Analysing the competitive performance of the South African subtropical fruit industry

Thesis (MCom)--Stellenbosch University, 2018.ENGLISH SUMMARY : The main purpose of this study was to investigate the competitive performance of the South African subtropical fruit industry in the global markets in view of recent general findings that the industry showed a declining trend of competitiveness (refer to the Agric-Competitiveness Matrix by Van Rooyen; Boonzaaier, 2017; BFAP, 2018). To determine the competitive performance of the industry and to arrive at the conclusions of the study, a five-step analytical and a systematic framework , applied in agri-business competitiveness studies by Esterhuizen (2006), Van Rooyen, Esterhuizen and Stroebel (2011), Jafta (2014), Boonzaaier (2015), Angala (2015), Boonzaaier and Van Rooyen (2017), Abei (2017) and Dlikilili (2018) was used. This framework was adapted and extended to accommodate the nature of the industry and to introduce Delphi-based consultative processes and statistical methods, such as principal component analysis (PCA) and Cronbach’s alpha analysis. In this study, competitiveness is defined as the: “ability of the South African subtropical fruit industry to trade products in both domestic and international markets on a sustainable basis; and to attract resource investment such as land, labour, technology, management skills and talent, and capital from other competing economic activities while earning at least the opportunity cost of returns on such resources employed” (adapted from Freebairn,1987). This definition, together with the Porter Competitive Diamond of enquiry, shifts the analysis away from a comparative advantage to a competitive advantage focus. Competitive performance of the South African subtropical industry was measured over time, based on its global trade orientation, and compared to the performance of the industry relative to that of its direct major international rivals. To achieve this, the Relative Trade Advantage (RTA) formula, developed by Vollrath (1991), was considered as appropriate to quantitatively measure competitive performance. Trade data from the Food and Agriculture Organization (FAO), available for the period 1961 to 2013, and from the International Trade Centre (ITC) for the period 2001 to 2016, was used. The results of the FAO RTA analysis show that the industry consistently recorded RTA values below one throughout the studied years (1961 to 2013), i.e. only marginally competitive performance. However, when using the ITC datasets, it showed a stronger marginally competitive trend, with RTA values around 1 in most of the years, and with that in 2010 (RTA of 1.55) being comparatively greater than in the other periods, followed by a decreasing trend over recent years to a RTA of -0.08 in 2016. The reason for differences in FAO and ITC RTA trends is found in the details of the respective databases used– with the FAO excluding mangos and macadamias. These are two of the most important competitive subtropical product groups for South Africa. The ITC based results, which included these products (i.e. mangos and macadamias), were thus used in the analysis, as confirming a generalised declining trend in competitive performance by the industry since 2011. As to individual products, great variation was however registered. The macadamia nut industry, with its high competitive performance – RTA >120 in 2014/15, proves to be the top-performing South African subtropical fruit industry, followed by avocado industry and mangos, all consistently recording RTA values above one. Banana, papayas and kiwi fruit were trading uncompetitive in the global markets. In relation to the value-adding activities of this industry, only pineapple juice was considered (due to no data being available for other processed subtropical fruit products), and while juice is rated competitively, there is an observable decline for fresh pineapples. The South African avocado industry, when compared to the other major Southern Hemisphere production regions to which it enjoys similar production seasons, had a relatively low rate of performance and was outperformed by all the competing countries. Chile had the highest RTA value for