Overview Of The Vegetable Industry Of The Western Cape
Overview of the vegetable industry of the Western CapeHoffmann W.H. and 2Harrison K112Agricultural economist: Department of Agricultural economics, Stellenbosch UniversityConsultant: Indego Consulting1. IntroductionThe Western Cape Province is the fourth largest province of South Africa in terms of land size. It is alsoaccepted that agriculture is a significant contributor to economic activity and output for the WesternCape Province. The Western Cape is relatively unique in terms of agricultural production in that it is atypical Mediterranean climate area. This means that winter rainfall and hot dry summers ischaracteristic for the province. A relatively wide spectrum of commercial farming types isgeographically located over the province with the acceptance of tropical fruits. The latter have alsobeen introduced over recent years.The Western Cape Province contribute roughly 14% to the national GDP and is third behind Gauteng(34.7%) and Kwazulu-Natal (15.8%). But unlike the other provinces the relative contribution ofagriculture to the GDP for the province is relatively high at 5.6%. The contribution of agriculture tonational GDP is around 2.7% (Western Cape Government, 2014). It is obvious that agricultural outputforms an integral component of the economic activities of the Western Cape Province.One of the areas of production of especially vegetables is the Philippi Horticultural Area (PHA) on whatis known as The Cape Flats. The area is characterized by sandy soils, a relatively shallow water table,that may in winter lead to drainage problems and is often quite windy. The shallow water table,however, allow for the option to irrigate from boreholes to extract relatively high quality irrigationwater. Farming in this area include mostly vegetable production, but also some dairy, poultry and horsefarming activities. The total area under production is 1245.43 ha, according to a 2017 farmer survey.This area includes small scale, commercial and big commercial farms. The close proximity of theproduction area to a large market along with a relatively constant supply of high quality irrigation waterbenefits the producers. Contrasting to that and real threats to feasible production is; crime and crimerelated issues, encroachment of the PHA by informal settlements, uncertainty regarding the relay ofthe R300 and property developments.These challenges are all being dealt with in alternative reports and platforms. The main focus of thisparticular report is the feasibility of longer term vegetable production in the PHA. Feasibility is not onlya function of production factors but also depend on the competitiveness of and industry as such.Therefore, the main aim of this report is to establish the importance of vegetable production andprovide an oversight of the vegetable industry as such.This is carried out as a desktop exercise and draws on available reports and statistics. The methodfollowed is roughly one of environmental scanning and will start of by an overview of South Africanagriculture, the Western Cape Province as related to South Africa, agriculture in the Western Cape andlastly draw on the relative contribution of the PHA. Throughout the whole exercise focus will be mostlyon horticultural production and especially vegetable production.3Overview of Western Cape- relative to South African agricultureFigure 1 and 2, show the relative contribution of each province in South Africa to the total area (Figure1) and to total population (Figure 2). The Western Cape Province make a higher contribution topopulation than to area, which means simply it is more densely populated than some of the otherprovinces, e.g. The Northern Cape.
Figure 1: The relative contribution of each province to South Africa in terms of area (Source:DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES, 2016, Abstract of Agricultural Statistics.)RELATIVE CONTRIBUTION TO SA POPULATION BYPROVINCEWestern CapeEastern CapeNorthern CapeFree StateNorth 3%2%5%24%7%20%Figure 2: The relative population of each province as percentage of total South African populationFigure 3 shows the relative contribution of each province to the total farming area of South Africa. Itis noticeable that again the Western Cape’s contribution is relatively higher than its contribution tototal area.
