Freight & Trading Weekly

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AuGuSt 2009frEIGHt & trADING WEEKLY

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AUGUST 2009 | 1

Editor Joy OrlekConsulting Editor Alan PeatContributors Liesl Venter Advertising Carmel Levinrad (Manager)

Yolande Langenhoven Claire Storey Jodi Haigh

Managing Editor David Marsh

CorrespondentsDurban Terry Hutson

Tel: (031) 466 1683Cape Town Ray Smuts

Tel: (021) 434 1636 Carrie Curzon Tel: (021) 674 6935Port Elizabeth Ed Richardson

Tel: (041) 582 3750Swaziland James Hall

[email protected]

Advertising Co-ordinators Tracie Barnett, Paula SnellLayout & design Dirk VoorneveldCirculation [email protected] by JUKA Printing (Pty) Ltd

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Page 2Export fruit basket turns lacklustre

Page 3Namport’s extended facilities ready for business growth

Page 4‘Political intervention needed to resolve restrictive barriers’

Page 6Fruit export major pins its hopes on a weaker rand

Page 7New FE service gets strong support from reefer exporters

Page 8Lower fuel price has helped citrus industry

Page 9IT efficiency gains momentum

Page 10‘Certain products have been resilient’

Page 11‘No room for complacency’

Page 13New pollution cover product launched

Page 14Business to Africa and Middle East remains buoyant

Page 16‘Automation can save millions in the long run’

Page 16Big opportunities in Africa

Page 16Farm to supermarket cold chain an emerging trend

The perishable industry has escaped the full impact of the global meltdown, but it has not emerged unscathed – particularly when it comes to discretionary products like flowers.

Exporters and their service providers offer their perspectives.

Cover photo: Tijana Huysamen.

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More Reefer SolutionsMore Sailings More Often

By Ray Smuts

Three glorious marketing years have come and gone, with South Africa’s sun-drenched export fruit basket

turning somewhat lacklustre this year.True, signs are emerging that the world

may slowly but surely be awakening from almost a year of economic hibernation. China is a case in point with better-than-expected GDP growth of more than 7% for the three months to July, but 2009 will be remembered by South African growers and exporters as pretty much an indifferent year.

So many factors enter the equation when seeking answers but a few readily come to mind. There was the strong rand that bedevilled price as payment is usually in international currency such as euros or dollars, lack of product demand in certain markets, inclement weather and the need to ‘refurbish’ tired farmland.

Luvuyo Mabombo, CEO of the Perishable Products Export Control Board (PPECB), says signs began emerging as early as last October (2008) that trading conditions were not going to be as rosy this year.

“Our own analysis is that going forward this is not purely a function of trading conditions (access to credit, protectionism etc) but that production also pertains to global warming.

“We are now seeing a recurrence of lateness in harvesting seasons which impacts on competition between product regions domestically and closes up trading windows internationally.”

Dealing with some commodity specifics, Mabombo says the PPECB has witnessed organic growth in citrus at an average 4-5% per annum but a probable decline of 7% and 9% in volumes this year. There’s been stability in the deciduous programme and stabilised volumes of

between 10 and 11 million cartons in the subtropical sector, with mangos and litchis showing a “drastic” decline

PPECB data for the first six months of the year reflect that all fruit shipped in containers was down to 937 246 from 966 730 in the corresponding period in 2008.

Competitiveness As to FTW’s poser: How the industry can do things better in the year ahead, Mabombo says the key to sustaining the country’s competitiveness is maintaining focus on quality (including quality of fruit to the local market), improving efficiencies in the logistics chain through the efficient use of all ports, and hopefully reducing logistics costs by utilising rail and government.

Citrus, which accounts for some 65% of all fruit exported, has shown organic growth of between 4-5% per annum but volumes

are expected to be between 7% and 9% down this year on last.

“We have the fruit available for export but the markets have not taken the product – so to predict what will happen next year is very difficult,” says Justin Chadwick, CEO of the Citrus Growers’ Association.

The prediction for all citrus exported this year is likely to be 84 million cartons, even though 4 million-odd extra cartons were packed but not shipped.

Valencias, the major citrus variety exported, will be down around 3 million cartons this year, to around 40.5 million cartons, navels down about 2.5 million cartons to 19 million cartons, grapefruit likely to be slightly up, from 11.3 million (17kg) cartons last year to 11.9 million, soft citrus down to 7.1 million cartons from 7.34 million last year.

Stefan Conradie, pome and stone fruit product manager at the Deciduous Fruit Producers’ Trust, says hail in the Ceres areas

Export fruit basket turns lacklustreLate harvesting impacts on global competition as global warming takes its toll

The key to sustaining the country’s competitiveness is maintaining focus on quality.

AUGUST 2009 | 3

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and spraying problems related to Golden Delicious apples accounted for this variety being 14% down in volume. Apple and pear exports meanwhile are expected to decline 7% this year from 26.48 million cartons (12.5kg) to 24.57 million.

The combined 2008/09 estimate for stone fruit (apricots, nectarines, peaches plums/prunes) is 12 826 086 cartons, slightly up on 2006/07.

Deciduous Back at the PPECB, Mabombo says increases in deciduous export volumes remain flat year on year, mainly due to increases in volumes being offset by orchard replacement programmes and continued consolidation within the sector. On grapes, it is too early in the year to predict the performance.

The industry, in concert with the PPECB and the DTI, is working hard to come up with electronic export certification (including phyto-sanitary certification), a pilot project likely to be phased in gradually next year over a four-year period.

