ABALONE MARICULTURE
IN THE EASTERN CAPE
The Eastern Cape’s proximity to international and Sub-Saharan African markets by means of multi-modal logistics and world-class infrastructure at the East London and Coega Industrial Development Zones (IDZs) are some of the advantages for investing in abalone mariculture operations in the province. Suitable climate and seawater temperatures, as well as access to a world-leading mariculture research institute at Rhodes University in Grahamstown are additional benefits for investors. The Eastern Cape Development Corporation (ECDC), the official economic development agency for the province, has helped several investors to identify and access business opportunities in abalone mariculture. ECDC assists new and existing investors at no cost to: • Identify business opportunities in key sectors; • Facilitate and finance joint ventures; • Access investment incentive schemes and local business service networks; • Create access to a diverse portfolio of available land and buildings; • Facilitate corporate relocations and aftercare services; and • Lobby provincial and national government for relevant interventions.
This brochure gives an overview of labour, climate and logistics issues concerning abalone farming in the Eastern Cape. The information provides a brief synopsis of the suitability of the Eastern Cape for mariculture investment. A site visit is encouraged with the view to conduct a full feasibility of an abalone production facility in the province, or alternatively to invest in an existing operation or opportunity. Market information: All statistics are from the Food and Agriculture Organisation of the United Nations (2008), The State of the World Fisheries and Aquaculture.
CONTENTS INDUSTRY STATUS
MARKET LABOUR POLICY COMPETITIVE ADVANTAGES SPECIES & TECHNOLOGY LOGISTICS
CLIMATE START-UP COSTS
LEGISLATIVE REQUIREMENTS
RISKS
INDUSTRY STATUS
The abalone farming industry is the largest aquaculture sector in South Africa by value. The industry has grown from 180 tons a year in 2000 to 913 tons in 2009. In 2004, exports of farmed abalone overtook those of wild caught animals, a trend which is unlikely to be reversed. Despite the considerable contribution that mariculture can make towards regional economic growth, job creation and foreign income earnings, the growth of the sector has been slow compared to other countries for several reasons which include:• Lack of appropriate technology which is now available; • Previously unsupportive institutional environment which has recently improved; • Harvesting of the wild abalone resource; and • Competition for land with other users.
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MARKET Aquaculture continues to be the fastest growing animal foodproducing sector worldwide. The per capita supply from aquaculture has increased from 0.7 kg in 1970 to 7.8 kg in 2006, an average annual growth rate of 6.9 percent. It is set to overtake capture fisheries as a source of food fish as it accounted for 47 percent of the world’s fish food supply in 2006 and projected to grow at 7.6% a year until 2020. The South African abalone, Haliotus midae, is one of the three most popular species in terms of demand and price. Other species in demand are the Japanese and Mexican species.
The price, depending on size and how the animal is processed (live, canned, dried or frozen), ranges from US$30 to US$35 per kilogramme. Most of the product is exported to the Far East, the biggest markets being China, Hong Kong and Japan. The market is stable, although recent abalone aquaculture developments in Korea and China have resulted in a narrower market share for the South African species. Prices also come under pressure from the illegal trade in poached wild abalone and low inflation rates in market countries.
Labour policy Mariculture falls within the agriculture sector and the South African Government labour regulations for farm workers (Basic Conditions of Employment Act, No 75 of 1997, Section 8). These regulations cover minimum wages, overtime allowances, maximum working hours, leave regulations, and generally bring agricultural labour relations in line with industrial labour. However, the actual values are lower than for other industries: • Minimum wage is currently (Feb 2011) R6.74 an hour; • Hours of regular work is 45 hours a week; • Overtime rates are 1.5 times the basic rate; • Work on Sundays and public holidays is paid at double the regular rate; • Annual leave is three weeks every 12 months worked or one full day for every 17 days worked; • Sick leave is six weeks for every 36 month cycle worked; • Family responsibility leave is three days for every 12 months worked. Due to high levels of unemployment, particularly in the rural areas of the Eastern Cape province, there is increased motivation for employees to keep their jobs and to go an extra mile when necessary. Productivity is generally improving with an increase in living standards being the major incentive. Government’s extensive skills development schemes extend into the agricultural sector, where numerous training and education programmes offer financial incentives for employers to uplift their staff.
COMPETIVE ADVANTAGES The Eastern Cape has a number of competitive advantages for abalone mariculture: • The price of suitable land is, on average, lower than the Western Cape. • Warmer sea temperatures allow the abalone to reach market size in 3.5 years as opposed to 4 years. • Africa’s leading mariculture research institute is situated in the province at Rhodes University, Grahamstown. • The East London IDZ has prioritised the mariculture sector and is committed to providing suitable infrastructure and support for investors in the zone. • The Eastern Cape offers a lifestyle unsurpassed by anywhere else in the country.
