prosperity – David South Consulting

Palestinian Olive Oil’s Peaceful Prosperity

By David South, Development Challenges, South-South Solutions

The economic devastation of the conflict between Israel and the Palestinians (http://en.wikipedia.org/wiki/Palestine) has brought much hardship to the Palestinian people. The United Nations under the UNRWA mission has been working to lesson the hardship for over 60 years (http://www.unrwa.org). But there is only so much it can do.

However, several business initiatives are creating strong Palestinian food brands to improve the reputation and awareness of Palestine around the world. In particular, Palestinian olive oil has led the way and enjoyed strong sales in countries like the United Kingdom.

Since 2004, the Palestine Fair Trade Association (PFTA) (http://www.palestinefairtrade.org) has been leading the movement of fair trade producers in Palestine, linking small Palestinian farms in fair trade collectives and cooperatives across the country.

Zatoun (http://www.zatoun.com) – or Zaytoun (http://www.zaytoun.org) as its known in the UK – are olive oil and soap brands using the Arabic word for olive. Olive oil (http://en.wikipedia.org/wiki/Olive_oil) is a popular cooking and seasoning oil and is sought after for its health benefits. Most of it is cultivated in the Mediterranean region, with Spain the largest single producer. Like wine, the quality of the olive oil varies greatly and the bouquet and viscosity of the oil play a big role in how consumers select a brand. The trend in the past 10 years has been for consumers to be more selective about the olive oil they buy and to be more informed about the choices available. This increasingly sophisticated consumer choice is what is helping the Palestinian oil succeed.

Another factor is the growing global popularity of the traditional Mediterranean diet. Research has linked it to the prevention of cancers, obesity and cardiovascular diseases, and an aid to food digestion. Olive oil and olives make up one of the six key groups of foods that are part of the Mediterranean Diet. The other elements are grains, fruits and vegetables, legumes and nuts, dairy products and fish.

The Zatoun brand of olive oil uses its profits to help olive tree farmers and their families in Palestine.

The brand is also hoping to alter public perceptions of Palestine. As its website states, “Zatoun helps to create a context based in ordinary everyday life to view and discuss the situation in Palestine-Israel. No longer is it an abstract geopolitical issue involving power elites and undefined national interest.”

The Zatoun brand is led in Canada by Robert Massoud, winner of the 2004 YMCA Peace Medallion. Zatoun is sold in Canada through peace groups and social justice and faith groups and is “intended as a tool to help promote their work and bring home the message that the struggle of Palestinians is ultimately one of human rights and social justice.”

The olive oil is certified fair trade under the Institute for Marketecology (IMO) (http://www.imo.ch/index.php?seite=imo_index_en) in Switzerland. The brand is operated as a not-for-profit with volunteer labour and the entire cost of the product goes to the farmers, customs and shipping costs, and promotion and administration. Each 750mL bottle sells from between CAD $15 (US $14) and CAD $17.50 (US $17.22) and each bar of soap is CAD $5.00 (US $4.90).

In the U.K., the Zaytoun brand was started by British women Heather Masoud and Cathi Pawson, also in 2004. The Palestinian olive oil has benefited from sales promotion during the United Kingdom’s annual Fair Trade Fortnight: a highly publicized promotion over two weeks that has consistently raised the profile of all Fair Trade products. Palestinian products were profiled during the 2009 event.

The Zaytoun brand is certified with the World Fair Trade Organization (www.wfto.com) and has been able to break through to sales in British supermarkets as a result. Having this certification is key to being accepted for display on the supermarket shelves. By being certified, the farmers are able to get guaranteed above market prices for their olives. This makes it easier to plan and invest in the farm and the community and avoid the wild fluctuations of market prices. It is common around the world for farmers to be bankrupted and impoverished when market prices crash and fall below the cost of growing and harvesting the product.

“We have been working for the Fair Trade certificate for four years,” Nasser Abufarha, chairman of the Palestinian Fair Trade Association told the Guardian newspaper. “Fair Trade will increase our sales, and bring us new markets and widen our reach.

