rainbow trout feasibility study · 2018-12-19 · rainbow trout feasibility study final 2018 8 ii...

Rainbow Trout Feasibility Study

Final Report

2018

RAINBOW TROUT FEASIBILITY STUDY FINAL 2018 8

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Prepared for:

DEPARTMENT OF AGRICULTURE, FORESTRY & FISHERIES

CHIEF DIRECTORATE: AQUACULTURE AND ECONOMIC DEVELOPMENT

Private Bag X 2

Vlaeberg

8018

Prepared by:

URBAN-ECON DEVELOPMENT ECONOMISTS

Lake View Office Park, First Floor

137 Muckleneuk Street

Brooklyn

Pretoria

0181

Tel: 012 342 8686

Fax: 012 342 8688

E-mail: [email protected]


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Executive Summary The Department of Agriculture, Forestry and Fisheries (DAFF) Chief Directorate: Aquaculture and

Economic Development aims to “develop a sustainable and competitive sector that will contribute

meaningfully to job creation, economic development, sustainable livelihoods, food security, rural

development and transformation” in South Africa. In line with this mandate, research and

development has been done on several freshwater and marine species which are important and

valuable to the South African aquaculture sector.

Rainbow trout is a popular and well-known species in the local and global aquaculture industry.

Although the trout value chain is fairly well developed in South Africa, improved market access,

production technologies and marketing of South African trout both locally and internationally is

required. Water and environmental conditions have a big impact on the location and success of

rainbow trout operations in South Africa.

Rainbow trout have been listed as a Category Two (2) species in the draft NEMBA regulations that

were published by the Department of Environmental Affairs in February 2018. As a category 2

species, trout would then require permits for aquaculture.

The rainbow trout industry is fast and dynamic, with rapid global growth being experienced in recent

years. Currently, Iran is the leading producer of trout, followed by Turkey and Chile. In Africa,

Lesotho is the primary trout producer, followed by South Africa. The South African trout industry

caters mostly for local and regional demand, as issue of non-compliance with EU and USA market

regulations prevent the export of locally produced trout.

The production guidelines provided in the table below gives a brief overview of a few important

factors that should be considered when looking at rainbow trout production in South Africa.

Rainbow Trout Production Guidelines

Optimal Temperature Range 12-16 °C

Maximum Temperature Range 2 -22 ° C

Water Conditions Optimal pH: 7-8

Optimal Oxygen: 95-100 % saturation

Ammonia: Less than 2mg/l NH₃-N

Nitrites: Less than 5mg/l NO₂-N

Optimal Salinity: Less than 10 ppt (Only during the hatchery period)

Average cost of fingerlings R 3-50 per 20-gram fingerling

Average Feed Cost R18-00 per kg

Feed Conversion Ratio (FCR) 1.2:1 or 1:1.

Stocking density RAS – 100 kg/m³ (only achievable with optimal flow-rates & oxygen)

Pond – 18 kg/m²

Cage – 25 kg/m3

Race/Flow – 40 kg/m3

Acceptable Monthly Mortality 1,2% per month

Accepted market Sizes 340 grams (plate sized fish)

1.2 kg fish


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The generic economic model for rainbow trout was developed through inputs from technical

experts, industry stakeholders and peer-review workshops. In addition to the key assumptions

mentioned above, several other production and system related assumptions were incorporated into

the model. An example of the results produced by the generic economic model is illustrated in the

table below.

Table 1-1: Example: Rainbow Trout Production in a RAS

Production and Financial Assumptions

Province Western Cape

System RAS

Minimum profitable tonnage/annum 82 tons

Selected selling weight 1243 grams

Applicant details Start-up farmer with no existing land, no infrastructure, or

facilities

Education level Formal Education (certificate, diploma, degree)

Finance option Debt/Equity (20%)

Interest rate 8.25%

Generic Economic Model Results

Total Capital Expenditure R 3 930 520.80

Working Capital R 1 145 498.00

Infrastructure expenditure R 2 785 022.80

Profitability Index (PI) 1.05

Internal Rate of Return (IRR) 8%

Net Present Value (NPV) over 10 years R 4 108 733.97

Number of employees (Year 1) 4

Based on the table above, RAS is profitable for rainbow trout production when producing a

minimum of 82 tonnes of trout per annum and selling the fish at the average price of R 59/kilogram.

This specific venture has a positive PI of 1.05 and an IRR of 8%. This RAS system requires an

estimated R 2 785 022 for infrastructure expenditure, and a working capital amount of R 1 145 498

which brings the total capital expenditure to R 3 930 520.

From the generic economic model, it was concluded that cage culture, flow-through systems, and

pond culture are the most profitable production systems for rainbow trout production in South

Africa. Key provinces identified for rainbow trout production from an economic perspective include

KwaZulu Natal, Eastern Cape, and the Western Cape, while the least profitable province for rainbow

trout production was the Northern Cape. It is essential to note that only certain regions in South

Africa offer the cool climatic conditions required for Rainbow trout production. While water

temperature management and cooling and/or heating can be used, this has a major impact on

production costs and the profitability of an operation.

Disclaimer: Production information and assumptions in this report may be subject to change over time as

certain production variables can be expected to fluctuate. Technical assumptions were utilised from various

industry experts and stakeholders. Due to the sensitive nature of information shared by stakeholders,

personal details of stakeholders will not be included in the report. Stakeholders will be referenced as

“Personal Communication” in the document, and reference list.


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Table of Contents 1. Introduction .................................................................................................................................... 7

1.1. Project Background ................................................................................................................. 7

1.2. Purpose of the feasibility study .............................................................................................. 7

1.3. Feasibility Study Outline ......................................................................................................... 8

2. Rainbow Trout ................................................................................................................................. 9

2.1. Species background ................................................................................................................ 9

2.2. Biological characteristics of Rainbow Trout .......................................................................... 10

2.3. Physical requirements of Rainbow Trout .............................................................................. 12

3. Potential Culture Systems for Rainbow Trout .............................................................................. 18

3.1. Recirculating Aquaculture Systems ....................................................................................... 18

3.2. Aquaponics Systems ............................................................................................................. 19

3.3. Flow Through Systems .......................................................................................................... 21

3.4. Raceway Systems .................................................................................................................. 22

3.5. Pond Culture Systems ........................................................................................................... 23

3.6. Cage Culture .......................................................................................................................... 24

3.7. Production System Summary ................................................................................................ 26

4. Geographical distribution of Rainbow Trout in South Africa ........................................................ 28

4.1. Suitability Assessment .......................................................................................................... 28

4.2. Key Location and Site Requirements .................................................................................... 29

4.3. Key requirements for Profitability ........................................................................................ 29

5. Rainbow Trout Market assessment .............................................................................................. 30

5.1. Production and Consumption ............................................................................................... 30

5.2. Marketing channels............................................................................................................... 34

5.3. Rainbow Trout Market requirements ................................................................................... 36

5.4. Barriers to entry and limitations of the market .................................................................... 37

6. SWOT analysis and Mitigation measures ...................................................................................... 39

6.1. SWOT Analysis ....................................................................................................................... 39

6.2. Mitigation Measures ............................................................................................................. 40

7. Rainbow Trout Technical Assessment .......................................................................................... 42

8. Rainbow Trout Financial Analysis ................................................................................................. 44

8.1. Introduction .......................................................................................................................... 44

8.2. Key Economic Model Assumptions ....................................................................................... 44


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8.3. Rainbow Trout Production Financial Overview .................................................................... 46

8.4. Financial Analysis Summary .................................................................................................. 53

8.5. Rainbow Trout Cost Benefit Analysis .................................................................................... 54

8.6. Rainbow Trout Best Case Scenario ....................................................................................... 55

9. Conclusion and Recommendations............................................................................................... 58

9.1. Conclusion ............................................................................................................................. 58

9.2. Recommendations ................................................................................................................ 59

10. References ................................................................................................................................ 60


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Table of Figures Figure 2-1: Production Life Cycle of Rainbow Trout ............................................................................. 11

Figure 2-2: Impacts of feeding rate increase on Rainbow Trout .......................................................... 14

Figure 2-3: Average Dissolved Oxygen requirements for salmonids .................................................... 16

Figure 4-1: Suitable areas for trout in South Africa .............................................................................. 28

Figure 5-1: Global Trout Production (1950 - 2015) ............................................................................... 30

Figure 5-2: Top 20 global producers of Rainbow Trout (2015) ............................................................. 30

Figure 5-3: Top Five global producers of Rainbow Trout 2000- 2015 .................................................. 31

Figure 5-4: Production of trout in Africa (2000-2015) .......................................................................... 32

Figure 5-5: Major Trout Importers (2013) ............................................................................................ 33

Figure 5-6: Global Key trout producer’s countries and their main trade routes .................................. 34

Figure 5-7: Russian import structure by country between 2013 and 2016 .......................................... 35

Figure 5-8: South Africa and Lesotho import and export trade routes (2015) ..................................... 36

Figure 8-1: Generic Economic Model Overview ................................................................................... 44

List of Tables Table 1-1: Example: Rainbow Trout Production in a RAS ...................................................................... iii

Table 2-1: Commercial Trout Feed Overview ....................................................................................... 13

Table 2-2: Trout Feeding Rates ............................................................................................................. 13

Table 3-1: Trout Production Systems Summary ................................................................................... 26

Table 5-1: Industry performances of selected key producers (2000-2015) ......................................... 31

Table 5-2: Domestic consumption of trout (2015) ............................................................................... 33

Table 6-1: Rainbow Trout Swot Analysis ............................................................................................... 39

Table 6-2: Rainbow Trout Mitigation Measures ................................................................................... 40

Table 7-1: Rainbow Trout Technical Assessment ................................................................................. 42

Table 8-1: Rainbow Trout Model Assumptions .................................................................................... 44

Table 8-2: Trout Financial and Production Assumptions ...................................................................... 46

Table 8-3: Capital Costs for a RAS ......................................................................................................... 46

Table 8-4: Operational Expenditure for a RAS (Year 1) ......................................................................... 47

Table 8-5: RAS Financial Overview ........................................................................................................ 47

Table 8-6: Capital Costs for Pond culture ............................................................................................. 48

Table 8-7: Operational Expenditure for Pond culture (Year 1) ............................................................. 48

Table 8-8: Pond Culture Financial Overview ......................................................................................... 49

Table 8-9: Capital Expenditure for Cage Culture .................................................................................. 49

Table 8-10: Operational Expenditure for Cage culture (Year 1) ........................................................... 50

Table 8-11: Cage Culture Financial Overview ....................................................................................... 50

Table 8-12: Capital Costs for a Flow-through System ........................................................................... 51

Table 8-13: Operational Expenditure for a Flow-through (Year 1) ....................................................... 51

Table 8-14: Flow-through Financial Overview ...................................................................................... 51

Table 8-15: Capital Costs for a Raceway System .................................................................................. 52

Table 8-16 :Operational Expenditure for a Raceway (Year 1)............................................................... 52

Table 8-17: Summary: Production Systems Financial Overview ........................................................... 53

Table 8-18: Rainbow Trout Cost Benefit Analysis ................................................................................. 54

Table 8-19: Best Case Scenario Summary ............................................................................................. 55


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1. Introduction

1.1. Project Background

In South Africa, aquaculture has been identified as a key economic sector and employment cluster.

Various policies, programmes and initiatives have been developed and implemented to assist with

the development of the aquaculture sector. Some of the key initiatives include the National

Aquaculture Strategic Framework (NASF), the Aquaculture Development and Enhancement

Programme (ADEP), and Operation Phakisa to name a few. The primary goal of the various policies,

programmes and initiatives is to accelerate the growth of the aquaculture industry, enabling it to

play a critical role in supplying fish products both locally and internationally, improving job creation,

and contributing to the national economy, among other aspects. The sector has also been identified

as a key industry that can impact the development and reindustrialisation of rural communities and

townships in South Africa.

