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Charles Hughes. CHINA ’ S EFFECT ON SA AGRICULTURE.

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Presentation on theme: "Charles Hughes. CHINA ’ S EFFECT ON SA AGRICULTURE."— Presentation transcript:

1 Charles Hughes

2

3 CHINA ’ S EFFECT ON SA AGRICULTURE

4 China’s affect on SA Agriculture China - That fearsome word installing fear in the minds of the world China - A country of 1.3BILLION people China - A land of massive opportunity or a threat to the world China - The cause of fears of food safety issues China - The cause of product safety and quality issues

5 China’s effect on SA Agriculture What has brought all this about? Lets explore the history Post war Japan re-built as economic power boosted by America to manufacture wide range of products This led to a series of critical misunderstandings of what the west wanted Japan believed the west needed cheap goods with no quality overrider “Jap Rubbish” expression was coined Japanese goods had no sustainable long term usage Japan had to take corrective action and became world leaders Key products – Sony, Toyota, Nikon, Nissan, Honda, Yamaha, Sumitomo etc… Japan quickly followed by Taiwan, Korea and others

6 China’s effect on SA Agriculture China meanwhile remained under the cloak of severe Communism 20 years ago the Dragon awakened China had to rebuild is economy under the Beijing Plan China realised its people was economic edge China became a World economic player The west rapidly sort JV ventures such as VW, Toyota, GM, Nike etc.. The west saw huge economic benefits in low cost production In essence Japan all over again!

7 China’s effect on SA Agriculture In the process, both China and the West have called for massive economies of scale but lost sight of quality issues Can China alone be blamed? The answer is a definitive NO! Global companies have chased profits whilst ignoring quality

8 China’s effect on SA Agriculture Lets review China’s key agricultural products and production Since 1949 China’s development has changed dramatically Between 1950 and 1953 wide-ranging land reforms gave peasants land During the period 1953 to 1957 yearly production output increased by 4.5% making this the “golden time” From 1958 to 1978 agriculture slowed to only 2.5% as a result of Govt co-op commune schemes and centralized management There was no free enterprise In 1978 this was changed to “household contract responsibility” system making for controlled free enterprise and renewed growth

9 China’s effect on SA Agriculture From 1985 Govt eliminated state monopoly of purchasing, marketing and contracts This led to increased production, competitive marketing and unprecedented growth in produce as well as support industries. Supply and demand became the key for growth From merely stable crops, animal husbandry and fisheries exploded whilst cash crops and grains reduced Over next 21 years agriculture gross output value achieved 6.5%, the highest 12.4% in 1984 surpassing world averages By 1999 production increased all round encompassing grain, cotton, oil-bearing crops, meat and aquatic products. SHORTAGES DISSAPEARED

10 China’s effect on SA Agriculture At the current time China’s economic growth with greater disposable income is creating new shortages China is once again a major IMPORTER The Govt is exploring the world for additional supplies and production opportunities China feeds 21% of world population on 9% of world’s total cultivated land

11 China’s effect on SA Agriculture Product% Production Grain65% Cotton0.5% Oil Bearing3% Sugarcane9% Sugarbeat1% Tobacco0.3% Tea0.2% Fruit8% Meat8% Aquatic5%

12 China’s effect on SA Agriculture Production areas Rice, wheat, corn, soybeans, tubers – Yangtze River and Yunnan Plateau Wheat – North China Plain Sweet Potatoes – all China but mainly Yellow and Hoaihe Rivers Cotton, Rape – Yellow and Yangtze Rivers Vegetables – Shandong, Guangdong, Quanxi and Liaoning Citrus – Chongging Apples, pears, grapes – Shaanxi, Hebei and Shandong Kiwi Fruit, Jujube and stone fruits – Shaanxi Wine grapes – Yunnan and Shandong (many wine estates with French support with wine houses resembling French Chateau’s)

13 China’s effect on SA Agriculture Motor vehicle sales with economic growth of 12.5% have exploded Beijing alone sees new vehicles each month Beijing is a gigantic parking lot! The result is an enormous demand for oil hence the current prices Bio-fuels is the next growth area – a huge opportunity for SA Shaanxi has huge coal reserves – Sasol will be developing here

