WP47 Hara et al Trade and ... - Centre of Excellence · 2 Menzies Centre for Health Policy at the...

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INSTITUTE FOR POVERTY, LAND AND AGRARIAN STUDIES (PLAAS) Trade and investment in fish and fish products between South Africa and the rest of SADC: Implications for food and nutrition security 10 October 2017 1 Institute of Poverty, Land and Agrarian Studies at the University of the Western Cape, South Africa 2 Menzies Centre for Health Policy at the University of Sydney, Australia 3 WorldFish Centre, Lusaka, Zambia

Transcript of WP47 Hara et al Trade and ... - Centre of Excellence · 2 Menzies Centre for Health Policy at the...

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INSTITUTE FOR POVERTY, LAND AND AGRARIAN STUDIES (PLAAS)

Trade and investment in fish and fish products between South Africa and the rest of SADC: Implications for food and nutrition security

10October2017

1InstituteofPoverty,LandandAgrarianStudiesattheUniversityoftheWesternCape,SouthAfrica

2MenziesCentreforHealthPolicyattheUniversityofSydney,Australia3WorldFishCentre,Lusaka,Zambia

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Institute for Poverty, Land And Agrarian Studies Faculty of Economic and Management Sciences University of the Western Cape

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Bellville 7535

Tel: +27-(0)21-9593733 Fax: +27(0)21-9593732

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PLAAS Working Paper 47: Trade and investment in fish and fish products between South Africa and the rest of SADC: Implications for food and nutrition security

ThePLAASWorkingPaperSeriesisdesignedtoshareworkinprogress.Pleasesendanysuggestionsorcommentstotheauthor(s).

©InstituteforPoverty,LandandAgrarianStudies,UniversityoftheWesternCape,October2017Authors:MafanisoHara,StephenGreenberg,AnneMarieThow,SloansChimaritoandAndriesduToitmhara@plaas.org.zaCopyEditingandProofreading:LizSpargLayout:MologadiMakwela

Citeas:Haraetal(2017)'TradeandinvestmentinfishandfishproductsbetweenSouthAfricaandtherestofSADC:Implicationsforfoodandnutritionsecurity’,WorkingPaper47.PLAAS,UWC:CapeTown.

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Institute for Poverty, Land And Agrarian Studies Faculty of Economic and Management Sciences University of the Western Cape

Private Bag X17

Bellville 7535

Tel: +27-(0)21-9593733 Fax: +27(0)21-9593732

Website: www.plaas.org.za Email: [email protected]

Twitter: @PLAASuwc Facebook: www.facebook.com/PLAASuwc

ACKNOWLEDGEMENTS Thankyoutoallintervieweesfortheirtimeandinsights.WealsothanktheEuropeanUnionforfunding the participation ofMafaniso Hara and Sloans Chimatiro throughWorldfish Center’sFishTradeProgramme,andtheNationalResearchFoundationthroughtheCentreofExcellenceinFoodSecurityforsponsoringtheparticipationofStephenGreenberg,Anne-MarieThowandAndries du Toit for the research for this paper. The research team also benefited fromparticipation in the World Public Health Nutrition Association (WPHNA) conference held atUniversityoftheWesternCapeinAugust–September2016.

ABSTRACT This paper looks at the dynamics of intra-regional trade and investment in fish and fishproducts between South Africa and the rest of the Southern Africa Development Community(SADC)region,andtheimplicationsofthistradeforfoodandnutritionsecurity.It isbasedonkey informant interviewswithpeople in the food industry inSouthAfricaandAfricaregionaleconomicbodies.ImportsandexportsoffishinSouthAfricaaredrivenbyimportsubstitution,shortfalls in local production, and meeting growing local and regional demand. Most SouthAfricanfishandfoodprocessorsprefertoexport,ratherthanestablishplants inotherAfricancountries,mainlyduetofactorsofeconomicefficiencyandthechallengesofdoingbusinessinthesecountries.Currently,however, increasingvolumesof fisharebeing imported intoSouthAfrica tomeet demand from the Africanmigrant community.While self-sufficiency and foodsovereignty are acknowledged priorities for the Southern Africa Development Community(SADC),importstomeetlocalshortfallsandspecificdemandoughttobeacceptableoptionsforensuring fish food availability and affordability. The reduction or removal of tariffs, throughregional free tradeagreements,promotes increased intra-regional trade.Overall, imports andexports provide for demand-led exchange of fish between SADC states, which promotesincreasedavailabilityandaffordabilityoffish;therebycontributingtowardsfoodandnutritionsecurity.However,despiteregional free tradeagreements thathavestipulated theremovalofbothtechnicalandnon-technicalbarriers,mostsmall-scaletradersstillexperienceproblemsinconductingcross-border trade.Themajorityofpeople inbothSouthAfricaand theSADCstillrely heavily on the informal sector for conduct business and buying food provisions. Thisincludes cross-border fish trade, which is dominated by small scale-traders, the majority ofwhomarewomen.Theinformalsectorensuresthatfoodreachesmostpeopleinanacceptablestate, form and price. In order to promote and facilitate improved and efficient fish tradedelivery systems andpositive benefits for food security and livelihoods, governance of cross-bordertradeoughttobebasedonflexibleregulationsandimprovedimplementationofthese.

Keywords:Fishtrade,availabilityandaffordability,informality,importsubstitution,economicefficiency,foodandnutritionsecurity.