This will eliminate any future risk of fruit being loaded before all the documentation is completed to the satisfaction of all parties.

Charles Hughes, CEO of Tru-Cape, the major apple and pear exporter, says overseas demand has not been all that bad this year.

“There is only so much fruit available but I must say it’s obviously a pricing issue, what the grower gets.”

Mabombo says the PPECB has “never been as rejuvenated and focused in years”, having defined the vision, mission and strategic objective of the business.

“At the PPECB we continue to emphasise our view that when it comes to agriculture, the horticulture industry “is the goose that lays the golden egg”. The country needs to harness and support the industry because of its potential to bring more forex into the country, create more jobs per hectare, more income for the farmer, untapped opportunities for BEE and unlock our dead assets in the hands of the rural poor.”

Namport’s extended facilities ready for business growthBy James Hall

The Namibian Ports Authority (Namport) wants to see the extensive cold storage facilities it has recently upgraded utilised by more perishable shippers from SA. Since 2007 Namport has doubled the cold storage capacity at its ports. Presently, the reefer plugs and refrigerated warehouses are mostly occupied by the catches of local fishing outfits and fresh-fish exporters.

A company source told FTW that Namport was ready to make all necessary investments to accommodate grape and dried fruit exports from the Western Cape, should the need arise.

At the largest port managed by Namport – Walvis Bay – a 9700m² reefer terminal can handle 256 reefer containers. The southern port of Luderitz has 72 reefer plug points available for cold boxes. Luderitz’s main cold-storage facility is a 2500m² refrigerated warehouse

which is privately owned and operated.

Working with a capital budget of nearly a half-billion rand this year, Namport is investing in further infrastructure improvements such as more mobile cranes, the latest of which is operating at Luderitz.

The port authority is using its membership of the Walvis Bay Corridor Group to market its ports to SA businesses.

Selling points for SA shippers considering Luderitz as an alternative to CT include the relatively storm-free Namibian climate, good infrastructure, competent and responsive port management and uncongested port facilities.

The perishables business has room to grow at the ports. At Walvis Bay, reefer vessels constitute the smallest percentage of vessels using the port. Overall, port use and cargo volumes have risen steadily every year for the past five years.

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By Ray Smuts

Breaking down restrictive trade barriers calls for fortitude, negotiating prowess, patience

and diplomacy, but it remains tough for the South African fruit industry to make a significant breakthrough into hugely lucrative potential markets without more proactive government participation and support.

This is by no means isolated thinking but shared by major players in all sectors of the export fruit industry, as has become clear during interviews for this 2009 Perishables Supplement.

What is more, the newly elected Zuma cabinet’s agenda of priorities does not appear to take cognisance of the industry’s concerns over obstacles that stand in the way of progress – and it remains to be seen how long it will take before government gets around to addressing such issues.

It not only takes time for countries to reach consensus, but it should be borne in mind that that the two cabinet ministers really important to the fruit sector, trade and industry minister Dr Rob Davies and agriculture minister Tina

Joemat-Pettersson, are only just settling into their portfolios and no doubt finding their feet.

The Perishable Products Export Control Board (PPECB), which acts as an independent service provider for quality certification and cold chain management for producers and exporters of perishable food products, was first to respond to FTW’s poser: “Is there perhaps something more we should be doing in view of stiff international competition than we have been to date?”

“Government must strengthen its focus on unlocking trade barriers (technical barriers to trade and sanitary and phyto-sanitary barriers) for South African fruit and vegetables to the US, India, Africa and China,” PPECB CEO Luvuyo Mabombo told FTW.

Says Anton Rabe, CEO of the Deciduous Fruit Producers’ Trust: “With new markets, government capacity and expertise is stretched to say the least. It is clear that some officials are trying their best but political intervention is urgently required to resolve issues around protocols with China and re-opening markets such as Thailand.

“This is just taking too long and is

providing opportunities for competitors New Zealand/Australia and Chile to exploit and develop these markets in our absence.”

Rabe says there are no technical barriers to trading with India but very high, protectionist-related duties of 50% or more that prevent economic returns and thus proper market access.

A process leading to a preferential trade agreement between South Africa and India has begun and Rabe is hopeful this will be fast-tracked as far as possible.

India is South Africa’s sixth largest trading partner in Asia, with two-way trade worth more than R2 billion a year.

The two countries, along with Brazil, are co-signatories to the so-called ‘New Delhi Agenda for Cooperation’, aimed at dramatically increasing trade between

the three countries.Stefan Conradie, product manager

for South African pome and stone fruit (apples, pears, peaches and nectarines included) at the DFPT, suggests government’s tardiness means it is not driving the process.

“We sometimes get the feeling that there is not capacity and focus because these activities very much involve lobbying in foreign countries, which is quite a long procedure, and if there is no energy (by government) in the process then it almost gets lost in the system.”

Conradie believes India to be a potentially huge market – also that the country will not have sufficient product to satisfy global demand, given the presence by giant retailers such as Walmart.

Charles Hughes, CEO of Tru-Cape, a major apple and pear exporter, has been quite vocal in the past about government’s “lack of commitment”, a view he has not changed, even though feeling the new agriculture minister should be “given a chance”.

South Africa and China are ‘partners’ in a two-way protocol that allows this country to export pears, table grapes and

‘Political interventionneeded to resolve restrictive barriers’

‘Government must strengthen its focus on unlocking trade barriers for South African fruit and vegetables to the US, India, Africa and China.’

