Aquaculture as a business in SA

The primary question that any investor into aquaculture should be asking relates to the profitability of aquaculture as a business venture.  Few of us see this as a hobby, and ‘cheap protein’ is an oxymoron, so it must be viewed through the commercial lens.  The investor needs to understand what the cost of investing in the infrastructure is, how much is required for operational costs until first sales occur, how long is the growth cycle, when is the first sale expected and what sort of return is possible?
 
The starting point for any farm is to consider where you will sell your produce, and any discussion on the market necessitates a discussion on the species as well. The market for freshwater fish in South Africa is traditionally regarded as limited due to the historic abundance of marine fish species off our coast.  However, in recent years there has been a decline in the availability of marine fish allowing tilapia and other freshwater species to become established in the local market. Trout has always been well accepted and is regarded as a high value product, therefore commanding a premium price.  Few markets in South Africa will guarantee offtake prior to seeing the fish, but discussions with various potential markets are valuable to develop an understanding of who may buy your fish, what forms they want the fish in, what quantities they're likely to take and the price you can expect to receive.  Always consider value addition options as these hugely broaden the market and generally increase the margin.  For example, selling fresh catfish in South Africa is very difficult, but once they are value added into smoked fillets, sausage or burger patties, they can be sold in very large quantities - even through supermarkets.
 
South Africa has a temperate climate with a cold winter and a hot summer, the exact temperature range depending on where you are situated across the region.  Therefore, farming fish outdoors is seldom an attractive option due to fish requiring a stable water temperature throughout the year, and nowhere offers this consistently.  Therefore, local fish farmers use intensive culture methodology inside insulated environments such as a greenhouse tunnel or shade house, and then heat or cool the water to obtain and maintain the optimal temperature for the species across the seasons.  The ideal site for fish farming provides protection from adverse weather conditions, whilst also ensuring excellent quality and adequate quantity of water available throughout the year.
 
Fish farming is a capital intensive venture both because the infrastructure is reasonably expensive to install and because most species have a growth period approaching, or even exceeding, one year.  The investor not only has to cover the cost of the capital invested but also the running cost until first sales start covering the operational expenses.
 
The discussion above relates specifically to the farming of fish which naturally produce solid wastes, continuously.  Aquaponics is the integration of hydroponics with intensive fish farming whereby the plants take up the nutrients produced by the fish thereby stripping these nutrients from the water and cleaning it to return to the fish in a continuous cycle.  In this way the feed fed to the fish produces a crop of fish and a substantial crop of vegetables and herbs.  The plants attain market size much sooner than the fish, which aids cash flow and profitability is generally increased in an aquaponics system relative to a pure aquaculture system.  In addition, this circular technology is environmentally appropriate as it significantly reduces water consumed to produce both the vegetables and the fish.
 
Aquaculture, and even more so aquaponics, is a skills-intensive undertaking necessitating a disciplined approach to managing the fish, water quality and plants. During the planning phase ascertain who can offer you the technical skills to train your team to run the facility optimally.  Part of this planning phase is to ensure that the infrastructure is professionally designed so that it is capable of (reliably!) producing the targeted quantities of fish and plants each month.  Along with the design, the Standard Operating Procedures according to which the system and stock are to be managed are also vital documents.
 
As with any commercial venture, scale is critical to attain profitability.  Small scale operators will always struggle to be economically viable but few ventures can afford to start on a large scale.  Therefore, what typically happens is that the business starts on a small scale, but plans for a clear growth trajectory to get to economic viability.  A rule-of-thumb guideline would be that an investment of at least R2m is required to attain breakeven and show some margin, with a larger investment being necessary to reach an attractive return.  With the ideal combination and careful management an aquaculture business can achieve a Return on Investment exceeding 30%.
 
Aquaculture can be an attractive economic investment, but it needs to be done excellently.  You need to have the right combination of infrastructure, species and market, and, as with any economic venture, the business needs to be professionally run to ensure economic viability.