Figure 3: The relative contribution of each province to South Africa in terms of farming area (Source:DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES, 2016, Abstract of Agricultural Statistics.)Figure 4: The relative contribution in number of farm units per provinceThe number of farm units for the Western Cape is relatively high compared to the area and farmingarea contributions. This is mostly due to a relatively large component of the Western Cape being farm
intensively and higher value crops are produced. In terms of relative economic contribution, theWestern Cape does better on per area contribution as well as relative contribution to population. Therest of South Africa is however overshadowed by Gauteng, which is in economic terms the realpowerhouse of South Africa. Figure 6 show the relative contribution of each province to national GDP.Figure 6: The percentage contribution of each province to national GDP (Source: Western CapeGovernment. 2014. WESTERN CAPE PROVINCIAL PROFILE. Report: WCPP2014)Figure 7: The value of output of the main Agricultural sub-sectors 2000-2015From Figure 7 it is evident that production of horticultural crop is increasing, like all other produce, itis noticeable that over time the total horticultural output is less volatile than field crops. The value ofanimal production has increased more, which a normal trend where people move into higher income
groups. There is a natural shift in consumption way from starch (rice, maize, potatoes) to proteins (fish,meat, dairy, eggs).4Overview of vegetables compared to other agricultural productsFigure 8 show the value of potatoes compared to all other vegetable types over the past 15 years.Figure 9 show the value of selected vegetables and potatoes over the past 15 years. It is important tonote that potatoes, unions and tomatoes form most of the value produced, or output for the vegetableindustry. It seems that the price for potatoes is relatively more volatile that for some of the othervegetables. This is however a year on year value movement and does not clearly reflect who the pricerisk involved with producing limited shelf life fresh products such as cabbage, salad, beetroot andbroccoli.Figure 8: Comparative value of potatoes to all other vegetablesFigures 11, 12 and 13 show the producer price indices for various groups of agricultural outputs. Figure11 compare horticultural products to field crops and livestock crops. It shows that the price index forfield crops is more volatile, but consistently higher than that of livestock products and horticulturalcrops (which has the lowest index value). Within the broader group of horticulture, fruit has the highestindex value, as shown by Figure 12. This means that vegetables, compared to fruit, is keeping the priceindex for horticultural products lower. Figure 13 shows the producer price index for various selectedvegetables on the major South African fresh produce markets. Its shows that the price index atproducer level is high for selected products, including; mushrooms, sweet potatoes, cucumbers,cabbage and lettuce. That of other crops are relatively low, including: carrots, unions and pumpkins.In general, the prices are relatively volatile over all crops. It is however fair to say that vegetableproducers are key role players in keeping the producer price of food relatively low.
Figure 9: The value of selected vegetables and potatoes over the past 15 years
Figure 10: Price trends for selected vegetables in the main fresh produce markets
Figure 11: Producer price indices for agricultural productsFigure 12: Producer price indices for horticultural products
Figure 13: Producer price indices for selected vegetables on the major South African fresh produce markets
5Philippi Horticultural Area: economic overviewThe Philippi Horticultural Area (PHA) is historically a vegetable production area situated on what, ispopularly known, as the Cape Flats. Indicated in Figure 14, is the geographical location of the PHA.Farming originated in the mid 1800’s when a number of German families settled there and startedfarming. Over time, the area developed into one of the most important vegetable producing areas forthe wider Cape Town market.Figure 14: Map of Cape Flats, indicating the Philippi Horticultural Area (Source: Socio-EconomicContribution & Potential of the Philippi Horticultural Area, Presentation to Government Stakeholders,Indego Consulting)The PHA is a relatively unique vegetable production area. A number of specific factors in a uniquecombination support the PHA. These factors include: first the proximity of the market. According tovarious role-players in the retail industry including the “Big five” super markets the PHA is seen as avaluable source of fresh produce. The fact that the PHA is close to the Epping fresh market also play arole in controlling the price of fresh produce. The area can produce in small time windows during theyear when other producing areas are not harvesting. That is due to the second unique feature and thatis climate. The fact that the PHA is relatively close to False Bay means that the South Easter (which isthe predominant wind during the warm summer months causes a cool breeze on most days that makes
the production of heat sensitive crops possible. These include lettuce and cabbage. Figure 15 show thedifference in temperature between Philippi and some of the competing production areas. The principleadvantage that the PHA has is during the warmest summer months of December until March, whenthe PHA is clearly below the average temperatures of the competing areas. This means that specificcrops will only be grown successfully in the PHA during these months. It is also normal for lettuce pricesto be relatively high over the Christmas – New Year period.Figure 15: The monthly temperature between major vegetable producing areas in the Cape Town area.The total area that is allocated to farming is Just over 1200 ha and the portion used for, mainlyvegetable production is just less than 1100ha. A survey, by Indego Consulting, by the end of 2017indicates just over 1000 ha to have official irrigation rights. Figure 16 show the most common land usetypes by crop for the PHA producers. The inter-cropping systems allow for roughly three to four cropcycles per annum. Crop cycles also vary from roughly 56-84 days for lettuce and up to 150 days forcrops like carrots and cabbage.