AUGUST 2009 | 5

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leaf tobacco, though sadly not apples, to China and the Chinese apples and pears to South Africa, neither of which have ignited fireworks in terms of volumes.

“The problems we are having are not due to the Chinese, who are ready to go ahead, but South Africa.

“What the industry would like to see expedited is Thailand where the South African government did not fulfil certain requirements set by Thailand so we sort of fell off the bus.”

South Africa has had a citrus protocol with China since the mid-1990s but here

again it has been a woeful exercise in terms of meaningful volumes shipped either way, perhaps a few hundred containers a year, despite some 400 South African growers registered to export to China.

Justin Chadwick, CEO of the Citrus Growers’ Association (CGA), says the protocol notwithstanding, the lion’s share, probably 80% of South African citrus, continues to find its way to the Chinese mainland via the so-called Grey Route through Hong Kong.

Factors that have a bearing on low

citrus volumes to mainland China direct is the Chinese government’s insistence that fruit be subjected to in-transit sterilisation for 28 days prior to landing. There’s also the belief by traders that the process has a negative effect on shelf life, hence their sourcing product in Hong Kong.

This would account for the sharp contrast in volumes to mainland China and Hong Kong last year – 300 000 cartons and 3.4 million cartons, respectively.

Chadwick, underscoring the

importance of spending money to raise product awareness, says Australia and the US are spending huge sums for that purpose – South Africa none.

”We are expecting China to accept we have a brilliant product but are doing nothing to get the message across.”

South Africa will have a presence for the first time at Asia Fruit Logistica in Hong Kong from September 2 to 4.

The DTI is sponsoring a stand and the CGA planning a series of promotions to make its products known to the many Asian buyers attending.

Probably 80% of South African citrus continues to find its way to the Chinese mainland via the so-called Grey Route through Hong Kong. Photo: Tijana Huysamen.

6 | AUGUST 2009

By Ray Smuts

Now is not the time for foolhardiness as the South African fruit export sector wrestles to come to grips

with the extremes of global recession, a reality of which Nico van Staden is all too keenly aware.

The group marketing director of Colors Fruit, tasked specifically with the export market, he recalls, perhaps with a twinge of nostalgia, the industry’s glowing successes of 2008, a scenario now as worrisome as an irregular cardiogram.

Colors is the third ranked, behind Capespan and Dole SA, having catapulted to prominence after deregulation of the industry in 1997.

Last year, the Paarl-headquartered company exported 15 million cartons. But Van Staden expects a decline of perhaps 3% this year.

“We started the New Year with a favourable exchange rate, the rand at R10.50 or R10.70/$, but that did not last for long and things have become a lot tougher, given that we all trade in pound, euro or dollar currencies, so it’s a big negative for the export market.”

Van Staden says whereas 2008 was a harvest year for speculators, this is certainly not the climate for such pursuits – rather a time for belt-tightening and staying focused.

What has stood Colors in good stead, unlike some other exporters, is that it has long followed a successful pre-programmed “recipe” of addressing the needs of global retailers, rather than the wholesale trade.

Its long-standing client base includes the French group and world’s second biggest retailer, Carrefour, Migros in Switzerland, Loblaws in Canada and all the UK heavyweights – Morrisons, Marks and Spencer, Tesco, Sainsbury’s and Asda.

Around 50% of Colors’ exports go to the UK and continental Europe, the Far

East and Middle East, each accounting for 15%, Africa for 5% (via wholesalers) and the remainder to various other markets.

Van Staden says the country’s fruit exports are down due not only to the global economic malaise but a smaller crop, mainly in citrus and grapes, although apples and pears appear more stable.

As to the future, he pins his – and indeed the industry’s hopes – on a weaker rand, even though the substantially reduced price of oil around $150 a barrel to the current $60-$70, has helped somewhat.

Reefer capacity remains a problem on the South Africa-North Europe trade, given that up to 70% of the country’s fruit is shipped to the UK and continental Europe, but availability is more fluid on other trades.

Nico van Staden … ‘Reefer capacity remains a problem on the South Africa-North Europe trade.’

Buffalo set to grow perishable sectorBy Liesl Venter

Expanding its perishable market is high on the agenda of Buffalo Freight Systems, says managing director Margrit Wolff.

So much so that the company has opened an office in Cape Town specifically to take advantage of opportunities in the sector.

“Together with our partners in Israel, Mentfield, who are world leaders in this market sector, we are expanding this market hugely,” says Wolff. “We have traditionally done some perishable work, namely meat imports and exports, as well as some airfreight of fresh produce into Africa. This has expanded to become a driving force in our development.”

According to Wolff the perishable

market has by most accounts managed to escape the effects of the global economic meltdown, making it an ideal market to grow and expand.

“There are many opportunities including huge cross-trade. And by increasing the value of the agricultural sector to the South African economy we can become the bread basket to the world.”

Wolff says aspects such as on time delivery, good relationships with shippers and authorities as well as a thorough knowledge of the statutory requirements and paperwork for perishables, which remains an extremely regulated market sector, are key when working in the perishable market where lack of service providers and high freight rates continue to be a challenge.