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Species &
technology Technology for the culture and grow-out of the species has been developed. Current practice is to produce the spat in a hatchery and then move them to grow-out sites. There are currently 15 grow-out facilities along the South African coastline, twelve of which have their own hatcheries. One of these facilities is based in the Eastern Cape. Not all the specialised equipment required for aquaculture operations is readily available in South Africa. Current operations therefore source some capital equipment from around the world. This is made possible by ports and airfreight from East London and Port Elizabeth.
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LOGISTICS Currently all abalone farmed in the Eastern Cape is either dried or exported live to the Far East. Other processing options pursued by other operators include shipping abalone live, canned or frozen.
Local
Freezer trucks can be arranged and will often be supplied by the buyer. Distances to all major centres are within 1,000km.
Export
An internationally recognised South African Bureau of Standards (SABS) health certificate is obtained by the producer prior to shipping. A number of international freight forwarders are established with their own warehousing and administration facilities in both East London and Port Elizabeth. Internationally recognised operators such as Maersk, DB Schenker and Röhlig-Grindrod are linked to national and international networks with facilities either in Johannesburg and Cape Town as well as European destinations. South African Airways (SAA) cargo operates all on-site airport facilities and is known for its compliance with all relevant international standards, procedures and quality maintenance. Cold storage facilities at both provincial airports, East London and Port Elizabeth, meet the highest international standards and have been approved by the Perishable Product Export Control Board for handling perishable products for export. This certification is in line with all relevant international agreements. Volumetric weight is 6,000 and freight rates are available on request. Transit time from Eastern Cape airports to destination ports via Johannesburg is approximately 18-20 hours. Other relevant facts for exporters: • Cold storage facilities have roller beds to handle aircraft pallets; • Airfreight space shortages are experienced during December from East London. Priority is given to airfreight with allocations on international flights. Port Elizabeth rarely experiences shortages of space to Johannesburg or Cape Town, except from October to March when fruit products are exported from these two hubs; • SAA accepts responsibility for the maintenance of prescribed temperature levels during transhipment at Johannesburg. Temperature loggers are available on request to monitor temperature throughout the voyage; • Cargo space can be booked with SAA Cargo reservations in Port Elizabeth for the destination required and SAA will confirm space out of Port Elizabeth. Space will be requested from either Johannesburg or Cape Town by SAA’s reservation staff in Port Elizabeth.
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CLIMATE The Eastern Cape straddles three major climatic regions. Although subject to major movements of air masses extending over hundreds of kilometres, there are many variations in temperature, rainfall, humidity and wind occurring over short distances in the Eastern Cape. The spatial variations within the coastal belt provide a large number of “miniclimatic zones”. (Source: Agricultural Research Council weather station)
Average climatic data collected from three stations in the province Location Wave Crest East London Port Elizabeth
Average Min air temperature (°C)
Average Max air temperature (°C)
Average % Humidity
13.1 14.4 13.5
21.2 22.9 22.3
65.6 NA 73.9
Average monthly seawater temperatures
Average minimum and maximum temperatures recorded in 2009 from Orient Beach (East London) and Pollock Beach (Port Elizabeth). 25.0 20.0 15.0 10.0 5.0 0.0
Jan
Feb
Mar
PE average
Apr
May June
July
Aug
PE minimum
Sep
Oct
Nov
Dec
PE maximum
25.0 20.0 15.0 10.0 5.0 0.0
Jan
EL average
Feb
Mar
Apr
May June
EL minimum
July
Aug
Sep
Oct
Nov
Dec
EL maximum 06
STARTUP COSTS Marine aquaculture operations are generally only viable at significant economies of scale. Construction of a facility may take up to two years before full production can be initiated. In addition, abalone requires 3.5 years to reach market size. This means that operating costs should be factored in for at least five years before a positive cash-flow begins. A 100-ton facility will cost around R45 million (Capex) with approximately R15 million for operating costs over five years.
LEGISLATIVE REQUIREMENTS
RISKS
Mariculture is a listed activity requiring a mariculture right and permit from the National Department of Agriculture, Forestry and Fisheries (DAFF).
Spikes of high sea temperatures pose a threat to abalone operations in the eastern part of the province and in sheltered bays where water movement may be limited. Farms in areas with a high silt load may be prone to infestations of the Polydora parasite, a boring worm, however good management practices can serve to mitigate this risk.
To obtain this, applicants must prove they have access to suitable land and have obtained all relevant provincial permits which include permits to undertake listed activities, water abstraction and land rezoning. An environmental impact assessment may have to be undertaken as part of the application process for the relevant permits.
ECDC facilitates and supports investment and development in key sectors in the province through a number of professional services which include investment and trade promotion, and facilitating foreign direct and domestic investment. ECDC invites interested parties to contact ECDC’s sector specialist for aquaculture, fisheries and environmental management, Rory Haschick: Tel: + 27 (0) 43 704 5606/5710 | Fax: +27 (0) 43 743 6036 | Email: rory@ecdc.co.za
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SMGAFRICA_6017
All marine species, no matter where they are cultured, require a mariculture right and permit from DAFF.