“We have given farmers hope,” he said. “An economic exchange that recognises Palestinian farmers’ rights and respects the value of their connection to their land, after marginalization under Israeli occupation, is a major accomplishment.”

Olives are Palestine’s biggest crop, and critical to the local economy. The industry employs more than 100,000 people and its economic health affects many more. But the ongoing conflict has harmed the olive industry in many ways, from the bulldozing of orchards to make way for the Israeli security fence – over 1,100 hectares olive orchards were cut off by the fence in the West Bank village of Anin alone – to clearing fields for the building of new settlements.

For some of the farms, fair trade has meant access to outside markets they haven’t had for 40 years.

The Palestinian olive oil is in a market with fierce competition. In the UK, the oil can retail for £14.49 (US $23) a litre, while some Italian olive oils can be had for just US $9. But the Palestinian olive oil has a number of advantages in the marketplace: consumers have shown a willingness to pay the premium to support the farmers and Palestine, and most importantly in the competitive world of food sales, food connoisseurs rave about it. Food and wine writer Malcom Gluck called Zaytoun olive oil “one of the aggressive yet pungently attractive olive oils I have tasted”. He believes it easily ranks alongside the best Sicilian, Cretan and northern Spanish oils.

Another Palestinian company having success with the olive products is the Anabtawi Group (http://www.anabtawigroup.com/index.php?a=1&lid=3&lid1=24). Based in Nablus in the West Bank, it started in 2008 the Al-Ard Palestinian Agri-Products Company and sells Al-Ard extra virgin olive oil, virgin olive oil and an olive oil soap. Operating on a large scale, the group has the largest olive oil storage facility in Palestine and provides training and support to the farmers. It also undertakes marketing of the products in new markets including Latin America.

Ziad Anabtawi, the company’s president and CEO, told the Brazil-Arab News Agency “Palestinian olive oil is known worldwide for its high quality and its very striking aroma. It is ‘premium’ and organic by nature. Farmers grow the product the traditional way. They do not irrigate the olive trees, [irrigation] comes from rainwater and we do not use any chemicals.”

The Palestinian experience shows it is possible to create new economic opportunities for farmers under even the most arduous political and security conditions.

Published: October 2010

Resources

Palestine Fair Trade Association: Website:http://www.palestinefairtrade.org/
International Olive Oil Council (IOOC): The global body to help market and promote olive oil products. Website:http://www.internationaloliveoil.org/

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.

https://davidsouthconsulting.org/2021/03/05/southern-innovator-issue-3/

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© David South Consulting 2022

Global South’s Middle Class is Increasing Prosperity

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

The global middle class is on the rise – and this is creating both challenges and opportunities. As poverty rates have come down across the global South, many countries have seen a rise in the proportion of their population categorized as “middle class”. Globally, being middle class is defined as a person able to consume between US $4 a day and US $13 a day (ILO).

According to the Organization for Economic Cooperation and Development (OECD), most of this growth will be in Asia and the region will soon make up 66 per cent of the world’s middle class. Historical experience shows that members of the middle class quickly become absorbed in spending their accumulated capital on housing, equipment, industry and business, health and education. In countries with a growing middle class, policy makers need to show a strong interest in creating stable economic conditions to encourage this expanding consumption and domestic demand, the OECD advises.

Growth of the world’s middle class took off after 2001, with an additional 400 million workers joining this group. The McKinsey group of consultants found the total number reached 2 billion in a dozen “emerging nations” in 2010, collectively spending US $6.9 trillion every year (McKinsey).

Forecasters predict a further increase in the middle class across the global South will bring with it a surge in consumption (a combination of spending and demand). Areas being highlighted by various studies and reports include China’s small and mid-size cities, other areas of East Asia and Africa.

Middle class spending in these dozen emerging nations could reach US $20 trillion during the next decade – twice the amount of consumption occurring in the United States right now (McKinsey).

The result is a re-shaping of populations, with growing numbers of people now neither rich nor desperately poor, but landing in the middle of the income distribution.