14 China’s effect on SA Agriculture How does all this impact on SA agriculture? China has 7 key objectives 1 - They want to increase farmer’s income 2 - They want to increase capacity of grain production 3 - They will continue to promote agricultural restructuring 4 - They will actively promote progress in agro-science 5 - They will open agriculture to the outside world 6 - They will speed up rural labour conditions 7 - They will continue to deepen rural reforms All of the above offer positive co-operation agreements

15 China’s effect on SA Agriculture Problems for SA- Pineapple fertiliser disaster, pet foods and baby foods - Could this have been avoided? - Yes if proper quality assurance procedures where in place, supported by both Governments - Our own experiences have shown that working with both Govt’s with clear rules of engagement guarantees safety

16 China’s effect on SA Agriculture The Future SA and Africa have much to gain with clear strategies Our seasons are counter seasonal – we are not competitors We have a wealth of experience for sharing They have a variety of products we can use for own benefit – A perfect win/win situation They can offer real value with small scale farming experience – great for future land reform objectives Both countries have similar growing conditions and % of available land utilisation We both rely on more than 50% of the population in agriculture We both share the same problems in terms of climate and water

17 China’s effect on SA Agriculture Our own experience China the largest producer of apples at 40% of world production (5.6x larger than USA) China the largest producer of pears at 61% of world production (14x larger than Italy) China only exports 8% of production yet imports more than exports SA only produces 1% for apples and 2% for pears of world production China is growing in excess of 12% p.a economically and pays substantive premiums for quality produce

18 China’s effect on SA Agriculture To appreciate the opportunity one has to review China’s needs In terms of apples, China produces the most Fuji yet needs more China also needs more Royal Gala Both of these are priority plantings in SA We have sourced by agreement Chinese plant material on an exclusive basis for both apples and pears We have by agreement returned the favour Is this a threat or opportunity? YES as we have a chance to export there and gain technical knowledge in return using their own expertise

19 China’s effect on SA Agriculture Will China represent a threat to SA in respect of imports to SA? At present the only fresh product coming to SA is Garlic but only in our off season, as well as fruit juice concentrate There are fertilizers and chemicals which are under review but they are of good quality and competitively priced SA has agreements to export citrus and grapes to China, the counter for China to export apples and pears to SA These all have strict protocols to ensure - Phytosanitory issues to protect both countries own crops - strict quality requirements - strict timing of delivery and value chain protection - full farm, orchard and packhouse accreditation Niether country wishes to have “dumping” as an issue

20 China’s effect on SA Agriculture China’s window of opportunity is very short – 10 to 12 weeks between our own seasons Values are in US$ Shipping is expensive and shipping time 35 days Its unlikely that much will come in as the market is small and the price will be expensive

21 China’s effect on SA Agriculture Recent research conducted by Prof Daan Louw of Free State Univ has concluded that there are few differences between China and SA in relation to - cost of money (if borrowing is required) - cost of land (actually more expensive) - cost of trees - cost of fertilizer, pesticides, fungicides etc… - cost of labour (increasing rapidly) - cost of packaging and cold storage - cost of shipment to major markets

22 China’s effect on SA Agriculture The main differences lie in the number of farmers and size of farms In SA an ave farm is 45 h/t’s whilst in China they have only.2 to.3 h/t’s In SA we have 700 plus apple farmers covering h/t’s whilst China has 70 MILLION covering 1.9 MILLION h/t’s

23 China’s effect on SA Agriculture What can we learn from this and what impact will it have on SA and Africa Both SA and Africa have been targeted by China to provide a wide range of products to boost their needs The African continent has the potential to grow many staples and China is willing and able to invest millions of $’s to achieve these goals China has already identified Africa for development Beijing have 12 specific projects covering a host of crops sustainable and beneficial for China For SA its aquaculture in the Northern Province’s

24 China’s effect on SA Agriculture SA should be in conjunction with Govt pursuing bilateral agreements to attract funds from China to develop unused or under utilized land aimed at export Bio-fuel crops could be a major priority SA could follow China’s small scale farming principles helping new farmers to develop unused land SA could revise its farming principles to grow suitable crops by region Of course we should also learn from their past mistakes and tap into current successes!

25 China’s effect on SA Agriculture When dealing in China remember these key points Nothing is ever what it seems Develop a strong relationship with both Central and Provincial Govt Spend time in China to learn the culture Eat the food, drink the wine and NEVER complain NO deals are ever successfully concluded with one visit

26 There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this mans lawful prey (Anon)

27 THANK YOU


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