Aquaculture is one of the fastest growing food sectors in the world; however the South African

aquaculture sector remains small and underdeveloped despite the high-growth potential offered by

the sector. In recent years, South Africa has seen improved access to aquaculture technology,

increasing amounts of research and development, as well as government support from several key

government departments. Coupled with the increasing support and interest in the South African

aquaculture industry, there is potential to overcome some key challenges faced in the industry

which hinders its development. These challenges include access to suitable production areas,

production challenges, market access, and the need for value chain development.

Through continued research and development, value chain development, education and skills

development, and continued support, the South African aquaculture industry shows good growth

potential that will prove to be valuable from an economic and social aspect.

This report focuses specifically on rainbow trout production in South Africa, and considers the

following potential production systems:

I. Recirculating Aquaculture Systems (RAS),

II. Pond culture,

III. Cage culture,

IV. Flow-through systems, and

V. Raceways.

1.2. Purpose of the feasibility study

This feasibility study will be focusing specifically on rainbow trout production and markets in South

Africa. The study will cover the following aspects:

I. Background on rainbow trout,

II. Geographical distribution of trout in South Africa,

III. Detailed global, regional, and local market assessment,

IV. Potential barriers to entry,

V. SWOT Analysis and Mitigation measures for trout production in South Africa,

VI. Technical Assessment, and

VII. Financial analysis


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In addition to the feasibility study conducted, a generic economic model was developed for rainbow

trout. The generic economic model is aimed at assisting DAFF, industry stakeholders, role-players,

and new entrants to the trout industry to determine the financial viability of trout projects in South

Africa.

1.3. Feasibility Study Outline

The following feasibility study is made up of nine (9) sections, each of which is briefly elaborated on

below to provide an overview of the report.

Section 1 provides a project background as well as the main aspects that covered within the

feasibility study.

Section 2 focuses on providing a species background, and the key biological and physical

characteristics of rainbow trout.

Section 3 provides a detailed explanation of the potential production systems that can be

used for rainbow trout in South Africa. These production systems are included in the generic

economic model to determine the financial viability of each system.

Section 4 looks at the geographical distribution of rainbow trout in South Africa, provides a

high-level suitability assessment, and identifies the key requirements for profitability.

Section 5 provides a detailed global, regional, and local market analysis for rainbow trout.

Marketing, pricing, demand and supply, and potential barriers to entry are key factors that

need to be considered before implementing an aquaculture project.

Section 6 includes a SWOT Analysis that provides a high-level overview of the rainbow trout

industry in South Africa. The section also identifies mitigation measures to address key

weaknesses and threats.

Section 7 includes a technical assessment that provides a brief overview of key production

assumptions and guidelines used for rainbow trout production. These assumptions were

used in the development of the generic economic model.

Section 8 provides a financial analysis for the potential production systems based on the

results obtained from the generic economic model. A high-level cost-benefit analysis is

discussed to compare the feasibility of the potential production systems; and a best-case

scenario is provided to highlight the minimum viable tonnage, recommended selling price

and investment potential offered by the various production systems in the nine provinces.

Section 9 provides the conclusion on the feasibility study as well as recommendations for

the growth and development of the rainbow trout industry in South Africa.


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2. Rainbow Trout

2.1. Species background

Salmonids, including rainbow trout are some of

the earliest fish introduced and spread in

temperature regions globally. Rainbow trout

(Oncorhynchus mykiss) is native to the cold-

water rivers and lakes of the Pacific coasts of

North America (ranging from Alaska to Mexico)

and Asia. In South Africa, salmonids were introduced in the late 1800’s and are thought to have been

introduced to more than 75% of major river catchments across the country (DEA, 2014). In addition

to the rainbow trout, other trout species that can be found include brown trout (Salmo trutta), and

golden trout, however, only rainbow trout are used for commercial aquaculture.

Rainbow trout are renowned for their attractive and colourful patterned skin, and their remarkable

ability to swim swiftly upstream. Whilst the physical appearance of rainbow trout can vary greatly,

depending on the habitat, food, age, sex, and spawning conditions (Woynarovich, et al.,

2011).Rainbow trout are generally blue-green or yellow-green in colour, with a pink streak along

their sides. The species are torpedo-shaped with short heads, a white underbelly, elongated and

moderately compressed bodies, and have small black spots on their back and fins. Rainbow trout

lack teeth at the base of the tongue, have a high food conversion ratio and grow quickly, although it

may take up to 18 months to reach full maturity. These fish are also more tolerant of a wide range of

environmental and production conditions compared to other trout species.

Although, the rainbow trout is not indigenous to South Africa, it is the most well-established

aquaculture species in the country (DAFF & WRC, 2010). It is very popular as a fishing species as well

as a high-value food fish. Since its introduction, rainbow trout have become established in many of

South Africa’s rivers and dams. The successful culture of trout requires culture systems with plenty

of clean, oxygen-rich water. They cannot be cultured in stagnant ponds or those with a slow water

exchange rate (DAFF & WRC, 2010).

Rainbow trout generally have several attributes which make them attractive as a culture species.

These attributes include:

I. They are popular recreational angling and table fish (dual-purpose),

II. They are fast-growing and can be cultured at high densities,

III. They can easily adapt to a variety of aquatic environments, including aquaculture conditions,

IV. The fish is a well-established aquaculture species, with established markets (the fish attracts

high prices at the market), and

V. They can be propagated artificially

However, some of the disadvantages of rainbow trout as an aquaculture species include:

I. They have little to no tolerance for low oxygen or high temperatures,

II. Rainbow trout are regarded as alien invasive species by conservation agencies.


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2.2. Biological characteristics of Rainbow Trout

The rainbow trout is a hardy fish that is fairly fast growing, and tolerant of a wide range of

environments. They can occupy many different habitats, ranging from anadromous, fast-flowing,

well-oxygenated rivers and streams, to permanently inhabiting lakes. The anadromous strain (known

as steelhead) is known for its rapid growth, achieving 7-10 kg within three years, whereas the

freshwater strain can only attain 4 to 5 kg in the same time span.

The rainbow trout require cool temperatures, with an optimal range of 12-16˚C; however, spawning

and growth occurs at a narrower temperature range of between 9-14 °C (FAO, 2017; DAFF & WRC,

2010). It has been noted that temperatures higher than 21°C could result in the trout not feeding,

increased risk of diseases, lower dissolved oxygen content and can prove to be lethal (Salie, et al.,

2008).

Sexual maturity of rainbow trout largely depends on their growth rate. Females usually reach

maturity at the age of two to four years, and males between one to three years. In terms of

reproduction, the female rainbow trout spawns mainly in river channels and their tributaries, as well

as inlet or outlet streams of lakes (NRCS & WHC, 2000). Using her tail, the female digs a depression

in the gravel, called a redd. She then deposits a portion of her eggs into the redd, as an attending

male fertilizes them. The fertilized eggs are covered by gravel as the female excavates yet another

redd just upstream. (NRCS & WHC, 2000).

Monoculture is the most common practice in rainbow trout culture, and intensive systems are

considered necessary in most situations to make the operation economically attractive. Females can

produce up to 2 000 eggs/kilogram of body weight, with their eggs being relatively large in diameter

(3-7 mm) (FAO, 2017). Most fish only spawn once, in spring, although selective breeding and

photoperiod adjustment has developed hatchery strains that can mature earlier and spawn all year

round. Superior characteristic selection is also achieved by cross breeding, increasing growth rates,

resistance to disease, prolificacy, as well as improving meat quality and taste. Genetic manipulation

of the embryo sex chromosomes has also been successfully carried out to produce sterile, triploid

females. This helps to avoid the 'hook-like' jaw that does not appeal to the customer and ensures

that introduced/escaped fish are not able to breed. It is important to note that the rainbow trout

does not spawn naturally in culture systems; thus, juveniles are usually obtained either through

artificial spawning in a hatchery or by collecting eggs from wild stocks, (FAO, 2017). Artificial

spawning however is a demanding task that requires careful planning and considerable equipment

to hatch the eggs and rear the fry successfully.

The figure below describes the production life cycle of rainbow trout, from fertilisation, through to

production, and the selection of trout broodstock.


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Figure 2-1: Production Life Cycle of Rainbow Trout

Source: (FAO, 2017)

The rainbow trout industry is known to have been negatively impacted by disease outbreaks, which

had a major impact on production in countries such as Chile in recent years. According to the risk

assessment conducted for rainbow trout in South Africa, the trout are considered to be a vector for

the whirling disease myxosporean parasite, which has affected the native rainbow trout populations

in North America; however, it was not expected that this disease would have a major impact in

South Africa’s native fish populations (DEA, 2014).

According to Salie, et al. (2008), although no major outbreaks of diseases have been reported by

South African trout farms, caution should be exercised, specifically in intensive aquaculture systems,

as disease causing pathogens are omnipresent in the water environment, and can be affected by

stocking density, water conditions, temperature, and general farm management practices. Apart

from the factors that can cause the diseases mentioned stress of the fish, specifically in aquaculture

systems, can increase the risk of disease as well as impact the fish’s ability to adapt to aquaculture

production conditions. When considering diseases and the trout, it should be viewed as a dynamic

equilibrium which is influenced by three main factors, namely the fish (host), the pathogen (disease

causing agent) and the environment. This equilibrium is highly sensitive and can be influenced or

altered by any action or change made by the producer, or changes that occur within the

environment (such as temperature, water quality, etc.), which will increase the risk of a disease

outbreak (Salie, et al., 2008). Generally, RAS is seen as a safer production from a disease point of

view; however, as the water quality needs to be constantly controlled, it can be more prone to

environmental diseases as opposed to other production systems. Regardless of the system being

used, special care and disease management measures are required to ensure disease outbreaks do

not become an issue (Noble, 2004).


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Diseases found in trout can either be viral or bacterial, depending on the type of pathogen causing

the problem. Poor health or disease outbreak in the fish can be noticed by these common signs:

Loss of appetite,

Fish are lethargic (slow swimming/hanging in water),

Abnormal behaviour (flashing, jumping etc.),

Changes in appearance (colour changes, darker fish, excess mucus),

Marks or lesions on the body or fins (ulcers, fin rot etc.), and

Increased or occurring mortality (Salie, et al., 2008).

2.3. Physical requirements of Rainbow Trout

Throughout its life cycle, rainbow trout typically have varying feed, temperature and water

conditions that need to be considered to ensure the optimal growth and health of the fish. To this

extent, the following aspects are important considerations when producing rainbow trout, for both

producers and trout feed manufacturers.

2.3.1. Feeding

Rainbow trout, as a carnivorous predator, has a gastrointestinal tract adapted to digest animal and

vegetable protein to a small degree. In the wild or natural waters, rainbow trout feed on natural

diets such as aquatic and terrestrial insects, molluscs, crustaceans, fish eggs, crayfish, and other

small fish. These natural diets are rich in pigments and are responsible for the pigmentation on the

flesh of the fish. However, the colour pigmentation can be induced in cultured systems, through the

addition of synthetic pigments in the fish feed. In cultured systems, feed is one of the main

production costs for producers thus the feed quality and feeding strategy are of the utmost

importance. The feed provides the fish with the energy and nutrients required for good growth and

health. The necessary composition of the feed varies throughout the life cycle of the fish. As such,

the choice of a specific feed type depends on the farming conditions, type of operation as well as the

management

The profitability of an aquaculture operation is dependent on good feed management, optimal feed

utilisation, and minimal feed wastage. To ensure optimal feed management is practiced, some key

considerations include, but are not limited to the following:

Feed should be correctly stored in a cool, dry, and well-ventilated facility,

Correct grain size and feed type must be selected according to the growth phase of the fish,

Prescribed feeding tables from feed manufacturers should be followed, however they can be

slightly adapted should the need arise,

Correct feeding procedures must be implemented and maintained. This includes feeding

time of day, tempo of feeding, frequency of feeding and feed distribution patterns, and

Fish behaviour should be observed before, during and after feeding. Adjustments to the

feeding programme can be done according to behaviour (Salie, et al., 2008).

