The main objective of this study was to analyze South African (SA) citrus farmers' perceptions of the benefits and costs of complying with quality assurance (QA) certification schemes for citrus exports to the European Union (EU). EUREPGAP vs standard production, 2003 19 Table 1.4 Estimated costs of compliance on selected SA farms with QA standards.
REVIEW OF LITERATURE 4
- Citrus trade, production and value in South Africa 4
- Quality assurance schemes for citrus in South Africa 6
- The EUREPGAP/GLOBALGAP scheme 8
- The Nature’s Choice scheme 11
- The British Retail Consortium (BRC) scheme 11
- The Hazard Analysis Critical Control Points (HACCP) system 12
- Overview of the economic implications of food safety regulation 12
- Factors motivating the adoption of QA schemes 14
- External benefits from implementing QA schemes 15
- Adoption of QA schemes for cost reductions 16
- Adoption of QA schemes to improve internal production efficiency 17
- Other indirect benefits from adopting QA schemes 18
- Costs of adopting private sector voluntary QA standards 18
- Adopters’ satisfaction levels and perceived benefits from adopting QA schemes 20
Therefore, the study for the rest of the thesis analyzes SA citrus farmers' perception of the benefits and costs of compliance with the EUREPGAP protocol. Based on the above literature review, this study will analyze SA citrus farmers' perceptions of the benefits and costs of implementing QA control chapters for SA citrus exports.
RESEARCH METHODOLOGY 22
- Data source 22
- Survey questionnaire design and pilot study 22
- Questionnaire for the sample survey of citrus growers in South Africa 23
- Study sampling method 26
- Summary of some past relevant research using postal surveys 27
- Statistical analysis for the study 27
- Principal Component Analysis 27
- Conceptual framework for regression model of factors affecting SA citrus farmers’
The first question in this section captures farmers' overall satisfaction with the QA schemes using a five-point Likert scale from 1 (Very dissatisfied) to 5 (Very satisfied). Level of education is noted to examine its association (if any) with growers' overall level of satisfaction with QA certification. H1: The higher the farmers' perceived internal benefits of certification, the higher the farmers' overall satisfaction with QA certification.
H2: The higher the farmers' perceived external benefits of certification, the higher the farmers' overall satisfaction with QA certification. The size of the farm is expected to have a positive influence on the sample farmers' general satisfaction with the adoption of QA certification. This variable is captured in question B4 of the questionnaire by asking farmers to indicate their satisfaction with their certifying agent on a 5-point Likert scale from 1 (Very dissatisfied) to 5 (Very satisfied).
EMPIRICAL RESULTS 32
Representativeness of the sample respondents 32
Tables 3.1 and 3.2 show that the Western Cape and Mpumalanga figures in the sample correspond to the national distribution, while for Limpopo they are 40% higher and for the Eastern Cape 50% lower. To further assess the representativeness of the survey sample, the researcher analyzed whether the income distribution of the QA certified respondents follows that of the industry. Half of the QA certified respondents had an annual turnover of over R5 million, with a further 33% between R2 million and R5 million.
Hardman (2009) confirms that this distribution is similar to the income distribution of commercial farmers in the South African citrus sector, again suggesting that respondents are reasonably representative of the target group.
Other characteristics of the sample respondents 34
Most sample farmers (52%) find information about quality assurance schemes from their certification agents, 17% from the Citrus Research Institute and 16% from private consultants. Surprisingly, only 2% get information from the CGA, suggesting that the CGA could perhaps become more involved in disseminating information about the development of citrus standards. Valencias account for the largest percentage of respondents' citrus exports by volume, as reported in Table 3.5 and Figure 3.1, followed by navels.
This distribution of export volumes is consistent with citrus exports reported by CGA in the literature reviewed. Markets offered by sample respondents were EU, UK, US, Middle East (ME), South East Asia (SEA), Japan (J) and Russia (R). The three main citrus export markets are the EU, the UK and the Middle East.
Respondents’ rankings of the EUREPGAP control chapters 37
Worker health was ranked as the third most difficult chapter, along with waste management and pollution, and was linked to perceived "unreasonable" checkpoints such as a worker wash basin every 600m in the orchard and the use of different types of protective clothing. Regulations regarding the disposal of chemicals and other inputs used on the farm required apparently expensive and stringent procedures. The results presented in Table 3.8 show that, on average, respondents were moderately satisfied with the service they receive from their certification agents, as indicated by average scores of approximately 4.
Overall, they are satisfied with the service they receive from their agents, with ratings ranging from 1 to 4. When asked whether the CGA should play a greater role in resolving compliance issues, approximately 57% of respondents agreed, 38% said “No” and 5% had no opinion (see Figure 3.4).
Factors motivating respondents to adopt QA schemes 39
The first principal component, PC1, had relatively high factor loadings for MOT3 (to improve farm management systems), MOT4 (to reduce fruit loss/spoilage), MOT5 (to improve record keeping), MOT7 (to improve product quality), MOT12 ( to reduce input costs) and MOT17 (to develop staff skills), all of which relate to improved on-farm operations and product quality, and to MOT18 and MOT19, which relate to environmental and social responsibility respectively. This PC identifies a drive to improve operational/technical aspects of the farm and achieve environmental and social responsibility goals. This PC was identified as “to improve market competitiveness” and explained about 10% of the total variance in the potential 22 motivators.