And local competitors in the global South are fighting hard for these consumers on their own turf.

The Hangzhou Wahaha (http://en.wahaha.com.cn/) beverage maker in China has been able to compete against multinationals such as Coca-Cola and PepsiCo, according to McKinsey. It has turned itself into a US $5.2 billion business using a multi-pronged strategy: targeting rural areas, catering to local needs, keeping costs low and positioning itself as the patriotic choice.

And this change is also occurring in Africa, where a growing middle class is fuelling sales of refrigerators, television sets, mobile phones, motors and automobiles across the continent, according to the OECD. In Ghana, for example, car and motorcycle ownership has risen by 81 per cent since 2006.

According to the African Development Bank (AfDB), Africa’s middle class has reached 34 per cent of the population, or 350 million people. In 1980, it was 126 million people, or 27 per cent of the population.

Countries with the largest middle classes in Africa include Tunisia and Morocco, while Liberia and Burundi have the smallest number of people in the middle class.

The economic growth that is fuelling this middle-class surge is coming from a combination of increasing investment in the services sector, the tapping of the natural resource sector and better economic policies in the past two decades. Africa’s middle class is driving growth in the private sector and boosting demand for goods and services, most often also provided by the private sector.

“The liberalization of African economies has resulted in improved efficiencies and led to a rapid growth in the service sector, which has spurred the growth of the middle class,” Lawrence Bategeka, a principal researcher at the Uganda-based Economic Policy Research Centre, told The East African newspaper.

How important the middle class is to increasing consumption levels can be seen in the cases of Brazil and South Korea.

According to the OECD, both countries had similar income levels and growth rates in the 1960s. But by the 1980s, high income inequality in Brazil capped the middle class at 29 per cent of the population. In South Korea in the 1980s, the middle class population reached 53 per cent. This larger middle class population enabled South Korea to switch from an export-driven growth strategy to domestic consumption.

While Brazil wasn’t able to do this at the time, it has since made impressive gains in reducing poverty – from 40 per cent of the population in 2001 to 25 per cent in 2009. This has seen the middle class grow to 52 per cent of the population and boosted domestic consumption.

While a rising middle class in the global South is good news for improving human development and living standards, the OECD found much of the new middle class was vulnerable and could easily slip out of that category. They also often lacked enough income to purchase more expensive durable goods such as automobiles (OECD Yearbook 2012).

The success of this fragile but growing middle class will be key to how well the global economy fares in the coming years.

A new report by the UN’s International Labour Organization (ILO) argues that the global South’s growing middle classes are just the thing to spur growth across the wider world economy.

“Over time, this emerging middle-class could give a much needed push to more balanced global growth by boosting consumption, particularly in poorer parts of the developing world,” said Steven Kapsos, one of the authors of the report.

In Indonesia, an example of the economic impact of the middle class trend in action can be seen in the surging life insurance business.

Association of Indonesian Life Insurance Companies (AAJI) chairman Hendrisman Rahim believes the growing middle class are potential customers for the country’s thriving life insurance industry.  “They are the ones who have the need to be insured and can afford to purchase a policy. Extremely rich people are financially capable [of buying], but may not have the need. Extremely poor people have the need, but require financial assistance to be insured,” he said to the Jakarta Post.

As the Indonesian middle class increases, the life insurance industry is expecting to see revenue rise by 30 per cent in 2013.

Published: February 2013

Resources

1) The $10 Trillion Dollar Prize by Michael J. Silverstein. Website: amazon.com

2) The Middle of the Pyramid: Dynamics of the Middle Class in Africa. Website: http://www.afdb.org/en/blogs/afdb-championing-inclusive-growth-across-africa/post/the-african-consumer-market-8901/

3) McKinsey Quarterly: Capturing the world’s emerging middle class. Website:http://www.mckinseyquarterly.com/Capturing_the_worlds_emerging_middle_class_2639

4) OECD Observer: An emerging middle class by Mario Pezzini. Website:http://www.oecdobserver.org/news/fullstory.php/aid/3681/An_emerging_middle_class.html