.1 Production areas 3

1.2 Total production 4

1.3 Potato production vs. consumption 5

2. MARKET STRUCTURE 5

2.1 Domestic market 5

2.2 Exports 7

2.3 Provincial and district export values of South African potatoes. 13

2.4 Share analysis 20

2.5 South Africa’s potato imports 25

2.5 Processing 26

3. MARKET INTELIGENCE 27

3.1 Competitiveness of South African potato exports 27

4. MARKET ACCESS 33

4.1 Tariff, quotas and the price entry system 33

5. DISTRIBUTION CHANNELS 38

6. LOGISTICS 38

6.1 Mode of transport 38

6.2 Cold chain management 39

6.3 Packaging 39

6.4 Quality control 39

7. TRANSFORMATION 39

8 BUSINESS OPPORTUNITIES AND CHALLENGES 40

8.1 Business opportunities 40

8.2 Challenges 40

9. SOUTH AFRICAN POTATO MARKET VALUE CHAIN 42

9.1 Informal sector 42

9.2 Formal sector 42

10. ACKNOWLEDGEMENTS 43

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1. DESCRIPTION OF THE INDUSTRY

Potatoes are the most important vegetable crop in South Africa and the world’s recognized stable food consumed by many people. In 2013, potato industry contributed approximately 54.2% to the total gross value of vegetable production, 11.9% of horticultural products and 3% of total agricultural products. Processing of potatoes has grown at a rapid rate over the past ten years, but it is still behind in size when compared to the potato processing industries in the developed countries. According to Potatoes South Africa, the processing industry represented 19% of the total potato crop. The rapid increase in potato processing can be attributed to consumer need for convenience ready to eat foods. The domestic processing sector uses potatoes primarily for, French fries, crisps, and frozen products. Potatoes are also fat and cholesterol free and high in fibre, Vitamin C and essential minerals like potassium, phosphorus and calcium.

Source: Statistics and Economic Analysis, DAFF

Depicted in the Figure 1 above is the contribution of the potato industry to the gross value of agricultural production over the period of 10 years. In 2005, contribution of the potato industry increased by 10.2%, in comparison to 2004 gross value. These can be attributed to high producer prices were favorable to the producers. The contribution increased steadily from 2006 and the increase in 2010 was 17% compared to the previous year. In 2011, potato industry contribution increased by 7%, in comparison to 2010 production year. During 2012, gross value of production grew by 4.7%, when compared to gross value of the previous years. This can be attributed to the 2.5% increase in production output and favorable producer prices in the same year. In 2013, potato gross value grew by 13.4% when compared to the previous year gross value and this can be directly attributed to 16.9% increase in producer price in the same year.

1.1 Production areas

Potatoes are produced from sixteen production regions which are spread throughout South Africa. The main producing regions are situated in the Limpopo, Free State, Western Cape, Mpumalanga, Kwazulu Natal and Eastern Cape. In 2013, Eastern Free State was the leading producer of

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Figure 1: Gross value of potato production

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potatoes with 20% of hectares of the total national production (Potatoes SA). Limpopo comes second with 19%, Western Free State is in third place with 14% and Sandveld comes fourth with 13%. Potatoes are planted at different times due to climatic differences in the production areas. This has resulted in fresh potatoes being available throughout the year. A total of 49 942 hectares were planted during the 2013 production year. This represents a 6.8% decrease in area under production when compared to the 2012 production year. The crop is produced all year round both in dry land and under irrigation. There has been a major shift for the past two decades from dry land production to production under irrigation. Today, almost 75% of the area is planted under irrigation. Plantings in dry land thrive well in areas where there is reliable summer rainfall such as Eastern Free State, Mpumalanga and Eastern Cape. A successful potato production, which is to a large extend dependent on quality planting material obtained from seed producers. Globally, China followed by India, Russia, Ukraine, United States and Germany are the top countries producing potatoes. According to FAO, a third of all potatoes are harvested in China and India.

1.2 Total production

According to Potatoes South Africa, in 2013 there were 569 commercial table potato farmers. This represents a 6.6% decrease in the number of producers compared to the previous production season. There are approximately 220 registered potato seed growers under the supervision and administration of potato certification services. From a production perspective the input cost for potato production has been high and escalating international fuel and input prices. From a Marketing perspective, the strength of the South African currency negatively affected the export of potatoes, including to destinations in the Southern African Development Community (SADC) region. Total potato production is illustrated in figure 2 below.


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Figure 2: Total potato production

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Figure 2 above shows that, the potato production dropped by 1.8% during 2005 in comparison to 2004 production output. From 2006 to 2008, production output has increased steadily until 2009 and there was an 8.7% drop in production volumes. From 2010 production output increased steadily and the total production of 2 250 085 tons were produced during 2012. This represents a 2.5% increase in production output compared to the tonnes produced in 2011. During 2013, production volumes slightly dropped by 3% when compared to the previous year production output.

1.3 Potato production vs. consumption

Figure 3 below depicts local consumption of potatoes compared to the production over the period of ten years. The figure indicates that the production of potatoes was fairly higher compared to fresh consumption. This indicates that South Africa is self sufficient in terms of potato production and surplus potatoes are exported to other countries. South Africa’s average potato consumption was approximately 1 382 145 tons per annum.


2. MARKET STRUCTURE

In South Africa potatoes are sold through different marketing channels such as national fresh produce market, informal trade (street hawkers), directly to retailers and processors for manufacturing of dry, frozen and fresh chips. Lastly potatoes are also exported to other countries through export agents and marketing companies.

2.1 Domestic market

Sales of potatoes at the National Fresh Produce Markets (NFPMs) have been declining over the years, but NFPMs remain an important channel for the sale of fresh potatoes in South Africa. Johannesburg fresh produce market with 35% share is the biggest potato market, followed by

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Figure 3: Production vs Consumption

Production (Tons) Consumption (Tons)

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Tshwane with 18%, Cape Town with 10% and Durban with 9% share. According to Potatoes South Africa, 36% of potatoes were distributed through formal market, 28% through informal markets (hawkers), 20% were processed, 8% were seed and 8% was exported in 2013.


As indicated in Figure 5 below, there have been fluctuations in the quantities of potatoes sold in the major fresh produce markets over the last ten years. The main reason for the lack of growth in potato sales has been the departure from the NFPMs by the potato producers because they now sell directly to the potato chips companies, processors, wholesalers and retailers. Potato prices in the NFPMs are primarily determined by market forces of supply and demand, which is the preferred way of marketing channel for potatoes. Product grading is a critical component of price determination in the market and as a result potatoes are still officially graded at the NFPMs. The price received by the primary producers on the NFPMs is a basis for the determination of the price for direct purchases from the producers. In 2012, there was a 5.5% increase in quantities of potatoes supplied to the NFPMs and at the same time the prevailing price in the NFPMs increased by 2% which can be attributed to a strong potato uptake in the markets. During 2013, quantities of potatoes supplied to the NFPMs dropped by 2%, which resulted in the 27.6% increase in the market price. The other factor that influences the price in the NFPMs is the quality of produce.

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Figure 4: Potato market share by the major NFPMs

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2.2 Exports

Potatoes are probably the most suitable vegetables for the export market (easy to grade and pack an under correct conditions, their shelf life is much longer than most other vegetables). However, South Africa is not considered to be a major exporter of potatoes, primarily because it contributes 1.08% and it is ranked number 17 in the world potato exports. In 2013, South Africa has gained competitiveness in terms of potato export since it was ranked number 19 in the previous year. In 2013, South Africa exported 29.1% to Namibia, 28.9% to Angola, 16.3% to Mozambique and 10.9% to Botswana. The bulkiness of potatoes, perishability and associated transport costs make the export of potatoes prohibitively expensive and for this reason South Africa’s primary export markets are located within the Southern Africa (Mozambique, Angola and Zimbabwe).During 2013, there was a notable diversion of South African potatoes exports to Namibia as in 2012, this country only commanded 0.9% of the exports. Table 1 shows that, South Africa, potato exports to Zimbabwe has decreased by 56% in value and 59% in quantity between 2009-2013 period. France, Germany, Netherlands, Belgium, United States of America, Egypt, Canada and Pakistan are the top countries exporting potatoes. Egypt is the only African country which is among the top ten potato exporters in the world. Table 1 and figure 6 illustrates South Africa’s potato export markets during 2013.

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Figure 5: Sales of potatoes at major national fresh produce markets

Volume (Tons)

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Table 1: South Africa potato exports in 2013

Importers

Exported value 2013 (USD thousand)

Share in South Africa's exports (%)

Exported quantity 2013 (Tons)

Unit value (USD/unit)

Exported growth in value between 2009-2013 (%, p.a.)

Exported growth in quantity between 2009-2013 (%, p.a.)