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Institute for Poverty, Land And Agrarian Studies Faculty of Economic and Management Sciences University of the Western Cape

Private Bag X17

Bellville 7535

Tel: +27-(0)21-9593733 Fax: +27(0)21-9593732

Website: www.plaas.org.za Email: [email protected]

Twitter: @PLAASuwc Facebook: www.facebook.com/PLAASuwc

TABLE OF CONTENTS

ACKNOWLEDGEMENTS ....................................................................... 3

ABSTRACT ................................................................................... 3

TABLE OF CONTENTS ........................................................................ 4

1. BACKGROUND AND INTRODUCTION ....................................................... 1

2. METHODOLOGY ......................................................................... 4

3. FINDINGS, DISCUSSION AND CONCLUSIONS ................................................ 4

4. IMPLICATIONS FOR FOOD AND NUTRITION SECURITY ..................................... 10

5. CONCLUSION .......................................................................... 12

REFERENCES ............................................................................... 14

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1. BACKGROUND AND INTRODUCTION Fisheries are important for provision of protein, livelihoods and economic growth,especially among the rural and poor populations of Africa. In 2010, the total fishproductionforthewholecontinentwasestimatedat9.4milliontonnes(FAOandNPCA,2014).

Anestimated12.3millionpeoplewereemployed incapture fisheriesandaquaculturesectorsin2010asfishers(50%),tradersandprocessors(42%)andfishfarmers(8%)(FAOandNPCA,2014;AUC-NEPAD,2014).Fishcontributesanaverageofover33%ofanimalprotein inAfrica (WorldFishCenter,2009). In termsofvolumeandvalue, fishandfishproductscontributed19%and5%oftotalagriculturalexportsrespectivelyin2013(AUC-NEPAD,2014).

Fish is a rich source of easily digestible high-quality proteins containing all essentialaminoacids.Inaddition,itprovidesessentialfats(forexamplelong-chainomega-3fattyacids) not found in most other protein sources, vitamins (D, A and B) and minerals(includingcalcium,iodine,zinc,ironandselenium),particularlywheneatenwhole.Fishis usually high in unsaturated fats and thus provides health benefits, especiallyprotectionagainstcardiovasculardiseases(FAO,2016).

Fish also aids foetal and infant development of the brain and nervous system. Evenwhen taken in small quantities, which is the case in many low-income, food-deficitcountries (LIFDCs) and least-developed countries, fish can have significant positivenutritional impactonplant-baseddiets.Withall thesevaluablenutritionalproperties,fishcanplayanimportantroleincorrectingunbalanceddietsandincounteringobesity(HLPE, 2014; FAO, 2016), which is one of the growing problems in some SADCcountries,suchasSouthAfrica(Shisanaetal.,2013).

Althoughannualpercapitafishconsumptionincreasedsteadily,globally(from5.2kgin1961to18.8kgin2013),itisstillconsiderablylowerinLIFDCs(from3.5to7.6kginthesameperiod)(FAO,2016).PercapitafishconsumptionforAfricain2010was9.1kg,less than half of the global average (AUC-NEPAD, 2014). Except for Mauritius andNamibia,percapitafishsupplyforallotherSADCcountriesremainsgrosslybelowtheglobalaverageandalsobelowtheaverageforAfrica(Table1).

Withmostglobalcapturefisheriesatmaximum(sustainable)productionlevels,orevenin decline, and aquaculture inmost African countries not providing a growth area tobridge the increasing gap between demand and supply (FAO, 2016), trade isincreasinglyseenasawaytomeetshortfalls innational fishsupply. Ineffect, tradeinfishandfishproductsamongAfricancountriesisbecomingincreasinglyrecognisedasbeing important for the continent’s food1 and nutrition2 security (WorldFish Center,2013,AUC-NEPAD,2014;Tall,2015).

1Foodsecurityreferstoaffordableaccesstoadequatenutritioushealthyfoodforeveryoneinthepopulation.2Nutritionreferstothefoodvalue(content)ofwhatconsumerseatacrossfoodtypes(e.g.carbohydrates,protein,vegetables,fruit,fats,etc.)forabalanceddiet.

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Table 1: Fish per capita supply for SADC countries

Country Percapitafishsuppy(kg/person/yr)

2005 2010 2015

Angola 12.1 14.7 14

Botswana 2.8 3.6 3.0

DemocraticRepublicof

Congo

5.5 4.0 6.0

Lesotho 0.9 2.0 1.0

Madagascar 7.1 6.8 6.0

Malawi 3.6 7.0 7.0

Mauritius 17.2 22.0 23.0

Mozambique 5.0 8.50 18

Namibia 13.1(for2000)

11.9 13.6

SouthAfrica 5.0 7.5(for2009)

6.0

Swaziland 2.0 2.4 2.0

Tanzania 5.5 7.7 6.0

Zambia 6.79 6.9 7.0

Zimbabwe 2.0 2.2 3.0

Source:http://www.fao.org/fishery/facp

Globaltradeinfishandfisheryproductshasexpandedconsiderablyinrecentdecades,fuelledbygrowingfisheryproduction(inparticular,aquacultureinChinaandAsia)tomeetthedemandfromagrowinghumanpopulation(ITC,2015;FAO,2016)andalsofromeatinghabitandlifestylechangesawayfromredmeatandtowardswhiteprotein.Fishand fisheryproductsrepresentoneof themost tradedcommodities in theworldfoodsector,withabout78%ofseafoodproductsestimatedtobetradedinternationally(FAO, 2016). In 2015, world seafood exports totalled US$101 billion, while importswereUS$97billion.SADCcountriesexportedUS$2.8billionandimportedUS$1billionworthofseafoodin2015(ITC,2015)(seeFigure1below).

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Figure 1: Fish imports and exports for SADC members states for 2015

Source: ITC, 2015

Figure1indicatesthatSouthAfricaandNamibiaarethelargestfishtradingnationsintheSADC,followedbyMauritius,TanzaniaandAngola.WhereasNamibiaandTanzaniaare largely exporting countries, SouthAfrica importsnearly50%of the volumeof itsexports.Mauritius is the largest importerof fish in theSADC, followedbyAngolaandSouthAfrica.

