An analysis of the competitiveness of the South African sunflower industry

Abstract

This study provides an overview of the sunflower seed industry, globally and locally. This overview is, followed by measurements of the comparative and competitive advantages of the South African and Argentinean sunflower seed industries. Two indexes are used to calculate the comparative and competitive advantages namely the Revealed Comparative Advantage (RCA) and the Relative Revealed Comparative Trade Advantage (RTA) index. The results show that South African sunflower seed has a competitive advantage in their primary form, however the value added sunflower seed products show a competitive disadvantage which is opposite to that of Argentina's sunflower seed products. The finding that South Africa is only competitive in the primary sunflower seed market was calculated by means of trade data. Factors that affect the competitiveness of the sunflower industry were identified to indicate why value added sunflower seed products experience a competitive disadvantage. In the analysis it was found that the South African sunflower industry is price driven. Since price plays an important role in the competitiveness of the industry, imports of cheaper sunflower crude and refined oils are considered to pose a major threat to the industry. Crushing margins has increased over the last few years due to higher sunflower oil and sunflower oilcake prices. In order to increase the competitiveness of the South African sunflower seed industry, it needs to; be more cost competitive; improve quality; launch new products; invest in new technologies and improve the innovativeness. Emphasis should be placed on the value added seed products as this is where South Africa has a competitive disadvantage. Health issues are of great importance to the local as well as global market and the production of a healthier vegetable oil has become a necessity for this industry. Innovation in this commodity will lead to great improvement in the competitiveness of the sunflower seed industry. Investment towards research and innovation is necessary in order to keep up with the changing environment. The competitiveness of the sunflower seed industry in South Africa cannot be achieved without the help of the government. Policy issues must be put in place to avoid the dumping of cheaper crude vegetable oils as well as bottled cooking oils in South Africa.