avocados, of 93.98, in 2003. In comparison to the Northern Hemisphere production regions – where the industry enjoys counter-seasonal production – the South African avocado industry, with RTAs of 3.13, outperformed Spain, with RTAs of 1.32 in 2016. The macadamia nut industry, which leads the competitive performance stakes in the South African subtropical fruit industry when compared to the other major Southern Hemisphere production regions to which it enjoys similar production seasons. It outperformed Australia and Zimbabwe, with an RTA value of 124.1 in 2014. When South African macadamia nuts are compared to the other major Northern Hemisphere production regions – in relation to which it enjoys counter-seasonal production. The local macadamia nut industry, with a RTA value of 128.3 in 2015, outperformed Hong Kong, China (with a RTA of -3.30 in 2015) and Guatemala (with a RTA of 52.1 in 2015). The next step in the analysis, involved a survey that was conducted among expert industry-level role players to determine the factors that influence (positively or negatively) the competitive performance of the SA subtropical fruit industry. A two-round Delphi method was introduced, using respondents to the first survey as the focus group. In the first round of the Delphi process, such participants were requested to rate the impact of identified factors on a Likert scale. A total of 101 factors were found to be positively or negatively affecting the competitive success of the industry. The enhancing factors included the use of advanced technologies, the use of labour-saving machines, economies of scale, and the availability of competitive local input suppliers, while constraining factors included the cost of skilled labour, the quality of unskilled labour and the cost of the new, specialised technologies. The role of the political process was viewed as highly constraining, together with administrative “red tape” and administrative/compliance factors impacting on the industry. The Porter Competitive Diamond model was next applied and fitted the 101 factors into the six Porter Competitive Diamond determinants, again illustrating constraining and enhancing determinants. Principal component analysis (PCA) was performed, showing interesting pointers to differences and consensus in the views of industry participants with regard to the impact of factors identified for each determinant. The results reveal that there was strong consensus (similarity) in opinions regarding 30 factors influencing the industry’s competitive performance. These correlated factors (consensus factors) were subjected to Cronbach’s alpha analysis to assess their levels of internal reliability. From the results, only three of the 30 factors showed no internal consistency reliability and they were removed, leaving 27 final factors. These 27 final factors were subjected to the round two Delphi analysis. In this round, the same participants were then again asked to rate and discuss the long run relevance of these factors as determinants of competitiveness. The final step in the analysis involved proposing industry-wide strategies to enhance the industry’s declining global competitive performance. Based on the X-Y scatterplot of impact rating (from Delphi round 1) and the long run relevance rating (from Delphi round 2), critical factors to be improved and maintained were identified that aided the formulation of strategies. A strategic agenda of 19 actions were proposed. These included, amongst others: innovation through value chain collaboration; the establishment of a Subtropical Fruit Industry Strategy Plan (SFISP), as a basis of collaboration between industry role players; and government; industry-specific human resource development; effective domestic marketing; the further development of foreign markets; improved logistics and efficient distribution infrastructure; and continued engagement with government through strategic planning regarding key industry issues such as labour policy, trade policy, development of new markets, and technological innovation support.AFRIKAANSE OPSOMMING : Die hoofdoel van hierdie studie was om die mededingende prestasie van die Suid-Afrikaanse subtropiese vrugtebedryf in die globale mark te