Africa’sRegionalEconomicCommunities3andtheAfricanUnion’sNewPartnershipforAfrica’sDevelopment (NEPAD)haveprioritised the strengthening of regional (Africa)trade, given that tradeamongAfrican countries isonlyabout10% of the continent’stotal exports (AUC-NEPAD, 2014). In this context, fish and fish products have beenidentified as key commodities for intra-Africa trade investment and policy support(WorldFish Center, 2013; AUC-NEPAD, 2014). The fisheries sector has also beenincluded in the NEPAD Comprehensive Africa Agriculture Development Programme(CAADP)’saimofachievinga6%annualgrowthinAfrica’sagriculturalGDP(FAOandNPCA,2014;AUC-NEPAD,2014).

The1996SADCProtocolonFreeTrade(SADC,1996)ledtotheestablishmentofaFreeTrade Area in 20084,5 as part of the SADC’s agenda for regional integration anderadicationofpoverty.TheestablishmentoftheFreeTradeArearesultedinthesigningof free trade agreements amongmember states that reduced tariffs on 85%of intra-

3Thesearecomprisedof:ArabMaghrebUnion(AMU/UMA),EconomicCommunityofWestAfricanStates(ECOWAS),EastAfricanCommunity(EAC),IntergovernmentalAuthorityonDevelopment(IGAD),SouthernAfricanDevelopmentCommunity(SADC),

CommonMarketforEasternandSouthernAfrica(COMESA),EconomicCommunityofCentralAfricanStates(ECCAS)andCommunityofSahel-SaharanStates(CENSAD).

4http://www.sadc.int/about-sadc/integration-milestones/free-trade-area5Angola,theDemocraticRepublicofCongo(DRC)andSeychelleshavenotyetratifiedtheProtocol,althoughthetwocountriesaresignatoriestotheagreement(Sandrey,2013).

0

100000

200000

300000

400000

500000

600000

700000

Imports (US$ '000)

Exports (US $ '000)

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regional imports6, leading to increased trade among member states after 2008(Sandrey,2013;Greenberg,2016).Evenso,intra-regionalfishtradelargelyremainslowdue to technical and non-technical barriers. In addition, intra-regional fish trade ispoorly documented. In order to evade the barriers that exist in the formal channels,traders prefer informal channels of trade (WorldFish Center, 2013;WWF, 2014; Tall,2015).

Whiletherehavebeeneffortstoincreaseaccesstostaplecereals–thesocalled‘caloriefundamentalism’ (Headeyetal.,2012;Thowetal.,2016)– limitedattentionhasbeengiventoimprovingtheavailabilityandaccesstofishandfish-basedproductsinAfrica,despitetherecognitionthatfishisarichsourceofmicro-nutrients(WorldFishCenter,2009; AUC-NEPAD, 2014). Improved intra-regional trade in fish and fishery productscouldplayamajorroleintermsofcreatingemployment,generatingincome,economicgrowthanddevelopment,aswellasproviding foodandnutritionsecurity.Thispaperuses fish as a lens for looking at the dynamics of (formal and informal) trade andinvestment and how these (directly or indirectly) influence and impact on food andnutritionsecurity,usingSouthAfrica(thelargesteconomyandfishtraderintheregion)andtheSADCastheareaoffocus.

2. METHODOLOGY The paper is based on results of semi-structured interviews conducted with keyinformantsinSouthAfrica(mainlyinCapeTown,PretoriaandJohannesburg)andsomeAfrican Union and SADC officials between June and November 2016. The informantswererepresentativesof:theprivatesectorinthefoodindustry;governmentministriesanddepartments concernedwith food andnutrition security and investment; privateconsultants working in the food industry; civil society interest group associations/organisations;fishretailersandtradersspecialisinginimportationandretailingoffishand other food products, in the Cape Town, Pretoria and Johannesburg metropoles;officialsofAUorganisationsandRECs;andacademicsandresearchersworking in thefood industry. Purposive selection of interviewees and snowballing were used assampling strategies in identifying and targeting the people to interview. In total, 18interview sessions were conducted with 32 people. Where necessary, secondaryinformationhasbeenusedtosubstantiateourfindingsorprovidealternativeviews.

3. FINDINGS, DISCUSSION AND CONCLUSIONS

3.1 Drivers of imports and exports SouthAfricaisthelargestimporterandexporteroffishandfishproductsintheSADC.In thepast, imports intoSouthAfrica tended tobemainlyhigh-valueproducts,but inthelastthreetofouryearsimportsoflow-valuefishandfishproductshaveincreased.This is mainly because investors are finding it cheaper and economically efficient tobring in imports to meet the shortfall in local production (for example, sardines –Sardinopssagax–alsoreferredtoaspilchards7),andalsoanincreasedsupplyisneededto meet the needs of new markets or demands (for example, Chinese tilapia are indemandfromtheAfricanmigrantmarket,livinginSouthAfrica).Localsardinecatches 6 http://www.sadc.int/themes/economic-development/trade/trade-liberalisation

7 The term used depends on region or country. For example, in the United Kingdom, ‘sardine’ refers to a young pilchard. In

South Africa, pilchards (not sardines) are VAT exempt, which means that it matters what name processors use, in order to qualify for this exemption.