World 38975 100 105964 368 38 38 91

Namibia 11333 29.1 21142 536 6303

Angola 11281 28.9 28592 395 60 57 -4

Mozambique 6369 16.3 31149 204 8 24 -10

Botswana 3463 8.9 7685 451 115333

Lesotho 2436 6.3 3923 621

Swaziland 1855 4.8 7852 236

Zambia 996 2.6 3358 297 26 11 31

Malawi 174 0.4 316 551 28 6 96

Congo 148 0.4 278 532 -14 -5 10

United Arab Emirates 118 0.3 142 831

Zimbabwe 113 0.3 175 646 -56 -59 -11

Oman 98 0.3 211 464 Source: ITC Trade Map

Figure 6 illustrates South Africa’s potato exports destinations during 2013.

Source: International Trade Centre (ITC)

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Namibia Angola

Mozambique Botswana

Lesotho Swaziland

Zambia Malawi Congo

United Arab Emirates Zimbabwe

Oman Others

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Figure 6: South Africa potato exports destinations in 2013


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Southern African Development Community (SADC) countries such as, Namibia, Mozambique, Angola, Botswana, Lesotho and Swaziland hold a bigger market share of South African potato exports according to figure 6 above. Together they constitute approximately 94.3% of South African potato exports. There should be attempting to expand other markets like the Middle East. That will enable the South African potato exports to grow. In 2013, there were no record of South African potato exports that remained in the ship stores and bunkers (This is the place where products without proper documents are held).

Source: Quantec Easydata

As indicated on the figure 7 above, there have been fluctuations in the real value of potatoes exported. There was a 6% decrease in the volume of potato exports in 2005, at the same time there was a 12% decrease in the real value of potato exports. In 2007, there was a 16.6% increase in potato exports and at the same time there was a 29% decrease in value of exports. The decrease in the real value of potato exports may have been due to currency fluctuations. In 2009, there was an 8% decline in volumes of potato exports and the value of potatoes has increased by 23% at the same season. The high export volumes were recorded in 2010, and the increase represented 53.9% when compared to 2009 and this can be attributed to 11% increase in production volumes in the same year. It was more profitable to export potatoes in 2005, 2009 to 2011 since higher values were recorded for volumes exported. During 2012, South Africa’s potato exports have increased by 35%, which can be attributed to 2.5% increase in domestic production output. It was also more profitable to export potatoes in 2012, when compared to the previous year. In 2013, South Africa exported more volume of potatoes by 1.9% in comparison to the 2012 potato exports despite a 3% drop in the domestic potato output in the same year. According to Figure 8 and Table 2 below, Southern African Development Community (SADC) countries such as, Zambia, Mozambique, Namibia, Botswana and Zimbabwe hold a bigger market share of South African potato seed exports. Together they constitute approximately 83.3% of South African potato seed exports. There should be attempting to expand other markets like the Middle East. That will enable the South African potato exports to grow. At least 0.5% of South African

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Figure 7: South Africa potato exports

Volume (tons) Value ( Rand)

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potato seed exports remained in the ship stores and bunkers (This is the place where products without proper documents are held).Table 2 shows that South Africa, potato seeds exports to Mozambique has decreased by 25% in value between 2012 -2013 period. South Africa, potato seeds to Democratic Republic of the Congo have decreased by 15% in value between 2012 and 2013 period.

Source: International Trade Centre (ITC)

Table 2: South Africa potato seed exports in 2013

Importer



Exported quantity 2013 (tons)

Unit value (USD /unit)




World 6651 100 11927 558 46 48 101

Zimbabwe 1961 29.5 3244 605 105 60 299

Zambia 1294 19.5 1875 690 36 31 0

Namibia 1038 15.6 1726 601

Mozambique 727 10.9 1470 495 24 40 -25

Botswana 519 7.8 832 624 25850

Angola 436 6.6 744 586 19 14 125

Lesotho 178 2.7 1320 135

DRC 161 2.4 226 712 21 19 -15

Swaziland 143 2.2 390 367

Hong Kong, 84 1.3 4 21000 47 32 24

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Namibia Mozambique

Botswana Angola

Lesotho DRC

Swaziland Hong Kong

Ship stores & bunkers China

USA Others

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Figure 8: South Africa's potato seeds exports destinations in 2013


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Importer



Exported quantity 2013 (tons)

Unit value (USD /unit)




China

Ship stores and bunkers 32 0.5 47 681 -36 -29 19

China 25 0.4 1 25000

USA 22 0.3 1 22000 22 Source: International Trade Centre (ITC)

Figure 9 is an illustration of South Africa’s potato export to the various regions.


Figure 9 above shows that South Africa exported high quantities of potatoes to the African region followed by Europe. South Africa also exported smaller volumes of potatoes to Asia, Oceania and Americas regions. In 2010, there was a significant increase in exports to the African region, at the same time, there were no export to the Americas region. A substantial volume of South African potato exports from 2004 to 2010 were not allocated to any region and in 2011 and 2012, the unallocated exports have dropped significantly. In 2011, considerable volumes of South African were exported to Oceania and Americas regions. During 2012, African region continued to be the preferred export market for potatoes originating from South Africa. African region continued to be the primary market for potato exports from South Africa during 2013. In the same year the exports to the Asia and Europe has notably increased and the exports to the Americas has dropped by 64.7% in comparison to 2012 potato exports.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Africa 25832206 17162827 26191097 30745806 28070166 25794762 40229424 47117894 63952646 64570727

Americas 100 395 152422 292 21039 2060 0 66311 93700 33010

Asia 36120 519 8490 1857 22802 80380 5842 8497 16941 601322

Europe 1217108 862322 410853 264446 131791 31653 31279 31138 44335 101107

Oceania 0 0 0 113300 68222 39000 13837 132000 33828 45220

Not allocated 48032 360909 342504 488652 438037 396755 266451 1908 2370 28000

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Figure 9 :South Africa's potato exports to various regions

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Figure 10 above shows the value of South Africa’s potato exports earned from the regions. African region has recorded high export value than the other regions as high quantities of potatoes were exported to this region during the period under review. In 2011, it was more profitable to export potatoes to European region, followed by America region then African region. It was less profitable to export potatoes to the Asian region during 2011. During 2012, it was more profitable to export to Asia followed by Europe, while Americas and African regions were less profitable markets during the same year. In 2013, potato export has fetched higher value, followed by Europe and America regions. In the same year, potato exports to Oceania were less profitable.


2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Africa 50525234 44769120 59159676 65624789 59119566 74102585 104609122 121539470 166565080 187979834

Americas 467 2144 49314 1332 65520 25015 0 482877 263029 118840

Asia 125513 2312 13307 15291 107406 561750 60392 14074 177175 3251037

Europe 2754298 1941489 1306045 756503 1286117 180205 273379 247265 298948 534481

Oceania 0 0 0 338829 172845 102690 37808 326100 126440 80324

Not allocated 153034 1102786 1273489 2009439 1913766 2458754 1547781 5354 17595 140000

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Figure 10: Value of potato exports to various regions

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Eastern Africa 91722 165700 66115 377515 176460 17 2577 1058 1136 101

Middle Africa 112336 57175 63632 323585 381760 339423 1629306 753631 318867 306779

Northern Africa 0 0 0 0 0 6300 0 0 0 7

Western Africa 103356 127060 162712 416353 242109 220781 157918 249245 126396 364200

SADC 25524792 16812892 25898638 29628353 27269837 25228241 39717278 46113960 63506247 63899640

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Figure 11: South Africa potato exports to Africa region

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Figure 11 above, shows that in Africa, SADC countries (Mozambique, Zimbabwe, Angola, Zambia, Congo and Democratic Republic of Congo) are the primary potato export market for South African potatoes. South Africa exported considerable quantities to West African countries (Ghana, Saint Helena and Nigeria), Eastern Africa (Kenya, Reunion and Uganda) and Middle Africa (Congo and Gabon). South Africa’s potato exports to Northern Africa were 2009 and were less significant. In 2011 and 2012, SADC region continued to be a leading market for potatoes originating from South Africa. Considerable volumes were also exported to Middle Africa and West Africa during 2011 while in 2012; the exports to these regions have dropped by half. Export to Eastern Africa (Kenya and Uganda) region has slightly increased during 2012. In 2013, SADC region continued to be the preferred potato export market, however there was a diversion on export destination. High percentage of exports was destined to Namibia and there was a notable volume of exports to Botswana, Lesotho and Swaziland. In the same year, potato exports to Western Africa (Ghana, Togo, Senegal, Cote d’voire and Nigeria) has notably increased when compared to the previous year exports.