ondersoek, gesien teen die agtergronds van waarnemings van verlagende mededingedheid (Agric-Competitiveness Matrix, Van Rooyen & Boonzaaier, 2017). Om die mededingende prestasie van die bedryf te bepaal en om by die gevolgtrekkinge van die studie uit te kom, is ’n vyf-stappe ontledingsraamwerk wat in mededingendheidstudies deur Esterhuizen (2006), Van Rooyen, Esterhuizen en Stroebel (2011), Jafta (2014), Boonzaaier (2015), Angala (2015) en Boonzaaier en Van Rooyen (2017) gebruik is, uitgebrei en aangepas om die aard van die bedryf te akkommodeer en om Delphi-gebaseerde konsultatiewe prosesse en statistiese metodes, soos hoofkomponent-ontleding en Cronbach se alfa-analise, in te sluit. In hierdie studie is mededingendheid eerstens gedefinieer as die vermoë van die plaaslike subtropiese vrugtebedryf om sy produkte in beide plaaslike en internasionale markte op ’n volhoubare basis te verhandel; en om skaars hulpbronne soos grond, arbeid, tegnologie, bestuursvaardighede en talent as ook kapitaal van ander, mededingende ekonomiese aktiwiteit te lok, terwyl dit ten minste die geleentheidskoste van opbrengste wat op hierdie hulpbronne gebruik is, verdien (Freebairn, 1987). Hierdie definisie, tesame met Porter se mededingende diamant-model, skuif die analise vanaf ’n studie van vergelykende voordeel tot mededingende voordeel. Die tweede stap in die ontledingsraamwerk was om die mededingende prestasie van die Suid-Afrikaanse subtropiese vrugtebedryf oor tyd op grond van sy handelsoriëntasie te meet, en om die prestasie van die bedryf met dié van sy grootste direkte internasionale mededingers te vergelyk. Om dit te bereik, is ’n omvattende indeks om mededingende voordeel te meet, naamlik die Relatiewe Handelsvoordeel (Relative Trade Advantage (RTA)) van Vollrath (1991), beskou as die gepaste indeks om die mededingende prestasie van die plaaslike bedryf kwantitatief te meet. Wêreldhandelsdata vanaf die Food and Agriculture Organization (FAO) vir die tydperk vanaf 1961 tot 2013 en vanaf die Internasionale Handelsentrum (International Trade Centre (ITC)) vir die tydperk 2001 tot 2016 is gebruik om die bedryf se RTA’s te meet. Die resultate van die FAO RTA-analise toon dat die bedryf dwarsdeur die studiejare (1961 tot 2013) konsekwent posetiewe maar marginale RTA-waardes (tussen 0 en 1) opgeteken het, m.a.w. marginaal mededingende prestasie. Toe die ITC-datastel gebruik is, het dit egter sterker ’n positiewe tendens getoon, met RTA-waardes in die meeste jare van om en by 1, en met die waarde in 2010 (RTA van 1.55) vergelykenderwys groter as in die ander tydperke en met ’n geleidelik afnemende tendens oor onlangse jare (RTA van -0.08 in 2015). Die rede vir hierdie verskille in RTA-tendense kan gevind word in die onderskeie databasisse wat gebruik is – met die FAO wat nie veselperskes en makadamianeute insluit nie. Hierdie is twee van die belangrikste mededingende subtropiese vrugtegroepe in Suid-Afrika. Die ITC-gebaseerde resultate, wat hierdie produkte ingesluit het (m.a.w. veselperskes en makadamianeute) is dus in die volgende stappe van die analise ingesluit en bevestig ook dat die suptropiese bedryf in die algemeen teen n dalende koers meeding sedert 2011. Groot produk spesifieke variasie word egter gevind ten opsigte van mededingendheid. Die makadamia neut bedryf, met sy hoë mededingende prestasie – RTA waardes >120 in 2014/15 -is die top-presterende Suid-Afrikaanse subtropiese vrugtebedryf, gevolg deur die avokadobedryf en mangos, met RTA waardes van konstant bo een. Piesangs en kiwi vrugte was in die algemeen nie mededingend. Met betrekking tot die waardetoevoegende aktiwiteite van hierdie bedryf is slegs pynappelsap oorweeg, aangesien data nie vir ander verwerkte subtropiese vrugte beskikbaar was nie. Pynappel sap toon n mededingende tendens met ’n waarneembare afname in mededingende prestasie by vars pynappels. Met betrekking tot die onderskeie produkte: wanneer die avokadobedryf met die vernaamste Suidelike Halfrond produksiestreke vergelyk word wat eenderse produksieseisoene ervaar, het dit relatief laag presteer en het al die mededingende lande beter presteer. Chili het die hoogste RTA-waarde vir avokado gehad, van 93.98 in 2003. In vergelyking met die Noordelike Halfrond