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havedeclineddramaticallyinrecentyears,duetowhatarethoughttobeenvironmentalfactors (Watermeyer et al., 2016; Blamey et al., 2015; van der Lingen, 2011),makingimportsvitaltomeettheshortfall.Giventhat70%ofconsumedseafoodinSouthAfricaispilchard(WWF,2014)andalsothattwo-thirdsoftheSouthAfricancannedpilchardis exported to otherAfrican countries (Hutchings et al., 2014), import substitution ofrawpilchardby local canning companieshasbeenabsolutelynecessary tomeetbothnationalandregionaldemand.ThegrowingimportationofChinesefrozentilapia intotheSADCregion(andAfrica ingeneral) at prices that wild and farmed tilapia cannot compete with8 points to thephenomenal growth in aquaculture production in China and Asia at much lowerproductioncosts,whilethedevelopmentofaquacultureinsubSaharanAfricacontinuesto struggle9. At the same time, increasing volumes of processed fish products ofdifferentvarietiesandspeciesfromvariousAfricancountrieshavebeenimportedintoSouthAfrica, targetingmigrants living in the country (Jimu, forthcoming;NdoforEpo,forthcoming).Thesecome inall forms, including fresh, frozen,sun-dried,smoke-driedandsalted-dried,andcanned.Regionalagreementsonremovaloftariffandnon-tariffbarriersaredriversofincreasedtrade within the SADC region, for example, agreements under the Southern AfricaCustoms Union (SACU) (SACU, 2002) and the SADC Protocol on Free Trade (SADC,1996). In this context, it is cheaper and easier for SouthAfrican companies to exportwithin SACU and the SADC. Equally, it should be easier for other SACU and SADCmember states to export to South Africa. Despite such regional agreements,memberstates can, and do introduce restrictions10. For example, Zimbabwe banned theimportationofbasiccommoditiesinJune2016aspartofmeasurestoprotectthelocalindustryandreduceitsgrowingimportbillandtradedeficit11.SouthAfricaalso introduced import restrictionsonmussels (Mytilusgalloprovincialis)as part of measures to protect its young mussel farming industry (Hara et al.,unpublished). In such cases, consumers could be disadvantaged, as a result ofrestrictiononordenialofpossiblecheaperimportedfood.Removaloftradebarrierscouldalsobeatacosttolocalconsumersanddetrimentaltofoodandnutritionsecurityiftheexportsresultinnationalreductionofaffordablefishandfishproducts.Inordertoevadetariffsorbenefitfromtariffreductionagreements,someSouthAfricancompaniesaremovingproductiontoothercountries.Forexample,companies obtain fishing rights in Namibia, and process and export the fish caughtundersuchrights, inordertobenefit fromNamibia’spreferentialtradeagreementforexportingtotheUnitedKingdomundertheLoméConvention.

8http://www.fao.org/in-action/globefish/market-reports/resource-detail/en/c/336939/;http://www.businessdailyafrica.com/Tilapia-imports-amount-to-sabotage/539546-3281754

9SomeoftheunderlyingfactorsforpoorandslowgrowthanddevelopmentofaquacultureinAfricahavebeenidentifiedas:unsuitableenvironmentalandbiophysicalconditions;shortageofseedsupplies;lowlevelsofknowledgeandskills;negativeattitudesandbehaviourtowardsaquaculture;weakorganisationandgovernance;poorparticipatoryapproach;andunclearterms

ofagreementforbusinesspartnershipsbetweencommunitiesandexternalplayers(Ateweberhanetal.,2013).10UndertheSADCProtocolonFreeTrade(SADC,1996)MSscanintroduceimportrestrictionsaspartofanti-dumpingor/andcountervailingmeasures.

11InJune2016,thegovernmentofZimbabwebannedtheimportofbasiccommoditiesunder‘StatutoryInstrument64of2016’aspartofmeasurestoreduceitstradedeficitandgrowingimportbill(http://www.myzimbabwe.co.zw/news).

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3.2 Distribution channels and networks KeytodistributionoffoodinSouthAfricaandtheSADCaretheinformalchannelsandnetworks.It isestimatedthat lessthan45%offoodproductsgothroughformalretailoutlets in South Africa, while in most SADC countries, the formal retail sector isestimatedtobenotlargerthan5%(Njiwa,2013).Inthiscontext,theinformaleconomycontributes an estimated average of 43% to the GDP of African states (Afrika andAjumbo, 2012). This also relates the findings that in Africamost of the cross-bordertrade is undertaken by the informal sector, and hence referred to as informal cross-bordertrade(ICBT)12.It isestimatedthatover70%of the informalcross-bordertraders in theSADCregionarewomen (Afrika and Ajumbo, 2012; Njiwa, 2013). In addition to seeking to evadetaxesorfeesimposedbygovernments,traderstrytoavoidadministrativeformalitiesinrelation to areas such as health, import of agricultural products, and security andimmigration, which are perceived as costly, complex and time consuming (Jimu,forthcoming)13.LargevolumesoffisharetransportedintoandoutofSouthAfrica,usingpassenger buses, as part of passenger accompanied goods. Some fish comes into thecountryon trucks coming to collectgoodsat theDurbanandCapeTownports,whilesome fromWest Africa comes through container ships to Durban Port (Ndofor Epo,forthcoming; Jimu, forthcoming). Zimbabwe’s recent ban on imports of basiccommodities has resulted in the establishment of informal and unofficial bordercrossing points for both imports and exports between Zimbabwe and its neighbours(ibid).As a marketing strategy, producers can either choose a trade channel and try todominate it, or they can serve all possible and available channels (both formal andinformal).Given the sizeand importanceof the informal sector inAfricaneconomies,mostproducersoffishproductsinSouthAfricaandtheSADCchoosethelatterstrategy.Asaresult,themarketpenetrationofcannedpilchardissecondonlytoCocaCola.Theinformalchannelsrequireadiverserangeofproductsizes,whichusuallyinvolvesre-packaging.InmostAfricancountries,foodisgenerallysoldinopenairmarkets.Fishisusuallynotevenpackaged; it iseithersoldassingleindividuallypricedfish(forbigspecies)orinmounds(forsmallfish),withoutweighing.Similarly,mostfishproductsinspecialised shops forAfrican food in SouthAfrica’smetropoles are soldunpacked, bypiece, with only small species, such as kapenta (Limnothrissa moidon) and usipa(Engraulicyprissardella)soldinpacketsofR10,R20,R50,etc.Thedilemmathatfacesregulatoryinspectorsiswhetherformalisationwouldresultinimproveddeliveryandqualityoffoodforconsumers,ordisenfranchisethesmall-scaletradingsectorbyincreasingpricesoffishandfishproducts.