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Fruit export major pins its hopes on a weaker rand

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New FE service gets strong support from reefer exporters

Exporters of citrus have added their support to the new containerised Safari 3 service

launched by Safmarine in July this year.Primarily aimed at providing an

alternative for dry cargo exports and imports to and from South Africa and the Far East, the service – which connects Mozambique, Madagascar and Mauritius with the Far East – has proved an attractive one for South African reefer exporters as well, says Safmarine’s reefer manager John Macdonald:

It provides access to the Far East, Middle East and European markets out of Maputo with one transhipment in Tanjung Pelepas. “This option can be a cost saving one for growers in the area as it offers easy access to these key markets. Maputo is also a convenient option for exporters should the port of Durban be under pressure in terms of storage space and capacity,” he said.

Macdonald – who has become Safmarine’s new ‘Mr Reefer’ following the retirement of Jan Kruger – says the line has already received a number of bookings for the new service even though it was launched mid-way through the citrus season.

A former commercial pilot whose father introduced him to ships at the age of five, Macdonald joined Saftainer in 1996. In 1998 he was seconded to Safmarine to take care of reefer

logistics and he’s been involved with reefer business ever since.

“Volumes ex South Africa have already dropped but, as history has

shown, the downturn is a natural cycle of events and those who survive have the potential to emerge stronger. My focus will be on helping our reefer

customers manage the current challenges by taking advantage of the opportunities out there,” says Macdonald.

John Macdonald … ‘The next 18 months will be tough.’

8 | AUGUST 2009

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Lower fuel price

While the perishable industry has not escaped unscathed, it has been less affected by

the global economic crisis than most, says Maersk Line reefer sales manager Graham Schrieder.

In this interview with FTW’s Joy Orlek, he offers his insights into the current state of the industry.

FTW: What percentage of your business does reefer cargo represent? How has this changed over recent years?

GC: Reefers are a significant portion of the total export volume for Maersk Line and are expected to increase as a percentage in 2009 due to the amount of dry cargo that has dropped off. As we know the automotive and mining industries have been affected to a large degree and so too export volumes.

We expect containerised reefer volumes for this year to be relatively stable in comparison. Maersk line has been successful in conversion from conventional to containers on various trades.

FTW: How has reefer business

performed over the past year? To what extent has it been affected by the global economic crisis?

GC: The total perishable volume is down around 10% for the first part of 2009 compared to 2008. Container volumes are around 12% down.

The most affected market – which is the biggest market for South Africa – is the European market which is down around 15%, mainly due to market prices and excess fruit in the market.

The economic crisis has hit all industries. Perishable cargo has been affected but less than most as it is still part of the bare essentials and people still need to eat. However, there is less disposable income with the growing unemployment in Europe and throughout the world.

FTW: What are your strongest markets? Any new markets trends?

GC: Europe is our strongest market, more specifically UK and the Netherlands. This has been the case for a number of years and I expect that it will continue for the next few years.

The Saudi market is expected to grow significantly in containers.

The USA may see a decline with more Chilean oranges being shipped and prices coming under pressure.

FTW: What are the key challenges for reefer shippers and how are these being addressed?

GC: Key challenges for shippers are the peak loading weeks and bottlenecks where extra costs are incurred.

This is being addressed by looking to spread the volumes to load out of more ports and not focus mainly on Durban.

Congestion in the ports is another major challenge. This is due to various factors but the major underlying factor is weather and productivity across all our major ports. One hiccup in one of the ports has a ripple affect on the rest and costs go up for both shipper and carrier.

This ultimately hinders South Africa and makes us less competitive than other countries where the landside and shipping is cost-effective.

This is being addressed by the industry on an ongoing basis and will take time to rectify.

FTW: Last year this time we

were concerned about the impact of rising fuel on reefer shipments. Any comments?

GC: It was a growing concern for both shippers and carriers, as rising costs were threatening sustainability and putting unnecessary pressure right the way down the chain. Carriers were under-collecting due to the lag in re-pricing (month on month) BAF and

Graham Schrieder … ‘Total perishable volume is down around 10% for the first part of 2009.’

has helped citrus industryContainerised reefer volumes ‘fairly stable’

AUGUST 2009 | 9

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Lower fuel price IT efficiency gains momentum along with Customs EDI focus

As Customs moves to a paperless environment and a regime where anyone processing more than 20 entries a month will be obliged to submit the transactions via EDI, the need for efficient IT systems gains momentum – and the perishables sector is no exception.

“Notwithstanding the specialised needs of this sector, the basic

requirements of the system remain the same across all users,” says Glenn Lawson of Core Freight Systems. “Proven reliability on a modern platform that will serve not only current procedures but future requirements as they evolve is key to the forward-thinking agent,” says Lawson.

“The attributes one should look

for may be identified from a number of perspectives. From the operator viewpoint the application should be windows-based and follow a simple, logical process-flow, incorporating data validation as required to ensure completeness and accuracy when the transaction has been concluded. Distribution of any reports to clients should be facilitated though real-time distribution direct from the application.”

Management will require process audit trails and comprehensive reporting, including strong financial control, says Lawson. “From an IT perspective the slick interchange of data with other applications is vital to take advantage of electronic data available, for example from an international forwarding system or supplier’s invoice. Local expertise and support from the service provider should be confirmed by reference to appropriate customer sites.”

The CoreFreight application is available as a fully hosted application. “This means that any complexity associated with the management of IT infrastructure is removed from the agent, allowing clients, both large and small, access to a comprehensive forwarding and clearing operations support system at a cost-effective price.”

Glenn Lawson … ‘Management will require process audit trails.’ Photo: Tijana Huysamen.

shippers still had to pay unacceptable fuel costs due to the oil price at the time.