The main components in the feed are protein, fat, carbohydrates, vitamins, and minerals. The

quality, composition, and the quantitative ratio between the individual components determine the

fish’s performance and the feed utilisation. A deficiency in any of the essential nutrients can limit the

growth of the fish and could result in health-related issues that negatively affect the production of

trout. Feed pellets used for feeding rainbow trout are manufactured by extrusion. The mixture is

exposed to extreme pressure and high temperatures for a short time. This treacly mass is then


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pressed through the extruder nozzles to create expanded and porous pellets that are able to absorb

relatively high amounts of oil (> 30% oil content). The pelletised fish feed is primarily used for

rainbow trout production in South Africa.

An example of trout feed ingredients are provided in Table 2-1 below. These amounts are specific to

one brand of commercial trout feed and may differ between feed manufacturers.

Table 2-1: Commercial Trout Feed Overview

Nutrient Units

Trout Fry (No.0

powder and 1

crumble)

Starter 2 mm

Pellet (No.2 and

3 crumble &

mini pellet)

Trout Grower 3

mm Pellet

Trout Finisher

4,5- and 8-mm

Pellet

Digestible Energy MJ/kg 16 16 16 16

Crude Protein g/kg 500 480 450 407

Arginine g/kg 29,9 29,0 27,1 24,2

Histidine g/kg 11,5 10,5 9,8 9,3

Isoleucine g/kg 20,7 20,3 18,9 17,0

Lysine g/kg 31,6 30,0 28,1 24,7

Methionine g/kg 13,3 12,4 11,5 10,2

T.S.A.A. g/kg 19,4 19,5 18,3 16,6

Threonine g/kg 19,4 18,9 17,6 15,8

Tryptophan g/kg 4,8 4,8 4,5 4,0

Valine g/kg 24,8 24,4 22,9 20,6

Fat g/kg 140 140 140 140

Linoleic Acid g/kg 8 9 11 12

ADF g/kg 18 23 27 32

Carbohydrate g/kg 142 171 184 190

Fibre g/kg 22 23 24 24

NDF g/kg 35 44 56 68

Ash g/kg 89 70 67 56

Avl Phosphorus g/kg 10 8 7 6

Calcium g/kg 22 17 16 13

Chloride g/kg 7 5 4 4

Magnesium g/kg 1 1 1 1

Potassium g/kg 6 7 7 7

Sodium g/kg 5 3 3 3

Sulphur g/kg 4 4 4 4

Total Phosphorus g/kg 15 12 11 9

(Urban-Econ, 2018)

The diets listed above are efficiently converted by the fish, often at food conversion ratios of around

1:0 to 1.2. Table 2-2 below indicates potential feeding rates based on a feeding rate (as a

percentage) of the fish body weight.

Table 2-2: Trout Feeding Rates


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fish size (grams) 0 12 20 68 130 182 297 566 685 943 1230

feeding rate % of body weight

7 6,32 4,8 3,51 2,14 2,33 1,91 1,78 1,69 2,1 1,62

Adapted from (Davidson, et al., 2014)

Based on the assumptions above, the following average feeding rates were applied to the generic

economic model; however, they can be amended to accommodate specific temperature ranges or

grow-out conditions:

Month 1 – 4,8 % of fish mass/day,

Month 2 – 3,51% of fish mass/day,

Month 3 + - 2,12 % of fish mass/day, and

Month 5 + - 1,72 % of fish mass/day.

Although hand feeding is suitable for small fish-eating fine food, mechanical, power driven feeders

are frequently used to feed specific amounts at set intervals depending on fish size, temperature,

and season. Demand feeders can be used for fish greater than 12 cm (FAO, 2017). In terms of feed

management, an increase in the feeding rates within an aquaculture system can have several

impacts on both the trout, as well as the production system. The Figure 2-2 below highlights the

impact that an increase in feeding rates can have on a group of rainbow trout.

Figure 2-2: Impacts of feeding rate increase on Rainbow Trout


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Source: (Klontz, 1991)

An increase in feed (over feeding) or alternatively underfeeding will have a negative effect on

growth rates and feed conversion rates therefore, affecting the overall production of a trout

operation. As such, producers must ensure that they manage and implement feed programmes

cautiously in order to ensure maximum growth and production of fish.

2.3.2. Temperature

Temperature plays an important role in the production of rainbow trout. The optimal, acceptable,

and lethal ranges of water temperature also vary according to the development stages of the fish.

Generally, rainbow trout prefer cooler temperatures (12-18˚C) growing optimally at water

temperatures ranging between 8 and 20°C (Salie, et al., 2008; DAFF & WRC, 2010). Temperatures

higher than 21°C will cause the trout to stop feeding and will create other problems, such as

increased risk of diseases and oxygen problems (mainly caused by too many microscopic algae in the

water) (Salie, et al., 2008). Special care must be taken to prevent mortalities as well as the on-set of

algae taints. Algae taints are caused by an increase in blue-green algae numbers as a result of higher

temperatures and nutrient levels. The algae release chemical compounds that are absorbed by fish

which can give the fish an 'off flavour' due to poor water quality and cyanobacteria.

Temperature has a major impact on the production of rainbow trout, as can be seen in the following

environmental changes for a 100-gram trout when the water temperature is increased from 9˚C to

15˚C.

a. Fish Associated Changes

67.5% increase in metabolic rates (oxygen demand)

97.8% increase in daily length gain potential

66.7% increase in daily weight gain potential

98.6% increase in ammonia generation potential

33.1 % decrease in oxygen carrying capacity

b. Water Associated Changes

12.8% decrease in oxygen concentration

58.8% increase in environmental unionized ammonia

67.5% decrease in dissolved oxygen (Klontz, 1991).

2.3.3. Oxygen levels

As with any fish, rainbow trout are dependent on dissolved oxygen (DO) to survive. The amount of

DO is dependent on temperature and can be affected by water quality, amount of sediment in the

water, the amount of oxygen taken out of the system through respiration or decaying organisms and

the amount of oxygen that is replaced in a system by stream flow and aeration. The higher the water

temperature, the lower the amount of dissolved oxygen available in the water, thus highlighting the

importance of regulating water temperature and oxygen levels for rainbow trout. According to Salie,

et al, (2008) during the incubation of eggs and the first development stages of fry, the acceptable

range for dissolved oxygen content of rearing water ranges between 5 and 6 mg/l1. For older age

groups, the acceptable oxygen content of water is between 4–5 mg/l (Salie, et al., 2008;

1 Milligrams of oxygen per litre of water


16

Woynarovich, et al., 2011). It is important to know that the oxygen consumption and demand of the

trout increases considerably during and after feeding (for a period of up to six (6) hours).

According to Muradian (2016), DO levels and metabolic rates depend on the water temperature. As

temperature increases, the saturation level of DO in the water decreases, however, the DO

requirements for the trout increase, which can be detrimental to the fish. Figure 2-3 below

illustrates that for trout eggs, DO levels greater than 11 mg/L are optimal, with DO levels above 9

mg/L considered sub-optimal but no stressful for the embryos. Abnormalities may occur when DO

levels fall below 7 mg/L and sustained DO levels below 5mg/L can be lethal.

From the image it is evident that

juvenile and adult trout have a higher

tolerance for lower DO levels than

eggs and sac-fry. Optimal and sub-

optimal levels occur at a minimum of

4 mg/L in cooler temperatures

(below 15˚C) while in warmer

temperatures (above 15˚C) optimal

and sub-optimal levels increase to a

minimum of 6 mg/L. In cooler

temperatures, mortality will occur

when the DO level is less than 3

mg/L, while in warmer conditions, a

lethal DO level is anything below 5

mg/L, with the fish being stressed

when DO levels fall between 5 – 6

mg/L.

Based on the data presented above, it is evident that oxygen and water

temperature must be regularly monitored and controlled. It is recommended that optimal oxygen

saturation of 95% to 100% is maintained at the optimal temperature range of 12 -16˚C to ensure

dissolved oxygen levels are kept at optimal levels.

2.3.4. pH Requirement

The pH is used to determine the level of acidity or alkalinity within a given culture system. A neutral

or slightly alkaline pH (between 7 and 8) is best for rainbow trout, (National Bank for Agriculture and

Rural Development, 2016). As such, the tolerable minimum and maximum pH values for rainbow

trout are between 5 and 9, respectively (NABARD, n.d.; Salie, et al., 2008). It should however be

noted that the optimal and acceptable ranges of pH for developing embryos and fry differ slightly,

varying between 6.5 and 8 (Woynarovich, et al., 2011). According to Molony (2001), a pH exceeding

9 will increase mortality rates of the trout, specifically at the egg or fry development stages.

The most important factor that increases pH levels in open culture systems is the growth of small

algae. The excessive abundance of these algae can increase the pH level to levels higher than 9

during the daytime (especially in small open culture systems), thereby putting the fish under stress.

This is due to the removal of carbon dioxide during the photosynthesis process. Most water quality

Figure 2-3: Average Dissolved Oxygen requirements for salmonids

(Muradian, 2016)


17

problems are often caused by oxygen depletion, high ammonia levels or high pH levels, and are very

closely linked to the abundance of microscopic algae; the occurrence of which depends on the

amount of nutrients (nitrogen and phosphorus) in the water. The main source of these nutrients is

through the source water (inflow), along with sediments during heavy rainfall events (runoff), or

through fish feed during the production cycle.

2.3.5. Ammonia Requirement

Ammonia is an inorganic component of nitrogen in water. Unless there is a direct inflow of ammonia

or the water is in very anoxic conditions (i.e. not enough oxygen), most nitrogen in the water will be

present as nitrate, which is not harmful to fish. Ammonia occurs in a toxic and non-toxic form; the

toxic form is usually less than 10% of the overall ammonia amount but can increase with high pH and

temperature levels. Ammonia levels will mostly not create problems in open culture systems unless

the system is very shallow (5 meters or less).

2.3.6. Water and Turbidity Requirement

Clear, pollutant and chemical free water conditions are required for rainbow trout production. The

turbidity should not be more than 25 cm of Secchi disc transparency. When selecting a production

site, it is important to check the quality and quantity (volume) of available water, and the suitability

of the site for rainbow trout production. To ensure the replacement of used water within a given

culture system, a continuous supply of fresh, clean, and oxygen-rich water is essential.

Water supply is expressed by the flow rate, which is expressed either in litres per second (litre/s) or

litres per minute (litres/min). Usually, about 10 litres/second (600 litres/min) of water should be

available to produce one ton of rainbow trout (Woynarovich, et al., 2011). At low water

temperatures, the quantity of water supplied may be less, but at higher water temperatures it

should be more. The availability (quantity) of water may change considerably according to the

seasons, especially in the case of surface waters and springs. In dry seasons, the water supply may

drastically reduce, whilst heavy rains often cause floods and sudden increases in groundwater levels.


18

3. Potential Culture Systems for Rainbow Trout The potential production systems identified are considered in the generic economic model to

determine the financial feasibility of each system from an economic perspective. Each production

system is unique in terms of the infrastructure requirements and operational costs which can be

seen in the generic economic model. The potential culture systems that could be used to culture

rainbow trout in South Africa include the following:

3.1. Recirculating Aquaculture Systems2

The recirculating aquaculture system (RAS) offers a dual

objective of sustainable aquaculture (i.e. to produce food

while sustaining natural resources) as a result of the

minimum impact that the system has on its surrounding

environment as well as the broader eco-system. The RAS

is sometimes referred to as indoor or urban aquaculture,

reflecting its independency of surface water to produce fish. Water recirculating methods of

aquaculture production is ideally suitable for areas with scarce water resources.