12Thisgenerallyrefersto‘tradeinprocessedornon-processedmerchandisewhichmaybelegalimportsorexportsononesideoftheborderandillicitontheothersideandvice-versa,onaccountofnothavingbeensubjectedtostatutoryborderformalitiessuchascustomsclearance’(AfrikaandAjumbo,2012:1).ICBTinvolvesbypassingborderposts,concealmentofgoods,under-reporting,falseclassification,under-invoicingandothersimilarillicitpracticesandactivities.

13Asaresult,thereisalackofverifiablefiguresintermsofthesizeofthissectorandthevolumeoffoodcommoditiesthatpassthroughtheICBTintheSADC(Jimu,forthcoming)andinAfricaatlarge(LesserandMoisé-Leema,2009).

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3.3 Employment and food security benefits of importation Theimportationofrawmaterialforlocalprocessingcanhaveapositiveimpactonjobandfoodsecurity.Forexample,duetoadeclineinproductivityand,therefore,reducedavailability of sardines in South African waters, the South African pilchard canningsectorimportsraw(frozen)fishforprocessing.Untilaboutthreeyearsago,mostSouthAfricancannersusedtooutsourcepilchardcanningtoThailandandChina.Tinplateforthe can contributes 40% of the cost of canning fish, and cans in SAwere 30%moreexpensivethaninothercountries.Inaddition,labourandenergyweremoreexpensive.But,duetotheweakeningoftherand,itbecamecheapertocanlocally.Thus,whereaspilchard fishing and processing, based on local production, used to be seasonal, theimportation of raw product for local canning has made it possible to run canningfactories throughout theyear, thereby increasing job security for the factoryworkers(nowfactoriesonlycloseforaboutonemonthayearformaintenance).

3.4 Do economies of scale facilitate availability and affordability of food?

A few large conglomerates dominate the food-manufacturing environment in SouthAfrica, including fishing and fish processing. This structural dynamic is a historicallegacy, based on favourable industrial policy and funding incentives under apartheidthrough the Industrial Development Corporation (Mondi and Bardien, unpublished).Forexample,theestablishmentofaSouthAfricanownedindustrialfishingsectorinthe1940s and 1950s was facilitated by government through soft loans and grantinvestmentsinafewfishingcompanies(VanSirtett,2003;NielsenandHara,2006).Asaresult, South African canned pilchard has experienced significant growth andmarketpenetrationsinceestablishmentofthecanningindustry(pilchardconstitutes70%ofallseafoodconsumedbySouthAfricans,andtwothirdsofSouthAfrica’scannedpilchardisexported,mainlytootherAfricancountries).Thesectorisdominatedbyafewlargeshare-basedcompanies.Oneoftheseisnowthelargest fishing company in Africa, the largest pilchard canning company in theworldand among the top ten fishing companies in the world. The company has a marketcapitalisation of around R1 billion and employs 5,000 people (a fifth of the totalemployment in South Africa’s commercial fishing industry). Its iconic and flagshippilchard brand has 80%market share of South Africa’s canned pilchardmarket. Thedominanceofthebrandissuchthatitisthefifthtopbrand(outofallconsumerbrands,notjustfish)inSouthAfrica.Intervieweesfromsomeofthelargefoodcompaniesarguedthatbytryingtobreakupor taking fishing rights away from these oligopolies, as part of transformation of thesector and Broad-Based Black Economic Empowerment14, governmentwould grosslyunderestimatebigcompanies’contributiontofoodandnutritionsecurity.Theyarguedthat, if governmentwere to break up the large companies, thiswould decrease theirfunctionalityandcapabilitytodeliveraffordablefood,whichonlythelargecompaniescan ably do, based on ‘economies of scale’. In this context, the fish canning industryarguesthatpilchardsarea ‘marginalbusiness’(whereyouneedeconomiesofscaleto

14Followingtheendofapartheidin1994,oneofSouthAfricangovernment’skeyobjectiveshasbeentransformationoftheeconomy(DPME,2016),mainlythroughBroad-BasedBlackEconomicEmpowerment(BBBEE).Inthefishingsector,thishasmeantofferingfishingrightstoblacksandtheirinclusioninownershipoftheexistingfishingcompanies(NielsenandHara,2006;IsaacsandHara,2008).

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bringontothemarketamarginallypricedproduct,includingthroughtheimportationoftherawpilchardforcanning,asthecaseiscurrently),andsmall-scaleoperatorswouldnotsurvive.Thequestioniswhethersuchmonopoliesresultinlackofcompetitionandthereforedisadvantageconsumersintermsofhigherfishprices.

