SOUTH AFRICAN GRAPE CRISIS.

South African grape farmers face squeeze. By Sue Emmett BBC Consumer Affairs producer.

Farmers say they are getting less and less for their grapes in the UK. The South African grape industry says it is in crisis. While exports have been hit by a strong rand and production damaged by bad weather in certain areas, farmers cite British supermarket price wars as a major reason for financial hardship and bankruptcies. They say that in many cases supermarkets are demanding high standards of production, while not paying the price it costs them to produce the grapes. According to the South African Table Grape Industry, 65% of the country's grape producers are now operating at a loss. Many are being kept afloat by bank loans or credit from their exporters. It is estimated that one in five grape farmers in the Orange River region of the Northern Cape has gone bust, and it is feared that many more are set to go the same way.
Falling prices.
Gerhard Oosthuizen is one of the farmers in Orange River to have recently gone bankrupt. I was stunned to see at what price they sell grapes compared with the price they get grapes. His farm had been in his family since 1920, but now the vines are being ripped up and the land sold at auction. He is clearly distraught at the thought of leaving it. The bulk of his crop went to UK supermarkets and he said that up to five years ago he was paid the equivalent of about £5 (60 rand) for each 4.5 kilo box. However, the price has since dropped and he now gets as little as £2 a box, despite each box costing more than £3 to produce. As he was producing 175,000 boxes a year, the losses were considerable. "I went to the UK in February and saw the prices at which people buy grapes in supermarkets and I was stunned to see at what price they sell grapes compared with the price they get grapes," he says. "They are making quite a lot of money. I think it's slightly unfair."
Price wars.
Many farmers are particularly critical of supermarket special promotions, such as 'buy one get one free' or sudden big price reductions, which can result in them being paid even less than expected. It is a common complaint that the grapes can already have been shipped and arrive in stores before the supermarket has decided the price it will charge the shopper - and therefore what it will pay the farmer. "They decide for strategic reasons and for reasons of competition between supermarkets to lower the price or to start a promotion or something like that and we are getting the raw edge of it," says Mr Gerhard. Matters came to a climax in December last year. This is the time of year when farmers normally get their best returns, as demand is high over Christmas, but supply is low. A number of supermarkets decided to take the unusual step of of cutting the price of grapes at this key period. "We knew this year would be difficult. We saw right from the beginning there was going to be heated price wars in the run-up to Christmas which is the time we normally get a premium," says Elaine Alexander, of the South African Table Grape Industry.
Minimum wage.
While some feel that the British consumer is benefiting from lower prices, it may be some of South Africa's poorest who suffer. Thousands of workers have lost their jobs in the past year. And even those in work may be facing hardship. At one farm supplying a British supermarket, a worker said she was earning less than the South African minimum wage, which is set at under £4 a day. The floor of her home was bare earth, the roof gaped and let in the rain, the stove was a primitive furnace. The worker, who did not want to be named, said she could not afford food or shoes for her children. It is a problem highlighted by campaigning charity Action Aid and the South Africa's Women in Farms trade union, which wants the supermarkets to abide by the ethical codes that most of them sign up to.
Eastern hopes.
But not all farms tell the same story. At another farm workers lived in relative luxury. They were housed in purpose-built homes with fitted kitchens and bathroom,; tiled floors and electric cookers. These were bought as a result of the higher price paid by Marks & Spencer and other supermarkets mainly in the Far East, who are prepared to pay a premium price for quality grapes. But this comes at a price to shoppers, who have to pay more higher prices. Another farmer, Floyd Fox, is also investing in better houses for his workers, after having switched away from British supermarkets. He now sells to China, whose buyers pay a premium for quality fruit. "If you provide better housing, you attract the best workers. But you can't make the investment if you are operating at a loss," he says. Fellow farmer Dawie Spangenberg, who has also supplied to British supermarkets, says getting a premium price can make all the difference.
"If I can get a contract with Waitrose or M&S I think it would save my farm. It would save the jobs of another 80 or 90 workers and their families," he says. He says that he has spent about £300,000 building a new packing plant to attract buyers, mainly from British supermarkets. But he says the price that some of them pay is not enough to cover his costs. He too faces bankruptcy.