The RAS can be used for rainbow trout production in a variety of ways, ranging from fry rearing up to

portion size fish as well as for larger trout. Some fry producers use recirculation technology to

improve the production efficiency. The benefits of using this technology include more regulated

rearing temperatures as well as securing high and constant water quality, which can improve growth

potential and health of the fish. The capital investment for farm construction is normally much

higher for RAS, compared to that of conventional aquaculture systems. As such, the system should

be designed and constructed in a way that it has lower running costs, therefore compensating for

the initial capital investment.

Recirculating systems are generally not suitable for rearing cold-water species such as rainbow trout,

as these species do not thrive in warm, recycled waters (Helfrich & Libey, 2013). The stocking density

of rainbow trout in a RAS depends more on the volume of water supply, temperature, and oxygen

concentration in water than on the actual size of the rearing tanks. Although fast current water is

required for rainbow trout production, very fast running water is also not desirable. This is because

fish might use energy more for swimming instead of growing if the current is too fast. On the other

hand, slow currents tend to result in the accumulation of waste products. Therefore, water flow in a

RAS must be higher in the summer months (when water temperature is higher and dissolved oxygen

lower) than in winter. Furthermore, it is recommended that water currents be sufficient to provide

at least one complete exchange of water every one or two hours (Joshi & Westlund Lofvall, 1996).

RAS have limited water exchange (typically up to 10% per day) and reuse the culture water.

Mechanical and biological water treatment is used to maintain water quality.

Advantages of using the recirculating aquaculture systems

I. RAS generally requires less area and water than conventional aquaculture systems,

II. It allows for higher stocking densities and provides greater control over the culture

environment,

2 It should be noted that even though rainbow trout grows well in RAS, fast-flow rates of water would be

required.


19

III. The system allows for intensive aquaculture production to be undertaken on a smaller

footprint,

IV. The system can be located in areas that do not have sufficient water resources for

conventional aquaculture systems,

V. RAS provides opportunities to reduce water usage, improve waste management and

increase nutrient recycling,

VI. RAS allows for better hygiene, disease management, biological pollution control and

reduction of the visual impact of the farm,

VII. The application of RAS technology enables the production of rainbow trout in close

proximity to markets, and

VIII. Rainbow trout cultured in RAS would unlikely be able to escape into natural waterways

therefore reducing its threat as an invasive species.

Disadvantages of using the recirculating aquaculture systems

I. The operation of these systems requires a high level of skills and expertise,

II. There are many different bio-filtration systems involved in operating the system. A bio-filter

must be suited to trout production and water conditions,

III. Large capital investments are required for building and starting up facilities,

IV. High operational expenses (electricity, labour, etc.) are a key disadvantage of a RAS,

V. Managing disease outbreaks may pose specific challenges in RAS, in which a healthy

microbial community contributes to water purification and water quality, and

VI. Minerals, drug residues, hazardous feed compounds and metabolites may accumulate in the

system and affect the health, quality, and safety of the fish.

3.2. Aquaponics Systems3

The aquaponics system combines the culture of fish

and plants in a closed recirculating system. Waste

nutrients in the aquaculture effluent are used to

produce plant crops (Rakocy, et al., 2004).These

systems require very little water and land for the

intensive production of trout, hydroponic vegetables,

and other crops such as culinary herbs, medicinal herbs

and cut flowers.

In the aquaponics system, the aquaculture effluent

typically supplies most of the required plant nutrients in adequate amounts, with only little

supplementation required, (Rakocy, et al., 2004). As the aquaculture effluent flows through the

hydroponic component of the recirculating system, fish waste metabolites are removed by

nitrification and direct uptake by the plants, thereby treating the water, which flows back to the fish-

rearing component for reuse. Continuous generation of nutrients from fish waste prevents nutrient

depletion while uptake of nutrients by the plants prevents nutrient accumulation, extends water

use, and reduces discharge to the environment. Culture water can also be used continuously for

several years under the aquaponics system.

3 Note that rainbow trout aquaculture under the aquaponic system has barely been tested in South Africa. Therefore, there

are no known literature on the species-system combination.


20

The technology associated with aquaponics is fairly complex. It requires the ability to simultaneously

manage the production and marketing of two different agricultural products. Aquaponic systems can

be highly successful, but they require careful management as well as special considerations. The

main factors to take into account when deciding where to place an aquaponics unit are: the stability

of the ground; access to sunlight and shading (most of the common plants for aquaponics grow well

in full sun conditions, however, extreme environmental conditions can stress plants and destroy

structures); exposure to wind and rain (strong and prevailing wind and rain fall can cause damages);

availability of utilities; and availability of a greenhouse or shading structure (FAO, 2014). The

essential components of an aquaponics system include the following:

I. The fish tank,

II. The mechanical and biological filter,

III. The plant growing units (media beds, nutrient film technique (NFT) pipes or deep-water

culture (DWC) canals),

IV. Water/air pumps,

V. Sump tank, and

VI. Water testing kits.

Advantages of using the aquaponics system

I. Ease of harvest,

II. Multiple income streams. Aquaponics utilise the nutrient rich water from aquaculture, that

would otherwise have been a waste product or needed to be filtered in a costly manner, to

produce other valuable plants,

III. Significant reduction in the usage of water. Aquaponics use a fraction of the water that

conventional aquaculture production systems use, because no water is wasted or consumed

by weeds,

IV. Significantly less land is required to grow the same crops as with traditional soil methods. In

aquaponics, plant spacing can be very intensive, allowing for the growing of more plants

within a given space,

V. Growth of plants is significantly faster than in traditional methods using soil, and

VI. Reduced damage from pests and diseases. In aquaponics, no pesticides or herbicides are

used, making the end-product healthier and safer.

Disadvantages of using the aquaponic system

I. As trout require pristine water and high dissolved oxygen levels to thrive, they are not as

adaptable to this culture system as other freshwater fish species,

II. Close monitoring of pH levels is required,

III. Another possible disadvantage is that limited plant choices would be available, because

recirculating cold water may harm the plants or stunt their growth,

IV. Aquaponics can be expensive to setup, as the system requires pumps, tubing, and

tanks/beds,

V. The setup requires technical knowledge of aquaponics systems,

VI. Water needs to be constantly monitored to make sure the water quality is suitable for the

fish, and

VII. Aquaponics requires electricity to maintain and recycle water within the system.


21

3.3. Flow Through Systems

Flow-through systems are the most commonly

used aquaculture production systems for the

culture of rainbow trout. Within a flow-through

system, grow-out tanks are continuously

refreshed with large quantities of new water,

usually gravity-fed from nearby streams or rivers.

The most essential features of flow-through

aquaculture systems are therefore the rapid

removal of wastes, the continuous replenishment

of the system with highly oxygenated water, and

the sloping topography.

Flow-through aquaculture systems require water exchange to maintain suitable water quality for fish

production and rely on water flow for the collection and removal of metabolic wastes. Water for

flow-through facilities is usually diverted from streams, springs, or artesian wells to flow through the

farm using gravity. Water pumped from wells or other sources is more expensive and are seldom

used. However, water diverted from springs or surface sources for flow-through aquaculture might

require an application for water rights as well as compliance with certain regulations. The discharge

of high-volume, dilute effluent from flow-through aquaculture facilities greatly limits the treatment

options available to producers from both technological and economic perspectives. Concrete

raceways are the most common in flow-through systems. Circular rearing tanks are also used in

flow-through systems, most commonly for brood stock production.

Advantages of using the flow through system

I. This aquaculture system can be operated with reduced levels of investment because the

transportation of oxygen and waste is done by the current of the water body,

II. The water current produced within a flow-through system is ideally suitable for rainbow

trout production, and

III. The fish grows in its natural habitat.

Disadvantages of using the flow through system

I. The success of operating a flow-through system depends on natural conditions and

environmental events. For example, a cold winter or a hot summer can negatively affect

production,

II. South Africa is a water scarce country, thus the opportunity for single use, flow-through

systems are limited,

III. The system can be easily polluted or contaminated. For example, water run-off from nearby

farms where pesticides have been used, can easily pollute the water bodies,

IV. The diluted waste from the system can also have an inadvertent influence on the

downstream habitat,

V. The system is high-tech driven, thus requires a lot of energy making it less cost effective.

VI. The discharge of effluent water may require a permit, with required periodic testing and

oversight.


22

3.4. Raceway Systems Raceways for fish culture are series of tanks (rearing

units) which are relatively shallow and continuously

supplied with high-water flow (usually along the

long axis), to sustain aquatic life. A typical raceway

culture system consists of a long and narrow canal

of concrete with a water inlet and outlet to maintain

a continuous flow of fresh water. With fresh water

continuously flowing through the canal, the water

quality is always high, and fish can be cultured at

high densities. Furthermore, in an ideal raceway system, the water flow is at an almost uniform

velocity across the tank cross section. However, friction losses at the tank-water and air-water

boundary layers cause water velocities to vary across the width and depth of the raceway. The

greatest water velocities are found at mid-depth, with slightly reduced velocities at the air-water

interface and greatly reduced velocities along the raceway bottom, towards the outlet.

Circular rearing units are more thoroughly mixed and provide relatively uniform environmental

conditions throughout the tank. The basic structure of raceway systems should be designed in a way

that none of the parts of culture waters are stagnant in the tanks, otherwise debris or faeces would

be accumulated in locations, thereby deteriorating water quality, or causing outbreaks of disease in

the system. As such, the primary factor to be considered in raceway construction is the available

water sources. When the available water sources are sufficient to support the entire system, the

raceways can be located across the water current. However, in cases where the water sources are a

limiting factor to the system operation, the raceways should be located along the water current. In

systems used for rainbow trout production, individual raceways are typically 2-3 metres wide, 12-30

metres long and 1-1.2 metres deep, (FAO, 2017). Raceways provide well-oxygenated water, an

important requirement for the production of rainbow trout. The water quality of the system can be

improved by increasing flow rates. However, the stock might be vulnerable to external water quality,

as the ambient water temperatures significantly influence growth rates.

The number of raceways in a series varies with the pH level, with the slope of the land also playing

an important role with regards to aeration (a 40 cm drop between each raceway is recommended).

To maintain good hygiene, water quality and control disease problems, and the parallel design

raceways is the most suitable, as any contamination flows through only a small part of the system.

Ground water can be used where pumping is not required, and aeration may be necessary in some

cases. Supersaturated well water with dissolved nitrogen can cause gas bubbles to form in the blood

of fish, preventing circulation, a condition known as gas-bubble disease. Alternatively, river water

can be used; however, temperature and flow fluctuations may alter production capacity.

Advantages of using the raceway system

I. Stocking densities for raceways are usually higher than for other culture systems. Optimal

stocking densities and quality feed can impact on growth and production volumes,

II. The labour costs associated with cleaning, grading, moving, and harvesting is significantly

lower in raceway systems,


23

III. Raceways offer a much greater ability to observe the fish. This can make feeding more

efficient,

IV. Disease problems are easier to detect and at earlier stages in raceway systems.

Furthermore, disease treatments in raceways are easier to apply and require fewer

chemicals than a similar number of fish in a pond (due to the higher density in the raceway),

V. Raceways also allow closer monitoring of growth and mortality, and therefore allow for

better inventory estimates compared to ponds, and

VI. Management inputs such as size grading are much more practicable in raceways compared

to other culture systems such as ponds; harvesting is also easier in this system.

Disadvantages of using the raceway system

I. The required hydrological conditions for the construction of raceways limit the number of

sites where a farm could be constructed,

II. The high stocking density could create stress and increase risk of disease outbreak,

III. Locating and securing a proper water supply can be challenging in South Africa,

IV. Commercial viability often requires that the water gravity flows through a series of raceways

before it is released. This adds a requirement for an elevation of the water source and

suitable topography for the gravity flow between raceways,

V. The release of large volumes of effluent with low retention times is another major limitation

of raceways,

VI. Raceway aquaculture is generally high-tech and high risk, as problems can develop rapidly if

the system fails, and

VII. The system requires high energy costs, specifically for pumping and maintaining water

conditions.