2.3 Provincial and district export values of South African potatoes.

A review of provincial level trade data presents an interesting but somewhat misleading view of the source of potatoes destined for the export markets. Firstly, the fact that 58.77% of potatoes exported in 2013 were from the Western Cape province does not imply that the potatoes were produced there but that the registered exporters were based in the Western Cape. Secondly provinces the Western Cape and Kwa-Zulu Natal serves as exit points for potato exports through the Cape Town and Durban harbour respectively. Figure 12 below depicts the value of potato exports from each province of South Africa. Highlights of the potato exports in figure 12 below were that the provinces of the Western Cape, Gauteng and to a lesser extend Kwa-Zulu Natal were consistently the top exporting provinces of South Africa over the last decade. In 2010, the highest export value was recorded for Mpumalanga province. Limpopo has also recorded a significant increase in export value. Export values for Western Cape, Gauteng and Kwazulu Natal have significantly increased during 2011. In 2012, Western Cape, North West, Limpopo and Mpumalanga export values have increased significantly. The Eastern Cape and Free State have recorded export values after eight years of recording zero trade. During 2013, Western Cape and Gauteng provinces continued to be major role players in potato exports from South Africa and their export value has notably increased. In the same year Northern Cape and North West exports have notable increased while Free State and Limpopo exports have dropped. Figure 12 below is an illustration of potato export by South African provinces.

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The following figures (Figures 13 – 21) show the value of potato exports from the various districts in the nine provinces of South Africa. From Figure 13 below, it is clear that potato exports from the Western Cape province were mainly from the City of Cape Town Metropolitan Municipality. West Coast and Eden municipalities contributed to a lesser extent. In 2010, there was a significant drop in export value recorded for the City of Cape Town. The use of the Cape Town harbour as an exit point may have played a major role in the metropolitan municipality being a leader in the export of potatoes from the Western Cape province. Highest export value for the leading municipality was recorded in 2011.West Coast and Eden municipalities have recorded high export values during 2011, while the export value for Cape Winelands has dropped significantly. In 2012, the City of Cape Town remains the leading municipality in potato exports and export values for West Coast, Cape Winelands and Eden has also increased significantly when compared to the previous year. During 2013, the City of Cape Town was by far still the leading municipality in terms of potato export from Western Cape. In the same year West Coast, Cape Winelands and Eden municipalities have notably increased their export values in comparison to 2012 export values.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Western Cape 42363673 34062546 40676826 44028294 41069502 47833945 28194626 56207415 100724503 112897996

Eastern Cape 0 0 0 0 0 0 0 0 10383 9093

Northern Cape 144281 0 0 0 0 0 0 0 51 134798

Free State 0 0 0 0 0 0 0 0 13647992 11835730

Kwazulu-Natal 2460506 2303913 565764 1063504 603994 896427 280993 308456 527281 563078

North West 0 0 0 0 0 0 1276693 1875 264282 1515180

Gauteng 6172032 10559020 20506409 23608944 20991724 28653452 29096273 65944551 39867654 53636184

Mpumalanga 902758 0 52832 17031 0 0 40523875 101655 12360926 11479460

Limpopo 1515296 892372 0 28409 0 47175 7156023 37774 45194 32997

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Figure 12: Value of potato exports by South African Provinces

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Figure 14 below, illustrates the potato exports from Gauteng province.


In Gauteng province, there has been fluctuation on the potato export values for the past ten years (see Figure 14). The leading role players are City of Johannesburg, Ekurhuleni and City of Tshwane to a lesser extent. High export values of the leading municipalities were recorded in 2011 for the City of Johannesburg and 2008 for Ekurhuleni. In 2010, there was a 21% increase in potato

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

City of Cape Town 41963501 30120082 39598195 43697217 40922013 47214433 27966623 55728094 95945656 105874234

West Coast 0 653243 65 72295 16503 0 0 195650 3951532 5694704

Cape Winelands 0 0 0 0 0 273978 27095 6559 291098 458056

Eden 400172 3289221 1078566 258782 130986 345534 200908 277112 536217 871002

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Figure 13: Value of potato exports by Western Cape Province

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sedibeng 0 0 50492 1304950 0 0 1447 0 0 4038969

Metsweding 0 0 0 0 0 0 14624 32312 329074 0

West Rand 0 0 0 287444 124135 1450131 1754608 578822 24260591 28973124

Ekurhuleni 203259 482040 1360950 316925 2646049 1401437 2486121 2066947 1382466 3113534

City of Johannesburg 5950318 10076981 19094966 21319366 18211653 25351764 24306204 61579047 10983500 14006655

City of Tshwane 18455 0 0 380260 9887 450120 533270 1687423 2912023 3503902

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Figure 14: Value of potato exports by Gauteng Province

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export value recorded for the West Rand district municipality. In 2011, export values for the City of Johannesburg, Metsweding and City of Tshwane have significantly increased while export value for Ekurhuleni has dropped. During 2012, West Rand municipality recorded the highest potato export value in a ten year period. Metsweding and City of Tshwane export values have increased while at the same time export value for the City of Johannesburg had dropped dramatically. In 2013 West Rand continued to lead in potato export from Gauteng province. West Rand, Ekurhuleni, City of Johannesburg and City of Tshwane have notably increased their export value during the same year.

Figure 15 below, illustrates the potato exports from Kwazulu Natal.


From figure 15 it is clear that potato exports from the Kwa-Zulu Natal province are mainly from Ethekwini Municipality. High export values for the Municipality were recorded in 2004. In 2008 and 2009 there was a significant decline in potato value recorded for Ethekwini Municipality. In 2009, Ugu district recorded its first potato export value. In 2010, there was a significant decline in export value recorded for Ethekwini municipality. Export value for the leading municipality has further declined in 2011 while; Uthukela has recorded its first export value in the same year. During 2012, Ethekwini municipality continued to lead in Kwazulu Natal potato exports. Uthungulu also contributed significantly to Kwazulu Natal exports after six years of recording a zero trade. In the same year Ugu district contributed to Kwazulu Natal potato exports for the first in a ten year period but the value was insignificant. During 2013 Ethekwini continued to lead in potato exports from Kwazulu Natal and export value for Uthungulu has significantly dropped in comparison to 2012 export values. The use of the Durban harbour as an exit point may have played a major role in the Ethekwini municipality being a leader in the export of potatoes from the Kwa-Zulu Natal province.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ugu District 0 0 0 0 0 119739 0 0 0 0

Umgungundlovu 0 0 0 0 0 0 0 0 732 0

Umzinyathi 4327 0 0 0 0 0 0 0 0 0

Uthungulu 282 3296 0 0 0 0 0 0 140854 5799

Uthukela 0 0 0 0 0 0 0 96060 0 0

Ethekwini 2455897 2300617 565764 1063504 603994 776689 280993 212396 385693 556130

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Figure 15: Value of potato exports by Kwazulu Natal Province

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Figure 16 above shows that, from 2004 to 2011, there was no potato exports recorded from Free State province despite being one of provinces producing high volumes of potatoes. During 2012, Xhariep recorded a significant export value for the first time in a ten year period. This is a good development as it shows that the Free State is producing and exporting its own potatoes. In 2013, Free State province exported potatoes through Xhariep and Lejweleputswa districts, but the export value for both districts have notably dropped when compared to the previous year.


Figure 17 above shows that, Greater Sekhukhune and Mopani district contributed notably to potato export from Limpopo province during 2004 and 2005. Capricorn recorded its first export value in 2007. In 2006 and 2008, Limpopo recorded zero trade for potatoes. In 2010, the highest export

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Xhariep 0 0 0 0 0 0 0 0 13624545 11827137

Lejweleputswa 0 0 0 0 0 0 0 0 20873 8594

Thabo Mofutsanyane 0 0 0 0 0 0 0 0 2567 0

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Figure 16: Value of potato exports by Free State Province

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Mopani 836991 64318 0 0 0 0 0 0 36 765

Vhembe 0 0 0 0 0 0 33990 37774 704 27517

Capricorn 0 0 0 28409 0 47175 7122033 0 38067 0

Greater Sekhukhune 678304 828054 0 0 0 0 0 0 0 0

Waterberg 0 0 0 0 0 0 0 0 6388 4741

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Figure 17: Value of potato exports by Limpopo Province

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values were recorded for Capricorn district municipality. In 2011, Limpopo province potato exports were exported through Vhembe district. During 2012, considerable export value was recorded for Capricorn district and Waterberg district recorded its first export value in a ten year. In the same year, export values for Mopani and Vhembe district were insignificant. In 2013, Limpopo province exported potatoes through Mopani, Vhembe and Waterberg districts, however the export value for Mopani and Waterberg districts were insignificant.


