Land Bank: Prospects for the local olive oil industry
|Published
By Gilberto Biacuana
GLOBALLY there has been an increase in the consumption of olive oil influenced by the consumer’s quest for overall health and wellness.
Consumers are turning to what are considered “healthy” vegetable oils in their regular diets, vegetable oils such as olive oil with specific health claims such as high omega-3, monounsaturated fatty acids, vitamin E and antioxidants, among others.
The rising demand for vegetable oils with such attributes is likely to support the steady growth of the global olive oil market, which was valued at $14.64 billion (R282bn) in 2023.
Given the global growth of the sector, the further development of the industry through policy and funding is likely to lead to the growth of the sector as well as export revenues, employment and the reduction of poverty. This could potentially mirror the success witnessed in the development of the South African wine industry.
Data from the International Olive Council (IOC) indicates that global production reached 3.1 million tons in 2021/22. Between 2016/17 and 2021/22 the global olive oil production grew at a compounded annual growth rate (CAGR) of 3.2%.
Data from the IOC also shows that the major global producers of olive oil in 2021/2 included Spain (41.9%), Italy (10.2%), Tunisia (7.7%), Türkiye (7.4%), Greece (7.3%), Morocco (6.5%), Portugal (3.9%) and Algeria (3.2%), among others.
South Africa is currently a net importer of olives. South Africa produces approximately 1.5 million to 2 million litres of olive oil, most of which is extra virgin olive oil. Imports are currently at 5 million to 6 million litres of olive oil.
According to data from TradeMap in 2022, sources of South Africa’s imports of olive oil included Spain (62.6%), Italy (31.6%), Greece (2.6%) and Portugal (2.6%), among others. During the same period, major export destinations for South Africa’s olive oil exports included Namibia (22.8%), Zambia (15.8%), Botswana (13.2%) eSwatini (7.3%), Sri Lanka (6.8%), Mozambique (6.6%) and Malawi (6.2%), among others.
Olives and olive oil are mainly produced under a Mediterranean-type climate. In South Africa, olives used for olive oil production are predominantly produced in the Western Cape owing to its Mediterranean-type climate. Hence, it accounts for 95% of domestic olive oil production.
The remainder of the production takes place in the Eastern Cape (2%), the Northern Cape (1%), Limpopo (1%) and the Free State (1%). Production outside the Western Cape is unlikely to increase due to climatic limitation as it needs a Mediterranean-type climate.
South Africa’s olive oil production has seen a sustained upward trend in the past few years.
According to industry body SA Olive, the area under olive production increased by 70% to 2 400 hectares between 2012 and 2020. This growth translates to a minimum of 20% per annum, making the olive industry the fastest growing agricultural subsector in South Africa.
South Africa’s per capita consumption is still very low in global terms at 0.08 litres per annum compared to 12 to 18 litres per annum in most European countries. Nonetheless, this is an indication of the potential future growth for the South African olive industry.
The quality of South African olive oil is guaranteed by the Commitment to Compliance (CTC) seal from SA Olive.
Export demand, particularly to African countries, also presents a lucrative opportunity for South Africa to expand production. Beyond Africa there are also export opportunities as major producers are faced with production challenges.
This as producers in Europe – such as Spain, Greece, Italy and Portugal – are facing weather-related challenges that have seen the surge in the global price for olive oil.
Data from the International Monetary Fund (IMF) shows that the global price for extra virgin oil was $10 281/ton in January 2024. This was 8.6% higher compared to the previous month, 13.8% higher compared to six months ago and 74.5% higher compared to a year ago.
Forecasts indicate that the global olive oil market will grow from $14.64bn in 2023 to $18.42bn by 2030, a CAGR of 2.9%. This will be supported by increased demand in the food service and retail channels owing to the increased consumer awareness about the health benefits of olive oil.
Global demand and the expected growth in domestic demand present the South African olive oil industry with various opportunities for expansion throughout the value chain, which includes farmers, the processing sector and other sectors that use olive oil as an input in their production processes.
Given that the production of olives/olive oil is labour-intensive, the development of the industry has the potential to create much-needed jobs throughout the value chain and reduce poverty in the communities in which farming and processing takes place.
Gilberto Biacuana is an economist currently serving as a research analyst at Land Bank.
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