3.5. Pond Culture Systems Ponds are large but shallow earth structures, which are typically constructed for rearing fish. Earth

ponds are the traditional structures used for rainbow trout production, usage of which have become

less common due to the intensification of trout farming in recent years. The pond size used for

rainbow trout production varies depending on several factors such as the availability of water,

topography, soil type, production goals, etc. Most earth ponds on rainbow trout farms are lined with

membrane or paved with stone or concrete. The required quantities of water for 1 m3 of a

rectangular earth pond may vary between 0.7 and 1.4 litres/minutes where the exchange rate of

water is about one to two times per day (Woynarovich, et al., 2011). The usual densities for the

different age groups of rainbow trout in earth ponds are presented in Table below. With aeration of

the water, the quantities of fish produced (as indicated in the table below) can cautiously be

increased.

Table 3-1: Key Semi-Intensive Production Figures of Rainbow Trout in Earth Ponds

Quantity of fish

and water

Fry Fingerling Growing Fish Table Fish

2 g/fish 5 g/fish 25 g/fish 100 g/fish 250 g/fish 500 g/fish

From To From To From To

Weight of fish

(kg fish/m3)

Not recommended 3 6 3 8 5 8 5 8

Quantity of fish

(fish/m3)

Not recommended 120 240 30 80 20 32 10 16

Source: (Woynarovich, et al., 2011)


24

Earthen pond systems can be more challenge to maintain than tank systems, specifically when it

comes to weighing and grading of the trout, which takes place on a regular basis. The carrying

capacity of an earthen pond is a function of the ratio of surface area to water volume, inflow rate

and oxygen demand of the sediments, and it is best determined by measuring the dissolved oxygen

concentration of the pond and outflow waters and by maintaining good production records.

Advantages of using Pond systems for Rainbow Trout farming

I. Construction cost is relatively low (unless there are flood defence problems) when

compared to other culture systems,

II. Pond culture systems are not labour intensive as other production systems,

III. Little skill is required to manage the ponds, and

IV. Lower fish densities associated with earthen ponds may result in trout with less fin erosion

with a more colourful appearance which are in demand for recreational fishing and stocking

purposes.

Disadvantages of using Pond systems for Rainbow Trout farming

I. Rainbow trout production in ponds present a difficult challenge for waste (faecal and feed)

management,

II. The system is reliant on a well-managed feeding programme (typically pelletised feed),

III. Fish are stocked at a lower stocking density, which may reduce yield and profitability,

IV. Rainbow trout farming requires a constant supply of fresh, circulating, and high-quality flow

of water, which is not necessarily offered by ponds,

V. There is a higher risk of build-up of solid waste (leading to growth of bacteria and fungus) if

waste materials are not disposed regularly,

VI. Rainbow trout cultured in ponds are more difficult to manage and harvest, and

VII. Rainbow trout cultured in pond systems can be more prone to stock theft.

3.6. Cage Culture

Cage culture for rainbow trout is an intensive

production system, where fish are stocked and fed in a

confined area. Unlike other production methods, the

water is continually exchanged in and out the cage by

natural currents or tides within the body of water. In

addition to this, the water volume, along with the

associated organisms occurring naturally in the body of

water act as a “natural bio-filter” system (Nerrie, 2013). According to DAFF (2015), fresh water cage

culture is a preferred farming method for trout internationally, as it is highly cost-effective when

optimal conditions are in place. However, in South Africa, cage culture for rainbow trout remains

underutilised and underdeveloped despite the potential it offers (DAFF, 2015). In South Africa, pilot

projects are currently in the process of being implemented for both freshwater and marine cage

culture to produce rainbow trout, however, access to published data is still somewhat limited.

Currently, the Royal Highlands Trout project in Lesotho produce rainbow trout using net pen

technology within the Katse Dam. The project experiences good growth rates and produces high-

quality fish due to the ideal production and environmental conditions. This type of cage culture has

been successful, and well implemented, and although the cages do discharge waste into the dam,

the Katse Dam, which is man-made, has a significant flushing factor which assists with moving water


25

through the dam to maintain the water quality. While the risk of escape and spread of diseases, is

posed a factor when using cage culture, these risks are mitigated through careful farm management

and stringent testing and monitoring by the Lesotho government. The farms are audited twice a year

to ensure the environmental impact is kept as low as possible, and additional regulatory frameworks

were implemented to efficiently manage the production of trout in the Katse Dam (WWF SASSI,

2018). These lessons from Lesotho can be implemented in South Africa with the purpose of

improving the development and usage of cage culture in the country.

Since rainbow trout require cool, clean water conditions, site selection for cage culture is essential.

According to Salie, et al. (2008), site selection plays a critical role in the success of any cage culture

operation. The following site requirements should be considered when selecting a site for cage

culture:

Carrying capacity of the dam/water body to be used,

Optimal water quality and conditions in the water body,

No upstream users (i.e. factories, mining areas or other potential pollution risk areas,

Proximity to hatchery (if obtaining fingerlings from hatchery),

Security to limit theft and/or vandalism,

Good access to the water body being selected for harvesting, and input provision,

Minimum depth of the dam should be five (5) meters to ensure the cages are free floating,

and prevent the build-up of waste underneath cages over the long-term,

Sufficient space from the base of the net to the bottom of the dam,

Wind exposure can increase water circulation through the cages, and

Stable water levels are ideal to ensure cages won’t be affected by fluctuating water levels.

According to studies done in the United States of America, the stocking density for rainbow trout in

cage culture systems should be between 10-13 kilograms/m³ as the low stocking densities result in

improved growth, lower mortalities, and better disease resistance (Weeks & Smith, 2014). In South

Africa, stocking densities can range from 20 to 50 kilograms/m³, thus a stocking density of 25

kilograms/m³ is used in the generic economic model.

Advantages of using Cage Culture for Rainbow Trout Farming

I. It is a well-known, commonly used production system,

II. Low technology and operational costs,

III. Cages can be made from various materials (net cages, constructed cages etc.),

IV. Can be done on a small, medium, or large scale,

V. High quality, “naturally” grown fish are produced,

VI. Production management is fairly simple, as it mainly consists of feeding and harvesting, and

VII. Cage culture has low labour requirements.

Disadvantages of Using Cage Culture for Rainbow Trout Farming

I. Requires a well-managed feeding programme, and is reliant on artificial feed sources

(usually floating pellets),

II. Cage maintenance is essential and requires careful management and monitoring,

III. Large-scale production can have negative impacts on water conditions and quality,

IV. Vandalism or theft of fish and infrastructure,

V. Control over natural predation and contact with wild fish species is limited,

VI. Pollution of the water body can result in high mortality rates, and


26

VII. Disease outbreaks from natural fish populations can affect the trout, and similarly trout

disease outbreak can affect natural fish populations.

3.7. Production System Summary

Having presented the advantages and disadvantages of the various culture systems for rainbow

trout production in South Africa, Table 3-1 below provides a summary for each production system

based on the literature discussed. The table provides an indication of whether or not a system is

viable from a production perspective. Although a system may be suitable for production, the generic

economic model was developed to assist with determining the financial viability of the potential

production systems; these results are discussed in the Financial Analysis Chapter.

Table 3-1: Trout Production Systems Summary

System System Overview System Status

Pond Culture

I. System is not entirely suitable for commercial production

II. Minimum technological requirements

III. Growth may not be at optimum level since trout thrive in

cool, clean flowing water

IV. Reliant on artificial feed sources, therefore high operating

costs

V. Currently being practiced in South Africa, although viability

is yet to be determined

Viable

Cages I. Currently being piloted in South Africa (Operation Phakisa

Projects) Viable

Aquaponic

I. This system has been barely tested in South Africa

II. No known literature on a local or international level

III. Difficult to make accurate technical assumptions for

economic model

Untested

RAS

I. The system has been tested in South Africa

II. Requires high operating costs (formulated feed,

temperature control, etc.)

III. Depends solely on artificial feed

IV. Rainbow trout cultured in RAS would be unlikely to escape

to natural waterways

V. Rainbow trout grow well in RAS, but fast-flow rates of

water would be required.

VI. Provide opportunities to reduce water usage

VII. May not be suitable for commercial grow-out operations

due to high operating cost

Viable

Flow-through

systems &

Raceways

I. Production under this system has been tested in South

Africa

II. The water current produced by the system is ideally

suitable for the production of trout

III. The fish grow in their natural habitat

IV. System is prone to drought especially when using a surface

water body

V. Surface water quality may be impacted by other activities in

the watershed area.

VI. System depends on natural conditions and environmental

events

Viable


27

System System Overview System Status

VII. System is suitable for commercial grow-out operations

Ranching N/A N/A

From the above table, the potential production systems that can be utilised in South Africa for the

production of rainbow trout are Flow Through Systems, Cage Culture, Pond Culture, Raceways and

Recirculating Aquaculture Systems (RAS). While aquaponics was discussed above, this system

remains untested in South Africa, however the production system is not considered to provide

optimal conditions for trout production.


28

4. Geographical distribution of Rainbow Trout in South Africa The most recent data available shows that the trout sub-sector accounts for roughly 82.43% of South

Africa ‘s total freshwater aquaculture production (DAFF, 2016). Trout farms are mainly located in the

Western Cape, Mpumalanga, Eastern Cape, and Kwa-Zulu Natal. Of these provinces, the Western

Cape accounts for the largest share of trout produced in South Africa. The second highest volume is

produced in Kwa-Zulu Natal, followed by the Eastern Cape Mpumalanga province, respectively.

According to the DEA (2014), the eastern escarpment stretching from the south-western Cape to

Northern Kwa-Zulu Natal is the most suited habitat for salmonids (DEA, 2014).

4.1. Suitability Assessment

Trout production in South Africa is limited by the high temperatures that are widespread throughout

the provinces, as well as the lack of suitable water for culturing. Trout requires cooler temperatures

between 12°C and 18°C which therefore, restrict the sites to small streams in higher altitude

catchment areas. Trout production is considered to be seasonal in South Africa, and typically occurs

during the winter months due to the seasonal variations that occur. As a result, much of the national

trout production is concentrated around:

I. The foot of the Drakensberg and Midlands areas of KwaZulu-Natal,

II. The higher regions of Mpumalanga,

III. The Amatola region of the Eastern Cape,

IV. The Drakensberg highlands, and

V. Upland regions of the Western Cape Province, as illustrated in Figure 4-1 below.

Figure 4-1: Suitable areas for trout in South Africa4

(Urban-Econ, 2018)

4 Based on the BRBA assessment for Rainbow Trout. Based on conductivity, altitude, the mean annual rainfall, the mean

annual air temperature, and the mean winter air temperature


29

4.2. Key Location and Site Requirements

There are many factors that can influence the success of a rainbow trout aquaculture enterprise. Site

selection is one of the most important factors. Once a good site is chosen, all efforts can go into

good production management and crises can be minimised significantly. Important factors that have

to be considered when selecting a specific site for culturing rainbow trout include:

I. Proximity to the hatchery to ensure that the juvenile fish (fingerlings) can be delivered to the

production unit in perfect health,

II. Security, to limit theft and vandalism,

III. Good access to the water body, to facilitate easy transfer of the juveniles to the cages, safe

transport of feed and equipment to the production unit, and a safe and fast harvest to

ensure the production of good quality fish,

IV. Where processing is considered, the processing facility should be near enough to maintain a

cold chain and allow the delivery of a fresh product,

V. Climate (water and environmental temperature),

VI. Slope and topography (flood-prone areas should be avoided),

VII. Soil type (applicable to pond culture systems), and

VIII. Proximity to market.

Along with the above-mentioned considerations, the most important issue is the quality of the water

source chosen for production. The quality of the water influences the fish’s growth (fish generally

grow faster in good quality water), the occurrence of diseases, and the taste and colour of the fish.