The economic slow-down may have had some benefit and brought the bunker rate to a more acceptable level.

We are still seeing volatility in the oil price and it will be interesting to see how it finishes up this year.

Interestingly BAF has fluctuated roughly between US$650 and $800 less compared to 2008 depending on the month, with the biggest month differential in July. This has assisted the citrus growers to some extent with their crop being stated as one of the most expensive crops produced.

FTW: What is the outlook?GC: With the state of where

container lines are, we are under pressure just like growers and exporters.

Maersk Line believes in sustainable business and a win win formula. We will continue to support and facilitate the creation of opportunities to sell our wonderful fruit and vegetables to as many markets as possible for our clients.

10 | AUGUST 2009

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There’s no denying that volumes are down and that the global economic recession has hit perishable exports,

but in the bigger picture it’s probably one of the least affected airfreight sectors.

And certain products have been particularly resilient, says Skyservices managing director Bernd Jülicher.

Fruit salad exports have remained consistent – with the UK the biggest year-round market and Amsterdam and Zurich consistent during their winter.

“Flower cuttings to Europe haven’t dropped off at all,” says Jülicher. “The mother plant is imported into South Africa, propagated here and the cuttings then transported to Holland and grown as fresh flowers.”

Ostrich meat has also bucked the trend and showed little drop-off despite the tighter global conditions. And this year fish exports out of Cape Town are doing particularly well.

But these were pockets of good fortune in an otherwise fairly gloomy picture.

“Compared to last year’s season, volumes were down 50%,” says director

national sales, marketing and operations, Jaco Vlok. “But if one takes into account the weather-related issues like hail on stone fruit and a very small litchi crop, it’s difficult to gauge what the market might have been – but it certainly was down.”

There were however some mitigating factors, says Jülicher. “The weaker rand was a great help and fuel came off which was a blessing. Without those two, we would have got a hiding.”

Luxury items were generally the biggest losers. “Flower exports to Amsterdam were significantly affected from January – this year’s Valentine’s Day, for example, was a non-event,” he said.

And while flower exports to the US and Far East also contracted significantly, the company saw growth in the Australian market, originating out of Zimbabwe.

Fresh fruit exporters also saw shipments shrinking or falling away completely.

Skyservices however believes that the market has already started to turn.

“Our financial year begins on March 1

and we are already ahead of the budgeted contraction of 20-25%.

“Our outlook is very positive and we are looking at new business.

“If the rand and fuel remain at current levels we can be quietly confident of a reasonable season.”

And there’s another offset for perishable cargo agents.

“There’s been a drop in market demand because of the recession but a bigger drop in demand on airfreight general cargo so perishable agents are

in a nice position – airlines are far more flexible than when they are flying 90% full.

“That’s an advantage for us and our customers who become more price-competitive.

“We’re getting good rates from the airlines and sales reps are visiting us far more often than in the past.”

Diversification is also on the short-term planning boards, says Vlok, who has hinted at related business opportunities.

Bernd Jülicher (right) and Jaco Vlok … ‘Diversification on the short-term planning boards.’

AUGUST 2009 | 11

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‘No room for complacency’Concern about product ‘not up to standard’

By Ray Smuts

Quality has always been the watchword for South African fruit exports but it may well

be that the country has consigned some product not up to the usual high standard, says Capespan’s Deon Joubert.

The operations manager responsible for exports at what remains South Africa’s largest exporter 12 years after industry deregulation, Joubert says when markets are strong [short supply] products are consumed more quickly “so we might have got away with some fruit that was marginal last year”.

“I think product volume has gone down this year, firstly due to the effect of production cycles, a tree possibly bearing good volumes for two years or so, followed by a year of less thereafter. Climatic conditions have also played a role in lower production.”

Joubert says South African citrus was in very high demand last year, due to crop failures in other parts of the world “so perhaps quality issues were not that evident because of the shortage of the product”.

Sadly, the credit crunch has impacted somewhat on the country’s exports – particularly in Russia and the Middle East.

There was a time when Russia took a good quantum of different fruit varieties from South Africa, as did the Middle East although more inclined toward citrus, but the situation has reversed due in large measure to a stronger rand which has had a negative effect on dollar payments.

While Capespan Exports recorded

its best financial year in 2008, net profit accounting for around R28.6 million [before tax] from fruit exports out of a total Capespan Group R195.9 million [before tax] , CEO Neil Oosthuizen has warned there can’t be room for complacency this year, a sentiment shared by Joubert.

“This is going to be a real watershed in terms of the business models, efficiencies and partnerships one is able to establish… and that goes for all exporters.”

Deon Joubert … ‘Competition has created need for greater logistics efficiencies.’

Providing total solutionsBy Liesl Venter

Providing total solutions is becoming increasingly important in the fast-paced business world where more and more companies want to be able to focus on their core business and let the experts do the rest.

Ilse van der Merwe, general manager of GEA Project solutions, a division of Grenco Africa, says it is for this reason that the division was created in 1995 and has been growing ever since.

“We are finding that more and more customers want to make use of this service so that they can focus on

their core business while we sort out the creation of new solutions.”

GEA Project Solutions is a full-scale refrigeration project management service. “We manage the entire process from the initial planning stages through to completion including both the technical and administrative aspect.”

According to Van der Merwe GEA Project solutions coordinates the services and structure while Grenco Africa provides the refrigeration design and installation.

