Agri SA yesterday made a clarion call for the government to step in after Tiger Brands gave notice of its intention to close down its canning factory in Ashton, Western Cape after it failed to find a buyer, which will hit 4 500 workers and cause socio-economic devastation to the surrounding community.
The canning factory has been in operation for more than 70 years and supplies fruit for Tiger Brands’ KOO brand as well as international brands like Silverleaf and GoldReef.
South Africa's largest food producer Tiger Brands confirmed yesterday it had embarked on the labour consultation process on the future of its deciduous fruit business Langeberg & Ashton Foods (L&AF), a division of Tiger Consumer Brands after a two-year search for a buyer had failed.
Tiger Brands indicated that 250 permanent jobs and 4 300 seasonal jobs were at stake at the peak of the season.
L&AF produces canned fruit and fruit purees largely for the export markets that include Europe, China, Australia and Japan.
Tiger Brands said the deciduous fruit business operates in an industry where trade barriers impacted the competitiveness of local produce. It added that fluctuations in exchange rates and global crop yields add further volatility.
In May 2020, Tiger Brands announced its intent to exit the deciduous fruit business following a strategic review as it focused on manufacturing, marketing and distributing everyday branded food and beverages.
“This follows the end of a process to find a buyer for the L&AF business by way of an extensive, professionally managed local and global search in which interested parties were unable to secure the required funding to meet the business’ working capital requirements,“ Tiger Brands said.
“Although the company received a non-binding indicative offer from the Growers Consortium in October 2020, the consortium were unable to secure funding required to operate the L&AF business as a going concern by the deadline of 31 March, 2022.
“As at the date of commencement of the consultation process in June 2022 the Growers Consortium have still not been able to show or present to Tiger Brands any commitment of funding in support of their non-binding indicative offer so as to be able to operate the L&AF business as a going concern,” it said.
Agri SA said the consortium consisted of 160 producers, but would require a further R200-R300 million to close the deal.
Tiger Brands said the consultation process with affected employees would be completed within 60 days in line with the Labour Relations Act, at which point Tiger Brands would be able to communicate the outcome and the way forward on the future of the L&AF division.
Tiger Brands said that it was in a parallel process engaging with relevant provincial and national government departments in attempts to explore available and sustainable commercial solutions to protect the South African deciduous fruit canning industry and support the growers.
In a joint-statement yesterday, Canning Fruit Producers’ Association chief executive Jacques Jordaan and Agri SA executive director Christo van der Rheede said: “The factory is the life support of the Ashton community and without it the community faces socio-economic disaster. The Langeberg and Ashton factory is also the biggest single source of income for the Langeberg Municipality.”
They called for Tiger Brands to come to the negotiating table with the producers and workers at its factory to find the best possible solution for all the affected stakeholders.
“With the latest announcement from Tiger Brands, these producers have been placed in a nearly impossible situation where they must secure the necessary funds in less than 60 days ...Without support from government and co-operation from Tiger Brands, the producers’ initiative will fail, and the fallout will be catastrophic,” the statement said.
Agri SA said it was concerned the closure of the factory would be a socio-economic disaster for the region, with ripple effects throughout the value chain.
“At a time when job creation and economic growth are desperately needed for the maintenance and recovery of the national economy, the agro-processing sector cannot afford this closure.”
They said the impact of the announcement was already being felt as labour brokers report that their teams were sitting at home as producers stopped pruning after the Tiger announcement.
Just over one permanent job opportunity was associated with each hectare of fruit orchard and 2 250 permanent farmworkers’ livelihoods were now in jeopardy.
Agri SA said the factory’s main sources were Cling Peaches, Bulida Apricots and Bon Chretien pears from 2 250 ha of canning fruit orchards.
“These orchards have been planted specifically for canning in the Klein-Karoo, Ashton, Robertson, Bonnievale, Breërivier, Wolseley and Ceres areas. Were the factory to close, about 300 farmers would have no alternative market for these fruits as the other fruit canning factory in South Africa, owned by the Rhodes Food Group, was already running at full capacity. These farmers would have to destroy the orchards,” it said.
Meanwhile, Mireille Wenge, Western Cape Minister of Finance and Economic Opportunities, told the Business Report they were concerned by Tiger Brands’ plan to close the factory.
She said the factory played a significant role in the region’s job creation as well as in the entire supply-chain in the agri-processing sector.
“The Western Cape government has been and will continue to actively engage with all parties to come to the best possible solution. These engagements, including meetings in the next week, include discussions with the Western Cape Government’s official trade, investment, and tourism promotion agency, Wesgro, as well as high-level meetings with the Premier, the Minister of Finance and Economic Opportunities as well as senior officials and private sector parties,” Wenge said.
The citrus industry is a major economic contributor, employing 120 000 people and generating R30 billion in export revenue. The further growth of the sector will translate into more jobs and revenue for South Africa.
Siyabulela Makunga, the Competition Commission's spokesperson, said he could not comment directly on the matter, but it was common that when a big player exited the market, existing players might take advantage and increase prices.
“This is dependent on the structure of the market, supply and demand factors, and whether there could be other options in the market,“ he said.
BUSINESS REPORT