Western Cape Business News

Send  Share  RSS  Twitter  24 Nov 2011

FOOD & BEVERAGES: Fruit Exports Have Manifold Risks


Recent Western Cape Business News

WITH variable weather patterns, transport bottlenecks and delays, port strikes, shipping risks, competitors, price variation and now even pirates, exporting something as innocent as fruit from South Africa to distant ports and markets in North America, Europe and Asia is fraught with risk.

Yet arranging insurance cover that will actually help when things go wrong remains a challenge for most local fruit exporters who “either avoid insurance entirely, risking financial hardship, or purchase the wrong type of cover for the risks that they actually face” says Avril Kenny-Wade, client services marine manger, Alexander Forbes Risk Services in Cape Town.

Typical risks that fruit exporters face include:

Risk of not disclosing enough. It is essential for insurers to have a thorough knowledge and understanding of the businesses they are insuring. Fruit exporters need to spend time with their brokers disclosing all relevant information. This enables brokers to arrange the best possible cover for the exporter, covering the major and most likely risks that the exporter faces.

Transport risk. The most common risks that arise when transporting goods into African countries are from war and poor infrastructure. Yet getting cover for these risks is difficult with most insurers only being prepared to cover cargoes to destination ports. Insurers willing to cover the inland risk are few and far between. Those generally willing to cover inland risk only do so to a limited number of destinations.

Port strikes. According to research compiled by the Department of Agriculture, Forestry and Fisheries, last years’ Transnet strike cost traders of agricultural products and seafood about R162 million in damaged and delayed goods. As such, Kenny-Wade urges exporters “to consider negotiating cover for damage or loss arising from delay caused by strike.” While not all insurers provide this cover for Africa, once secured it will protect their goods against the kinds of port delays that occur unexpectedly and frequently on the continent.

Shipping risks. Insuring cargo is a complex business. Exporters have to make careful decisions when packaging goods for transportation. For example, insurers encourage exporters of perishable goods to package their consignments into containers instead of shipping break bulk. This gives exporters more control over their goods as fruits can be offloaded easily for alternative transport. Containers also have cooling systems allowing fruit to stay fresh for a longer period while “losing a few containers represents a much smaller loss than losing the entire contents of a vessels hold” says Kenny-Wade.

Competition risks. If fruit exporters fail to get their goods to markets in time competitors can take advantage of this situation and offer fruits at a cheaper price.

Risk of not taking out enough cover. Kenny-Wade advises exporters to take out the widest cover possible, including delay risk cover which compensates exporters in the event of voyages being delayed or extended.

Pirates. Pirates are making it increasingly difficult for exporters to transport their products by sea. This has resulted in shipping companies seeking alternative routes. Other shippers have started charging a safety levy for using routes where pirates are known to operate. “Exporters can get cover for piracy through an all risks insurance policy” advises Kenny-Wade.

Certainly, when it comes to fruit exports Africa presents a number of challenges. That said, since risk advisors with a thorough knowledge of and presence on the continent “can make this rapidly growing market both accessible and profitable it should not be avoided out of fear or ignorance,” says Kenny-Wade.

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