Figure 16: Land use by producers in the PHA
The yields for vegetables vary over time and also between crops. The typical yield expectations arepresented in Annexure 1, to illustrate variance in vegetable crop yields. The normal yields and alsothe marketing window that producers aim for would allow for a general assumption of a turn-over ofroughly R400 000 per ha per annum. That is taking into consideration more than one crop cycle butalso allowing for different market prices. That means that the total turnover for the PhilippiHorticultural Area is roughly R440 000 000/annum. There are however, opportunity during themarketing year for higher than usual profit margins, depending on time windows and total supply tothe various markets. This could in other words be a relatively conservative estimation. Figure 17 showthe total value of agricultural business in the PHA. This figure includes input supply, processing andpacking, cold storage and general agribusiness, and not only production.Considering the crops produced in Philippi, as shown in Figure 16, and comparing that to the producerprice indices, shown in Figure 13, it is to some extent positive that, except for carrots, most of thecrops are in a positive price trend, from a producers perspective. Figure 17 confirm the upwards trendin value of agriculture in the PHA. The growth in terms of year on year ranges between 4% (2009) and10% (2011). This is roughly within the normal inflation rate for South Africa and does not indicate realgrowth.An important aspect of agriculture is that of employment. The PHA is geographically located not onlyin close proximity to major markets, but to an abundant supply of labour. The survey indicated thetotal amount of full time and seasonal labourers employed in the PHA and is presented in Table 1. It isimportant to note that these labourers are only those directly employed in primary production. Theagricultural activities in the PHA also employ workers in value adding activities such as packaging,cooling, transport and input supply. Figure 18 shows a schematic presentation of a typical supply chainsystem for fresh produce. It shows that primary production will subsequently employ a number oflabourers (possibly relatively skilled labour) in the downstream side as well as input supply. Inputsuppliers to farming include: planting material (seed or seedlings), fertilizer companies, plantprotection companies, energy suppliers, mechanization suppliers, packing material, informationsuppliers, water services and irrigation equipment suppliers.Table 1: Employment figures for the PHA
Figure 17: The typical supply chain system for fresh produce from the PHA
6Wider economic importance: Economic multipliersThe idea or concept of multipliers is defined as the nature and extent of the impact/effect of anautonomous change in a specific economic quantity (i.e. exports) on other economic quantity orquantities, for instance production or employment.Definition of the multipliers concept by (Samuelson 1970) is as follows:“The multiplier is the number of which the change in investment must be multiplied in order to presentus with the resulting change in income”.The standard sector impact multiplier can be defined as the total impact on a certain macroeconomicvariable, which occurs throughout the economy if a specific sector production change by R1 million.These multipliers thus work on sector level and is in essence not designed to measure the impact on aspecific geographical area. A number of existing multipliers will however be used to measure thetheoretical impact against the available data. This is needed because not all the producers filled outand participated in the survey and the data, thus do not include all the farmers. The followingmultipliers will be used: Labour Multipliers Total Employment (Numbers)/Direct ProductionCapital Multipliers Capital Formation/Direct ProductionThe function for sector j has the following format:ej a bXjwhere:ej employment in sector j (labour);a constant;b employment-output ratio of sector j; andXj real output of sector j.“The Social Accounting Matrices form the basis for calculating the multipliers including standardmultipliers. It’s important to note that the Social Accounting Matrix (SAM) is a specific and specialextension/application of Input-Output analysis” (Mosaka, 2015).6.1 LabourTable 2: Example of the Multipliers as indicated by the SAM modelling