“It is all about attention to detail and complying with safety measures and legislation.”

12 | AUGUST 2009

Marine Cargo Insurance being Import, Export | Advance loss of Profits | Stock Through Put Marine Goods in Transit and liabilities attaching thereto | Hull - Private and Pleasure, Commercial and Fishing

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still in demandReefer containers

By Alan Peat

Despite the economic downturn, refrigerated containers (reefers) both 20-foot and

40-ft are still in demand, according to Darren Singh, operations director of SA container conversion and supply major, Container World.

Marine reefer containers have built a solid landside market, proving a most cost-effective solution for cold storage requirements in the agricultural, fishing and frozen product distribution industries, he added.

The demand, Johannesburg-based executive director Barron Charsley told FTW, is both in the domestic market and in the other overborder countries in southern Africa.

“And the market requirements are across-the-board,” he added, “with options from a choice of chillers, holding and cold rooms, and blast freezers – to combined units.

“Also, our custom-built units are specifically developed for harsh operating conditions in Africa, being structurally robust and with minimum maintenance

requirements.”But the big frustration of the

moment, according to Singh, is that an ever-diminishing supply is just not able to meet the demand.

“Retail giants have been stockpiling, and that has helped the leasing market for long-term leasing,” he told FTW. “But, all said and done, there has been – and there still is – a shortage of both sizes of refrigerated containers.”

Somewhat easing the strain in the current tight economic conditions is the drop in the ice-making market, with not many enquiries being received.

“It is evident,” said Singh, “that capital expenditure is on hold.

“Also, the citrus season this year has been hit hard, with very few containers being exported. Therefore, depots have been overloaded with reefer container stock.

“There are signs that these market conditions are changing, with a demand for 20-ft containers – which with time will increase,” he said. “I’d say we are managing to maintain our presence in the market place to ensure that we keep our

market share.”An example of the demand,

according to Charsley, is that the Johannesburg office recently concluded a deal for 24 new 20-ft reefer containers which were sold to the Rwandan military for its peace-keeping effort in Sudan.

“And, in order to keep our existing clients happy, we also invested in new 40-ft containers for our local domestic leasing market,” he said. “For customers this means no worries, with the whole expected lifespan of the new containers still to come.”

Industry fragmentation raises concernBy Ray Smuts

An issue of concern raised by several industry experts with this correspondent in the past is the increasing number of exporters – 405 in 2007 from 331 in 2002.

This, to Capespan’s Deon Joubert’s mind, does not augur well for the industry – it’s not good for growers but a cause of further fragmentation of the supply side.

Of interest is that 80% of the country’s exports were controlled by 29 exporters in 2002, whereas 80% was controlled by 55 in 2007 (Source: FPEF).

Joubert argues that Capespan, once with a 100% monopoly of the export trade in SA, has lost market share due to “huge” growth in the industry, greater competition and diversifying into global sourcing to supply customers with year-round product.

Indeed, the group still holds between 22% and 28% of overall market share, depending on the commodity.

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Associated Marine to launch new pollution cover productInsurance rates under pressure

By Joy Orlek

The freight industry is clearly on a cost-cutting drive – and that applies no less to the insurance

sector.According to chief operating officer

of Associated Marine, Mike Brews, customers are looking for the lowest rates and the widest cover.

And whereas in the past they would tend to absorb smaller claims – in the R20 000–R50 000 range – they’re now putting those claims through because it all makes a difference to their bottom lines. “So claims are becoming more frequent and demands on administrative staff are rising.”

And according to Brews, rates have been on a gradual decline since 9/11 – and this year is no different.

“We thought the Napoli incident would turn rates around but as a whole that year was generally profitable.

“With a number of new people coming into the industry there’s effectively been an overcapitalisation of the marine insurance industry with everyone fighting for their piece of

the pie. This inevitably leads to a rates battle so you end up fighting on rates to retain business.”

Brews estimates that in the past there was generally a seven year cycle of ups and downs. “Now we’ve had eight years of constant downs, so the cycle is becoming a lot longer.”

Associated Marine has a long history in the market, offering a range of cover for the perishable industry from fish to fruit by every transport mode.

And it’s the perishable nature of the cargo that presents the greatest challenge.

“As soon as there’s a delay of any sort you’re under risk for losses. In conjunction with that you have a range of restrictions in the countries to which the goods are being exported. If any of the temperature meters in the containers have a false reading, there’s a huge rejection risk and you end up having to find alternative markets that have less stringent restrictions. Whatever the solution, there are always costs involved.”

In the case of a claim, an

independent surveyor is appointed to undertake a full analysis based on information from temperature gauges, shipping schedules and the like to establish the reason for the damage or loss.

“Because there are so many restrictions on perishable cargo there are not many corners that can be cut and there will always be the odd problem – like cargo stuck on an

arrested vessel.”South Africa’s alarmingly high road

accident rate is a concern, but the saving grace is that values on a truck are much lower than a vessel.

“You can put one or two containers on a truck but you can put 50 from one client on a vessel. The frequency of accidents may be much higher but values comparatively low.”

Innovation and differentiation are clearly important competitive factors in the marine insurance industry, which is why Associated Marine is currently looking into the introduction of pollution cover on the back of its haulage business.

The product is being developed through an associated company to cover clean-up costs following tanker accidents. “It’s the advantage of being part of the Santam group – enabling us to draw on associate companies to offer this type of cover.