Factors that have an impact on the quality of the water quality include:

I. Temperature,

II. Oxygen levels,

III. Ammonia levels, and

IV. pH levels.

4.3. Key requirements for Profitability

The list below illustrates the optimal operational requirements, at a high-level, for the production of

rainbow trout to be profitable:

I. Hatchery (mainly because rainbow trout do not spawn naturally in culture systems),

II. Fast growing strain,

III. Suitable freshwater temperature,

IV. Suitable highland deep-water dam or lake,

V. Suitable feed supply,

VI. Appropriate water quality and quantity,

VII. Suitable site with correct soil type, slope, and topography,

VIII. Good farm management practices,

IX. Disease control and management,

X. Appropriate production technology,

XI. Economies of scale and consistent volume of production, and

XII. Access to market.


30

5. Rainbow Trout Market assessment The section outlines the production and consumption trends of trout at a global and local level and

elaborates on the marketing channels, as well as discusses the industry’ main market requirements.

5.1. Production and Consumption

The following section considers the global, regional, and local supply, demand and consumption

trends and patterns for rainbow trout.

5.1.1. Global, Regional and Local Supply Analysis

The rainbow trout industry is dynamic and fast-growing. Globally, the industry has experienced a

rapid growth of approximately 400% from the 1980’s to 2015. Production levels have doubled from

about 150 000 tonnes in 1980 to roughly 300 000 tonnes in 1990. Further development of the

industry saw production grow to approximately 500 000 tonnes in 2000 and a record high of 760 000

tonnes in 2015, as illustrated in Figure 5-1 (FAO, 2016a).

Source: FAO, 2016a

Figure 5-2 below illustrates the top 20 producers of rainbow trout in the world.

Figure 5-2: Top 20 global producers of Rainbow Trout (2015)

Source: FAO, 2016a

As illustrated in Figure 5-2, Iran currently dominates the rainbow trout industry. In 2015 the country

recorded production volumes of 140 632 tonnes, which was approximately 20% of the global

production, followed by Turkey, Chile and Norway producing, 106 598, 94 717 and 72 921 tonnes

(15%, 13% and 10%) respectively. Furthermore, from Figure 5-2 it is also clear that the trout industry

- 20 000 40 000 60 000 80 000

100 000 120 000 140 000 160 000

ton

nes

-

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

1950 1960 1970 1980 1990 2000 2015

ton

nes

Figure 5-1: Global Trout Production (1950 - 2015)


31

is not well developed in East and South-East Asia, and that production in that region is mostly found

in China and Japan. The core production regions of the global industry are: Europe, South America,

and the Middle Asia. The low growth of the Chile trout industry can be attributed to the salmonid

rickettsial septicaemia (SRS) disease outbreak which severely affected production. The disease

outbreak can be linked to ineffective farm management practices, lack of overall strategic planning,

and above all an unsuitable legislative and regulatory environment.

A closer historical look at the dynamics of the industry in terms of the top five global producers

reveals that Chile was the dominant leading country until 2013. Because of the dramatic drop of

production in Chile during 2013 along with the continued decline due to disease outbreaks, Iran has

positioned itself as a leading producer of rainbow trout as seen in Figure 5-3 below.

Figure 5-3: Top Five global producers of Rainbow Trout 2000- 2015

Source: FAO, 2016a

Furthermore, Table 5-1 below. Illustrates the significant growth that Iran and Peru’s trout industries

have experienced since 2000; Iran’s industry has grown with roughly 1463% and Peru’s industry with

approximately 2024%. These growth trends can be attributed to well strategized governance, strict

import and sanitary requirements and the utilization of available natural resources (Singh, 2016).

Table 5-1: Industry performances of selected key producers (2000-2015)

2000 2015 Shift (tonnes) Shift (%)

Iran 9 000 140 632 131 632 1463%

Turkey 44 533 106 598 62 065 139%

Chile 79 566 94 717 15 151 19%

Norway 48 778 72 921 24 143 49%

Peru 1 928 40 947 39 019 2024% Source: FAO, 2016a

Within the context of the African continent, trout production is dominated by South Africa, followed

by Lesotho, Kenya, Malawi, and Zimbabwe. Tanzania and Ethiopia have also reported to farm trout

but on a significantly smaller scale compared to other African countries. Trout production in Lesotho

is relatively new, starting in 2006 with a single large-scale commercial operation named Royale

Highlands Trout, which is a farm that operates in both Lesotho and Franschhoek in the Western

-

50 000

100 000

150 000

200 000

250 000

300 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

ton

nes

Iran Turkey Chile Norway Peru


32

Cape. Production in Lesotho has rapidly increased over the past nine years and was estimated to

reach 1 000 tonnes during 2015, as illustrated in Figure 5-4 below (FAO, 2015).

Figure 5-4: Production of trout in Africa (2000-2015)

Source: FAO, 2016a

Currently, Royale Highlands Trout is one of two farms located in Lesotho, and is considered to be the

largest trout farm on the continent, with production of just over 1 500 tonnes in the Katse Dam

reported for 2016 (The African Journal, 2016). In South Africa, the trout industry is the biggest of the

freshwater aquaculture industries. It contributed approximately 82.43% to South Africa‘s total

freshwater fish production in 2015, recording a total production of 1497.30 tonnes.

Trout farms are predominantly located in the Western Cape (which accounts for approximately 50%

of total production), Mpumalanga, the Eastern Cape, and KwaZulu Natal. The South African trout

industry production includes both trout fish (sold as whole fresh or frozen and processed smoked

filet) and trout eggs for the industry, known also as “fertilised trout ova” (Weaver, 2013). Despite the

trout industry being well established in South Africa, the production figures indicate no substantial

growth since 20135 (DAFF, 2016). Possible explanations for the stagnation include inability to expand

due to limited environmental conditions and suitable locations for additional trout farms to be

developed (Personal Communication, Pete Britz and Peter Stubbs).

The South African trout industry is also characterised by a well-established processing sector,

operated by key players in the industry. Large scale processing plants (that have a total capacity of

approximately 5 000 tonnes/year) that receive fish from local farmers as well as imported fish from

Norway, are offering the local market value-added products such as smoked trout (Personal

Communication, Gerrie van der Merwe and Pete Stubbs). South Africa has an established market

supply chain with central distribution centres for most retail chains (e.g. Pick n Pay, Woolworths, and

Checkers). Other distribution channels require more logistical efforts regarding direct sales to

individual stores such as Food Lovers Market and the SPAR group (Personal Communication, Gerrie

van der Merwe and Peter Stubbs).

5 These figures were provided by the association and could be underestimated.


33

5.1.2. Global, Regional and Local Demand Analysis

Global consumption of trout is growing fast, which has led to the rapid development of global supply

(as discussed in the previous section) in order to meet the growing demand. The biggest markets for

trout imports are shown in Figure 5-5 below. Japan and Russia account for approximately 28% and

23% of the global importation, respectively.

Figure 5-5: Major Trout Importers (2013)

Source: FAO, 2016a

Despite experiencing a decline in imports in recent years, the Japanese market, which is driven by

the highest consumption of fish per capita, remains the top importer of trout (FAO, 2016). The

Russian market is primarily a seafood market, with an average annual fish consumption of 22 kg per

capita and total imports of 885 000 tonnes of seafood and fish products worth $2.9 billion during

2014 (World Food Moscow, 2016). As the second biggest global importer of trout with nearly 58 000

tonnes imported, Russia’s demand for trout is continually growing as a result of increased

consumption of trout, mostly due to changes in consumer preference. Germany is considered to be

the biggest trout importer in the EU market with nearly 30 000 tonnes of trout imported during 2013

(FAO, 2016). During 2015, Germany was the largest market for smoked trout with a value of EUR

33.8 million, while the market for fresh trout was spread between Finland, France, Poland, and

Germany (EUMOFA, 2016). There is a global demand for producers to supply high quality salmon

and trout eggs. For salmon the main markets are Scotland, Norway, Chile, and Canada, whereas for

trout there has been a rapid increase in demand from countries such as Iran, Chile, Turkey and

Norway in recent years (Hambrey, 2016). In addition to this, the demand for trout caviar for human

consumption is growing at a rapid in Russian (Eurofish, 2005).

As illustrate in in Table 5-2 below, the size of the South African market is approximately 2 233.95

tonnes a year. South Africa has an established market for trout, which is mostly (about 55%) situated

in Gauteng; the rest of the market is mainly spread across urban areas in South Africa. Seasonal

consumption is found along the coastline during holiday periods (Personal Communication, Peter

Stubbs).

Table 5-2: Domestic consumption of trout (2015)

Domestic consumption 2,233.95 tonnes

Import of trout 756.65 tonnes

Export of trout 19.7 tonnes

Local production of trout 1497 tonnes

Source: DAFF 2017

01000020000300004000050000600007000080000

ton

nes


34

The local market is dominated by retail outlets such as Pick ‘n Pay, Woolworths and Checkers who

act as off takers for fresh whole fish as well as for added value products such as smoked or fillet

trout. Additional markets could include direct marketing to producer owned stores and linkages to

the well-established tourism businesses (e.g. wine-routes, coastal recreational shops, etc.). In

summary, the South African demand-supply balance indicates that local demand currently exceeds

local production levels. As a result, the industry relies on imports in order to meet local demand. It is

however expected that this trend will change in the next year or so as developments in local

production will enable the industry to meet local requirements (Personal communication, Peter

Stubbs).

5.2. Marketing channels

The marketing channels section provides an overview of the key global, regional and local trade

channels for trout, as well as specific details such as changes in trade over time and the value of the

trout trade. The generic economic model takes both local and international markets into

consideration and offers flexible pricing options which are dependent on the size of the fish being

produced and the target market identified. The pricing of the fish and the target market impact on

the financial results obtained when using the generic economic model, as these two factors play a

key role in determining the profitability of an operation. Therefore, understanding the markets,

pricing and preferred products for the market is essential.

5.2.1. Global Rainbow Trout Trade

The global trade channels can be defined around several key routes including Iran’s trade with

Russia and the Middle East, Turkey exporting into Europe, Norway exporting to China, trade

between Japan and the USA, Europe’s intra-trade (such as Denmark, France, Italy and Poland), and

Chile and Peru exporting to the USA and the EU markets as illustrated in Figure 5-6 below. Figure 5-6: Global Key trout producer’s countries and their main trade routes

Source: (FAO, 2016a; Personal Communciation, 2017)

The Russian political ban on EU producers, which was the response to the EU’s ban on Russia,

resulted in a major shift of trade between 2013-2016 (Lepke, 2017). Major changes included the

replacement of the dominant Norwegian supply (33% of Russian import) with China, Faroe Island,

and Chilean products as seen in Figure 5-7 below.


35

Figure 5-7: Russian import structure by country between 2013 and 2016

Source: Lepke, 2017

Along with good price levels, the Japanese and the USA markets have significantly increased their

imports of trout from Norway which has led to a strong recovery in export revenues for the industry

(FAO, 2016b). The USA exports of fresh and frozen rainbow trout are small (set at 807 tonnes during

2015), mostly as local production is sold and consumed domestically. Imports of trout into the USA

are much more significant and have been increasing steadily, reaching a value of over USD 104

million in 2015, surpassing the value of domestic production (USD 96.4 million). Most of these

imports are from Chile and Norway, accounting for USD 65.2 and 19.4 million, respectively (Isaac,

2017).