The fourth PC, PC4, was named "To meet market access requirements" as MOT1 (to meet the needs of retailers), MOT8 (to meet package requirements) and MOT21 (the schemes are a barrier to entry market) all had large factor loadings. This PC was labeled “To improve farm profitability” and explained almost 8% of the variance in the original variables. This PC is similar to PC3 and PC4, although it emphasizes maintaining and increasing market share; it was labeled “To increase market access” and also explained approximately 8% of the variance.
Respondents’ perceptions of the internal benefits from QA certification 43
All of these benefits are on-farm and relate to perceived time and input cost savings due to SC certification. Based on the above interpretation and from the reviewed literature, this component is called "Benefits of cost reduction" and explains about 36% of them. Benefits obtained from PC2 related to improved farm organization through relatively high loadings for IBEN4 (better farm organization), IBEN7 (improved worker health and safety), IBEN11 (improved garden management), IBEN12 (better data quality for decision-making) and IBEN16 (best environmental practices on the farm).
PC2 is therefore labeled as "Improved farm organization and management benefits". 2005) identified a similar dimension among the underlying benefits of QA adoption identified in their studies. PC5 showed high loadings for both IBEN15 (certification serves as insurance in case of farm accidents) and IBEN16 (better environmental practices on the farm), and was therefore labeled "Insurance and environmental benefits", accounting for about 5% of the variance in the 23 potential internal benefit ratings. PC6 was labeled “Fruit safety improvement, input cost savings and reputation benefits” due to the high loadings for IBEN6 (improved fruit safety), IBEN20 (savings on fertilizer and pesticide costs), and IBEN10 (improved farm business reputation).
Respondents’ perceived external (supply chain) benefits from QA certification 47
Varimax rotation was used to maximize the variance of the new PCs and to try to improve interpretability of these PCs. The two separate PCs extracted from the original 11 supply chain benefits accounted for 63.64% of the variance in the original variables. PC2 included benefits related to improved coordination, more joint decision-making on fruit quality and safety, more information sharing and contractual benefits.
Given the focus of PC2 on collaboration and less time needed to negotiate contracts, PC2 is labeled "Improved Collaboration and Contractual Benefits". Fostering closer relationships between supply chain partners can lower transaction costs and improve the quantity and quality of throughput. The managerial implication is that certification can improve working relationships between supply chain players, which can improve the competitiveness of the South African citrus export supply chain.
Respondents’ estimated costs of EUREPGAP certification and compliance 49
The results are consistent with findings by Deodhar (2003) in the Indian study on HACCP implementation and by Zaibet & Bredahl (1997) who reported certification costs with quality standards averaging 1.5% of total annual expenditure. So while introducing QA schemes could lead to cost savings, the cost of QA certification could be a disincentive for smaller farms. Respondents were shown a list of the initial and recurring compliance costs identified in previous surveys that would be incurred when implementing EUREPGAP, and were asked to report their costs in Peripheral figures.
Sample respondents with a packing house spent statistically significantly more funds on additional costs for infrastructure, equipment and employee training than those without a packing house to achieve certification. Respondents raised the issue that it is difficult to establish clear baselines and cut-off points against which the costs of EUREPGAP compliance can be identified relative to the costs of other day-to-day business activities. Sample respondents with a package house spent relatively more on annual certification costs, as shown by statistically significantly higher average costs for auditing, storage, additional labor, soil analysis, and water analysis costs in Table 3.19.
Respondents’ perceptions of the constraints on complying with QA certification 52
Non-certified respondents’ reasons for not adopting QA schemes 53
Regression analysis of respondents’ overall level of satisfaction with their
The adjusted R² indicates how much variance in SATISi is accounted for by all the explanatory variables combined. The explanatory power of the OLS regression model estimated above is relatively low (Adjusted R² = 38.8%), and very few parameter estimates have statistically significant t values. Varimax rotation was again applied to try to improve the interpretation of the new PCs to be used in the OLS regression.
PC1 that drew all the supply chain benefits (EBENim) with high factor loadings was marked. This computer was therefore labeled "Improved internal farm operating performance", and it explained approximately 9% of the total variance in the original variables. This computer is therefore called "On-farm advantages" and it explained about 6% of the variance in the explanatory variables.
Key issues that sample respondents face in dealing with their QA certifying agents 61
These perceived challenges are consistent with respondents' rankings of registration (for crop protection and other management activities) and staff training and first aid procedures as difficult aspects of the EUREPGAP control chapters to implement. Five dimensions of respondents' perceived internal benefits of certification, namely foreign market access benefits;. However, relatively smaller farmers or new entrants to the SA citrus industry need to be aware of the perceived benefits versus the potential costs of QA certification.
Research into the factors that motivate citrus growers in South Africa to adopt QA certification provides insights to help improve the competitiveness of South Korea's citrus export supply chain. Head of Horticultural Science Discipline, University of KwaZulu-Natal, Pietermaritzburg, KwaZulu-Natal, South Africa. Paper presented at the 26th Conference of the International Association of Agricultural Economists, Brisbane, Australia, 12–18 August 2006.
Contributed paper presented at the 11th seminar of the European Association of Agricultural Economists, Copenhagen, Denmark, August. F2: Please give EACH of the following factors a score out of 10, as reasons why you have not adopted private quality assurance schemes: where 1 = Not important and 10 = Very important.