produksiestreke – waar die bedryf teen-seisoenale produksie ervaar – het die plaaslike avokadobedryf, met RTA’s van 3.13, beter presteer as Spanje, met ’n RTA van 1.32 in 2016. In terme van die makadamianeutbedryf, wat die beste presteerder is in die Suid-Afrikaanse subtropiese vrugtebedryf, is dit naasbeste wanneer dit met ander vername Suidelike Halfrond produksiestreke vergelyk word, wat eenderse produksieseisoene het. Dit het beter presteer as Australië en Zimbabwe, met ’n RTA-waarde van 124.1 in 2014. Wanneer Suid-Afrikaanse makadamianeute met produksiestreke in die Noordelike Halfrond vergelyk is – met teen-seisoenale produksie – het die plaaslike makadamianeutbedryf, met ’n RTA-waarde van 128.3 in 2015, beter presteer as dié van Hongkong (China) (met ’n RTA van -3.30 in 2015) en Guatemala (met ’n RTA van 52.1 in 2015). Stap drie het eerstens ’n bedryfsopname behels wat onder kundige bedryfsvlakrolspelers onderneem is om die faktore te bepaal wat die mededingende prestasie van die SA subtropiese vrugtebedryf beïnvloed (hetsy positief of negatief). ’n Twee-rondte Delphi-metode is gebruik, met respondente van die eerste opname wat as die fokusgroep gebruik is. In die eerste Delphi-rondte is hierdie deelnemers gevra om die impak van geïdentifiseerde faktore op ’n Likert-skaal te bepaal. ’n Totaal van 101 faktore is gevind om die mededingende sukses van die bedryf positief of negatief te beïnvloed. Die versterkende faktore was o.a. die gebruik van gevorderde tegnologieë, die gebruik van arbeidsbesparende masjinerie, ekonomieë van skaal en die beskikbaarheid van plaaslike insetverskaffers, terwyl stremmende faktore die koste van geskoolde arbeid, die gehalte van ongeskoolde arbeid en die koste van die nuwe, gespesialiseerde tegnologieë was. Die rol van die politieke proses is as hoogs stremmend beskou, tesame met die rompslomp en administratiewe/nakomingsfaktore van die bedryf beïnvloed. Die vierde stap het Porter se mededingende diamant-model toegepas en die geïdentifiseerde 101 faktore in die ses Porter mededingende diamant-determinante ingepas. Dít het weer die stremmende en versterkende faktore geïllustreer. Hoofkomponent-ontleding (PCA) is ook uitgevoer, aangesien dit betekenisvolle, interessante wysers verskaf na die verskille en konsensus in die sienings van die kundiges met betrekking tot die impak van die faktore wat vir elke determinant geïdentifiseer is. Die resultate toon dat daar sterk konsensus (eendersheid) was in opinies oor 30 faktore wat die bedryf se mededingende prestasie beïnvloed. Hierdie gekorreleerde faktore (konsensusfaktore) is verder aan Cronbach se alfa-analise onderwerp om hulle vlakke van interne betroubaarheid te assesseer. Die resultate het getoon dat slegs drie van die totaal van 30 faktore geen interne betroubaarheid getoon het nie en hulle is verwyder, wat 27 finale faktore agtergelaat het. Hierdie 27 finale faktore is onderwerp aan die tweede rondte van die Delphi-analise. In hierdie rondte is die kundige deelnemers gevra om die relevansie van hierdie faktore as determinante van mededingendheid te beoordeel en te bespreek. Die resultate toon dat die meeste van hierdie finale faktore relevant was vir die langtermyn mededingende sukses van die bedryf, en daar is in die finale stap van die analise aan hulle aandag geskenk. Stap vyf van die raamwerk het die voorstel van bedryfswye strategieë behels om die bedryf se delende globale mededingende prestasie teen te werk. Op grond van die X-Y puntediagram van impakbeoordeling (vanuit Delphi rondte 1) en die relevansiebeoordeling (vanuit Delphi rondte 2) is kritiese faktore wat verbeter en onderhou moet word, geïdentifiseer wat die formulering van strategieë gehelp het. Negentien strategiese aksies word voorgestel--dit sluit onder andere in die stigting van ’n Strategiese Plan vir die Subtropiese Vrugtebedryf waar waardeketting rolspelers en ook die regering kan saamwerk; bedryfspesifieke menslike hulpbronontwikkeling; doeltreffende plaaslike bemarking; die verdere ontwikkeling van buitelandse markte; verbeterde logistieke en verspreidingsinfrastruktuur; en voortgesette betrokkenheid by die regering oor sleutel bedryfskwessies, soos arbeidsbeleid, handelsbeleid, ontwikkeling van nuwe markte, ens