“We’ve identified a gap in the market and hope to have it up and running in the next couple of months. We see it as a way of adding value to the products we offer.”

Mike Brews ... ‘Offering a range of cover from fish to fruit by every transport mode.’

14 | AUGUST 2009

Tel: +27 11 948 7930/1 E-mail: [email protected] Fax: +27 088 011 943 1538 www.gwl.za.com

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Business to Africaand Middle East remains buoyantSeafreight volumes ‘fairly consistent’

By Alan Peat

Fair forecast or foul is the question being asked in the hard-pressed international

perishable export market, another victim of the recession-dented trade arena.

“The export of perishables has

certainly not been recession-proof in 2009,” Mike Froy, divisional CEO of Grindrod PCA (Perishable Cargo Agents), a major muscle in the SA perishable forwarding market, told FTW.

“Volumes have dropped per product-type, primarily due to the recessionary conditions in Europe, our major trading partner. The most severely affected commodity has been flowers – as this is regarded as discretionary spend.

“Even luxury products like lobsters and abalone (perlemoen) are starting to taper off as demand is waning.”

Also crabbing-up the market is producers holding back on production as prices are very low at present in the main markets – of which Froy rated the Far East as “by far the most significant” importer.

“However, on a positive note,” he added, “business into Africa and the Middle East remains buoyant. Thankfully, our volumes into these important markets have remained

only marginally less than the corresponding period last year.”

Froy felt that everyone – be they in the domestic market, imports or exports – was feeling the pinch.

“The domestic market,” for example, “has seen quite a noticeable swing away from airfreight to roadfreight, due to the significant difference in price between the two modes of transport.”

On the shipping side of things, it’s been a pretty consistent season for MSC, according to Cape Town branch manager, and perishable shipping specialist, Mike Economou.

“We’ve been doing fine,” he said, “and from our point of view it’s been a fairly good season. I suppose it all depends on seasons and markets.”

In MSC’s case, the main perishable export market is Europe.

“For us, it has gone well,” Economou added. “We’ve certainly had to market harder to sell our volumes, but we have set ourselves up well in that marketplace to face the

future.”Although he noted that the US

demand was a bit down, he was encouraged by a good and stable volume into the Middle East, a market where he shares Froy’s enthusiasm.

“Our direct calls at the Port of Jebel Ali mean that our transit times give us a big boost, and volumes are constantly high.”

What the state of the prices in the market have been remains very much a producer’s secret, Economou added, but it’s certainly been a tough year for everyone.

“However,” he said, “for us moving the cargoes, the perishable products have remained fairly constant.

“We’ve also been able to maintain good schedule integrity, although there have been the occasional wind problems. But then that’s always there.

“Overall, tight times – but we have fared well in these arduous market conditions.”

The most severely affected commodity has been flowers – as this is regarded as discretionary spend.

AUGUST 2009 | 15

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Unique logistical solutions developed for each product

‘Peaks and valleys are part of the deal’

By Alan Peat

In a bold statement, divisional CEO Mike Froy was adamant that SA forwarding major, Grindrod PCA,

remained committed to the perishable market “notwithstanding that times are tough”.

“We started out as Perishable Cargo Agents (PCA) in 1957 and have seen many peaks and valleys in the perishable industry over this lengthy period of time,” he told FTW.

“The tie-up in 2004 with the Grindrod group has only made us stronger and even better equipped to weather the current storm.”

He attributed the company’s success at what it does to being able to offer exporters and importers a complete freight forwarding and logistics management solution.

A longstanding relationship and mutual trust in shared expertise with all the airlines operating to and from SA and strategically positioned, airport-based office/warehouses in Johannesburg, Port Elizabeth, George, and Cape Town, are just two of Grindrod PCA’s strengths.

The company also lists membership of all the applicable air cargo bodies – Iata; the Animal Air Transport Association (AATA); and the Southern African Express Parcel Association (Saepa). It has also been audited to obtain “regulated agent” status with the SA Civil Aviation Association in line with the new, globally adopted Part 108 security legislation for the air cargo industry.

“Our focus is perishable cargo – as the name suggests,” added Froy. “The main products we export are fresh fish – hake to Spain, fresh tuna to Europe. US-grown fresh flowers to Europe; fresh SA fruit to Europe and Russia as well as exotic fish like lobster and abalone to the Far East and Europe.

“Each product involves inventing and creating a handling, packing and logistical solution best suited to that product to ensure superb quality and critical cool chain management.

“The stimulation and enthusiasm of our job is the challenge each new product and international destination presents. Nice marketing is what it is all about!”

Big growth in Taiwanese volumesBy Alan Peat

Perishable volumes have been up this year on a year-on-year basis for Transmarine Logistics, according to branch manager in Cape Town AJ Munian. “The overall Far East market has grown,” he told FTW, “and we have seen a growth commensurate with this. We had about 15%

annual growth in 2008.”The company’s main products

are citrus out of Durban and Port Elizabeth and apples and pears out of Cape Town.

“We are waiting for the end of the year and the start of the plum season next,” Munian said.

One specific area of note

for Transmarine has been the Taiwanese market.

“We have seen big growth there,” Munian said.

And a big advantage has been the company’s ability to comply with the special cold treatment legislated for Taiwan’s perishable imports – where the temperature is reduced to specified levels during transit.

“The market we have been able to develop by including this service has shown very good growth,” Munian said.

India, China and Vietnam are three of the areas of future potential, he added – although acknowledging that India is a highly protected market, and China has its own development difficulties.

