Recently I heard of a proposed project which planned to produce 90 tonnes of tilapia per year from a greenhouse based system in the southern coastal region of South Africa.
While it is always encouraging to hear about new projects, promoters and investors should embark on such an adventure with eyes wide open, as well as with a certain humility and knowledge that many producers have tried and failed before.
Let’s look at some of the reasons why this happens.
Before initiating a project, it is crucial to conduct thorough research. Simply stating that “the correct growth and filtration design will be used” ignores the fact that the heating, oxygenation, filtration and nitrate removal techniques in a recirculating aquaculture system (RAS) are far from infallible.
Granted, most operators who run large systems know more than the basics, but their systems may not be economically viable in terms of capital and running costs.
Every operator should consider whether their system has a high feed conversion ratio (FCR) at a high storage level. I challenge anyone running a hot water RAS in South Africa to improve on an FCR of 1:1.5 between fry and market size.
This is partly due to the relatively poor quality of feed available, but also to the need to house fish at high stocking levels (>30 kg/m3 of water) to make efficient use of the limited space and produce at a viable economy of scale.
Fish reared in a RAS are completely dependent on the feed given.
It takes a superbly designed system and skilled management to turn 1.5 kg of feed into 1 kg of marketable fish meat repeatedly and profitably.
Add all costs
Operating costs are often misjudged when promoting a project to investors.
If a RAS consumes about 10 KW of electricity continuously (i.e. two fans, six small pumps and some lighting), the electricity bill will be over R10,000/month.
Labor (two workers) will add an additional R10,000 per month, and feed (based on an expected production of 90t per year, or 7.5t per month) will mean a bill of R146,250 per month.
Add another R20,000 for transport, repairs, packaging, processing, insurance, bookkeeping, cost of internet connectivity, telephone, tariffs, fingerlings and incidentals, and the R7,500 kg of fish cleaned to represent 6,675 kg salable will need to be sold for more than R28/kg just to break even.
The entrepreneur then sees tilapia fillets or processed tilapia for sale in high-end supermarkets at over R150/kg and assumes that he can achieve an entry price of at least half that price.
Most supermarkets add well over 100% to the base price – and in South Africa most value-added tilapia come from Indonesia and other eastern countries at a landed price of less than R30 /kg.
The value added by the supermarket then triples this price to a wholesale value, which is doubled for retail sale to the public.
It then competes head-on with value-added marine products.
The caveat to this is that the cost of producing locally produced tilapia must be extremely low to be viable.
When it is necessary to depend 100% on expensive and mediocre feed, farmers must be aware of the real production costs.
– The Farmers’ Weekly