July 31, 2017

South African-based pelagic, aquaculture, and natural foods business, TerraSan is soon to close on the acquisition of canned fish company Saldanha Group and is investing in a strategic expansion in the aquaculture sector.

Backed by South Africa’s Trustee Board Investments, TerraSan is reported to have agreed to pay US$35.5 million for Saldanha, who’s pelagic business includes a canning plant and a fishmeal plant – both in Saldanha Bay with the canning plant able to process 20 tons of raw fish per hour and the fishmeal plant able to process 50 tons per hour. Under the terms of the deal, TerraSun also will acquire the Saldanha brand name.

The company, which is owned by the Silverman family, also has a fishing fleet that brings in sardines, and pilchards for canning and anchovy for fishmeal production. All told, the Saldanha pelagic business sees a turnover of approximately US$54 million.

Once completed, the deal, which is expected to close within the coming few months, will make TerraSan a top-three pelagic companies in South Africa along with Oceana Group and Pioneer Fishing.

Aquaculture Also

TerraSan is also a leading fish and marine farming company. It’s wholly owned subsidiary Aqunion controls investments along the entire abalone value chain, with farming operations Aquafarm and Bay Sea Farm, as well as processing and feed manufacturing assets in Hermanus and Gansbaai.

Established in 1994, TerraSan’s abalone division developed the first farm to export commercial volumes of farmed abalone to Hong Kong, and has since expanded to export to markets across Asia including China, Japan, Taiwan, Singapore, and Malaysia.

TerraSan also completely owns Blue Ocean Mussels Ltd. – an aquaculture operation and processor that supplies more than 50 percent of the domestic mussel market in South Africa.

In 2015 TerraSan raised ZAR95 million (US$7.2 million) which is earmarked to fund an expansion of the group’s marine farming business.

With this backing, the company plans to expand to 35 rafts for mussel production this year, which is expected to bring output from 600 tons to 1,500 tons by 2018 since mussels only require seven months to mature. Since abalone takes four years to mature, the expansion of the abalone operation is on a longer timeline, with production estimated to reach 300 tons by the end of this year and 450 tons once the project is complete.

Looney for Abalone

The global aquaculture market is forecast to be worth US$202.96 billion by 2020, according to a study released by Grand View Research, with global demand climbing from 69,230 kilo tons in 2013 to 80,400 kilo tons by 2020, representing a compounded annual growth rate of 2 percent between 2014 and 2020.

Within this rapidly growing industry, abalone is one of the most in-demand sub-categories, and the leading sub-category in South Africa, which is the third largest exporter in the world, producing 1,450 metric tons in 2015.

Peter Britz, Rhodes University professor of Ichthyology and Fisheries Science, told Engineering News that abalone has the greatest potential for growth in the South African aquaculture sector, and that mussels were well positioned for a strong future due to support from the government’s Operation Phakisa scheme, which is tasked with connecting smaller producers with larger commercial companies.

However, with the good always comes some bad. Abalone, which is highly sought after, especially in Asia, and can fetch upwards of US$150 per pound  is now seeing poaching totaling $440 million per year, according to South Africa’s Department of Agriculture, Forestry and Fisheries, as poachers are stealing a record 7 million abalones annually.

National Geographic reports that the legal South African abalone harvest in 2015 totaled 105 tons, while the poached abalone haul is estimated to be 3,477 tons. Looking farther back, since 2001, an estimated 40,000 tons, or 75 million abalone have been taken from South African waters.

Despite this, the growth potential for abalone farming is so strong that South African asset manager, Furthergrowth Asset Management, has targeted abalone production operations for the bulk of its aquaculture investments.

Amrish Narrrandes with Futuregrowth told AKF Insider that abalone farming was “under-invested in South Africa despite ongoing poaching of wild abalone populations.”

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.