From Figure 18 above, it is clear that potato exports from the Mpumalanga province were mainly from Ehlanzeni and Nkangala District Municipalities. High export values for the leading municipalities were recorded in 2010 (for Nkangala) and 2012 (for Ehlanzeni). However, there has been fluctuation in terms of export values from the leading municipalities in the past ten years. In 2008 and 2009, the province has recorded a zero trade for potatoes. In 2011, export values for both Nkangala and Ehlanzeni has dropped significantly when compared to 2010 export values. During 2012, Mpumalanga exported potatoes only from Ehlanzeni district and the value has increased significantly when compared to the 2011 export value. In 2013, Gert Sibande contributed for the first time to Mpumalanga potato exports during a ten year period. At the same time Nkangala export value has increased while the export value for the Ehlanzeni has slightly dropped when compared to 2012 export values.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nkangala 893746 0 0 0 0 0 40326236 10366 0 29178

Ehlanzeni 9012 0 52832 17031 0 0 197639 91289 12360926 11419962

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Figure 18: Value of potato exports by Mpumalanga Province

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Figure 19 shows that, from 2004 to 2011, Eastern Cape province has recorded a zero trade for potatoes. In 2012, Nelson Mandela district municipality has recorded considerable export value after eight years of zero potato trade from Eastern Cape province. During 2013, Cacadu district contributed to Eastern Cape potato exports for the first time in a 10 year period.


From Figure 20 it is clear that potato exports from the North West province were recorded in 2010 for Bojanala, Bophirima, and Southern district municipalities and from 2004 to 2009, the province has recorded a zero potato trade. In 2011, North West province exported potatoes from Southern district. During 2012, export value for Southern district has increased significantly when compared

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Figure 19: Value of potato exports by Eastern Cape Province

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Bojanala 0 0 0 0 0 0 625 0 0 0

Bophirima 0 0 0 0 0 0 1273358 0 2151 506187

Southern 0 0 0 0 0 0 2700 1875 262132 1008993

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Figure 20: Value of Potato exports by North West Province

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to export value for the previous year. In 2013, North West has exported potatoes from Bophirima and Southern district and the export values recorded for these municipalities has notably increased. The high export values can be attributed to an increase in potato exports to the neighboring Botswana in the same year.


From Figure 21, it is clear that Northern Cape province exported potatoes from Pixley ka Seme district municipality in 2004. From 2005 to 2011, Northern Cape province has recorded a zero trade for potatoes and the export value for 2012 was insignificant. During 2013, Namakwa contributed for the first time to Northern Cape potato exports and the export value was notable and the higher value can be attributed to increase in potato exports to neighboring Namibia.

2.4 Share analysis

Table 3 is an illustration of provincial shares towards national potato exports. It shows that Western Cape and Gauteng provinces have commanded the greatest share of potato exports for the past ten years. In 2011, Western Cape commanded 60.15% and Gauteng commanded 23.81% of South Africa potato export shares. This is in spite of the fact that Free State and Limpopo together with the Western Cape are the leading producers of potatoes. As explained earlier, this means that the leading export provinces (Western Cape and Gauteng) derive their advantage from the fact that the registered exporters are based in their provinces and they also have exit points for potato exports. In 2010, Mpumalanga has commanded 38.04% of potato export share. This can be attributed to direct export to neighboring Mozambique which commanded 49.6% of South African potato exports. In 2011, export shares for Mpumalanga and Limpopo have dropped when compared to exports shares recorded for the previous year. During 2012, Free State province has commanded 8.15% of South Africa’s potato export share. This is a positive development considering that the province has commanded zero shares for that past nine years, despite being one of the top provinces producing potatoes. In 2013, Western Cape

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pixley ka Seme 144281 0 0 0 0 0 0 0 51 0

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Figure 21: Value of potato exports by Northern Cape Province

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followed by Gauteng province continued to command high potato export share. Western Cape export share has dropped slightly to 58.77%, while Gauteng export share has gone up to 27.92% when compared to 2012 export shares. In the same year Free State export share has dropped slightly to 6.16%, Northern Cape Kwazulu Natal, North West and Limpopo export share were insignificant.

The above scenario raises concerns about the availability of marketing infrastructure and agro-logistics in the other major potato producing provinces of South Africa like Free State and Limpopo because Gauteng is not a potato producing region and yet the sizable share of South African potato exports (27.92% in 2013) are exported through this province. Table 3: Share of provincial potato exports to the total RSA potato exports (%) Years Province

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Western Cape 79.10 71.23 65.82 64.04 65.54 61.78 26.47 45.86 60.15 58.77

Eastern Cape 0 0 0 0 0 0 0 0 0.01 0

Northern Cape 0.27 0 0 0 0 0 0 0 0 0.07

Free State 0 0 0 0 0 0 0 0 8.15 6.16

Kwazulu-Natal 4.59 4.82 0.92 1.55 0.96 1.16 0.26 0.25 0.31 0.29

North West 0 0 0 0 0 0 1.20 0 0.16 0.79

Gauteng 11.52 22.08 33.18 34.34 33.50 37.01 27.31 53.79 23.81 27.92

Mpumalanga 1.69 0 0.09 0.02 0 0 38.04 0.08 7.38 5.98

Limpopo 2.83 1.87 0 0.04 0 0.06 6.72 0.03 0.03 0.02

South Africa 100 100 100 100 100 100 100 100 100 100 Source: Calculated from Quantec Easydata

The following tables (Table 4 – 12) show the share of provincial potato exports to the total national potato exports. Table 4: Share of district potato exports to total Western Cape provincial potato exports (%) Year District

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

City of Cape Town 99.06 88.43 97.35 99.25 99.64 98.71 99.19 99.15 95.26 93.78

West Coast 0 1.92 0 0.16 0.04 0 0 0.35 3.92 5.04

Cape Winelands 0 0 0 0 0 0.57 0.10 0.01 0.29 0.41

Eden 0.94 9.66 2.65 0.59 0.32 0.72 0.71 0.49 0.53 0.77

Western Cape 100 100 100 100 100 100 100 100 100 100 Source: Calculated from Quantec Easydata

Table 4, above indicates that the City of Cape Town municipality commanded the greatest share of potato exports from Western Cape Province. In 2010, City of Cape Town commanded 99.19% and West Coast 0.71% share of potato exports. The City of Cape has continued to command high export shares and during 2011, it commanded 99.15% share of exports and in 2012 the export share dropped slightly to 95.26%. During 2012, West Coast, Cape Winelands and Eden have increased their export shares. In 2013, City of Cape commanded 93.78% of Western Cape potato export share. At the same time West Coast has slightly increased its export share to 5.04% and Cape Winelands and Eden export share were insignificant. Cape Town Harbour renders exit point for exports from this province.

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Table 5: Share of district potato exports to the total Gauteng provincial potato exports (%) Year District

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sedibeng 0 0 0.25 5.53 0 0 0 0 0 7.53

Metsweding 0 0 0 0 0 0 0.05 0.05 0.83 0.0

West Rand 0 0 0 1.22 0.59 5.06 6.03 0.88 60.85 54.02

Ekurhuleni 3.29 4.57 6.64 1.34 12.61 4.89 8.54 3.13 3.47 5.80

City of Johannesburg 96.41 95.43 93.12 90.30 86.76 88.47 83.54 93.38 27.55 26.11

City of Tshwane 0.30 0 0 1.61 0.05 1.57 1.83 2.56 7.30 6.53

Gauteng 100 100 100 100 100 100 100 100 100 100 Source: Calculated from Quantec Easydata

Table 5 above shows that the City of Johannesburg and Ekurhuleni municipalities have commanded the greatest shares of potato exports from Gauteng province. In 2011, City of Johannesburg commanded 93.38% and Ekurhuleni has commanded 3.13% share of potato exports. During 2012, West Rand has commanded the greatest share in Gauteng and its share has increased to 60.85%, while export share for the City of Johannesburg has dropped to 27.55% share. Metsweding, Ekurhuleni and City of Tshwane have slightly increased their export shares during the same year. In 2013, West Rand was still the highest contributor to Gauteng potato export shares. It has commanded 54.02%, followed by the City of Johannesburg with 26.11% and Sedibeng with a 7.53% export share. OR Tambo International Airport renders exit point for exports from these municipalities. Table 6: Share of district potato exports to the total Limpopo provincial potato exports (%) Year District

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Mopani 55.24 7.21 0 0 0 0 0 0 0.08 2.32

Vhembe 0 0 0 0 0 0 0.47 100 1.56 83.32

Capricorn 0 0 0 100 0 100 99.53 0 84.23 0

Greater Sekhukhune 44.76 92.79 0 0 0 0 0 0 0 0

Waterberg 0 0 0 0 0 0 0 0 14.13 14.63

Limpopo 100 100 0 100 0 100 100 100 100 100 Source: Calculated from Quantec Easydata

Table 6 illustrates that, Capricorn commanded the greatest share of potato exports from Limpopo province. Greater Sekhukhune has commanded greatest share of Limpopo potato exports in 2003 and 2005. Mopani contributed considerably to potato export during 2004. In 2010, Capricorn commanded a 99.53% share of potatoes from Limpopo province. In 2011, Vhembe commanded a 100% share of potato exports from Limpopo province. During 2012, Waterberg contributed to Limpopo potato export share for the first time in a ten year period and it has commanded 14.13% share. Vhembe district has increased its export share from 1.56% in 2012 to 83.32% in 2013 and at the same time Capricorn export share has dropped from 84.23% to 0%.