3.5 Investing in African countries Thequestionaboutpriceandaffordabilityof foodalsorelates towhether itwouldbecheaper for local consumers if external food companies invested in and establishedfisheries-based industries in the localeconomies.Forexample, Irvinand Johnson(thelargest hake company in South Africa) has a Zimbabwe-based bream (Oreochromisniloticus) cage farming company (LakeHarvest) onLakeKariba.A second example isthat a number of South African fishing companies have fishing rights in Namibianfisheries. Most of the big food companies are share-based and the key concern forinvestorsis‘returnoninvestment’andthepotentialforgrowthoftheirinvestments.Inthiscontext,a company’scontribution to foodandnutritionsecurity,both locallyandregionally, are secondary concerns for investors. Some of the interviewees from theprivate sector expressed the view that food security andnutrition are (or shouldbe)byproductsofeconomicgrowth.Thequestion is, therefore,whetherthefoodindustrycanreconcileconsumers’healthandnutritionneedswithprofitmotives.Accordingtointerviewees,themainobstaclesthatSouthAfricancompaniesexperienceregarding foreign investment, especially in other African countries, are related to anumberofkeyissues:

i. protectionofinvestment(forexample,ZimbabwepassedtheIndigenisationandEconomic Empowerment Act in 2007, which requires all externally ownedcompaniestocedeatleast51%ofsharestoblackZimbabweans,apolicythatthegovernmenthasbeenvigorouslytalkingabout,ifnotactuallyimplementing);

ii. repatriationofinvestmentrevenueandprofits(anintervieweegaveanexampleof a lucrative market for horse mackerel in Angola, which was operationallydifficult tocontinuewith,due toproblemsofshortageof foreignexchangeandalsolawsgoverningrepatriationofrevenueandprofits);

iii. theneedforagoodbusinesspartnerintheothercountry;and

iv. theneedforanefficient‘routetomarket’.

ThesechallengesaresimilartothosecitedbyMeachametal.(2012),whonotedthatthefive most significant challenges regarding African markets were; underdevelopedinfrastructure, disorganised and fragmented retail landscape, lack of reliable marketresearch, unclear and ever-changing government regulations, and a severely limitedtalentpipeline. Intervieweespointedout that itwouldbe easier to expand intootherSADC and African countries if there were clear, agreed and enforceable fiscalregulationsandprocesses,which isusuallynot the case.Thusone interviewee statedthat,giventhathiswasalarge, listedcompanywithimpeccablecorporategovernanceprinciples,hiscompanywasnotkeenonmovingorestablishingsubsidiaryoperationsincountrieswithunclearorquestionableinvestmentpoliciesandprotocols,andthatitwouldbe best towait until good regional andnational practices hadbeendevelopedandimplementedbeforeinvestingoutsidethecountry.

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UnstablecurrenciesinmostAfricancountrieswasidentifiedasanothermainriskfactorwhen entering suchmarkets. Other intervieweesmentioned the growing problem ofcompetition with counterfeit products, due to poor border controls and poorenforcement of standards and labelling. The issue of counterfeit fish products can beseeninthegrowinglabelsofpilchardsincountriesintheSADCregionthatdonothavepilchardfisheriesnorcanningcompanies(forexample,MapetopackedforacompanyinMalawi, Royal Ocean packed for a company in Zimbabwe, etc.), and pilchard andmackerel labels imported from Pakistan, Singapore, Morocco, Japan, etc. into SouthAfricaandSADCcountries.

3.6 Product standards and labelling SouthAfricanfishproductstandardsarearguablythehighestintheSADCregion.These,andthosebeingusedasbasisfordevelopingregionalSADCfoodstandards(SADCSTANand WorldFish, 2016), are based on the Codex Alimentarius International15 FoodStandards system. One of the issues thatmost South African companies have to dealwith is whether they should be producing products with different specifications forother markets/countries that require lower standards (and thus reduce productioncosts), presumably in order to compete on thesemarkets. The problem of producingproducts with different specifications for different markets/countries is the risk of‘round tripping’16. There could also be a need to do thorough market research andpossiblyproductdevelopment fornewmarkets, if developingproductswithdifferentspecifications was the route chosen; in effect adding to costs for entering into newmarkets. In addition, newmarkets provide unique challenges for additional brandingand marketing. For example, after exporting to East Africa, one South African foodcompanydiscoveredthatacultureofconsumingcannedfoodsislackinginEastAfrica,despitethegrowingtrendgloballytowardsconveniencefoods.Labellingisaparticularchallengeespeciallywithimportandexports.Someofthemainissues around labelling are language (e.g. requirements for French andPortuguese inFrench- and Portuguese-speaking African countries), and/or different labellingrequirements.Thechallengewithdifferentiatedlabelsisinmanagingstockflows(howmanyofwhichlabel/forwhichcountry/forlocalorexport).Inreality,whatiscurrentlyhappeningisthatSouthAfricansupermarketsandfastfoodchainsarecroppingupeverywhereintheSADCandAfricaingeneral,takingwiththemSouthAfricanstandards,sincemostdonotrunseparateproductlinesforSouthAfricaandothercountries.Thus,SouthAfricanregulationsandstandardsareeffectivelybeingexportedandimposedonothercountries;whethergoodorbad.Traders that import processed fish into SouthAfrica also pointed out that one of theproblemsattheborderswasthattheSouthAfricancustomsdeclarationformdoesnothavetheproductcodesformostofthespecificspeciesandtypes/formsoffishproductsthatare increasinglybeing imported into thecountry,as thesewerenot import itemswhentheformwasdesigned.Thiswasstatedasoneofthemainreasonssomeoftheseproductsarenotrecordedorarerecordedunderthewrongcodes.

15ThissystemwasdevelopedandestablishedbytheFoodandAgricultureOrganizationoftheUnitedNations(FAO)andtheWorldHealthOrganization(WHO)in1963forsettingglobalstandardsonfood.Thissystemofstandardsaimstoprotectconsumers,especiallyregardingfoodsafety,andharmonisefoodstandards,labellingandcontents(additives,preservatives,etc.).Thenutrientreferencevaluesunderthesystemareaparticularrequirementforgloballytradedfood.

