Challenges for R8.4bn SA orange export industry

Even in the days of Apartheid, South African oranges were an important export.

However, FNB is warning that these exports have recently been hit by the water crisis.

“The devastating drought, characterised by the lowest rainfall since 1904 and a sharp fall in dam levels during the 2015/16 production season has caused a 21% drop in the production of South Africa’s most precious fruit export – oranges.  There is however a lot more that is impacting this fruit than just the recent drought,” the bank reported.

“Oranges are by far the most precious of the important fruit industry in South Africa. In the 2016/17 season in a year in which the drought was at its peak saw the total gross producer value for oranges reach R9.29 billion with earnings from exports accounting for 91% of the total production, at R8.47 billion.

Paul Makube, Senior Agricultural Economist at FNB says diseases are the real challenge for the industry.

“South Africa’s main export destination, the European Union where the Citrus Black Spot (CBS) is considered a quarantine pest, has caused consternation between the two trading partners. Another disease is Navel splitting; it has affected the Western Cape so much so that exports there have reportedly dropped by about 17% to 20%. This raised demand for navels from other regions of South Africa, particularly at the time when the export market was particularly strong in the EU, the Far East, Russia, and the Middle East,” he said.
He noted that the European market is the leading destination for South African oranges, accounting for about 36% of total orange exports, followed by the Middle East with a share of 25%, and then the South-East Asian market at 12%.

“It therefore goes without saying that a decrease in this sector carries far reaching consequences.
Producers have started to switch to soft citrus, which in the longer term may eventually lower the status of oranges as the leading fruit in terms of production and being the export leader in terms of fruit in South Africa,” says Makube.
FNB said that the weather turned positive during the rainfall season of 2016/17, and the outlook so far indicates that we are likely to have a normal to above normal rainfall during the 2017/18 crop season.
“This does not suggest that orange production is at its death bed, it is still a long way as it currently accounts for 63% of the total hectares under citrus. Outside the concerns, the current weather augurs well for the recovery in orange production with a rebound in volumes for the export market.

“When that is offset by the relatively weaker rand exchange rate, it is most likely to boost export revenue,” concluded Makube.

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