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Table 7: Share of district potato exports to the total Kwa-Zulu provincial potato exports (%) Years District

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ugu 0 0 0 0 0 13.36 0 0 0 0

Umgungundlovu 0 0 0 0 0 0 0 0 0.14 0

Umzinyathi 0.18 0 0 0 0 0 0 0 0 0

Uthungulu 0.01 0.14 0 0 0 0 0 0 26.71 1.03

Uthukela 0 0 0 0 0 0 0 34.14 0 0

EThekwini 99.81 99.86 100 100 100 86.64 100 68.86 73.15 98.77

Kwazulu Natal 100 100 100 100 100 100 100 100 100 100 Source: Calculated from Quantec Easydata

Table 7 above indicates that Ethekwini district municipalities commanded the greatest share of potato exports from Kwazulu Natal province. In 2010, Ethekwini commanded a 100% share of potatoes exports. The greatest share by Ethekwini can be attributed to Durban harbour which renders export exit point. Uthukela commanded a 34.14% share during 2011, while Ethekwini export share has dropped to 68.86% when compared to 2010. In 2012, the Ethekwini continued to lead in potato exports and its export share has increased to 73.15%. Uthungulu contributed significantly by commanding a 26.71% share and Umgungundlovu has commanded its first potato share for the first time in a ten year period. Ethekwini district continued to lead in Kwazulu Natal export share and it has increased its export share from 73.15% in 2012 to 98.77% in 2013. At the same time Uthungulu export share has dropped from 26.71% to 1.03% share. Table 8: Share of district potato exports to the total Free State provincial potato exports (%) Year District

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Xhariep 0 0 0 0 0 0 0 0 99.83 99.93

Lejweleputswa 0 0 0 0 0 0 0 0 0.15 0.07

Thabo Mofutsanyane 100 0 0 0 0 0 0 0 0.02 0

Free State 100 0 0 0 0 0 0 0 100 100 Source: Calculated from Quantec Easydata

Table 8 shows that Thabo Mofutsanyane commanded 100% of potato exports in the Free State province in 2004. From 2005 to 2011, the province has recorded a zero trade for potatoes. During 2012, Xhariep commanded the 99.83% share of Free State potato exports and this was the first export share recorded for this district municipality. In 2013, Xhariep slightly increased its potato export share from 99.83% to 99.93%. Table 9: Share of district potato exports to the total Mpumalanga provincial potato exports (%) Year District

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nkangala 99 0 0 0 0 0 99.51 10.20 0 0.25

Ehlanzeni 1 0 100 100 0 0 0.49 89.80 100 99.48

Mpumalanga 100 0 100 100 100 0 100 100 100 100 Source: Calculated from Quantec Easydata

24

Table 9 above illustrates that Ehlanzeni and Nkangala district commanded the greatest share of potato exports from Mpumalanga province. In 2010, Nkangala district commanded a 99.51% share of potato exports. In 2011, Ehlanzeni commanded an 89.80% share and Nkangala has commanded 10.20% share of potato exports. During 2012, Ehlanzeni commanded a 100% and in 2013, it has commanded 99.48% share of potato export share from Mpumalanga province. Table 10: Share of district potato exports to total Eastern Cape provincial potato exports (%) Year District

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nelson Mandela 0 0 0 0 0 0 0 0 100 0

Cacadu 0 0 0 0 0 0 0 0 0 100

Eastern Cape 0 0 0 0 0 0 0 0 100 100 Source: Calculated from Quantec Easydata

Table 10 shows that in 2012, Nelson Mandela district commanded a 100% share of potato exports from Eastern Cape Province and from 2004 to 2011, the province has recorded a zero potato trade. In 2013, Cacadu district municipality has commanded 100% share of Eastern Cape potato export. Table 11: Share of district potato exports to total North West provincial potato exports (%) Year District

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Bojanala 0 0 0 0 0 0 0.05 0 0 0

Bophirima 0 0 0 100 0 0 99.74 0 0.81 33.41

Southern 0 0 0 0 0 0 0.21 100 99.19 66.59

North West 0 0 0 100 0 0 100 100 100 100 Source: Calculated from Quantec Easydata

Table 11 above illustrates that from 2004 to 2006, 2008 and 2009, North West province has recorded a zero trade for potatoes. In 2007, Bophirima commanded 100% and in 2010 it commanded 99.74% share of potato export. In 2011, Southern district has commanded a 100% and in 2012, it commanded 99.19% share of potato exports from North West. Bophirima district export share has notably increased during 2013, while Southern district export share has dropped from 99.19% to 66.59%. Table 12: Share of district potato exports to the total Northern Cape provincial potato exports (%) Years District

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pixley ka Seme 100 0 0 0 0 0 0 0 100 0

Namakwa 0 0 0 0 0 0 0 0 0 100

Northern Cape 100 0 0 0 0 0 0 0 100 100 Source: Calculated from Quantec Easydata

In 2004 and 2012, Pixley ka Seme has commanded the 100% share of potato exports from Northern Cape province. From 2005 to 2011, the province has recorded zero trade for potatoes. During 2013, Namakwa commanded the 100% share of potato exports from Northern Cape province and, this was the first export share recorded for this district municipality.

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2.5 South Africa’s potato imports

South Africa is self sufficient in terms of potato production; this is attested by low potato imports by South Africa. During 2013, South Africa’s potato imports represent 0% of world imports for potatoes and its ranking in the world is 156. In 2010, South Africa imported potatoes from Zambia and Nigeria. During 2011, Zambia was the sole supplier of potato imported from by South Africa. In 2012, South Africa imported potatoes from Ghana. In 2013, South Africa imported 70.1% of potatoes from Swaziland, 22.1% from Namibia and 2.6% from Botswana. Globally, Belgium, Germany, United Kingdom, Spain and Italy were the top countries importing potatoes during 2013.


Figure 22 above illustrates South Africa’s potato imports in a period of 10 years. In 2004 and 2007, the imports were insignificantly low. In 2006, there was a significant increase in potato imports when compared to 2005 potato imports. The highest potato imports were recorded in 2008, despite a 6% increase in the domestic output. In 2009, potato imports decreased by 83% despite low domestic production output in the same year. In 2011, potato imports continued to decrease and these can be attributed to 5% increase in the domestic output. During 2012, South Africa potato imports increased by 82% despite a 2.5% increase in the domestic production output. In 2005, 2006, 2008, 2010 and 2011, it was more expensive to import potatoes since low values were recorded for higher volumes imported. It was cheaper to import potatoes during 2012. During 2013, South Africa potato imports grew by 39.8% and this can be ascribed to 6.8% decline in potato output in the same year. South Africa paid higher value for 2013 potato imports in comparison to 2012 import value.

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Figure 22: Potato imports by South Africa

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Figure 23 above shows South Africa’s potato seed imports in the period of 10 years. South Africa is generally not a major potato seed importer. This is attested by low import volumes. However, in 2011, South Africa’s potato seed imports surged higher when compared to other years. During 2013, South Africa’s seed imports represented 0% of world imports and it is ranked number 142. In 2010, South Africa imported seeds from Germany and Netherlands. In 2011, South African seeds imports were sourced from Zimbabwe and Netherlands. During 2012, South Africa imported potato seeds from Netherlands, Germany and Japan. Netherlands supplied 54.5% and United States of America supplied 45.5% of South Africa’s potato seed imports in 2013. Globally, Egypt, Algeria, Belgium, Spain, Germany and Italy were the top countries importing potato seeds during 2013.

2.5 Processing

Apart from being consumed fresh, potatoes are processed into a number of products. According to Potatoes South Africa, 20% of South Africa’s total table potatoes production was processed in 2013. The industry development comes mainly from frozen fries, dry crisp and fresh chips. The manufacturing of dry, frozen and fresh chips comprise 98% of processed potato products while the remaining 2% was used for canned and mixed vegetables.

As depicted in Figure 24, the quantity of potatoes taken in for processing has been stable in the past decade. In 2009 there was a 3.5% increase in quantity taken for processing. This growth was mainly due to the expansion in the fast-food industry; the higher average income of the population, rapid rate of urbanization and the influx of international processing companies. A major shift in the value of processed potatoes was a 60% increase in 2009. In 2010, processed volumes increased by 9.9%, while the value of processed potatoes increased by 7.5%. There was a 5.6% drop in potatoes volumes that were processed during 2011. In 2012, the processed volume dropped by 3.6% when compared to 2011 processed potatoes. During 2013, volumes that were processed declined further by 4.3% and the value of processed potatoes has dropped by 15% when compared to 2012.

