B A L O B I
P R O C E S S O R S
Casting the Net Wide
Balobi Processors is a specialist producer of frozen hake, squid and sardines. Jane Bordenave talks to Mark Rowe to find out what has made this business so successful and how a changing market will affect its future.
ocated in Port St Francis, Balobi Processors was established in 2000 by Anton Viljoen, and specialises in processing sardines, hake and, most importantly, squid. The company owns its own fleet of squid vessels and also buys up sea frozen squid that is brought into the harbour by other boats. As explained by Mark Rowe, General Manager of Balobi Processors, the company’s location in St Francis Bay, is probably its greatest strategic asset. “Virtually all the squid caught in South African waters is caught between Port Elizabeth and Tsitsikamma Nature Reserve on the Eastern Cape. We are located midway. Of the +-10,000 tonnes that are caught annually, we process and sell 20 per cent – and that is squid alone.” Additionally, the same area is on the migration route for Sardines as they make their way up the coast annually from January to July. Balobi Processors has the capacity to freeze up to 40 tonnes of sardine per
Balobi Processors FEATURE
day caught by its own purse seine vessel. Balobi’s fishing activities require a lot of labour, “in general terms the fishing and fish processing sectors are the ones that create the most jobs in the area, and in the high season with the passing sardines we can more than triple our workforce, going from 37 staff up to 100 or more.” The company’s main product is whole round sea frozen squid which after being boxed, is exported in container loads to the Mediterranean countries. However, Balobi also processes fresh long line hake, which is packed into polystyrene boxes, trucked at -10C to Oliver Tambo Airport Johannesburgh and sold to importers in Spain, Portugal and France. This was a very successful business model for many years, however the recent financial crisis has hit Balobi Processors’s business badly, “The recession as been tough,” says Mr Rowe, frankly, “Spain, our main market, simply has no money, nor do any of the other
European Mediterranean countries. It is a very difficult situation – the difference in the exchange rate has meant that we have to increase our prices in the Euro Zone constantly, but our customers have got to the stage where they cannot afford to pay the catching fee for the produce, let alone the processing fee.” This has a knock-on effect for the company’s supply chain; even now, if the company sends a hake or squid vessel out to sea, it risks doing so at a loss, “We need to pay our vessels a price that makes it worth their while to go out to sea and currently we are paying the absolute bear minimum – we just cannot pay less than we are currently. There is also a serious danger that if the Euro weakens further we will not be able to raise our price without running the risk of out pricing our product.” The firm has also seen a change in purchasing habits in that where quality was once king, it in now price that is the deciding factor in a purchase. For example, whereas extra-large www.southafricamag.com
Balobi Processors FEATURE
and large squid used to be the premium product, it is now the small and medium sizes that are the most desirable to their customers. “Really, we have to consider other markets for our hake and squid, as it is uncertain when these economies will pick up. Clearly, this isn’t something we can do over night and it requires hard work, but it would be strategically advantageous for us to do so.” But all is not lost. The firm’s sardine operation is still relatively untouched by the world wide economic troubles. About eighty percent of the sardine that is processed is sold outside of South Africa to fisheries based in the strong emerging markets in China and Taiwan. This is quite a different market to the Mediterranean squid and hake business.
As Mr Rowe explains, “we sell these sardines not as food but as bait used in long line tuna fishing in the Indian Ocean. The advantages of selling to the East are two fold; not only are the markets in this area more stable, but all trade is carried out in US Dollars, which is a stronger and more stable currency than the Euro at the moment.” What the company has found through difficult times in the past is that, if one of its three sectors shrinks another will come forward and pull the company through, “it is a real advantage to be trading in three areas and while the current situation is very challenging, our infrastructure and our staff are 100 per cent rock solid. We are confident that, while it may be something of a struggle at the moment,
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once the European markets pick up again we will have a nice, profitable, growing business for many years to come.” The company is not allowing itself to come to a halt though. By having a very stable financial situation, with its earlier purchases mostly paid off, Balobi Processors has been able to invest R7m (£611,196) in a new, state of the art freezer vessel for squid, which will be deployed in September this year, “While the hake market has come close to drying up, there is still demand for squid, although it is less than before the recession,” says Mr Rowe, “the new boat is 19.8m long and will use the latest technology to enable us to get a detailed 3D view of the seabed, showing us every peak, every canyon and, of course, shoals of squid.” Economies wax and wane and in the commodities market there is always the chance that demand will decrease to the point that other avenues need to be pursued. But the combined experience of the top level staff at Balobi Processors, who have already seen off recessions in the 1980s and 90s, as well as their stable financial standing puts the company in a strong position to overcome current troubles, “we are confident for the future. By trying to grow our number of fishing permits in a strategic manner, we feel that the diversification and steady investment we are engaging in now will pay off in the long term.” Nothing lasts forever, not even a downturn of this magnitude, and by securing its business now the firm is ensuring an even more prosperous future. END
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