The EU is almost self-sufficient in the production of trout, though its sufficiency decreased from 95%

in 2010 to 90% in 2013. Trade between EU countries concentrates on fresh products. Turkey’s

position as a key producer of trout is strengthened by its proximity to the EU market and its ability to

supply primarily frozen trout (EUMOFA, 2014). Germany’s total value for trade in 2016 was over EUR

70 million, whilst Poland’s was approximately EUR 30 million and France’s almost EUR 20 million

(EUMOFA, 2016). Trout from England, Wales and Northern Ireland faces intense global competition.

High quality freshwater trout from Denmark and Norway feed into higher value UK and European

markets. In addition to this, the markets experience increasing competition from marine cage grown

trout and salmon as well as mass pond production in countries such as Iran, Chile, and Turkey

(Hambrey, 2016). Denmark and Sweden account for 45% of the total export value in the EU, and

they experienced significant increases in their export value (14% and 54%, respectively) during early

2015 (EUMOFA, 2016).

5.2.2. Regional and Local Trade of trout


36

Figure 5-8: South Africa and Lesotho import and export trade routes (2015)

During 2015, the South African trout trade

was made up of a total of 756.65 tonnes

of imported trout products, which was

about 33% of the total local market

demand in South Africa. In contrast, South

Africa’s export market is underdeveloped

with roughly 19.7 tonnes of trout and

trout products exported. Exports from

South Africa is currently very limited,

mostly due to the lack of the NRCS testing

and therefore, the inability to issue export

permits and codes to any of the existing

farms (Personal Communication, Peter

Stubbs).

Import and export trade channels are

continental (such as with Lesotho,

Botswana, and Nigeria) and internationally

including Norway, Chile, and China as seen in in the figure above.

Lesotho’s trade is mostly focused on exports to Japan and to a lesser extent, exports to South Africa

(DAFF, 2016).

During 2015 South Africa imported an estimated value of R45.4 million in total. Norway was the

leading exporter to South Africa with 65% (mostly due to the free trade agreement with South

Africa) (Personal Communication; Peter Stubbs), followed by Lesotho with 19%, Chile with 14% and

Denmark with less than 1% (DAFF, 2016a). On the other hand, South African exports included both

fish products and trout eggs. The eggs where exported to countries such as Denmark, Peru, Czech

Republic, Georgia, Greece, Kenya, Russian, Slovenia and Uzbekistan (DAFF, 2016a). Trout eggs from

South Africa have a seasonal advantage as South Africa can supply eggs to Europe (and the northern

hemisphere) during our winter months/their summer months.

5.3. Rainbow Trout Market requirements

5.3.1. Global Markets

Trout is typically considered as a high-value species, with consumers finding it more attractive than

the common white fish products. The freshwater fish market is large because the flesh is soft and

delicate, white to pink in colour, with a mild flavour. There are many outputs from rainbow trout

culture, which include food products sold in supermarkets and other retail outlets, live fish for the

restocking of rivers and lakes for recreational game fisheries (especially in the USA, Europe, and

Japan), and products from hatcheries such as fertilized eggs and juveniles are sold to other farms

(FAO, 2017). Products for human consumption come in the form of fresh, smoked, whole, filleted,

canned and frozen trout that can be eaten steamed, fried, broiled, boiled micro-waved and baked.

Trout processing wastes can be used for fish meal production or as fertiliser (FAO, 2017).

The optimal harvest size varies globally: in the USA, trout are harvested at 450-600 grams, in Europe

at 1-2 kg; and in Canada, Chile, Norway, Sweden and Finland at 3-5 kg (from marine cages). Such

Adapted from DAFF, 2016


37

variations support the various value-chain and market requirements, whereby large fish are often

used for value-added products (e.g. fillets). Preferences in meat colour also vary globally with USA

preferring white meat, whilst Europe and other parts of the world prefer the pink meat generated

from pigment supplements in the fish food. Strict guidelines are in place for the regulation of

rainbow trout produced for consumption with respect to food safety. Hygiene and safe

transportation of fresh fish are critical (FAO, 2017). In the EU market, most trout are sold fresh (63%

in value and 74% in volume) or smoked (22% in value and 9% in volume); the remaining trout are

traded as frozen products between EU member states (EUMOFA, 2016). The average price in the EU

of both fresh and smoked trout was recorded at 4.17 EUR/kg and 11.52 EUR/kg, respectively during

early 2016 (EUMOFA, 2016). The average price of trout in Germany between 1998-2003 ranged from

USD 4.13/kg for fresh trout, to USD 4.17/kg for frozen trout (Nielsen, 2009).

5.3.2. The South Africa Trout Market

The primary trout products sold in the South African market are:

“Kilo Trout” (1.2 to 1.5 kg whole fish) and “Plate Size Trout” (300 to 400-gram whole fish).

Typically, these products are sold fresh, but are also often found as “Previously Frozen”

product (see image below). Prices are around R200/kg

Value-added products, such as smoked filleted trout packed in 200 grams, priced at R120 a

pack (i.e. R 600/kg) (see image below)

Live trout for recreational angling, which is an established industry in the country

Trout egg caviar and fertilised eyed ova for production aimed at the export market

The Western Cape primarily produces large trout and value-added products such as smoked trout

for the food service and retail industry with, whereas Mpumalanga trout producers tend to focus on

plate (300-400 grams) and live production (Weaver, 2013).

5.4. Barriers to entry and limitations of the market

Barriers to entry and market limitations are an important consideration when looking at the

feasibility of a product. Various aspects such as market saturation, trade barriers, market

competition and potential market restrictions are important for this market assessment. As the

South African trout industry is well-established, no market immaturity was noted.

5.4.1. Seasonality of Trout Production

As trout production in South Africa is primarily limited to the winter months in the Western Cape,

and summer months in Mpumalanga the production and supply of trout to the markets is seasonal.

Production and supply of trout peaks towards the end of winter and into early summer which results

in high supply volumes reaching the markets.

5.4.2. Market Saturation

At a global scale, the EU trout markets are largely saturated, as a result of local European production

and its status as “self-sustained” industry, as a result, South Africa should focus on targeting export

markets such as Japan and Russia. However, issues surrounding the NRCS testing and export permits

will need to be resolved first due to the fact that the freshwater sector is not currently regulated by

the DAFF, only the provincial environmental affairs departments. No indication of market saturation

exists yet in the local South African market, but the future expansion of the market may result in

local supply (including from Lesotho) exceeding local demand (Personal Communication Peter

Stubbs).


38

5.4.3. Competition

Globally, the trout industry does experience competition in various locations, such as within the EU

market, from the low production costing countries such as Chile and Turkey. Within the local

context, the biggest threat to the local industry is the import of bulk, cheap salmon from Norway,

Chile, Argentina, Scotland, and the UK. Salmon is often viewed by local consumers as a preferred

substitute product for trout and as a result, the local trout price has always shadowed that of

salmon. However, in recent years South African consumers shown some “trout loyal” behaviour

which has resulted in the price and demand for trout becoming steadier (Weaver, 2013).

5.4.4. Logistics Challenges

The existence of poor infrastructure (roads, cold chain systems for food preservation etc.) imposes

serious limitations on market distribution in many African markets. Cold chain infrastructure

including storage facilities and refrigerated track and trains, are lacking in the Sub-Sahara African

markets. This creates a critical bottle-neck in the transportation of fresh goods from the farms to

other potential African markets.

5.4.5. Trade Restrictions

With the exception of trout eggs, which is mainly exported, the local trout industry focuses on

supplying the local market. This is mostly likely as a result of the quality restrictions imposed by

international markets such as Japan, the EU, and the USA. A national monitoring system to certify

farmed products is currently lacking in South Africa. It should be noted that DAFF currently has a

finfish monitoring programme which aligns with international standards and has been implemented

for the marine finfish industry, however, as DAFF does not regulate the freshwater aquaculture

industry this programme does not include rainbow trout. The Aquaculture Development Bill

(currently in Parliament) aims to address this issue.

The lack of protection from imported goods has resulted in an influx of products from Chile

(although imports carry 25% import duty) and Norway, which has had an impact on local production

levels. Specifically, the free trade agreement that exists with Norway allows the importation of

products at cost-effective prices. Despite this, local production is still considered to be cheaper than

trout imports, which assists local farmers to maintain their position in the industry and offer lower

pricing. As previously mentioned, exportation is an issue, mostly due to the lack of the NRCS testing,

and the lack of aquaculture legislation covering the trout industry, thus the local industry’s inability

to issue export permits and codes to any existing trout farms is a challenge for producers (Personal

Communication, Peter Stubbs).


39

6. SWOT analysis and Mitigation measures This section provides a SWOT Analysis for the production of rainbow trout in South Africa as well as

includes high-level mitigation options to address the threats and weaknesses identified.

6.1. SWOT Analysis

Table 6-1 below presents potential strengths, weaknesses, opportunities, and threats faced by the

rainbow trout industry in South Africa.

Table 6-1: Rainbow Trout Swot Analysis

Strengths Weaknesses

The trout industry is well established in South

Africa

There are existing markets for trout in South

Africa as well as across Africa

Consumer preference leading to high market

price

Recreational angling (tourism) and table fish

(dual-purpose)

Fast-growing and can be cultured at high

densities

Easily adapted to a variety of aquatic

environments including aquaculture conditions

Can be propagated artificially, which makes it

important for fish food production.

Disease free status: Currently (2018), South

Africa is relatively free of specific salmonid

diseases

High cost of artificial feed

Underdeveloped market channels

Initial investment is relatively high for

infrastructure and equipment

High risk of disease in the trout industry

Weak forward and backward linkages in the

value chain

Little or no tolerance for low oxygen or high

temperatures, which restricts their distribution

Fingerlings of rainbow trout are only obtainable

from hatcheries

Production is primarily seasonal due to

environmental condition (i.e. water

temperature etc.)

Opportunities Threats

Demand is increasing for trout as well as trout

eggs

SA has the potential to expand the industry in

order to meet current local demand, therefore

reducing its reliance on imports

The development of hatcheries can lead to

additional export opportunities of products

such as trout fry.

Potential to expand trout processing industry

Potential for RAS hatcheries to increase grow-

out period and supply of fingerlings in suitable

seasons

Potential to expand the culture of trout into

seawater which would address water

availability issues and seasonal production

challenges

Lack of suitable spaces for expansion of the

trout industry

Possible outbreak of viral diseases in South

African trout stocks through imports due to

poor border control

Potential risk of trout invading natural water

systems/eco-systems

Rainbow trout are regarded as alien invasive

species by conservation agencies

Costs of production may continue to increase

(electricity, feed, labour etc.)

Water scarcity in South Africa is a threat to

aquaculture

Changing climate may limit the areas suitable

for trout production


40

The generic economic model considered some of the key weaknesses and threats that could impact

on the profitability of a farm. The model assists with developing a risk profile for producers, which is

then used to determine interest rates and loan repayments based on education levels and skills, as

well as access to land, infrastructure, and facilities. Factors such as permits and veterinary costs are

also built into the model to mitigate the potential threat of disease outbreaks.

6.2. Mitigation Measures

The mitigation measures identified in Table 6-2 below aim to address the threats and weaknesses

identified in the SWOT analysis discussed above. It is essential for trout producers to take note of the

potential risks and weaknesses identified to ensure they can implement mitigation measures and

understand the potential challenges they may face.

Table 6-2: Rainbow Trout Mitigation Measures

Risks Identified Mitigation Measures

1. High Capital & operating

costs

Research and development focusing on improved

technologies, reducing feed costs, and designing systems

that are more cost-effective

Improved access to affordable and sustainable technology

suitable for production systems in South Africa

2. Underdeveloped market

channels

Focus on developing the local market

Developing NCRS testing and production regulations to

comply with the EU and USA market standards

Adopt DAFF finfish monitoring programme for freshwater

aquaculture

Identify potential markets within Africa

3. Disease & pest outbreak

Establish early warning and communication system

between government and trout producers to alert of any

disease outbreaks globally and potential outbreaks in

South Africa

Develop and implement disease and biosecurity guidelines

for trout production

Farmers should receive training and extension services

support to ensure that good farm management and

disease control measures are in place6

4. Access to inputs

Encourage engagement between current producers,

industry stakeholders and government departments

Focus on the development of the local value chain

Building a RAS hatchery to increase supply of fingerlings

which is limited due to seasonal temperatures. Increase

availability of fingerlings to new entrants that want to

focus on only the grow-out of trout

5. Permits & regulations

Include regulatory & permit requirements in guideline

document

Identify ways in which the permit/regulatory process can

6The Aquaculture Development Bill identifies the need for extension support.