“But there have certainly been signs of growth in Vietnam, and we are therefore watching it closely,” Munian said.

“The volumes into the two other markets have yet to materialise in a big way, but we definitely want to get into them in the future.”

‘India, China and Vietnam are three of the areas of future potential, although India is a highly protected market, and China has its own development difficulties.’

16 | AUGUST 2009

APC Storage Solutions 5

Associated Marine 12

Buffalo Freight Systems 10

Compu-Clearing 8

Container World 9

Core Freight 4

G.A. Rix Trust 2

Generator Plant Hire SA 10

German Warehousing & Logistics 14

Grenco South Africa 9

Grindrod 7

LCL Grindrod 11

Lombard Insurance Group IFC

Macro 2000 4

MACS Maritime Carrier Shipping 13

Maersk South Africa IBC

MSC Shipping 15

Namibian Ports Authority OBC

Robertson Freight 4

Safmarine 3

Sky Services 1

The Cargo Connection 14

Transit Freight Co-ordinators 6

Transmarine Logistics 2

TSC Thusano Supply Chain 12

Advertisers' Index Big opportunities in Africa

‘Automation

Growing consumer trend to value-added products

Developing self-support cold storage facilities

By Liesl Venter

There’s been a growing consumer trend towards value-added products in foods such as fish, meat and poultry in the perishables food market in recent years, says Andre Schoonraad, managing director of Grenco Africa.

“Scores of supermarkets now promote individually quick frozen products whereas only a few years ago these were only obtainable from selected outlets,” says Schoonraad. “This trend has been extended to include good growth in prepared meals.

“Other trends we are seeing in the perishable industry at present are the re-cooling of fruit riding on the back of growth in export markets as well as

greater demand for controlled atmosphere storage of fruit.”

Grenco Africa, a Cape Town based company, has been in operation in South Africa since the sixties and specialises in the supply of refrigeration solutions for the petro-chemical and mining industries. Its transport division has been providing temperature controlled systems for a variety of mobile applications for truck and trailer bodies to the refrigerated transport industry for several years.

According to Schoonraad challenges currently facing the perishable industry include low price expectations that need to be managed as well as reducing energy consumption and reducing the carbon footprint.

A firm believer in one-on-one deals

with clients, Schoonraad said that in recent years they had found communication was one of the most important aspects in successful business. “It is all about ensuring there is no miscommunication and accepting single point responsibility for the ultimate reliability and efficiency of the refrigeration plant.

“Aspects such as spoilage and extended shelf life, hygienic standards and improved processes are a key focus in this market, guiding our everyday business ethos.”

Schoonraad says despite the global economic downturn there is still much growth opportunity in the sector, especially in finding total solutions and moving into Africa where food production for export markets is starting to take off.

Farm to supermarket cold chain an emerging trendBy Liesl Venter

A total “unbroken” cold chain from farm to supermarket at competitive rates without jeopardising quality is an emerging trend in overseas markets, says Mario Tito, managing director of TSC Thusano Supply Chain.

“There’s more and more direct sourcing from farms and pack houses, cutting out the export agent,” says Tito. “These supermarkets have huge buying power with shipping lines as they source globally and thus have global accounts with these shipping lines – this in effect means that the supply chain cost is reduced significantly.”

While the South African perishable market was somewhat affected by the

global meltdown, Tito says there is still much happening in the market.

“Consignees are taking longer to sell fruit and this means exporters are having to wait longer for their money and this in turn has affected agents. There is definitely less fruit available for export but those that can survive the recession will definitely be around for a long time.”

Tito’s optimism can be seen in his commitment and drive to expand TSC’s services.

“In the perishable industry there are no secrets and everyone knows the costs of the supply chain. It is however not only about costs – it is also about passion, experience, commitment and being available at all times for your client. We are looking at a number of ventures not

only in South Africa but also overseas.”Established in April 2008, TSC has

carved a niche in the export of perishable products.

“We want to expand our services around the core product,” says Tito. “The key stakeholders in South Africa are farmers, growers and agents and the focus for many of these is price and value. With the strengthening of the local currency against the dollar, South Africa has had to increase its productivity dramatically to stay competitive against the other southern hemisphere countries.”

Tito says focus on cost reductions, generally left to the category managers and retailers at destination, has led to the focus now being shifted to value added services.

can save millions in the long run’

By Liesl Venter

There is no denying the importance of supply chain efficiency when it comes to the perishable market,

says Fred Albrecht, managing director of APC.

“It is essential to meet the growing demands, even in a recessionary state, and warehouse automation is the one driver that could add competitive edge.”

Albrecht says while most companies have been affected by the recession it has been a time of reducing costs while driving efficiencies up. “It could be simplistic supply chain changes that make the difference in one’s business nowadays. For us it is all about finding these weaknesses and offering services that will help the bottom line – and that

could be an automated or sometimes even a non-automated storage solution.”

APC, considered pioneers in the design, construction and start-up of turnkey cold stores and refrigerated warehouses, is currently applying its vast knowledge to the construction of self-support cold storage facilities for the perishable market.

“It is all about automation,” says Albrecht. “We are infrastructure builders and need to make customers understand that by investing in an automated warehouse they can save millions in the long run. The perishable industry is all about timing. Understanding your market demand and the supply chain shortfalls such as for example road infrastructure goes a long way in being able to manage your business model around the challenges.” Cold room ... ‘It’s all about automation.’

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