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Figure 23: Potato seeds imports by South Africa

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Source: Statistics, and Economic Analysis, DAFF

3. MARKET INTELIGENCE

3.1 Competitiveness of South African potato exports

Competitiveness is described as an industry’s capacity to create superior value for its customers and improved profits for the stakeholders in the value chain. The driving force in sustaining a competitive position is productivity that is output efficiency in relation to specific inputs with regard to human, capital and natural resources. In 2013, South African potato exports represented 1.08% of world exports and its ranking in the world export was number 17. South Africa has improved its competitiveness in terms of potato exports as in 2012, it was ranked number 27. In 2013, South African potato seed exports represented 0.0% of world exports and its ranking on the world exports was number 142. South Africa has lost its competitiveness as in 2012; potato seed exports were ranked 195 in world potato exports. As depicted on Figure 25 below, South African potato exports are growing faster than the world imports into Ghana, Mayotte, Zambia and Angola markets. South Africa’s performance in these markets can be regarded as gains in dynamic markets. South African potato exports are growing slower than the world imports into Malawi, Congo, Mozambique and Democratic Republic of the Congo. These markets are dynamic and South Africa’s performance should be regarded as an underachievement. South African potato exports are growing while the world imports are declining in Zimbabwe market. South Africa’s performance in those markets can be regarded as gains in declining markets and should be viewed as an achievement in adversity. At the same time South African potato exports have declined faster than the world imports into Saint Helena market. South Africa’s performance in those markets can be regarded as a loss in declining markets

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Figure 25: Growth in demand for potatoes exported by South Africa in 2013

Source: ITC Trade Map

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Figure 26: Growth in demand for potato seed exported by South Africa in 2013


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As depicted in Figure 26 above South African potato seed exports are growing faster than the world imports in Angola and Zambia market. South Africa’s performance in these markets can be regarded as gains in dynamic markets. South African potato exports are growing slower than the world imports into Democratic Republic of the Congo and Zimbabwe markets. These markets are dynamic and South Africa’s performance should be regarded as an underachievement. South African potato seed exports are declining faster than the world imports into Saint Helena. South Africa’s performance in those markets can be regarded as a loss in declining markets South Africa’s potato exports are growing while the world imports are declining in Mozambique, Mauritius and Hong Kong ,China markets. South Africa’s performance in those markets can be regarded as gains in declining markets and should be viewed as an achievement in adversity. Figure 27 below illustrates prospects for market diversification by South African exporters of potatoes. In 2013, Namibia held a bigger market share of South African potato exports. In terms of market size France, Germany, Netherlands, Belgium, United States of America and Egypt are the leading markets/importers of potatoes. Egypt is the only African country ranked in top ten potato importers. Whilst six countries dominate world fresh potato imports, it is interesting to note that countries like Malawi and Ghana have experienced higher annual growth rate in value from 2009 – 2013. Malawi has experienced an annual growth rate of 93%. Second was Ghana with 45% annual growth rate. These countries represent possible lucrative markets for South African potato producers. Potatoes imports from the world to Saint Helena and Zimbabwe have declined between 2009– 2013 and as a result, these countries have recorded a negative growth rates of 21% and 69% respectively. Figure 28 below illustrates prospects for market diversification by South African exporters of potato seed. In 2013, Zimbabwe and Zambia held a bigger market share of South African potato seed exports. In terms of market size Egypt, Algeria, Belgium, Spain, Germany and Italy are the leading markets/importers of potato seed. Whilst six countries dominate world potato imports, it is interesting to note that countries like Botswana and Zimbabwe have experienced higher annual growth rate in value from 2009 to 2013. Zimbabwe has experienced an annual growth rate of 201% and Botswana has experienced 37% annual growth rate. These countries represent possible lucrative markets for South African potato seed producers. Potato seed imports from the world to Hong Kong, China and Mozambique have declined from 2009 to 2013 and as a result, those countries have recorded a negative growth rate of 32% and 11% respectively.

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Figure 27: Prospects for market diversification for potatoes exported by South Africa in 2013


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Figure 28: Prospects for market diversification for potato seeds exported by South Africa in 2013


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4. MARKET ACCESS

Barriers to trade can be divided into tariff barriers (including quotas, ad valorem tariffs, specific tariffs and entry price systems) and non tariff barriers (sanitary and phytosanitary measures, labels, etc). The main markets for vegetables (including potatoes) employ various measures, both tariff and non tariff to protect the domestic industries. Whilst many of the non tariff measures can be justified under the auspices of issues such as health and standards, the tariff measures are increasingly under the scrutiny of the World Trade Organization (WTO), and as such are gradually being phased out. Nevertheless, exporters need to be aware of all the barriers that they may encounter when trying to get their produce on foreign shelves.

4.1 Tariff, quotas and the price entry system

Tariffs are either designed to earn government revenue from products being imported or to raise the price of imports so as to render local produce more competitive and protect domestic industries. Quotas can be used to protect domestic industries from excessive imports originating from areas with some form of competitive advantage (which can therefore produce lower cost produce). Tariffs and quotas are often combined, allowing the imports to enter at a certain tariff rate up to a specified quantity. Thereafter, imports from that particular region will attract higher tariffs, or will not be allowed at all. The entry price system, which is used in many northern hemisphere markets, makes use of multiple tariff rates during different periods when domestic producers are trying to sell their produce, and lower the tariffs during their off-season. Alternatively, the tariff rate can be a function of a market price – if the produce enters at a price which is too low (and therefore likely to be too competitive), it qualifies for a higher tariff schedule. Whilst tariff regulations can be prohibitive and result in inferior market access, it is often the non tariff barriers that restrict countries like South from successfully entering the large developed markets. Many of these barriers revolve around different types of standards, including sanitary and phytosanitary standards (SPS), food health and safety issues, food labeling and packaging, organic produce certification, quality assurance and other standards and grades. Tariffs applied by various markets to potatoes originating from South Africa during 2012 and 2013 are presented in Table 13.

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Table 13: Tariffs applied by various export markets to potatoes from South Africa

COUNTRY PRODUCT DESCRIPTION ( H070190)

TRADE REGIME APPLIED TARIFFS

TOTAL AD VALOREM EQUIVALENT TARIFF

APPLIED TARIFFS


2012 2013

Angola Potatoes fresh or chilled MFN duties (Applied) 15.00% 15.00% 50.00% 50.00%

Botswana Potatoes fresh or chilled Intra SACU rate 0.00% 0.00% 0.00% 0.00%

Canada Fresh or chilled potatoes (excluding seed) MFN duties (Applied) 4.31$/Ton 1.05% 4.31$/Ton 1.05%

Congo Potatoes fresh or chilled MFN duties (Applied) 30.00% 30.00% 30.00% 30.00%

China Fresh or chilled potatoes (excluding seed) MFN duties (Applied) 13.00% 13.00% 13.00% 13.00%

DRC Potatoes fresh or chilled MFN duties (Applied) 10.00% 10.00% 10.00% 10.00%

EU Potatoes for manufacture of starch, fresh or chilled

Preferential tariff for South Africa 0.00% 0.00% 0.00% 0.00%

Egypt Potatoes fresh or chilled MFN duties (Applied) 5.00% 5.00% 5.00% 5.00%

EU Fresh or chilled potatoes from 1 January to 30 June


Ghana Potatoes fresh or chilled MFN duties (Applied) 20.00% 20.00% 20.00% 20.00%

Malawi Potatoes fresh or chilled Preferential tariff for South Africa 0.00% 0.00% 0.00% 0.00%

Swaziland Fresh or chilled potatoes Intra SACU rate 0.00% 0.00% 0.00% 0.00%

Mauritius Potatoes fresh or chilled MFN duties (Applied) 0.00% 0.00% 0.00% 0.00%

Mozambique Potatoes fresh or chilled Preferential tariff for South Africa 15.00% 15.00% 15.00% 15.00%

Mayotte Fresh or chilled potatoes (excluding seed) General tariff 5.00% 5.00% 5.00% 5.00%

Namibia Potatoes fresh or chilled Intra SACU rate 0.00% 0.00% 0.00% 0.00%

Ukraine Fresh or chilled potatoes (excluding seed) MFN duties (Applied) 10.00% 10.00% 10.00% 10.00%

Lesotho Potatoes fresh or chilled Intra SACU rate 0.00% 0.00% 0.00% 0.00%

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COUNTRY PRODUCT DESCRIPTION ( H070190)

TRADE REGIME APPLIED TARIFFS


APPLIED TARIFFS


2012 2013

Zimbabwe Potatoes fresh or chilled MFN duties (Applied) 40.00% 40.00% 40.00% 40.00%

