A R90 million world-class tomato paste factory, to be built this year in the Coega Industrial Development Zone, will at full production create 3 000 jobs, and produce up to 50 000t of tomato paste from tomatoes to be grown in the area on about 1 650ha. Mike Burgess spoke to Stuart Robinson from Post Harvest Technologies – the project’s initiators – about the challenges of getting the project off the ground, its ability to compete with China, and why this is very good news for commercial farmers.
The Cape Concentrates project will see the establishment of a tomato paste factory in the Coega Industrial Development Zone (IDZ). The project has been initiated by the international company Post Harvest Technologies (PHT) and along with their BEE joint venture partners Makubu Amatsha they have entered into a strategic alliance with Club Refrigeration, the largest refrigeration contractors in South Africa and the Italian-based, food-engineering company, Fenco SpA, that designs, manufactures and installs food-processing plants.
Accessing finance, including support for the potential new tomato growers, from various financial institutions in South Africa has been challenging and time-consuming says Stuart Robinson, managing director of PHT. “A disappointment has been that South African commercial banks have no understanding of project finance at this level. They don’t have management in place to handle projects of this nature.” He charges that development banks’ high staff turnover results in communication challenges. “Constant movement of staff between the major development banks results in an inability to create a focal environment to give the project any kind of momentum,” he explains. An almost 18-month delay has been very frustrating.
“This part of the Eastern Cape – the Sundays River area – is unique and can produce tomatoes for processing all year round, ensuring a 330-day processing season and two growing cycles a year,” says Stuart. When taking into account that other major global producers have considerably shorter growing seasons – China (60 days), California (180 days), and Southern Europe (120 days) – the area is ideally suited to growing and processing tomatoes. Other reasons for PHT’s choice of the Sundays River Valley as the site for the paste factory include a good water source in the Gariep Dam and Great Fish River, and the high production potential. Favourable sugar content or Brix specifications between five and 6,5, and substantial support from national and regional government institutions, have also been taken into account.
The planning phase
The Eastern Cape was only one of many areas investigated by Stuart when in 2004 PHT reached an agreement with Fenco that would find a site and Fenco would build the plant, either in Africa or the Middle East. Stuart first considered an area on the Saudi/Jordanian border, but it was found that strong desert winds from the Sinai Peninsula would destroy tomato seedlings. After investigating a number of options in Africa, Stuart eventually considered an area along the Limpopo River. There, the threat of the plants suffering from serious heat stress and a lack of water, thanks mainly to what would be overproduction, convinced him to have a look at the Eastern Cape. In 2005 he contacted the Eastern Cape Department of Agriculture and soon PHT set their sites on the town Kirkwood. Problems with securing a site there then led Stuart to the Coega IDZ – around which, in about a 200km radius, commercial farmers are now being recruited to grow tomatoes. The project requires a total land base of 1 650ha on which existing vegetable, pineapple, citrus or deciduous fruit farmers would be asked to produce a cash crop of tomatoes twice a year.
Competing with China
Any tomato paste factory planning to compete in the global market needs to compete with China, says Stuart. Tomato paste factories already operating in China and built in cooperation with Fenco are a real competitive threat, but circumstances have also changed in China. The plants there were built on the basis that the Chinese – who basically don’t eat tomato paste – would have an export commodity for hard currency. Understandably, at the time, Chinese banks were therefore really geared up to finance the projects there. The Italians supported the initiative by introducing export subsidies, enabling the Chinese to import Italian equipment and they came to an agreement whereby Italy would buy the paste from China.
That arrangement has recently come to an end – a scenario capable of hurting paste factories in China, specifically in light of their reduced operating and processing seasons. “It’s questionable, just how many of them will survive,” says Stuart. Such scenarios bid favourably for South Africa, but it’s not all that could be going for South Africa and future tomato paste factories. In fact, a competitive analysis study comparing South Africa and China and commissioned by PHT shows that South Africa can very effectively compete with China in terms of the import substitution and also in terms of the duty paid landing cost of the Chinese product. The reasons for this is partly entrenched in the Coega IDZ area’s year-round growing season, ensuring more productive months, and more months in which to amortise debt.
In the long run Stuart believes China can do more damage to its own food exports than anybody else could. “China’s poor record concerning traceability of products and other critical issues in the food chain, offer African producers and processors a real opportunity,” he stresses. “People don’t feel comfortable taking food products out of China. What this project can offer to the food chain, including domestic users such as Tiger Brands and international users such as Heinz, is full traceability,” explains Stuart.
He’s convinced that offering a quality product, at a duty paid land cost and with full traceability, will afford a competitive edge on China in a number of markets. “The competition can begin right here in South Africa and Namibia. South Africa imports about 20 000t of sub-grade Chinese paste a year. In Namibia and South Africa the fishing industry alone absorbs 12 500t of paste a year,” says Stuart. In fact, the entire west coast of Africa from Angola to Nigeria represents a significant market, with, for example, Ghana importing up to 75 000t of the 1 million tons of sub-Saharan consumption of tomato paste and other tomato derivatives.
As for Europe, the winds of change blowing over common agricultural policy and subsidy policy are gradually picking up to the advantages of Africa. “Subsidies are now being phased out in the spirit of giving Africa a chance,’’ he explains. One of PHT’s marketing partners in Europe – Tomatoland – already have over 300 interested customers, while the US tomato paste price has seen significant increases. In short, the global market is potentially a buoyant one for a well-run South African tomato paste factory, fed by well-supported commercial farmers. Contact Stuart Robinson on 078 386 7567
PHT, Club Refrigeration and Fenco SpA
Post Harvest Technologies (PHT) was established in 2002 to initiate and develop projects from inception to the commissioning of “turnkey projects” within the value-added food-processing sector in Africa and the Middle East. PHT farm management assures those who fund projects that all farm outputs conform to EurepGAP standards, while the processing facilities are accredited by the European Union, the British Retail Consortium, and the Food and Drug Administration in the US. PHT operates in technical partnership with UK Refrigeration in Africa. “This is done specifically in terms of projects where UK Refrigeration’s expertise can complement that of Club Refrigeration, or when joint EU and South African funding is required,” explains Stuart.
Club Refrigeration provides specialised refrigeration and food engineering contractors to South Africa. They have undertaken numerous projects in Africa, including installing high-care environments for the manufacture of pharmaceuticals for Adcock Ingram, Pfizer Warner-Lambert, Roche, Novartis, Merck, GlaxoSmithKline and Pharmacare. In the agricultural sector they have done work for Homegrown and East African Growers (Kenya), York Farms (Zambia) and Bidvest. The tomato paste factory in Coega will be grounded with technical assistance from the Italian food engineering company Fenco that has built over 240 food-processing centres worldwide, including puree lines, concentrate lines, individually quick frozen (IQF) plants and spiral freezing plants. Additional sources: www.tomatoland.com and www.fenco.it