Growing great fruit may not be enough to keep SA’s fresh fruit industry on top – new research

A unique three-way research collaboration between Henley Business School Africa, the University of Pretoria’s Gordon Institute of Business Science (GIBS) and Stellenbosch University, has published new research this week that cautions that the fresh fruit farming industry in South Africa – the biggest contributor to the agricultural export sector (by value) – is facing a perfect storm of challenges that may require a more strategic relationship-driven approach to secure its economic viability.

South Africa’s fresh fruit industry has achieved remarkable success. The largest exporter of fresh fruit in the Southern Hemisphere, the industry generates more than US$3 billion in foreign exchange annually and has created over 400,000 employment opportunities throughout the value chain. But, rising competition and logistic challenges could threaten the industry’s sustainability, the research argues.

Decaying infrastructure, bottlenecks at ports, rising shipping costs, electricity and water crises and the lingering effects of the COVID-19 pandemic, are among the key challenges outlined in the white paper. According to lead author of the research, Professor Danie Petzer, head of research at Henley Business School, these obstacles not only hinder logistic efficiencies but also jeopardise South Africa's global competitiveness.

“While South Africa has a wide export reach – Russia and the EU are our biggest buyers of fresh fruit – and our prices are competitive, pressure from fellow Southern Hemisphere producers, Chile and Peru, that share the same winter window, are threatening to grab market share. Should our production slip, or our relationships with key buyers fray, these competitors will be ready to step into the gap,” he says.

The white paper stresses that in this terrain, establishing and nurturing long-standing relationships with foreign buyers, as well as diversifying trading partnerships, are essential strategies for growth.

“Our research highlights the importance of investing in strong relationships with both existing and new markets,” says Professor Marianne Matthee, from GIBS. “We set out to understand more about what drives successful exporter-importer relationships and export performance and sustainability. Surprisingly, empirical research in this critical area is sparse and we set out to plug this gap.”

A snapshot of SA’s fresh-fruit exporters

The researchers surveyed 65 direct exporters of fresh fruit in South Africa, looking for the behind-the scenes inter-firm relationship behaviours that are the most significant predictors of export performance and sustainable exporter-importer relationships.

On average, respondents had been exporting their fresh fruit for 15 years, exporting to their largest foreign buyer for 12 years. Just over 81% of their fresh produce sales were derived from directly exporting to 35 buyers and exporting nearly 27% of their products to their largest foreign buyer.

While most exporters surveyed perceived their export performance as satisfactory and sustainable, the white paper highlights the need for increased investment of time and energy in the largest foreign buyers, who play a crucial role in long-term export sustainability. Exporters on average devoted around 14 hours per week to business affairs and communication with their largest foreign buyers.

Five recommendations to shore up the industry’s success

The research makes five core recommendations for fresh fruit exporters in South Africa to enhance their export performance and sustainable exporter-importer relationships, even in difficult times.

First, it recommends that exporters prioritise the economic viability of their exporter-buyer relationships and use sales and profitability measures to objectively measure this. This would require a willingness and ability to engage with buyers to frankly discuss minimum order quantities and frequency of orders.

Second, it urges exporters to take a long-term view of relationships with foreign buyers and not be swayed by short-term gains that could compromise long-term sustainability and profitability.

Third, it suggests that exporters retain open communication with foreign buyers; frequent and candid information sharing and consultation is crucial and exports can work to ensure that lines of formal and informal communication remain open to regularly engage in listening, sharing, planning and problem solving.

Fourth, exporters can screen and/or train staff to ensure high levels of relationship proneness – identified as a key driver of both export performance and sustainable exporter-importer relationships. For example, ‘soft skills’ and emotional intelligence workshops could boost employees’ desire and ability to forge mutually beneficial relationships with foreign buyers.

Fifth, on a management level, leaders also need to walk the talk, the researchers suggest. Exporters can foster a relationship-centred business culture that is upheld by management.

“Building a relationship-centred business requires long-term planning and investment both in financial assets and in human capital,” says Dr Stefanie W. Kühn from Stellenbosch University, adding that it is clear that South African exporters themselves understand the value of this approach.

“It is noteworthy that non-economic satisfaction, commitment, communication, and cooperation emerged as key drivers of sustainable exporter-importer relationships in this study. This is a testimony that the exporters we surveyed value working closely and effectively with their foreign buyers in the interests of both parties.”

To download the white paper, click here.