USA

Fresh potatoes, other than yellow (Solano) potatoes or seed potatoes

Preferential tariff for AGOA countries 0.00% 0.00% 0.00% 0.00%

Zambia Potatoes fresh or chilled: other


Source: Market Access Map

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South Africa has a preferential trading agreement (PTA) with the EU and they apply zero tariffs to potatoes originating from South Africa. Furthermore, South Africa has access to the US market under the AGOA which significantly lowers the tariff barriers for South African potatoes. In reality, the tariffs are likely to be far lower for South Africa when considering the preferential agreements, but at the same time, most tariff structures are particularly complex, with quotas, seasonal tariffs and specific tariffs (an amount per unit than rather than a percentage of value) all contributing to many different tariff lines and often higher duties payable than one might have anticipated initially. One must also bear in mind that most tariffs are designated to protect domestic industries, and as such are likely to discriminate against those attempting to compete with the domestic producers of that country. One can also see that certain countries wishing to protect their local industries (presumably in which they feel vulnerable or where large number of farmers are employed) will raise prohibitive levels. China is the largest potato producer and it applies 13% tariff for potatoes originating from South Africa. During 2013, 29.1% of South Africa’s potato exports were exported to Namibia, 28.9% to Angola, 16.3% to Mozambique and 8.9% to Botswana. Namibia and Botswana apply 0.00% Intra-SACU, to potatoes originating from South Africa. Angola has increased its tariff from 15% to 50% and Mozambique applies 15% to potato exports originating from South Africa despite SADC- Free Trade Agreement (FTA). Tariffs applied by various markets to potatoes seeds originating from South Africa during 2012 and 2013 are presented in Table 14. South Africa has a preferential trade agreement (PTA) with the EU and no tariff is applied for potato seeds from South Africa. Furthermore, South Africa has access to the US market under the AGOA which significantly lowers the tariff barriers for South African potato seed. During 2013, South Africa exported potato seeds mainly to Zimbabwe (29.5%), Zambia (19.5%), Namibia (15.6%), Mozambique (10.9%) and Botswana (7.8%). Zambia apply 0.00% preferential tariff due to SADC- Free Trade Agreement (FTA). Namibia and Botswana apply 0.00% Intra-SACU, to seed potatoes originating from South Africa. Zimbabwe and Mozambique apply 5% and 2.50% tariff to seed potato originating from South Africa despite SADC- Free Trade Agreement (FTA). In reality, the tariffs are likely to be far lower for South Africa when considering the preferential agreements, but at the same time, most tariff structures are particularly complex, with quotas, seasonal tariffs and specific tariffs (an amount per unit rather than a percentage of value) all contributing to many different tariff lines and often higher duties payable than one might have anticipated initially. One must also bear in mind that most tariffs are designated to protect domestic industries, and as such are likely to discriminate against those attempting to compete with the domestic producers of that country. One can also see that certain countries wishing to protect their local industries (presumably in which they feel vulnerable or where large number of farmers are employed) will raise prohibitive levels Morocco and Angola have reasonably high tariffs for potato seed originating from South Africa. Morocco applies 40% and Angola has increased its tariff from 15% to 50% to potato seeds from South Africa.

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Table 14: Tariffs applied by various export markets to potato seed from South Africa

COUNTRY PRODUCT DESCRIPTION TRADE REGIME

APPLIED TARIFFS


APPLIED TARIFFS


2012 2013 Algeria Seed potatoes: fresh or chilled General tariff 5.00% 5.00% 5.00% 5.00%

Angola Seed potatoes: fresh or chilled MFN duties (Applied) 2.00% 2.00% 50.00% 50.00%

Canada Seed potatoes: fresh or chilled MFN duties (Applied) 4.76$/ton 2.07% 4.31$/ton 0.57%

Botswana Seed potatoes Intra SACU rate 0.00% 0.00% 0.00% 0.00%

DRC Seed potatoes: fresh or chilled MFN duties (Applied) 5.00% 5.00% 5.00% 5.00%

EU Seed potatoes Preferential tariff for South Africa 0.00% 0.00% 0.00% 0.00%

Ghana Seed potatoes MFN duties (Applied) 0.00% 0.00% 0.00% 0.00%

Malawi Seed potatoes Preferential tariff for South Africa 10.00% 10.00% 0.00% 0.00%

Egypt Seed potatoes MFN duties (Applied) 2.00% 2.00% 2.00% 2.00%

Malaysia Seed potatoes MFN duties (Applied) 0.00% 0.00% 0.00% 0.00%

Mexico Seed potatoes MFN duties (Applied) 0.00% 0.00% 0.00% 0.00%

Morocco Seed potatoes MFN duties (Applied) 40.00% 40.00% 2.50% 2.50%

Lesotho Seed potatoes Intra SACU rate 0.00% 0.00% 0.00% 0.00%

Mozambique Seed potatoes MFN duties (Applied) 2.50% 2.50% 2.50% 2.50%

China Seed potatoes MFN duties (Applied) 13.00% 13.00% 13.00% 13.00%

Namibia Seed potatoes Intra SACU rate 0.00% 0.00% 0.00% 0.00%

Swaziland Seed potatoes Intra SACU rate 0.00% 0.00% 0.00% 0.00%

USA Seed potatoes: fresh or chilled Preferential tariff for AGOA countries 0.00% 0.00% 0.00% 0.00%

Zambia Seed Potatoes Preferential tariff for South Africa 0.00% 0.00% 0.00% 0.00%

Zimbabwe Seed Potatoes MFN duties (Applied) 5.00% 5.00% 5.00% 5.00%

Source: Market Access Map

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5. DISTRIBUTION CHANNELS

There are roughly three distinct sales channels for exporting vegetables. One can sell directly to an importer with or without the assistance of an agent. One can supply vegetables combined, which will then contract out importers/marketers and try to take advantage of economies of scale and increased bargaining power. At the same time combined vegetables might also supply large retail chains. One can also be a member of a private or cooperative export organization which will find agents or importers and market the produce collectively. Similar to combined vegetables, an export organization can either supply wholesale market or retail chains, depending on particular circumstances. Export organizations will wash, sort and package the produce. They will also market the goods under their own name or on behalf of the member, which includes taking care of labeling, bar-coding, etc. Most of the time, export organizations will enter into a collective agreements with freight forwarders, negotiating better prices and services (more regular transport, lower peak season prices, etc). Some countries have institutions that handle all the produce (membership compulsory) and sell only to a restricted number of selected importers. Agents will establish contacts between producers/export organizations and buyers in the importing country, and will usually take between 2% and 3% commission. In contrast, an importer will buy and sell his/her own capacity, assuming the full risk (unless on consignment). They will also be responsible for clearing the produce through customs, packaging and assuring label/quality compliance and distribution of the produce. Their margins lie between 5% and 10%. The contract importers of fruit combines market and distribute the produce of the combines, clear it through customs and in some cases treat and package it. Only few exporters have long term contracts with wholesale grocers who deliver directly to retail shops, but with the increasing importance of standards (EurepGap, Global Gap, etc) and the year round availability of fruit, the planning of long term contractual relationship is expected to increase.

6. LOGISTICS

6.1 Mode of transport

The transport of vegetables falls into two categories, namely ocean cargo and air cargo. Ocean cargo takes much longer to reach the desired, location but costing considerably less. The choice of transportation method depends, for most parts on the fragility of the produce and how long it can remain relatively fresh. With the advent of technology and container improvements, the feasibility, cost and attractiveness of sea transport have improved considerably. With the increased exports by South Africa, the number and the regularity of maritime routes have increased. These economies of scale could benefit South Africa if more producers were to become exporters and take advantage of the various ports which have special capabilities in handling fruit produce (Durban new fruit terminal).

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6.2 Cold chain management

Cold chain management is crucial when handling perishable products, from the initial packing houses to the refrigerated container trucks that transport the produce to the shipping terminals, through to the storage facilities at these terminals, onto actual shipping vessels and containers, and finally on to the importers and distributors that must clear the produce and transport it to the markets/retail outlets. For every 10 Degree Celsius increase above the recommended temperature, the rate of respiration and ripening of produce can increase twice or even thrice. Related to this are increasing important traceability standards which require an efficient controlled supply chain and internationally accepted business standards.

6.3 Packaging

Packaging can also play an important role in ensuring safe and efficient transport of a product and conforming to handling requirements, uniformity recyclable material specifications, phytosanitary requirements, proper storage needs and even attractiveness for marketing purposes. The potato industry currently relies on two suppliers of paper for packaging of potatoes. The local producer of paper namely Sappi, supplies the bulk of the paper with Gerber Paper Products importing the balance mostly from Scandinavian countries and from Brazil. All the paper complies with the strict specifications of the Department of Agriculture, Forestry and Fisheries. The Packaging Forum takes care of the supply of paper and packaging to the industry and also ensures that the packaging is manufactures according to the specifications prescribed by Department of Agriculture, Forestry and Fisheries.

6.4 Quality control

The potato industry is one the few fresh produce industries currently in South Africa, which has a full quality assurance service at all the fresh produce markets in the country. The potato industry acknowledges the importance of this service and recognizes the added benefit that results from this, such as traceability of the product. The quality assurance is provided to the potato industry by PROKON (Product Control for Agriculture) an article 21 company. PROKON is charged with establishing and maintaining product quality for the benefit of all, from farmers to the potato consumer.