16LowerstandardgoodsmeantforaspecificmarketendingupbackontheSouthAfricanmarket.

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Municipalitiesaresupposedtomonitorspecificfoodstandardsandlevelsofhygieneforfood premises (processing plants, retail shops, restaurants, etc.), equipment and foodhandling. These are set by the South African Bureau of Standards and the NationalRegulator for Compulsory Specifications. Thus, all food processors and retailers arerequired to have an annually renewable certificate that gives them permission toprocessandsellfoodinagivenmunicipalarea.Inaddition,municipalitiesaresupposedto have inspectors who should routinely conduct impromptu spot checks andinspectionsof foodprocessingandretailingpremises in theirmetropolitanareas.ThespecialisedmigrantfoodshopsinSouthAfricanmetropolitanareasarealsorequiredtohave such certificates frommunicipalities. The observedopen, unpackageddisplay offish, where buyers touch and choose fish without hand hygiene (gloves), and theunhygienic conditions in which some of the shops usually are, calls into questionwhetherhealthstandardsarebeingenforced.

4. IMPLICATIONS FOR FOOD AND NUTRITION SECURITY What are the implications for food and nutrition security for: import substitution;imports to meet local shortfalls/availability; regional trade agreements that removetrade barriers; protectionistmeasures for local production/industry;monopolies andeconomies of scale; foreign investment; types and forms of food distribution; andstandardsandlabelling?

Whilenational foodproducers,processersand retailers (especially small-scale)oughttobenurturedandprotectedfromunfaircompetition(forexample,dumpingandcheapimports)inordertopromotefoodself-sufficiencyandsovereignty,thismustnotresultininefficientfoodsectors,ultimatelyworkingagainstfoodavailabilityandaffordability,andthusjeopardisingfoodandnutritionsecurity.Thus,theselectionofwhichsectorstoprotect, how to protect these and for how long should be carefully analysed,implemented and monitored. As soon as such measures are no longer necessary orbeneficial for the consumers, they should be suspended or removed. For example, itmakes sense to protect South Africa’s young mussel farming industry from cheapimports,whileitwouldnotmakesensetointroducesuchmeasuresfortilapia,asSouthAfrica does not have tilapia from its capture fisheries, nor does the country have atilapia aquaculture industry. How long the current measures protecting the musselindustry should stay in place needs to be balanced against whether such measurescontinuetobebeneficialtotheconsumers.WhetherSouthAfricaandtheSADCshouldintroducerestrictionsonimportsoftilapiashouldbedeterminedbywhetherandwhenthisbecomesnecessary,forexample,ifthecountryandtheregionalcommunityinvestincommercialtilapiafarming.

Import substitution meant to bring in cheaper products, while exporting the morevaluablelocalproducts,asisbeingpractisedwithregardtohakeandsquid,isbeneficialto South African consumers; assuming that this makes available a cheaper productwhileearningthecountryforeignrevenue.Similarly, the importofsardines(themostaffordable and thus most popular fish among South African consumers) to meetshortfalls in national productionhas positive benefits for food andnutrition security,especiallyforthoseinthelow-incomebracketwhoconsumelargeamountsofpilchard(WWF , 2014; Isaacs, 2016). In addition, this also has positive benefits for regionalconsumers in African countries that import two-thirds of the pilchard processed bySouthAfricancanners.InSouthernAfrica,importedtilapia,whichusuallysellsatprices

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below locally produced freshwater and/or aquaculture tilapia species, is beneficial toconsumers, both in terms of increased availability of a popular fishwhose per capitasupplyhasbeendecliningandalsoaffordabilityoftheproduct.Whileself-sufficiencyinfoodandfoodsovereigntyareusuallypolicyprioritiesofmostdevelopingnations,suchas those in the SADC, import substitution of cheaper products and imports to meetnational/localshortfallsinproductionoughttobeacceptableoptionswheresupplyandavailability factors leave a state or region no other feasible option for meeting andensuringfoodandnutritionsecurity.

The issue ofwhether to produce locally or process to add value locally are businessdecisionsthatareusuallybeyondgovernments.Forindustry,suchdecisionsarebasedonwhether local production ismore economically efficient than importing. Similarly,decisionsaboutwhether to addvalue locallyor export aproduct in its raw formwilldepend onwhether thiswould result in increased efficiency and profitability. It alsodependsonwhatformconsumerswanttheproduct.InSouthAfrica,almostallsardinesfor human consumption are canned.When it has been necessary to import sardines,theyhavebeenimportedwholebySouthAfricancanners,and,untilaboutthreeyearsago,mostofthecanningwasoutsourcedtoAsia,wherethematerial,energyandlabourwerecheaper.

Concerning fish products being imported into South Africa for the migrant market,decisionsonproductformaremainlybasedonthemodeoftransport(buses,trucksandcontainerships)andtheneedtopreservetheproductas longaspossible.Thus,driedandsmoke-driedproductsarebest.Also,mostfishisconsumedinthisform,evenintheoriginatingcountries.Ultimately,decisionsaboutwhethertoproducelocallyorimport,whethertoaddvalueornot,whethertooutsourceprocessingandwhatproductformtoproduceinvolvereconcilingtheneedsofinvestors,businessmanagersandconsumers.

