International hydroponics consultant Professor Gert Venter D. Eng; M. Eng (Agric) CUM LAUDE looks at some case studies, which illustrate why some greenhouse businesses in South Africa thrive while others fail. South Africa’s relatively young greenhouse industry is characterised by some spectacular successes but there are just too many projects that become total failures very soon after kick-off.
Analysing the reasons for such failures shows in hindsight that the focus of these projects was on job creation and improvement of living conditions amongst the poor and previously disadvantaged members of society, and not on overall viability and sustainability of the projects that collapsed.
Reasons for undercover project failures
The 10 main reasons behind these failures can be found in the following aspects, that is:
1. Focusing on job creation and other issues instead of viability and sustainability
2. Lack of proper planning before start-up
3. Lack of a proper business plan
4. Lack of proper training in all aspects of the project
5. Lack of commitment of participants
6. Lack of funding
7. Lack of water
8. Poor management
9. Absence of a proper marketing strategy
10. Ignoring the benefits of adding value on the farm.
Photo 1 shows the condition of a 0.36 hectare production facility, consisting of 12 plastic tunnels just a few months after commissioning. This is a glaring example of what can happen when improper planning is combined with poor management and low commitment of all parties involved in such a project.
Let us analyse some of the facts
1. Labour: (Focusing on job creation instead of viability)
This tomato project was planned to create jobs for 12 young participants involved in production, plus administrative and other personnel. This is equivalent to a labour force of about 40 people per hectare, which is at least five times more than the norm for similar successful projects in South Africa. There were also about eight times more labourers involved in this project than the international norm of five labourers per hectare for highly mechanised production systems. The yields in such modern, fully mechanised systems is also more than four times higher than the yield that could have been expected from the failed project, even with three boilers to heat up the structures for winter production.
2. Lack of proper planning
The whole project was poorly planned.
(i) The ventilation of the 30m x 10m tunnels was inadequate for summer conditions in the area. Poor ventilation causes heat stress, wilting, poor pollination and fruit set; as well as a resultant drop in production, fruit size and quality of the fruit.
(ii) Three boilers were installed to maintain production right through the winter months. This was a fallacy, as the main driving force for production isn’t only related to the maintenance of high temperatures during the winter, but rather related to available light, which is the main driving force for photosynthesis and plant growth. Even if summer temperatures could have been maintained during the winter, the yield would still have been much lower than during the summer due to shorter day lengths, lower light intensities, lower sun inclination and fog, mist or cloudy conditions during the winter.
(iii) The boilers were supposed to heat the whole interiors of the greenhouses. Root zone warming should have been recommended instead. It requires much less energy, gives more even heat distribution and has been proved to give higher yields along with many other benefits.
3. Lack of proper training and commitment
It took the 12 growers about three months to plant 1½ tunnels. The rest of the tunnels did not receive a single plant by the time the project failed. With proper training, planning and commitment, the 12 producers should have been able to get all of the tunnels planted within a day or two. This slow start-up had an immediate effect on the project’s viability as wages and salaries had to be paid over a long period before the project was supposed to come into production. Obviously, there was no commitment to get the project in full production in the shortest period after start-up.
4. Poor management
Not a single tomato was produced before all the plants died from drought when the electricity supply was cut due to non payment of the bill. The growers didn’t know who was responsible for payment of the electricity bill which, obviously, should have formed part of the planning of the whole project from the start.
There was also no effective financial control on expenses, which resulted in start-up funding disappearing under poor management.
Poor management is also reflected in the slow start-up and lack of control over the labour force. The end result was that most tunnels were never planted, no tomatoes were ever harvested, and start-up funding ran dry due to poor financial control, etc.
5. Not following the business plan
When asked about the business plan, no one knew where it was. The chimneys of the three boilers, for instance, showed that the boilers were never used even though, according to the business plan, boilers were installed to maintain production right through the winter months.
The business plan also warned against theft and pilfering in the area, but security measurements were inadequate, resulting in the theft of copper cables, borehole pumps, plastic cladding and other items from the site soon after the project was terminated.
6. More poor management
The fact that 12 people were unable to get 12 tunnels into full production within days after start-up is a clear indication that there was no management involved, as far as the staff or growers were concerned.
It was also clear that there was no financial control, as questions about expenditures could not be answered by anyone afterwards, and no records were available to show how the available start-up funding was allocated.
Photo 2 shows the tattered and torn remains of: “An award-winning, government-backed agricultural project for disadvantaged locals that showed great promise in helping to reduce unemployment and poverty in the economically depressed Karoo town.”
The project required additional rescue funding from the provincial government within a year or two after commissioning, however, the company still went into negative cash flow and had to close soon afterwards.
What went wrong?
Some of the following reasons were quoted in press releases after closure of the project:
1.The unsustainable cost of transporting the products over 500km to the nearest market far exceeded the total income generated.
2. The project was never in a position to pay for municipal services such as providing the available land, providing water and insurance.
However, the following aspects were also ignored during the planning stages of this project:
1.The project was launched in a low rainfall, arid area with that is well known for the shortage of water during periods of drought. The poor quality underground water in that area has a high salinity contents.
2. Long distances are involved in transporting produce to any of the major markets in South Africa.
3. The greenhouses had inadequate ventilation for an area where summer temperatures could reach 40°C and more, requiring large electric fans and wet wall systems to operate continuously during the warm summer period. The wet wall systems require even more of the poor quality and scarce water that is needed to irrigate the plants.
4. Production systems were not very well planned, as expensive imported substrate and related prefabricated container systems were used instead of locally available materials that could have given the same growth results with a much lower capital expenditure.
5. Seedlings were planted at very low plant densities at the final spacing for full grown plants, which resulted in poor utilisation of the floor area and available sunlight during most of the production period.
6. Large passages between the production beds reduced the potential production per square metre by more than 50 per cent, which had a negative influence on the viability of the whole project.
7. Production systems with relatively low output potential were used instead of water efficient hydroponic systems that could have increased their yields by more than 500 percent. Modern production systems such as DFT (Deep Flow Technique) might have saved the project from disaster.
The lessons that can be learned for these two examples clearly illustrate the fact that high levels of capital expenditure is no guarantee for success if a project cannot be properly planned, managed and steered in the right direction right from the start.
Learn from this experience and be successful.
Hydroponics dream project in tatters; WESTERN CAPE / 2 September 2013. Ω
PH&G June 2017 / Issue 180