South Africa’s Burgeoning Aquaculture Industry

A growing market navigating complex risks and challenges

South Africa's aquaculture industry is still in its infancy, but growing steadily, built upon the cultivation of marine species such as mussels, abalone, prawns and oysters and freshwater species such as catfish, trout, crocodiles and tilapia.

Given the country’s 6.44 kg baseline per capita fish and seafood consumption, 424,627 tonnes of fish and seafood will be needed to satisfy South Africa’s demand of its 65,956 thousand projected population in 2030, which is 42,796 tonnes higher than its 381,831 tonnes of baseline fish and seafood demand. It means that South African aquaculture production needs to grow by 18% a year between 2020 and 2030 to generate enough extra supply to cover the demand as opposed to its current 6,4% growth rate [1].

“As the aquaculture industry sits on the cusp of massive growth and development, it needs to avoid being blindsided by the growing risks in the market that could have a profound effect on its livelihood and sustainability. With consumers becoming more vocal about sustainability and environmentally friendly practices, companies in this space not only have to contend with traditional business challenges and risks, but also have to deal with open and very public scrutiny of their ESG (Environmental, Social and Governance) practices,” says Harold Bond, senior client manager at Aon South Africa.

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Key risks facing South Africa's aquaculture industry, include:

1. Food Safety and Public Health - As with any other foods, aquaculture poses risks to consumer health. The production process itself can present public health concerns where organisms are raised in wastewater or water contaminated with animal and human waste. Biological hazards include bacteria, viruses and trematodes.
2. Environmental Risks - Aquaculture can negatively impact the environment, from damaging ecosystems to relying on harmful chemicals, antibiotics and unsustainable feed ingredients. While the impact varies based on the species farmed, production intensity and farm location, new strategies and technologies are being developed to promote sustainability in aquaculture.
3. Social Issues - The aquaculture industry often faces limited government oversight and transparency, leading to risks of human rights violations and unfair labour practices. In some areas, conflicts have arisen between land users and farmers over water resources. Although more women are participating in aquaculture, challenges remain in improving labour conditions, pay equity and access to technology, resources and financial support.
4. Certification Challenges - Aquaculture supply chains are complex and involve many intermediaries, making it difficult for buyers to ensure they are purchasing sustainably sourced seafood. Certification remains a critical component of sustainable supply chains that requires more effective problem-solving that includes a focus on human rights and social issues.
5. Slow Progress in Sustainability and Social Improvement - Certification schemes have struggled to scale sustainability and social initiatives, particularly for small-scale farmers, resulting in existing programs that are more suited to large, consolidated industries such as farmed salmon, with limited incentives under current schemes for farmers to improve the sustainability of their operations.
6. Barriers to Sustainable Production – Current certification processes are time-consuming and costly with small-scale farmers often finding it difficult to demonstrate environmental and social sustainability, limiting their access to higher-value markets. Even when using sustainable practices, many farmers cannot meet certification standards or benefit from improved prices or market access.

“It is critical for operators within the aquaculture market to investigate risk management measures that address their needs and to find suitable risk transfer solutions where necessary. The mortality of livestock is a good case in point, where disease and accidents could expose the business to a profound financial loss. Specified perils such as lightning and severe storms can also wreak havoc on an aquaculture farm, not to mention theft, stock in transit perils and business interruption risk. Liability matters also loom in the background, especially when dealing with food safety and public health,” says Harold.

Working with a specialist broker and risk management team with specialisation in aquaculture risks from across the globe is invaluable to the business. “Stock levels and equipment used in the water and on land is just the start of putting together a comprehensive risk management and insurance plan that accurately depicts and addresses the risks that the business is faced with. In a niche market such as this that is brimming with potential, you need to plan for the future and be able to make informed decisions that supports the longevity of your business,” Harold concludes.

[1] https://openknowledge.fao.org/server/api/core/bitstreams/9d737c2c-6c46-4922-830e-4acc2ab0d0d6/content

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