FINFISH 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 finfish 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 finfish mariculture, some of which have already established operations in the East London and Coega IDZs. 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 finfish 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 a finfish 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 Aquaculture of marine food-fish species, widely known as finfish mariculture, is a relatively new industry in South Africa that has developed in response to declining catches and increasing fish prices.
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:
Finfish mariculture is expanding following research and pilot commercial operations where technology for farming indigenous species has been demonstrated.
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Finfish projects include land-based dusky kob culture which, in 2009, produced around six tons, and a pilot scale cage culture of yellowtail which produced 23 tons. Pilot scale kob pond culture experiments are due to begin in Port Elizabeth during 2011. The annual total production is expected to exceed 200 tons in 2011.
Lack of appropriate technology, which is now available; Previously unsupportive institutional environment, which has recently improved; Historically low price of seafood in South Africa, which is changing as consumers are becoming more conscious of the health benefits that seafood offer; Ready access to seafood from captive marine fisheries; A high-energy coastline that limits sea-based mariculture operations; Veterinary and animal health support; and Competition for land with other users, which restricts landbased operations.
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MARKET Global statistics show that aquaculture continues to be the fastest growing animal food-producing sector. 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 is projected to grow at 7.6% a year until 2020. South Africa is currently a net exporter of fishery products but most South African products are considered used to the maximum with many high-valued fish products such as wild abalone, prawns and linefish being over-exploited. The projected increase in demand for high-end fish products provides an opportunity for substantial increases in finfish mariculture production. Domestic demand can also be met by imports, therefore the projected increase in demand only provides an opportunity for finfish mariculture if it is competitive. A competitive export market does exist for aquaculture products, however, as production has yet to reach full capacity, a major percentage of products will be exported to the USA, Asia and Africa. Currently there are no exports of aquaculture products allowed to the EU as an environmental monitoring programme must be completed before certification will be awarded.
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 are 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; and • 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 finfish mariculture: • The price of suitable land is, on average, lower than the Western Cape (western coastal area of South Africa). • Warmer sea temperatures allow fish to reach market size in a shorter time than those grown in the Western Cape. • Africa’s leading mariculture research institute is situated in the province at Rhodes University, Grahamstown. • The East London IDZ has prioritised mariculture 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 of kob (Argyrosomus japonicus and A.inodorus) and yellowtail (Seriola lalandii) has been developed and is being refined for white stumpnose (Rhabdosargus globiceps), geelbek (Atractoscion aequidens), spotted grunter (Pomadaysis commersonnii) and white margined sole (Dagetichthyes marginata). Current practice is to produce fingerlings in a hatchery and then transport them to grow-out sites.
The province has four facilities (three commercial and one research) involved in the production of fingerlings. In terms of operational grow-out farms, there is one sea-cage (yellowtail) and five land-based operations (dusky kob), of which all except one are situated in the Eastern Cape. Offshore cage culture is also being investigated for the Eastern Cape. Since South Africa does not have all the technology and specialised equipment for aquaculture operations, current operators source some parts from around the world. This is made possible by ports and airfreight from East London and Port Elizabeth.
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LOGISTICS There is currently no fish processing plant in East London and therefore all product produced in the region are processed in other areas in the province such as Port Elizabeth and Cape St Francis. However, as finfish production grows in the region, investment into this infrastructure is likely to occur.
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
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
EL maximum 06
STARTUP COSTS Marine aquaculture operations are generally only viable at significant economies of scale. Construction of a facility in addition to the time taken for the animals to grow to harvest size can be up to three years. This period accrues substantial operating costs compared to other industries. Start-up costs for a 50-ton land-based pond system (excluding hatchery) are in the order of R1, 500,000 (Capex) and R800, 000 (operating costs). Start-up costs for a 300-ton recirculating land-based system (excluding hatchery) are in the order of R20 million (Capex) and R8 million (operating costs). Start-up costs for a 200-ton cage culture operation (excluding hatchery) are in the order of R8 million (Capex) and R5 million (operating costs which includes a boat). Internationally, most marine fish are reared in sea cages, and a relatively large volume (minimum 1,000 tons) is required for a business to achieve competitive production costs for export.
LEGISLATIVE REQUIREMENTS
RISKS
Mariculture is a listed activity requiring a mariculture right and permit from the National Department of Agriculture, Forestry and Fisheries (DAFF).
Large swells following storm and current events occur along the length of the exposed and high-energy coastline of the Eastern Cape. These events could pose a threat to offshore cage operations and the general recommendation is that the site should experience less than one metre swell height for at least 90% of the time.
Certain projects may qualify for an exemption from the regulations based on annual tonnages produced. All marine species, no matter where they are cultured, require a mariculture right and permit from DAFF.
ECDC facilitates and supports investment and development in keys sectors in the province through a number of professional services which include investment and trade promotion, and facilitating foreign direct and domestic investment in key sectors.
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However, technology for “high seas” cages has developed rapidly in recent years. The potential feasibility of marine fish culture in South Africa’s semi-sheltered embayments which are protected from the prevailing swell direction is currently under investigation. Minor threats to cage operations include predation from seals and sharks which can be mitigated using barrier nets or acoustic technology. Theft is a potential problem for both land and cage operations, however, efficient 24-hour monitoring of facilities (using manpower or cameras) help to reduce the risk. A risk to land-based operations is the possibility of periodically inconsistent supplies of acceptable quality seawater due to such factors as red tide, an extreme drop or spike in ocean temperature, or increased sediment from rainfall runoff. This can be mitigated easily through pre-filtration and treatment in conjunction with the use of partial recirculation technologies. If the quality of incoming seawater to the farms is unfavourable for a short period of time, the farm can turn off or reduce incoming seawater and run on 100% recirculation until the quality of seawater improves.
ECDC invites interested parties to contact ECDC’s sector specialist for aquaculture, fisheries & environmental management, Rory Haschick: Tel: + 27 (0) 43 704 5606/5710 | Fax: +27 (0) 43 743 6036 Email: rory@ecdc.co.za
SMGAFRICA_6018
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.