HOW SOUTH AFRICA’S AGRICULTURAL EXPORTERS AVERTED A COVID-19 DISASTER
As a net exporter of many agricultural products, South Africa’s agricultural industry would have been in dire straits had it failed to adapt to the difficulties presented by Covid-19. But quick thinking and rapid adjustments meant that some agricultural products were not only able to survive, but also thrive.
The announcement of the first case of Covid-19 in early March, and the consequences that followed, may have come as a surprise to those businesses not dealing in export markets. But for companies that rely on global shipping channels, like those in the country’s agricultural industry, the impact was felt weeks before.
‘A lot of the containers we were planning to use got stuck in the Far East because of rising Covid-19 infections there, as early as February,’ says Rory Netterville, the supply-chain manager at Zest Fruit. ‘Many of these ports in the East are serious hubs for import and export, and a lot of the shipping lines’ containers couldn’t get in or out of there.’
These delays had an immediate knock-on effect for the local citrus industry, which had to rapidly reconsider how they would ship their imminent harvests around the world.
One quick change came in how exactly these products were shipped. Under normal circumstances, companies like Zest would use refrigerated containers, also called reefer containers, to ship their products, but with these specialised containers unable to leave Covid-19-ravaged ports in the Far East, they quickly changed their strategy.
‘We had to diversify and use other options. For example, if you could ship your product in a bulk ship, where you load pallets without containers, you did that,’ says Netterville.
ADAPTING TO SOUTH AFRICA’S PORT CLOSURES
Eventually, Covid-19 infections did hit South African ports, and by June, major shipping companies were avoiding key ports because of delays.
‘In the Western Cape, where they had a high number of infections around May and June, it led to some ports being closed,’ says Agbiz Chief Economist, Wandile Sihlobo. ‘Logistically, we then had to be flexible and move products to ports in the Eastern Cape and KwaZulu-Natal.’
For many farmers, the strategy then became to avoid the temptation to send produce to geographically convenient ports and rather send their products overland to ports where the flow of goods was still active.
‘We took a lot of Eastern Cape fruit to Durban, and then shipped it to Asia. We also took a lot of Eastern Cape fruit to the Western Cape, and from there onwards to Europe,’ says Netterville. ‘At different times of the season, different strategies played out to reduce the impact of Covid-19.’
AUTOMATION AND INNOVATION ARE THE FUTURE
Although rapid thinking and adjustments to shipping arrangements enabled the agricultural industry in South Africa to survive, Sihlobo says the pandemic has caused many to look to automation and innovation to mitigate future stoppages.
‘The biggest legacy for the agricultural industry, highlighted by Covid-19, will be a look towards increasing automation,’ says Sihlobo. ‘If you look at the United States, Brazil, and parts of Europe, there were a number of Covid-19 cases in meat plants. As a result, many have decided to increase their automation to minimise the limitations of human labour.’
This has the potential to reduce downtime and get products from the farm to international markets significantly faster.
Netterville says automation has been a rapid trend in the fruit industry and it will continue to expand following the impact of Covid-19.
‘Many of the pack houses have previously upgraded to automation, so tasks like fruit grading and sizing are already automated. At the moment, it’s just the harvesting, and the process of taking the fruit and putting it in the box that’s labour-intensive.’
Sihlobo says he is confident there will be other innovations to emerge from the disaster and many may only reveal themselves once the dust has settled on Covid-19.
On a smaller scale, some operators are already looking towards different ways of shipping, marketing, and getting their products to market – especially in the wine industry.
Tiny Keg, a small-batch mobile canning company based in Cape Town, believes that they may hold one solution to future outages.
Their solution is forgoing the traditional wine bottle – which is bulky, and thus difficult and costly to ship – for light, stackable cans with longer shelf lives. It may just be an export innovation to rise out of otherwise markedly difficult circumstances for the alcohol industry.
THE COST OF CONTINUING OPERATIONS
These rapid innovations, strategy adjustments, and full automation are complex and costly matters.
Some shipping companies charged emergency bunker surcharges that fruit exporters could not have budgeted for, and the last-minute change of ports in order to avoid bottlenecks also came at a cost. Other exporters faced complications brought on by forward exchange cover agreements, used to hedge against the risk of currency fluctuations.
‘From the farmer’s side, the various Covid-19 adjustments came with a heavy financial burden,’ says Sihlobo. ‘But at the end, it enabled the country to operate.’
TURNING TO BANKS FOR SOLUTIONS
These short-term complications were undeniable, and many exporters turned to financial institutions for assistance and advice during the peak of the crisis.
‘For many exporters, there were severe short-term predicaments, and as global markets went through a slump, many have suffered financial burdens,’ says Nedbank Business Banking’s Mark Rose.
‘Many may still be in a position whereby their cashflow is negatively affected, because they were relying on exporting in the same volume as they were previously or had agreed on prices before they experienced export delays.’
Although Rose says there has been a lot of understandable negativity and frustration in many export businesses over the last few months, there’s also opportunity that comes with it.
‘As a bank, Nedbank Business Banking is well placed to facilitate and provide a strong advisory position to our clients looking to export around the world,’ he says. ‘This is particularly true for businesses looking to export into Africa, given the bank’s strong partnerships on the continent. We can connect businesses to people that have experience in export markets, and we have a strong research wing that can support them through this,’ says Rose.
For export-dependent farmers on the ground, it’s been a stressful period, but one that’s shown they’re able to roll with the punches, innovate, and automate in order to stay in business.
‘If it had been business as usual, without the industry coordination and cooperation, it would have been a disaster,’ says Netterville. ‘Farmers are exporting perishable products – if you don’t move them, they’re gone. So, the stakes, even during normal times, have always been incredibly high.’
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