“Bitter Oranges – An Unjust Citrus Supply Chain”, July 2021

Germany is an important target market for citrus fruit producers in South Africa. The European Union (EU) is by far the largest importer of citrus fruits from the country at the Cape, and Germany in turn is a major importer within the EU. A significant proportion of the oranges, lemons and mandarins that German retailers offer their customers come from South Africa, especially in the summer and autumn months. After Spain, South Africa is the most important exporter to the German market with 80,400 tonnes per year.

Market power within the supply chain is extremely unevenly distributed. This is expressed in the trading practices of the supermarket corporations. They order the citrus at short notice, often do not sign a written contract, renegotiate the price week by week and only pay after receiving the goods. The risk borne by the German import companies is in turn passed on to the producers. Import companies often receive the fruit on commission instead of purchasing it.

Even though prices for citrus fruits in South Africa have risen significantly in recent years, price margins continue to be distributed very unevenly along the supply chain. An ideal-type of calculation of price margins shows that, of the just under two euros that a kilogram of oranges costs in the supermarket in Germany, an estimated 60 cents remain at the retail level. At 45 cents, the South African producer’s gross margin is less than a quarter of the final price. Shares of roughly the same amount remain with the transport and logistics sector (44 cents) and the German importer (44 cents). The share of the retail price for a kilogram of oranges received by the farm workers with a permanent contract is the equivalent of six cents.

In terms of both quality assurance and minimum social standards, private standards have increasingly prevailed in the cultivation of citrus in South Africa over the past fifteen years. The code of conduct of the Sustainability Initiative of South Africa (SIZA) plays a central role in this. It was developed by the producers in South Africa themselves and is recognised by the supermarket groups at the end of the supply chain. Within the framework of the present study, five citrus farms in the Gamtoos Valley were examined in more detail, all of which are certified by SIZA. These farms produce for packing houses, which in turn supply the German retailers Edeka, Netto, Rewe, Lidl, and the wholesale group Selgros. On the farms surveyed, there were five areas where, according to workers, applicable labour laws were violated. The conditions on the farms Nuwelande, Mimosa and Hillside are particularly problematic.

• Employment contracts and wages: Basic labour rights are violated on three of the five farms: The employees do not have an employment contract, during the harvest season the statutory minimum wage is replaced by a piecework wage, freedom of movement is restricted and the privacy of the workers is violated.
• Trade union organisation: On three of the five farms, workers report being intimidated or actively fighting trade union organisation. On one of the farms, the trade union’s shop steward was dismissed in December 2020.
• Drinking water: On all five farms surveyed, the workers who live on the farms do not have access to clean drinking water. This problem is exacerbated by the current drought in the Eastern Cape.
• Health protection: Highly hazardous pesticides are used on all five farms. On four of them, the necessary safety standards are not met. Several cases of acute poisoning were documented on one of the farms.
• Accommodations and toilets: On three of the five farms, accommodations are in poor condition and there are not enough toilets available. The citrus producers in South Africa advertise that they are promoting a transformation of agriculture through their own projects, from which black South Africans are to benefit. On two of the five farms surveyed, Farm Worker Equity Schemes (FWES) have been set up. However, participation in this programme does not give workers any voting rights or information rights about the management of the companies. On one of the two farms, the annual dividend was less than half of a month’s wages. Citrus fruit production is actually considered a sector with high additional employment potential. However, the pressure to rationalise on the farms and in the packing houses is undermining a significant part of this potential.

The South African government should act: The number of inspections by the labour department must be significantly increased. In particular, existing labour law must be enforced in the five areas described above. To ensure that private sustainability standards are not disconnected from the right to organise and bargain collectively, framework legislation for private standards such as SIZA is needed. In addition, the South African government should develop binding minimum standards for Farm Worker Equity Schemes.

The German government should act: Based on its national supply chain law, it should force German supermarket corporations to ensure that fundamental labour rights in their supply chains are protected. With a view at their second-tier citrus suppliers in South Africa, this particularly concerns occupational health and safety, access to clean drinking water and the right to trade union organisation. The German government should also advocate at the international level for the human rights due diligence regulation of global supply chains. Finally, it should improve the new Agro-Organisations and Supply Chain Law. The list of banned Unfair Trading Practices in this law should be extended, particularly written supply contracts fixing the prices in advance of the transactions between retailers and suppliers should be prescribed.