Photo: Aon Insights

South Africa's Aquaculture Industry: A Growing Market Facing Complex Challenges

SOUTH AFRICA
Friday, September 13, 2024, 06:30 (GMT + 9)

Johannesburg – South Africa's aquaculture industry, though still in its early stages, is experiencing steady growth. It is built on the cultivation of both marine species, such as mussels, abalone, prawns, and oysters, and freshwater species, including catfish, trout, crocodiles, and tilapia, according to a report from Aon South Africa.

With a baseline per capita fish and seafood consumption of 6.44 kg, South Africa will need 424,627 tonnes of fish and seafood to meet the demand of its projected population of 65.9 million by 2030. This is 42,796 tonnes more than the current demand of 381,831 tonnes. To meet this increased demand, South African aquaculture production must grow by 18% annually from 2020 to 2030, significantly outpacing its current growth rate of 6.4%.

“As the aquaculture industry sits on the brink of significant growth, it must also navigate emerging risks that could threaten its sustainability. With consumers becoming more conscious of sustainability and environmentally friendly practices, aquaculture companies face not only traditional business challenges but also increased scrutiny of their Environmental, Social, and Governance (ESG) practices," says Harold Bond, Senior Client Manager at Aon South Africa.

Key Risks Facing South Africa's Aquaculture Industry

1. Food Safety and Public Health: Aquaculture poses risks to consumer health, including the potential for contamination from water polluted with animal or human waste. Biological hazards, such as bacteria, viruses, and parasites, are also significant concerns.

2. Environmental Risks: The environmental impact of aquaculture can vary widely based on species, farming methods, and location. It can damage ecosystems and rely on harmful chemicals, antibiotics, and unsustainable feed. New technologies and strategies are being developed to promote sustainable practices, but challenges remain.

3. Social Issues: Limited government oversight and transparency can lead to human rights violations and unfair labor practices in the aquaculture industry. Conflicts over water resources are common, and while more women are entering the industry, they face challenges in labor conditions, pay equity, and access to technology, resources, and financial support.

4. Certification Challenges: Complex supply chains make it difficult for buyers to ensure they are purchasing sustainably sourced seafood. Current certification programs are better suited to large-scale operations, like farmed salmon, and often fail to incentivize small-scale farmers to improve sustainability.

5. Slow Progress in Sustainability and Social Improvement: Certification schemes have struggled to scale sustainability initiatives, particularly for small-scale farmers. Current programs often benefit larger, consolidated industries, with limited incentives for smaller producers to improve their operations.

6. Barriers to Sustainable Production: Certification processes are often time-consuming and costly, limiting small-scale farmers' access to higher-value markets. Even when employing sustainable practices, many farmers cannot meet certification standards or benefit from improved prices or market access.

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“It is essential for aquaculture operators to explore risk management measures tailored to their specific needs and consider suitable risk transfer solutions. Livestock mortality due to disease or accidents can lead to significant financial loss. Perils such as lightning, severe storms, theft, stock in transit, and business interruption also pose substantial risks. Liability concerns, especially those related to food safety and public health, should not be overlooked," adds Harold.

Partnering with a specialist broker and a risk management team experienced in global aquaculture risks is invaluable. “Building a comprehensive risk management and insurance plan that addresses both water-based and land-based risks is just the beginning. In a niche market full of potential, planning for the future and making informed decisions are critical to ensuring the longevity of your business," Harold concludes.

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