HOW HIGH IS THE BARRIER TO ENTRY FOR NEW GROWERS IN THE SUBTROPICAL FRUIT INDUSTRY?
It’s not difficult for a new farmer to grow a few trees and sell the fruit to the informal market. However, if you want to farm on a larger scale to supply the formal market (export and local retail), significant financial investment in irrigation and other infrastructure is required. For an avocado farm, the set-up costs are between R130 000/ ha and R170 000/ha, depending on irrigation and soil preparation techniques.
The return on investment is also linked to how well the trees are looked after. If you don’t farm correctly from the start, you could end up not making your money back at all. So it’s important that whatever you do is done properly and no shortcuts are taken, as this will affect profitability down the line.
Farmers also have to comply with accreditation systems such as SA GAP, Global GAP and SIZA [South African and Global Good Agricultural Practice, and Sustainability Initiative of South Africa]. Getting the accreditations in place requires a lot of time, so most farmers use consultants, which is an additional cost. Then there’s also the cost for the audits, which can be up to R10 000 for a small farm.
Commercial land is expensive and isn’t always easy to find. Because land is becoming scarcer, it’s also getting more expensive. Coupled to this is finding a suitable farm with water rights.
You need a lot of capital to sustain yourself before the first crop comes in, as you start breaking even only in year seven or eight, depending on your planting density.
These are some of the barriers to entry for any new farmer, black or white.
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September 13, 2019