Peru and Chile Challenge South Africa’s Dominance in European Table Grape Markets

South Africa’s Table Grape Exports Face Mounting Pressure in European Markets as Peru and Chile Emerge as Strong Competitors

The global trade in table grapes is undergoing significant transformation, with Peru surpassing South Africa to become the second-largest exporter from the Southern Hemisphere, trailing only Chile. A recent study explores whether South Africa, which sends 75% of its table grape exports to Europe, is at risk of losing its competitive edge due to shifting export strategies by Peru and Chile. The analysis delves into four critical factors: policy impacts, competitiveness metrics, freight costs, and trade barriers, revealing that Peru’s near-zero policy distortions position it as a formidable competitor in the global market. While South Africa benefits from a depreciating rand, its long-term success hinges on diversifying market access beyond the EU and UK.

Global Production and Export Trends

Global table grape production has surged by 60% from the 2010/2011 to the 2023/2024 Southern Hemisphere marketing season. During this period, Southern Hemisphere exporters—Chile, Peru, and South Africa—have dominated the market. Chile remains the largest exporter, though its share of Southern Hemisphere exports has dropped from 70% to 38%. Meanwhile, Peru has outpaced South Africa in growth, with both countries increasing their contributions to global exports. While Chile and Peru primarily target the U.S. market due to proximity, South Africa has historically relied on Europe, which accounts for over 50% of its exports, and the UK, which takes another 20%.

South Africa’s Export Challenges

South Africa’s table grape industry, which exports over 90% of its production, has thrived due to favorable access to European markets. However, the rise of South American exports and their potential spillover into Europe pose a significant threat. South Africa’s ability to compete sustainably is uncertain, particularly if Chile and Peru redirect excess production to the EU and UK. Factors such as exchange rates, climate change, labor costs, and infrastructure inefficiencies further complicate the industry’s competitiveness.

Policy and Competitiveness Analysis

The study employs the nominal rate of assistance (NRA) to assess policy impacts, revealing that South Africa’s NRA has declined since 2012, while Peru and Chile have seen gradual increases. South Africa’s depreciating rand has provided a temporary competitive advantage, but this is offset by rising input costs and infrastructure challenges. Peru, operating in a low-distortion policy environment, has capitalized on stable macroeconomic conditions and trade liberalization, while Chile faces challenges from high labor costs and climate-related production constraints.

Competitiveness Metrics

Using measures such as relative trade advantage (RTA), normalized revealed comparative advantage (NRCA), and logarithmic relative export advantage (lnRXA), the study highlights Peru’s growing competitiveness in the global table grape market. South Africa maintains a steady position, but its growth rate lags behind Peru’s. Chile, despite its historical dominance, shows declining competitiveness due to slower adoption of new varieties and climate-related challenges.

Freight Costs and Trade Barriers

Indirect freight costs and trade barriers further influence market dynamics. South Africa’s inefficient port infrastructure increases trade costs, undermining its competitiveness. In contrast, Peru benefits from lower freight costs and favorable trade agreements, while Chile’s high labor costs and exchange rate volatility pose additional hurdles.

Conclusion

The study underscores the need for South Africa to diversify its export markets and address infrastructure inefficiencies to remain competitive. While the depreciating rand offers short-term benefits, long-term success will depend on strategic investments in production efficiency, market access, and climate resilience. As Peru and Chile continue to expand their global presence, South Africa’s table grape industry must adapt to an increasingly competitive landscape.

Recommendations

1. Market Diversification: South Africa should explore new markets beyond the EU and UK to reduce dependency on a single region.
2. Infrastructure Investment: Improving port efficiency and reducing trade costs are critical to enhancing competitiveness.
3. Policy Support: Government policies should focus on reducing input costs and supporting innovation in production techniques.
4. Climate Adaptation: Investing in climate-resilient practices and varietal development will help mitigate the impacts of climate change.

By addressing these challenges, South Africa can strengthen its position in the global table grape market and navigate the intensifying competition from Peru and Chile.