TheSADCProtocolonFreeTrade (SADC,1996) resulted in tariff reductions formostproductstradedamongmemberstatesthathavesignedandratifiedtheProtocol.ThisbenefitsconsumersintermsofpricereductioningoodsandalsoincreasedflowoffoodamongmemberstatesintheSADCregion,ineffecthavingpositivebenefitsforfoodandnutritionsecurity.Regionaltradecouldalsobehelpingtogetpricesrightinsituationswhere having only local production is not economically efficient. For example, theimpactof imported frozenChinese tilapiaonpricesof tilapia in theSADCandAfricancountriescouldbehavingapositiveimpactonthepriceofregional/nationaltilapiaforconsumers,eventhoughthiscouldbeatthecostofpromotingself-sufficiencyandfoodsovereignty.Inthiscontext,globaltradehasbeencreditedforreductioninfoodprices(WTO,2014),whichbenefitslow-incomeconsumersbyhelpingthemtoaccesscheaperimported food. Such agreements are also supposed to result in easier and quickerborder processes, as there should be less incentive for use of informal channels andpractices.Overall,regionaltradeagreementsenhanceandpromoteintra-regionaltrade.

Atthesametime,contextswherebymemberstatesunilaterallyintroduceprotectionistbarrierscallintoquestionwhethertradeagreements,suchastheSADCProtocolonFreeTrade can be strictly enforced among member states. The fact that states can stillintroduce bans and restrictions unilaterally, like Zimbabwedid, raises concerns as tohowenforceablesuchprotocolsandagreementsreallyareandwhatmeasurescouldbeput inplace inorder to ensure that all states abideby theprotocols andagreements.Also, member states need to consider the impact of such unilateral protectionistmeasuresonthefoodandnutritionsecurityoflocalconsumers.

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Regional measures should include harmonisation of general and sanitary andphytosanitarystandards.Thefact thata lotofpeoplewhoconductcross-bordertradearesmall-scaletradersandwomenalsocallsforintroductionofflexibleexemptionsforthis category of trader from someof themeasures, regulations and restrictions. Suchflexibility is likely to have positive benefits for food security and livelihoods of thesmall-scale producers and small-scale traders and many others in these food valuechains.

Informal distribution channels appear towork best inmost of SADC, including SouthAfrica. Evenwith growing penetration of supermarkets into rural towns and tradingcentresinSouthAfrica,themajorityofpeoplestillrelyheavilyoninformalretailoutlets.Measures to support these shouldbe introduced,with flexible regulations in termsofhygieneandhealth,storage,preservation,displayandotherfactors.Since,thesearethechannelsandoutletsthatensurethatfoodreachesmostpeopleinanacceptablestate,formandprice,evenstandardsandlabellingforbothlocalandimportedfoodshouldbebasedonflexibleregulationsthatpromoteimprovedandefficientdeliveryofnutritioushumanfood.

5. CONCLUSION International trade is driven by import substitution, shortfalls in local production orunavailability of the type and quality of food demanded by consumers. This studyrevealed that large volumes of imported sardines are an important source of rawmaterialforSouthAfrica’scanningindustry.ThisiscreatingstablejobsinSouthAfrica,aswellassupplyingotherSADCstateswithvaluablefishprotein.Anotherfactoristhepricecompetitivenessof locallyproducedfood,comparedtoimports.Thus, itmightbemore profitable for investors to export locally produced products to more lucrativeexportmarketsandthenimportcheaperproductsforthelocalmarket.Exampleshereare the locally produced hake and squid,which are exported to Europe and, in turn,cheaper imports are brought in, helping South Africa to generate foreign exchange,whileatthesametimeprovidingthesefishproductsataffordableprices.

In theory, investing inproduction infrastructure in localmarketsby commercial foodproducerscouldbethemostefficientwayfortheroutetomarket.However,exportofproducts using ready established production capacity in the exporting country isusually the preferred route. Suchdecisions are partly influencedby the difficulties ofestablishing a presence in another country, prevailing global/regional/nationaleconomic conditions and the fiscal regulations of the potential country for whichinvestmentisdestined.MostSouthAfricanfoodproducersthusprefertheexportroutetomeetthedemandofconsumersinnewexternalmarkets.

Informal international fish trade is a result of the structureof the economies inmostSADC countries, which largely depend on small-scale traders, rather than large-scaleformalmulti-chainsupermarkets.Forthisreason,informaltradeislikelytoremainthemainchannel for the foreseeable future inSouthAfricaand theSADC. Informal trade,includingcross-border,helpsdeliverfoodtomostpeople’splatesand,therefore,greatlycontributes towards food andnutrition security. In the SADC region,women formanimportant component of cross-border trade, especially informal trade. Given the rolethatwomenplayinensuringthattheirfamiliesandhouseholdshavefood,trade-basedlivelihoods are important in contributing to household food security. Therefore,

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improving howwomen and small-scale traders transact economically both nationallyandthroughcross-bordertrade,withoutdiminishingtheireffectiveness,oughttobeanimportantaspectofregionaltradeagreements.Onewaycouldbetoexemptsmall-scaletradersfrommostoftheimport/exportregulatoryrequirementsandintroduceflexibleprocesses and controls (for example, through one-stop border posts, such as the oneintroducedatChirunduborderpostbetweenZambiaandZimbabwe),apartfromthoseconcerningfoodsafety,andsanitaryandphytosanitaryissues.

Structural and institutional weaknesses and inefficiencies at most South African andother SADCmember state borders result in traders having low confidence in formalborder systems, thereby encouraging and reinforcing informal systems and channels.This represents loss of revenue for states, and loss of data captured throughdocumentingandrecordingthevolumesandproductformsofimportsandexports.

Agreedregionalstandardsforimportingandexportingfishandfishproductsisanotherarea in need of urgent attention and resolution. Given the traditional and culturaldifferences and habits that food represents to consumers, this is a difficult aspect ofregional and multi-lateral trade agreements; however it is necessary to resolve it.Improving border infrastructure, processes and institutions and developing commonprinciples for minimum quality and standards through shared understanding andagreements could greatly increase traders’ confidence in formal border systems andenhancethecontributionofcross-bordertradetofoodandnutritionsecurity.

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