Dependency and staying safe

Dependency is dangerous and can be quite uncomfortable.

This holds true in most circumstances, but lockdown exacerbated the fact. We all have stories to tell about shady cigarette deals, bootlegging, starting an exercise regime just to get out of the house and not being able to find a specific ingredient for our favourite meal because suddenly everybody was a chef and the shops were sold out!

Businesspeople around the country did their best to continue their operations and ensure the livelihood of their business and staff. Some were successful and some were not. Farmers were lucky in that they were spared some lockdown regulations and could continue as essential services - until they tried to sell their produce. Locally most continued as normal but the exporters of produce were faced with a conundrum: their product was geared towards and graded ,packed and priced for an export market that relied on timeous delivery and difficult regulations at the best of times. Now they could not export at all. The upside was that we could suddenly source very nice “export fruit and vegetables” locally and even the price was digestible because the locals had precious little else to spend their money on.

There are a lot of rules and regulations when entering the export market. It is certainly not for the faint-hearted. Agricultural exports play a very important role in our trade balance as a country. Quoting economist Wandile Sihlobo from Agbiz : “After reaching a record level of $10.6-billion in 2018, South Africa’s agricultural exports fell by 8% year-on-year (y/y) in 2019 to $9.8-billion. This, however, was unsurprising as agricultural production data for 2019 showed a notable decline in a number of exportable commodities because of the drought.” Nearly a quarter of these exports went to either the UK or Netherlands. This makes sense as these countries act as a conduit for produce to the rest of Europe. So, despite the drought and several other calamities, south african farmers still forged ahead producing world class produce and finding markets outside of our borders. And then the borders closed.

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I have no doubt that these export farmers should continue to do so. On many levels it is essential for them to continue flying the flag, showing the world what incredible abilities they have to produce the best produce at  competitive prices in the correct time windows to capture the heart and wallet of people who pay in foreign currencies.

What I do want to encourage exporters to do is to analyse their business performance during the lockdown and think about the impact of the lockdown on their ability to export. You may have scraped through this time but if harbours and airports were closed for longer or your markets had gone elsewhere, what would you have done and in what situation would you have found yourself?

Dependency on a particular distribution model can be very profitable but it could also strangle your business or farm to death. This is perhaps the right time to ensure that you spread your risks and find domestic markets that can support you should the boat fail to sail. There are various, obvious, local distribution channels such as the national fresh produce markets, chain stores, greengrocers, the hospitality industry and the informal market. If you sit and think about it the list is endless.

The challenge is to find your niche within the local market whilst not relinquishing your export clients. You may decide not to go this route but rather look at beneficiation to extract the most possible value. Maybe do this rather than exporting your raw product and then buying it back at exorbitant prices. It holds true for our mining sector and even more so for our agricultural market. It is important to have a very clear strategy for your produce and not sit back and sell to whoever comes around. Identify your market and their needs.

Farmers have a competitive advantage in today's marketplace. They represent unique values to customers and feed them. Your strategy must never compromise the integrity of your product and the relationship you have with your market. Just understand that you need to develop more markets, both locally and abroad and stay safe.

Andries Wiese -National Business Development Manager at Hollard Insurance