Living Gold rose project: Learning from past challenges

Gold Fields and the government-run Industrial Development Corporation have invested a total of R160 million (US$22 million) in the Living Gold rose farm since 2003. To date, this alternative livelihood project, which is based on the Far West Rand in South Africa, has provided training for over 600 people in the skills of growing, harvesting, sorting and packaging roses for export. The project currently employs 132 people.

Since it started, however, the Living Gold project has encountered a number of unanticipated challenges that have undermined its economic viability. These include:

• The ‘building-in’ of relatively high base- and overhead-costs, including water treatment, heated and artificially ventilated tunnels, and the upfront purchase of excess power to support anticipated expansion
  
  
• Commercial and practical challenges posed by the high-volume cultivation of a small variety of rose species
  
  
• Strong competition within the export market from large-scale rose exporters, including those in Kenya that enjoy certain climatic advantages and lower overheads
  
  
• A significant strengthening of the Rand against key foreign currencies – with commensurate impacts on relative export prices, resulting in significantly smaller margins

In the spirit of continuous improvement, Gold Fields is implementing a ‘turnaround’ strategy to ensure the longterm sustainability of the project. This includes:

• The introduction of an increased number of exclusively licenced rose varieties and a commensurate reduction in the volumes being cultivated per variety – allowing for a better-targeted, niche marketing and sales programme
  
  
• A new focus on improved quality and lower-volumes to avoid over-supply – and a focus on higher value sales to local markets. This has already improved the economics of the project through, for example, reduced transport costs associated with export
  
  
• The introduction of enhanced production techniques to improve rose quality and average stem length. In 2011, this contributed to a near doubling in the average price fetched by Liquid Gold roses
  
  
• The diversific ation of production to include high-value vegetables and cut foliage. This is expected to broaden and expand the project’s revenue base and will be piloted and rolled out in the second half of 2012
  
  
• The introduction of a more appropriate labour model, based on a core of permanent staff supported by additional seasonal personnel
  
  
• Energy saving initiatives to reduce electricity costs

As a result of these changes, the Living Gold project has been put back onto a more sustainable footing. In January 2012, Gold Fields also secured a 10% equity partner in the venture, who will manage Living Gold on an economically sustainable basis.

http://www.idc.co.za/