SA’S MARINE MONEYSPINNER

In­dus­try play­ers say de­mand for the pricey, land-farmed sea snail con­tin­ues to ex­ceed sup­ply, spark­ing growth and creat­ing sought-af­ter jobs. Red tides and poach­ing seem to be the only things hurt­ing prof­its

Financial Mail - - FEATURE - Stafford Thomas thomass@fm.co.za

In a world in which more than half the fish con­sumed is farmed, SA is poorly rep­re­sented in all but one area: abalone. “It is the only aqua­cul­ture in­dus­try in SA of sub­stance and it is grow­ing strongly,” says Peter Britz, a Rhodes Univer­sity pro­fes­sor in ichthy­ol­ogy (the study of fish) and key fig­ure in the in­dus­try’s cre­ation about 25 years ago.

The SA in­dus­try has come a long way and to­day ranks as the world’s third largest. Its 12 farms — all land-based — have an an­nual ca­pac­ity of about 1,400 t, with new de­vel­op­ments set to boost this to 2,000 t by 2020, says Tim Hedges, MD of Her­manus-based Abagold, one of the in­dus­try’s big­gest play­ers.

It’s a lot of abalone, but you’d be hard-pressed to find it in lo­cal restau­rant. “It is just too ex­pen­sive for the SA mar­ket,” says Ber­tus van Oordt, a di­rec­tor of the 170 t/year HIK Abalone Farm in Her­manus. “We only ex­port.”

The world’s big­gest con­sumers are China,

Hong Kong, Sin­ga­pore and Tai­wan, says Van

Oordt. China alone con­sumes about 85,000 t/year

Abalone prices are scary. At the farm gate the av­er­age is about Us$30/kg, but this varies be­tween fresh, canned and dried abalone (the most costly of all). For canned abalone a con­sumer would pay about R400 for 213 g, says Hedges.

But con­sumers in the East are not put off by price. “We are see­ing strong growth in de­mand,” says Hedges. “The in­dus­try’s ex­pan­sion will be read­ily ab­sorbed.”

It’s a view shared by one of the food in­dus­try’s most as­tute play­ers, AVI. Its I&J di­vi­sion has op­er­ated an abalone farm at Dan­ger Point, near Gans­baai, for 25 years.

“We have just com­pleted a project to take an­nual ca­pac­ity from 300 t to 500 t and are head­ing for 600 t,” says AVI CEO Si­mon Crutch­ley.

“We are look­ing to even­tu­ally go to 1,600 t.”

Abalone is a solid money-spin­ner for AVI, hav­ing con­trib­uted a profit of R71m — al­most 16% of I&J’S to­tal profit — in the year to June. Crutch­ley says that at 600 t, abalone profit will be more than R100m.

Abagold has also just com­pleted an ex­pan­sion, which lifted its an­nual ca­pac­ity by 260 t to 600 t.

It was a costly project. “Our capex was R160m and we needed an­other R80m for work­ing cap­i­tal,” says Hedges.

Lead times are long in the in­dus­try. It takes 3645 months for the costly sea snail to grow from an egg to a mar­ketable size. The process re­quires abalone to be kept in tanks through which sea wa­ter is con­tin­u­ally pumped. Abagold, says Hedges, pumps 240,000l of wa­ter a day.

It’s a power-hun­gry process. “Elec­tric­ity is our big­gest ex­pense,” says Van Oordt. “It costs us R1m/month.”

Abalone farm­ing is also labour in­ten­sive, with one job cre­ated for ev­ery ex­tra ton of ca­pac­ity, ac­cord­ing to Hedges. They are highly sought-af­ter jobs. “They are qual­ity jobs re­quir­ing well-trained peo­ple,” says Britz. “They are all per­ma­nent and wages are at least dou­ble the av­er­age in the agri­cul­tural sec­tor. You will find very happy peo­ple work­ing at abalone farms.”

How­ever, abalone farm­ing is not with­out risks. One of the big­gest of these is red tide, which is deadly to all sea crea­tures. Red tide struck in Jan­uary. “Red tides are com­mon but usu­ally last only a few days,” says Van Oordt. “This one lasted 45 days and was the worst since 1998.”

It has taken a heavy toll on the out­put of abalone farms in the Her­manus area. “We lost

50 t,” says Van Oordt.

Abagold fared bet­ter, los­ing 22 t. But this was still enough to send its net profit of R60m in 2016 slump­ing to a R33m loss in the year to June.

“We will bounce back and be at full ca­pac­ity a year from now,” says Hedges.

Proac­tively, Abagold is act­ing to re­duce busi­ness risk. “We have formed a joint ven­ture with an Omani com­pany, Mus­cat Over­seas, to es­tab­lish a farm in Oman that will have the ca­pac­ity to pro­duce 500 t/year of abalone by 2021,” says Hedges. “We will be farm­ing a warm-wa­ter species that grows twice as fast as SA’S cold­wa­ter species.”

There is still one dark cloud hang­ing over SA’S oth­er­wise thriv­ing abalone farm­ing in­dus­try: large-scale poach­ing.

“About 2,000 t of abalone worth R1.5bn is poached an­nu­ally,” says Britz. “It is smug­gled out through coun­tries such as Le­sotho and is closely linked to other il­le­gal ac­tiv­i­ties such as drugs and pros­ti­tu­tion.”

Poach­ing means the le­gal in­dus­try must en­sure it meets the high­est eth­i­cal stan­dards. “We are cer­tainly achiev­ing that,” says Hedges.

123RF/ whaihs

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