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May 26, 2010

South Africa considering declaring fruit farming disaster

by Christelle Terreblanche

The South African government is considering declaring the fruit farming crisis caused by the Transnet strike a disaster.

Agriculture Minister Tina Joemat Pettersson on May 24 expressed “grave concern” over the potential for massive job losses as foreign countries are likely to cancel contracts. This will affect agriculture, forestry and fisheries industries. The minister said the government is investigating whether a disaster could be declared in order to bail out farmers and would base a decision on scientific reports it has requested.

“We have made provision for disaster management. We need to decide if this category (of crisis) could be reclassified as a disaster”, she said. “Until now disasters were classified as droughts and floods. We have never categorised this situation as a disaster. So we cannot yet speculate about any form of assistance.”

The minister said the “shipping lines were calculating a US$10 million loss by midweek last week. By the end of last week we could still manage our losses but as from this week our losses are becoming acute. We are entering into a very risky period now.”

Joemat-Pettersson warned that costs would escalate exponentially if a backlog in cold storage is not cleared before the citrus, deciduous fruit and avocado harvesting season starts, while the citrus fruit industry alone is already anticipating an R650 million loss due to bottlenecks.

The fruit industry has already suffered delays from the volcanic ash crisis.

“We are concerned that the prolonged strike action is negatively impacting on agriculture and adversely affecting our economic potential,” the minister said. “In the past year, this sector has shed more than 100 000 jobs. In the first quarter of this year alone, 30 000 jobs were reclaimed. These jobs are now under threat as the sectors themselves are facing production losses.” Besides jobs, she said, another key concern is “the loss of market space and our image as a reliable source of fruit”.

She said markets in European countries like Greece, Spain and Ireland are already uncertain due to the new financial crisis and contracts are likely to be cancelled if South Africa cannot deliver agricultural products on time.

She said any assistance decided upon would cover a broad category of products, not just a package for those who are losing product offset markets in line with current proposals to introduce state subsidies for the sector.

Last week the minister told Parliament that her department was reconsidering World Trade Organisation agreements because the country was not using all the rope it had for subsidies and tariffs to assist local farmers.

She said commercial farmers have not received any substantial government assistance since 2000.

On May 24, she said her department was in negotiations with Transnet to increase capacity in order to clear bottlenecks in harbours, while contingency plans are being implemented to transport fruit via air freight – “an extremely expensive” option.

“There is rerouting of some export products through Walvis Bay and other alternative routes, but the strong value of the rand is making the exercise of rerouting even less profitable”, said Joemat-Pettersson.

Transnet is locked in a week-long labour dispute with unions over pay.

Business Report

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