This means that when applied to the PHA for instance the case of labour multipliers will result in:Total output from production: R440 000 0000 (Conservative calculation)R581 350 000 (Weighted amount according to survey)For every R 1 million 4.65 jobs are created in the vegetable industry and thus it creates in the PHA: On the conservative production value: 440 X 4.65 2046 jobs. (This is less that the actuallabour according to survey, but is calculated on a conservative figure.)On the survey amounts: 581 X 4.65 2701 jobs (this very close to the actual survey, but doesnot include value adding labour ect.)6.2 Capital formationOn capital formation the multiplier is 1.94. That would mean that for the two sets the amounts wouldbe: Conservative: 440 X 1.94 R853.6 MillionSurvey: 581 X 1.94 R1127.4 MillionThis means that the value invested in capital, excluding the actual land value is almost twice that ofproduction output.7ConclusionThe Philippi Horticultural Area (PHA) is a unique geographical area on the Cape Flats that is renownedfor vegetable production. A variety of specialized vegetable are produced in this area, which includeslettuce and cabbage. These crops can be difficult to produce because of sensitivity to elements suchas soil and weather. In this regard the PHA is especially well situated as the daily maximumtemperatures in the summer is much lower than that of other vegetable producing areas. This alsoallow the producers to exploit certain time windows in the market that makes vegetables morelucrative for those time pockets.In general the PHA produce a variety of vegetables, seedlings, dairy, chickens and pork, but is bestknown for vegetable production. The total cultivated area is 1100 ha roughly and employ 2700 workersand a turnover or R440 000 000, relatively conservatively calculated. It is thus obvious that the PHA isan important contributor to livelihoods within a relatively poor and socially challenged largercommunity.
References:DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES, 2016, Abstract of Agricultural StatisticsJohnson G.I., Weinberger K. and Wu M-H. 2008. The Vegetable Industry in Tropical Asia: ThailandMosaka Economic Consultants CC, Trading as Conningarth Economists. 2015. Sectoral Multipliers: Study areaNational and Western Cape.Western Cape Government. 2014. WESTERN CAPE PROVINCIAL PROFILE. Report: WCPP2014. Compiled bythe Agricultural Economic Services: Marketing and Agribusiness. Date of compilation: August 2014.
Annexure 1: EXPECTED YIELDSThere can be very marked differences between yields of different plantings of a vegetablecrop, depending on the cultivar selected, and on the environmental conditions prevailingduring the growth of the crop. Even larger differences in yield between crops can be ascribedto the cultural practices applied, and to the relative expertise of the individual growers. Certainfarmers consistently achieve good yields of good quality, while others produce poor crops.This difference in the ability of growers is of particular importance with horticultural crops,which are grown intensively.Whether the causes of yield differences are environmental or managerial, a growerinexperienced in a particular vegetable crop needs to have some indication of potential yieldas an aid when making decisions about growing the crop.Expected yields from commercial plantings of some vegetable crops can be listed underthree headings:The conservative yieldThe "conservative" yield is that obtained from a relatively poor crop, and is frequently noteconomical to produce, unless particularly high prices are realised.The likely yieldThe "likely" yield is that achieved from the majority of plantings by the average grower.The target yieldThe "target" figures are those that a good grower could realistically achieve in practice.These are not considered to be the potential yields of the prospective crops. For example,the target figure for dwarf green beans is given as 10 to 15 tons per hectare. Yields of over20 tons per hectare have been achieved by some growers, even from large plantings, andcertain trial plots have yielded the equivalent of about 30 tons per hectare. Similarly,carrots could yield in excess of 70 tons per hectare, cabbage over 110 tons per hectare andtomatoes more than 100 tons per hectare, from specific commercial plantings. However,such yields are exceptional. Yields that a commercial grower may expect from the mainvegetable crops grown, divided according to the above categories, are suggested in thefollowing table.Table 8.Commercial yields of vegetable crops.CropYield in tons per -8Bean, dwarf, green57-810 - 15B
The Western Cape Province is the fourth largest province of South Africa in terms of land size. It is also accepted that agriculture is a significant contributor to economic activity and output for the Western Cape Province. The Western Cape is relatively unique in terms of agricultural production in that it is a typical Mediterranean climate area.
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