Horticulture

An appropriate climate for horticulture operations

The horticulture sector is defined as the production and marketing of highly perishable products destined for fresh consumption, with relatively high-value per unit. Average annual worldwide production and trade in horticultural goods (fresh fruits, leguminous vegetables, cut flowers, nuts, and spices) have grown steadily. From 1993-2002, world trade in fruits and vegetables increased by 37 percent to an estimated USD 75 billion. While production has risen steadily in most regions of the world, an increasing share of this production growth has occurred in developing countries. Today, according to FAOSTAT, Asia is the leading exporter of fresh fruit and vegetables (USD 607 million), followed by latin America (USD 408 million). Sub-Saharan Africa’s export value is USD 89.6 million, behind the US (USD 205 million) and the EU (USD 96 million).

Among developing regions, Africa has shown relatively higher growth not only in the export growth of fruits and vegetables, but also in terms of the share of fruits and vegetables in the region’s total agricultural exports. In many African countries, horticulture exports have become a bright spot with vegetable and fruit exports now ranking first in total sub-Saharan Africa agricultural exports. More than 60 percent of this volume comes from the Southern African Customs Union (SACU), with Kenya’s in particular, a successful example. A number of other countries across Africa have moved aggressively in recent years in efforts to duplicate Kenya’s success story and several have achieved some notable success in diversifying their production and accessing export markets.

In export markets, supermarkets are increasingly playing an important role in the horticulture industry, particularly in the retail of fruits and vegetables. This trend, combined with the increased concern for food safety issues, is the force shaping the new supply chain structure in the horticulture sector. There is heavier reliance on fewer but trusted suppliers whose relationship is based on stringent and detailed contracts. In some cases, this relationship may also involve technical and other assistance. However, there has not yet been a trend for these supermarkets and hypermarkets to become direct investors. In fact, the majority of horticulture commodities in Africa today are produced by smallholders, who, in turn, depend on medium-to large-scale agri-businesses to organize their produce for exports.

While the amount of FDI in the horticulture sector is not substantial compared to other sectors, such as light manufacturing, it is a factor. In fact, FDI is behind almost all the successful horticulture development stories in Africa, and continues to play an important role. Opportunities are sought by entrepreneurs, particularly in the final-market country, who see climate and other production advantages in Africa. In the horticulture sector there appear to be export opportunities in the growth in demand for high quality pre-packed vegetables. An advantage for Africa is that these industries require a combination of labor-intensive activities such as pre-packaging work, and lower labor costs. Africa’s position with regard to fresh cut flowers, starting material for cut flowers (seeds, young plants, cuttings, etc.) and pot plants, is currently strong. In particular, starting material presents good opportunities because of its relatively high levels of labor intensity, which now makes it impossible to produce it in Europe.

For potential investors, in addition to the climatic requirements, good logistics in order to comply with just-in-time-and-shape delivery required by buyers is critical. Equally important is the availability of inputs such as pesticides, fertilizers, and packaging materials. Market access questions will be determined by the ability to comply with trade standards rather than tariff levels.

Horticulture Sector Survey Profiles

*13 firms also produced processed food

Horticulture Brief

• Horticulture operations in Madagascar serve local, US, and European markets.
• Horticulture products traditionally grown in Madagascar include citrus fruit, bananas, mangos, coconuts, litchi, pineapple, avocados, peach and nectarines, apples and pears.
• Opportunities also exist for establishing large farms or consolidating small ones, as there is high demand in the local food and beverage processing market for the stability and predictability in crop supply that large farms provide.
• Malagasy horticulture firms purchase natural fertilizers and packaging materials on the local market. It is necessary, however, to import chemical fertilizers from Japan, the US or France and plant seeds from the Netherlands or Kenya.
• Within Madagascar, horticulture firms prefer to locate in close proximity to roads with access to the airport.
• Horticulture companies in Madagascar rely on the use of local out-growers as well as seasonal and casual laborers.

Comparative SWOT Analysis for Horticulture Madagascar vs. Snapshot Africa

Breakdown of cost motivations reported by horticulture firms

Breakdown of quality motivations reported by horticulture firms

Total annual cost to employer per function in USD (millions)

* Among Snapshot Africa countries

Air freight rates to Amsterdam and New York (Regular rate for general cargo under 45kg in USD/kg)