7. TRANSFORMATION

Potatoes South Africa has been involved in transformation projects over the years and the results are slowly beginning to bear fruits. The number of hectares of potatoes planted by black farmers is on the rise and there are farmers who have potential to farm commercially and they are currently receiving support from Potatoes South Africa. During the past years, Potatoes South Africa focused on the following projects in contribution to potato industry transformation: Enterprise development, small grower development program, tertiary skills pipeline, farm based training and Black Economic Empowerment (BEE) Baseline study.

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8 BUSINESS OPPORTUNITIES AND CHALLENGES

8.1 Business opportunities

Two major shifts in production and processing of potatoes are expected to have a significant impact on the South African potato industry in the future. The first is the continuation of the shift from the dry land production to the irrigated production. Over and under production during good and poor seasons will be eliminated, a more and constant supply and, therefore, greater price stability within the subsector are anticipated. The second shift is that over the years, the demand for potatoes locally has grown and manifested by the increase in the sales of potatoes on the fresh produce markets, as well as the increase in the volume of potatoes taken in for processing. This growth could imply a move away from traditional staple food such as maize, especially in the urban areas. An increasing number of countries in sub-Saharan Africa are reportedly also turning to South Africa as a reliable source of food. This may therefore considerably increase the possible market size for South African potatoes.

8.2 Challenges

The constraints and market failures hinders investment, growth and employment in the industry. The main challenge facing the industry is to maintain the quality of the produce for exports so that quantities reach destinations in a desired form. It is also very expensive to keep fresh potatoes on refrigerated transport especially where the distance is very long. Other challenges for the industry include:

Increased production for the supply of international markets while at the same time to decrease production cost and to make profit.

Protection of the local potato industry against dumping practices and protection against imports from subsidized countries.

Phtyo-sanitary requirements for the European markets.

Climatic conditions that affect production.

Packaging paper price on the world market.

Rapid escalation in production costs especially fuel.

Lack of infrastructure in remote rural areas in accessing markets, especially for small-scale producers.

Water for agriculture. South Africa is located in semi arid part of the world with an average rainfall of 450mm per annum – well below the world average of approximately 860mm per year. As a result, South Africa’s water resources are, in global terms, extremely limited. This is of special importance to the potato sector, which is heavily dependent on water for irrigation given that 70% to 80% of all potatoes are produced under irrigation.

Cheap imports have the potential to jeopardize domestic processing industry.

Frequent labour unrest.

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Figure 29: South Africa potato value chain

Source: Potatoes South Africa

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9. SOUTH AFRICAN POTATO MARKET VALUE CHAIN The following discussion will focus on the main segments of the potato value chain (see Figure 29) which are the informal sector and the formal sector.

9.1 Informal sector

According to Potatoes South Africa, during 2013 informal traders were responsible for the distribution of 53% of all fresh potatoes sold on the fresh produce markets and for 28% of all potatoes sold, including informal trade from fresh produce markets, urban and rural sales. Currently an unknown number of informal traders purchase 10kg pockets from fresh produce markets, or directly from producers, repackage them into 1kg or 2kg plastic bags and sell these (or just sell the potatoes loose) in a number of settings in both rural and urban areas. This form of trading in urban areas has reportedly emerged as a direct result of changes in urban eating habits and urbanization.

9.2 Formal sector

The formal sector consists primarily of the large retailers in South Africa, such as Fruit and Veg City; Pick ‘n Pay, Shoprite-Checkers, Spar and Woolworths, and small retailers such as greengrocers and independent stores. It consumes an estimated 31% of all fresh potatoes produced, excluding any processed potatoes products that also go through normal trading channels. The formal trade in potatoes generally concentrates on the sale of high quality fresh potatoes, either loose or in smaller packaging. Some of the formal traders undertake their own packaging, branding, advertising and sometimes even semi-processing of fresh potatoes through direct purchases from producers, through dedicated wholesalers and from fresh produce markets.

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10. ACKNOWLEDGEMENTS

10.1 The following industries are acknowledged: 10.1.1 Potato South Africa Private Bag X 135

Pretoria 0001 Tel (012) 349 1906/7 Fax: (012)349 2641/7 www.potatoes.co.za

10.1.2 National Department of Agriculture, Forestry and Fisheries

Directorate: Statistics and Economic Analysis Private X 246 Pretoria 0001 Tel (012) 319 8454 Fax (012) 319 8031 www.daff.gov.za

10.1.3 Perishable Export Control Board

P. O. Box 15289 Panorama 7506 Tel (021) 930 1134 Fax (021) 930 6868 www.ppecb.com

10.1.4 Trade and Industrial Policy Strategies (TIPS)

P. O. Box 11214 Hatfield 0028 Tel (012) 431 7900 Fax (012) 431 7910 www.tips.org.za

10.1.5 National Agricultural Marketing Council (NAMC)

Private Bag X 935 Pretoria 0001 Tel (012) 341 1115 Fax: (086) 626 4769 www.namc.co.za

http://www.potatoes.co.za/

http://www.daff.gov.za/

http://www.ppecb.com/

http://www.tips.org.za/

http://www.namc.co.za/

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10.1.6 International Trade Centre (ITC) www.trademap.org

10.1.7 Product Control for Agriculture

P.O. Box 24026 Gezina 0031 Tel (012) 325 4579 Fax (012) 325 4585 www.prokonsa.co.za

10.2 The main mixed vegetable manufacturers. 10.2.1 Dimpho Fresh Food

P. O. Box 3746 Vereeniging 1930 Tel (016) 421 3840 Fax (021) 422 1400

10.2.2 Golden Harvest

P. O. Box 1206 George 6530 Tel (044) 873 3716 Fax (044) 873 3917

10.2.3 McCains

P. O. Box 231 Springs 1560 Tel (011) 365 3000 Fax (044) 818 4096

10.3 The main French fries (fresh) manufacturers. 10.3.1 Dimpho Fresh Food

P. O. Box 3746 Vereeniging 1930 Tel (016) 421 3840 Fax (021) 422 1400

10.3.2 Errol Veg (direct)

P. O. Box 44294 Jeppes Town Tel (011) 365 3000

http://www.trademap.org/

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Fax (044) 818 4096 10.3.3 Mannic Chips

Edenvale Tel (011) 452 6894

10.3.4 Rooipoort Fresh Products

P. O. Box 25212 Monument Park 0181 Tel (012) 326 1388 Fax (021) 326 3724

10.3.5 Super Chip

P. O. Box 150 Kraaifontein 7569 Tel (021) 884 4708 Fax (021) 884 4102

10.4 The main French fries (frozen) manufacturers. 10.4.1 McCains

P. O. Box 231 Delmas 2210 Tel (013) 665 1690 Fax (013) 665 1275

10.4.2 Lamberts Bay Canning Co.

P. O. Box 1 Lambertsbay 8130 Tel (027) 432 1101 Fax (027) 432 2002

10.4.3 Mine Corp Services

P. O. Box 69 Kliprivier 1871 Tel (011) 903 8963 Fax (011) 903 8910

10.5 The main canned food manufacturers.

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10.5.1 Langeberg Koop P. O. Box 1460 Boksburg 1460 Tel (011) 914 221 Fax (011) 899 8498

10.5.2 Giants Foods

P. O. Box 2007 Makhado 0920 Fax (015) 894 8261

10.6 The main crisps manufacturers. 10.6.1 Dowmont Foods

P. O. Box 1386 New Germany 3620 Tel (031) 700 5129 Fax (031) 700 4749

10.6.2 Frimax

P. O. Box 1047 Pietermaritzburg 3209 Tel (032) 233 8616 Fax (032) 233 8622

10.6.3 Kavalier Foods

P. O. Box 1627 Germiston 1400 Tel (011) 873 2113 Fax (011) 825 2932

10.6.4 L & C Messaris

P. O. Box 105 Elsiesrivier 7480 Tel (021) 592 5300 Fax (021) 591 4018

10.6.5 Willards

P. O. Box 251 Rosslyn 0200

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Tel (012) 529 5300 Fax (012) 541 1928

10.6.6 Poco Foods

P. O. Box 251 Bethal 2310 Tel (017) 647 1081 Fax (017) 647 6107

10.6.7 Simba Quix

P. O. Box 99 Isando 1600 Tel (011) 974 5435 Fax (011) 392 1294

Disclaimer: This document and its contents have been compiled by the Department of Agriculture, Forestry and Fisheries for the purpose of detailing the potato industry. Anyone who uses this information does so at his/her own risk. The views expressed in this document are those of the Department of Agriculture, Forestry and Fisheries with regard to agricultural industry, unless otherwise stated. The Department of Agriculture, Forestry and Fisheries therefore, accepts no liability that can be incurred resulting from the use of this information.

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