Aquaculture could be Africa’s next big thing in business. But it could also be a difficult catch.
“Before anyone goes into Africa, you need to take off the enthusiasm, take off the crazy entrepreneurial hat and get the fundamentals right, before they come back to bite you.”
This is the warning from veteran Gavin Johnston, Head of Aquaculture Consulting and Management Services, who has spent 20 years in the game across Africa. He has seen it all.
Johnston’s journey began in 1994 where he worked in South Africa’s abalone industry in Hermanus. At the time it was little more than an experiment to see if the snail-like delicacy, in high demand in Hong Kong, could be farmed on Africa shores; it grew into a million-dollar industry
“Abalone is a niche within a niche. It’s the high-end of society that wants our species. There is lots of different species. The market is complex. The price can fluctuate by as much as 200 percent depending on how it was dried or its slight color differences. With a capacity of 80,000 tons a year, [South Africa] is currently producing 1,300 tons. We are a small fry that supplies a small portion,” he says.
When it comes to aquaculture in Africa, abalone has shone. It remains to be seen if similar pilot projects such as South Africa’s Operation Phakisa, launched by President Jacob Zuma in 2014, will be as successful.
“It is looking at ways of exploiting the coastal and marine environment to create jobs. Aquaculture is there and it’s kind of the new buzzword. But here are the graves of so many failed projects… Government is seeing something interesting in that aquaculture has the ability to be seen in a remote area. It has constraints, access to markets and infrastructure,” says Johnston.
Phakisa streamlines marine-based business by creating industrial hubs. The hubs plan to cut time consuming environmental impact assessments as well as setting up infrastructure. In short, it means getting fisheries up faster and getting your legal documents signed off quicker.
The government plans to unlock the ocean economy in four areas: marine transport and manufacturing activities; offshore oil and gas exploration; aquaculture and marine protection services and ocean governance. In 2010, the ocean contributed around $4 billion to South Africa’s GDP and supported approximately 316,000 jobs. Government says the ocean has the potential to contribute up to $13 billion to the GDP and up to a million direct jobs. That’s more than twice the number of people in mining which creates more than half of South Africa’s exports.
The latest data released in the Aquaculture Yearbook 2014, by the Department of Agriculture, Forestry and Fisheries, shows businesses in the seas are on the rise. In 2013, the value of the aquaculture sector, based on sales of products, grew by 38.1% to R696 million ($51 million). Of this, abalone production accounted for 76% of this at R529 million ($39 million). It’s a drop in the ocean compared to South Africa’s agriculture production, which was almost R188 million ($13.8 million) in 2013.
Johnston is a farmer at heart and looks like one – he wears a working shirt, shorts and shoes – and he has plenty of ideas to bring down costs. In the comfort of a coffee shop in the Hemel-en-Aarde Valley, on the outskirts of Hermanus, around 120 kilometers from Cape Town, we are in farming country. A hundred meters away is a farm that supplies half of the Western Cape with lettuce. On this farm Johnston is testing a new irrigation system that could produce even more. It’s a good place to muse about food, the sea and the future.
“The population is growing, [fish] catches are going down and the middle class is expanding. If you do the numbers you get a massive apparent basket of demand. That’s what’s driving the market. What’s missing is the economics behind it.”
“What people are talking about is 3,000 tons [of fish] a farm. That’s approximately 65 percent of the total wild catch of line fish in one year, in one farm.”
As we sit sipping coffee Johnston speaks passionately about a river fish in the Congo that lives off pig manure; he thinks it will feed millions of Africans by 2033. This hardy fish, called tilapia, can survive in sea and fresh water, it also feeds off algae and is cheap.
“This business is bigger than any farming operation in South Africa, and it’s a backyard operation. [African fisheries] are likely going to be lots of small guys who go and dig a dam; fill it up with water from the local river and throw in some pig manure so it goes green. I know guys who will harvest three tons a day. They have a pump; take it down to the market and just down the road, there is no ice, and they sell the whole thing. Gone,” says Johnston.
But, the rough South African seas make it difficult to farm large scale offshore.
“Most farming on large scale is done offshore, in those big fish cages. The reason is you have 100 tons of fish in one cage. You’ve got one boat that pumps feed in. The sea washes away the waste and thanks for coming.”
High density farming in tanks onshore is also a problem.
“You can have a disaster with water and in 10 minutes you will lose your product… But, the thinking at the moment [about Operation Phakisa] is there is going to be this large scale global market stuff. Whether it’s going to be the next mass production line, like chicken, I don’t know?” says Johnston.
You also need to choose the right fish to cover your costs. Farming hake, a fish that ends up on most South African plates, is pointless when it is far cheaper to catch.
“People are not going to pay R100 a kilogram for hake, and that’s the market that eats a lot of fish. The market that’s eating that nice little plate of fish, the upper tier market, that’s on MasterChef, that’s the market that will pay for the stuff. Those are the people will pay R150. So yes the equation is very nice. There are more people and there is less being caught. But there is a price point where people are saying that’s my limit.”
South Africa is a late entry into the game that has been played for centuries. It could take years before South African varieties appear on plates in international hotels.
“A lot of the fish producers have had to go big to get over that economy of scale. South Africans will only eat so much, so let’s export them. The question is to whom? Cod doesn’t exist on the international markets. They know all the international species. The Norwegian government must have spent so much money to make their salmon a dietary component of middle class citizens.”
Then there is the wild caught market, that is fish caught in the sea and not farmed, that can lower the price of your fish fillets in an instant.
“It’s a bit of a tragic assumption, because aquaculture is like any farming business. It thrives under a standard price, put a 20 percent mark-up and there’s your price. But the capture market isn’t like that. You don’t know what’s coming in tomorrow. Pilchards are caught in their millions of tons, can cost about R3 a kilogram. The cost of a kilogram of food to feed them in captivity is R20.”
Africa needs to get in on the action and one of its drawbacks is infrastructure, or the lack thereof. Johnston found out the hard way – he lost out on a $50-million cob farm in Mozambique when the gas came in.
“In Mozambique we got beaten out by oil and gas. We got there first. We got set up. It was unbelievable. The lead-up to it was amazing, and then it suddenly turned on us. The minister said that Mozambique was going to produce 70,000 tons of fish for $25 million. Then the gas came and unfortunately we were just in the same area, you can’t say no to $75 billion over the next 10 years.”
The problem in Africa is the supply chain and the local markets are few and far between, except for tilapia.
“Local markets are not going to support a high-value species. You need to build infrastructure, from roads to water, electricity to sanitation. You still need to have the same quality of high-level sanitation, whether it’s coming out of France or Djibouti.”
“Where farmers buy in seeds, in aquaculture you can’t buy eggs. You can’t just bring in seed stock. You need to have your own little hatchery, which adds its own little complexity.”
“The real nail in the coffin for most places is the regulatory requirement, intergovernmental agreements on health certifications. [Governments] just don’t set it up. [In Mozambique] everyone was ready. But the local government hadn’t done their paperwork. You can’t send [stock] out of the country. It can be as simple as your country’s veterinary authority not having done the health checks before it gets sent to Europe. Currently South Africa has the same problem. So you can farm your fish but you can’t sell them to Europe.”
Aquaculture may be a stormy business, but at least it’s in the swim.