41

Risks Identified Mitigation Measures

be streamlined in order to better assist producers

6. Limited suitable production

areas

Research and development aimed at identifying strategic

areas for trout production in South Africa

Conduct pilot projects to test the suitability of various

systems and environments in South. For example, cage

culture in large scale dams or marine cage culture for sea

run trout.

7. Risk of trout landing up in

natural water

bodies/systems

Provide guidelines for system design as well as biosecurity

measures required within South Africa

Training and educating new trout producers on the risk of

escape from aquaculture operations

Conduct site visits to assess existing aquaculture

operations biosecurity measures

New trout operations should meet minimum standards

before being approved


42

7. Rainbow Trout Technical Assessment The technical assessment below provides a summary of the assumptions used within the economic

model for rainbow trout, as well as data presented in the species overview and biological

characteristics. Information covered in the technical assessment include:

Water conditions

Broodstock/Breeding

Genetic selection

Hatchery/fry production

Production performance

Additional information

Table 7-1: Rainbow Trout Technical Assessment

Latin Name Oncorhynchus mykiss

Common name Rainbow trout

Biological requirements

Salinity Less 10 ppt. Sea run trout projects are currently being tested/trialled.

Temperature

The optimal temperature for rainbow trout to produce and grow in is 16˚C, and

the range of temperatures that they can tolerate and survive in are between 6-

16˚C. Rainbow trout will start to show signs of stress at temperatures exceeding

21°C.

Broodstock/breeding

Spawning

Rainbow trout is known to spawn easy and the large number of fry can be easily

weaned on artificial diets. Rainbow trout in captivity can spawn all year around;

whereas in the wild they will only spawn once, in spring.

(Natural/induced)

Rainbow trout will not spawn naturally if in captivity; thus, juveniles must be

obtained either through artificial spawning in hatcheries or by collecting eggs

from wild stocks. At the time of hatching, the rainbow trout larvae will already

be well developed.

Egg size Females can produce up to 2 000 eggs per kilogram of body weight. The eggs are

relatively large ranging from 3-7 mm in size.

Genetic selection Selective breeding programmes have produced disease resistant trout (to

furunculosis)

Hatchery/fry production

Hatchery system

Eggs are incubated in trays or in Californian incubators, with a maximum of two

layers of eggs. Fertilised eggs should be kept in the dark, the water exchange

should be moderate (one renewal per hour, eggs should not move), and the

dissolved oxygen level kept at 100 percent saturation. The water temperature

should be stable and kept between 4 and 12°C. Dead (white) eggs should be

manually removed every day. At the eyed stage (typically 230 degree-days), eggs

can be manipulated again and sold.

First feed requirement

When the fry has almost completed their yolk reabsorption and started

swimming, they can be fed for the first time with artificial dry feeds (0.4 mm

diameter, 55% protein and 12% lipid content).

Hatchery survival Typically, 90%

Industry experts, stakeholders and

relevant literature sources provided the

technical information below. This

information may be subject to change.


43

Production performance

Typical FCR 1.2:1 or 1:1 depending on the grow-out size.

Feed requirement

Rainbow trout feed have been modified, as the years passed by, with a variety

of compact nutritious pelleted diets for all life stages. These pellets are usually

high in fish oils, with over 16% fat. Addition of pigments in the food is important,

to give rainbow trout their distinctive pink colour.

Typical survival Typically, 75% to 85%

Typical growth rate The growth rate depends on ambient temperature. At 16°C, it is usually possible

to rear fish to a table size (30-40 cm) within nine months.

Stocking densities

Ponds: 18 kg/m³

RAS: 100 kg/m³ (under optimal production conditions)

Flow-through/Raceway: 40 kg/m³

Cage: 25 kg/m³

Disease Whirling disease is a disease that is caused by a virus that affects rainbow trout.

Production

Production system

Ponds: Earthen ponds

RAS: Plastic, circular grow-out tanks

Raceway: Concrete grow-out tanks operating on RAS technology

Flow-through: Linear, lined tanks with fast flowing water/currents

Cage: Floating cages in an open water body

Intensity Intensive systems are considered necessary in most situations to make the

operation economically attractive.

Main producers The main producers of rainbow trout globally are Iran and Turkey.

Processing and markets

Product form

Trout ova/eggs (mainly international markets)

Fresh: whole fish or fillets

Processed: Pate, smoked, frozen products

Recreational: hand caught, fresh, whole fish

Additional Information

Research and

development

There are national breeding programmes for genetic improvement of wild

stocks for improved aquaculture production including for rainbow trout in

Norway. In Africa, a major trout farm is under development in the Katse Dam in

Lesotho. Additional research is required on production systems and the

reduction of production costs. Market research and regulations are required to

grow the market and allow for exports to the EU and USA.

Environmental impacts

Impacts from flow-through systems are largely from disease treatment

chemicals, uneaten feed, and fish excreta, which can alter water and sediment

chemistry downstream of the farm. Elevated nutrients reduce water quality

(increasing biological oxygen demand, reducing dissolved oxygen, and increasing

turbidity) and increase the growth of algae and aquatic plants.


44

8. Rainbow Trout Financial Analysis

8.1. Introduction

The generic economic model provides users with the opportunity to individual producer data,

proposed production volumes and scales and financial data. Through the model, the users will

receive financial outputs which include capital and operational costs and financial indicators which

will guide the user in determining whether the proposed aquaculture project is feasible, and a viable

investment opportunity. A high-level overview of the model process can be seen in the figure below.

Source: Urban-Econ, 2018

The generic economic model can be customised to provide results for individual producers based on

selections made with regard to the location of the aquaculture operation (at a provincial level), type

of operation (start-up or existing), the scale of operation, type of production system, size and pricing

of the trout, education level and type of financing that could be used to fund the proposed

aquaculture project.

8.2. Key Economic Model Assumptions

The generic economic model for trout was developed using data from various information sources,

consultations with various stakeholders and industry experts, and through inputs gathered at two

peer-review workshops conducted.

8.2.1. Production Assumptions

To develop the generic economic model, specific production assumptions for trout were identified

and utilised. Some key assumptions used can be seen in Table 8-1 below.

Table 8-1: Rainbow Trout Model Assumptions

Average cost of fingerlings R 3-50 per 20-gram fingerling

Average Feed Cost R18-00 per kg

Stocking density RAS – 100 kg/m³ (only achievable with optimal flow-rates &

oxygen)

Pond – 18 kg/m²

Cage – 25 kg/m3

Race/Flow – 40 kg/m3

Acceptable Monthly Mortality 1,2% per month

Selected Fish size 9 months/ 1.2-kilogram fish

Producers should be encouraged to establish relationships with suppliers to benefit from bulk prices,

specifically at larger tonnages.

Interface

Assumptions

System

Selection

OPEX

CAPEX

Financial

Analysis Final Output

Figure 8-1: Generic Economic Model Overview


45

It is important to note that the results below are unique for each system and based on the results

obtained from the generic economic model. The average selling price identified is based on the

stakeholder consultations and may not be identical to current market prices. When considering

Rainbow trout production it is essential to consider the target market, demand, and a realistic selling

price to ensure the project is sustainable.

The land size identified above is calculated based on the minimum infrastructure footprints. As each

aquaculture operation will differ according to layout, design, and infrastructure requirements, the

land size should be used as a guideline for the minimum size property.

The generic economic model accounts only for the sale of whole trout, sold directly from the farm to

either a third-party processors, retail markets or directly to consumers looking to purchase whole

trout. Should processing be required on a farm, additional capital will be required.

8.2.2. Capital Expenditure

The capital expenditure costs for rainbow trout production focused on the establishment of different

production systems suited for trout production in South Africa. The capital expenditure is

determined by the scale of production, and the selected production cycle length. Some of the key

factors to note include the following:

a. Pre-development costs for construction phase, concept design, specialist consultations,

town planning alignment (zoning, rezoning etc.), and development of bulk infrastructure

(roads, installation of electricity to the site, bulk water services etc.) were excluded from

the model as this is site specific and not suitable to model at a provincial level,

b. Land costs were included should an individual/business not have an existing farm. Based

on average farm prices for 2017/2018, a per hectare (ha) rate of R 246 346 was used,

c. Services such as the costs of water and electricity were included in the model, and vary

between the provinces,

d. Buildings such as storerooms, offices, cold storage, and a feed room were considered,

e. Aquaculture system costs focused on the development of infrastructure for the systems,

and additional equipment required.

f. Infrastructure costs are calculated as a once-off, lump sum amount to be spent in year

one, however a producer can choose to phase in production which would spilt the costs

up depending on how the production is phased in.

8.2.3. Operational Expenditure

Operational expenditure or working capital was determined by looking at the variable costs of

production, and fixed costs. Costs can be divided into fixed and variable costs. Variable costs include

fingerlings, fertilisers (where required), feed, transport, and water costs. It should be noted that it is

assumed that aquaculture producers in South Africa are currently not charged for water unless using

municipal water sources (DAFF, 2018). Fixed Costs include costs such as salaries, insurance,

electricity, legal/licensing costs, veterinary services, and general expenses (telephone, electricity,

health and safety apparel, stationery etc.). Reserve and unforeseen costs have also been included

(calculated at 2% of the variable cost total).


46

8.2.4. Scale of Production

From the generic economic model, two production volumes were identified, firstly the minimum

production volume indicates at what tonnage a producer would be profitable from when selling at

the average selling price identified in the model, and secondly, the optimal production tonnage was

identified, which indicates where the optimal return on investment and profitability is achieved

when selling at the lowest feasible selling price.

8.2.5. Market Information

An average farm gate price of R 59 per kilogram (kg) for 1-kilogram rainbow trout was identified

during stakeholder consultation. This price may differ depending on the market being supplied, size

and quality of the trout. The model assumes that the trout are sold live or fresh, and not as

processed goods.

8.3. Rainbow Trout Production Financial Overview

Table 8-2 below provides the financial and production assumptions used to conduct the financial

analysis on each of the potential production systems. As the generic economic model is based at a

provincial level, for this analysis, the Western Cape was selected as most trout farms in South Africa

are located within the province.

Table 8-2: Trout Financial and Production Assumptions

Province Western Cape

Market Local

Operational Status Start-up farmer with no existing farm, facilities, or infrastructure

Skills Level Formal education (certificate/diploma)

Financing Option Debt/Equity

Debt Percentage 20%

Interest Rate 8.25%

Selling weight 1.2 kilograms (9 months)

Additional Information

The models exclude the construction and development phase. The models

consider from when production starts.

Consulting, or specialist fees are not included in the model

Based on the assumptions above, the results obtained from the generic economic model are

presented below for rainbow trout.

8.3.1. Recirculating Aquaculture System

The recirculating aquaculture system (RAS) is considered to be one of the more expensive

production systems to establish and maintain due to the infrastructure requirements, and the need

for tunnels, specifically in South Africa due to the climatic conditions experienced.

8.3.1.1. Capital Expenditure

Table 8-3 below provides a summary of the infrastructure and built environment costs required to

establish a RAS for trout production.

Table 8-3: Capital Costs for a RAS

Production Scale Min. Profitable 40 tons Optimal 988 tons

Infrastructure (Buildings) R 1 188 400 R 3 849 990

Purchase of Land R 302 652 R 1 286 225


47


RAS Infrastructure R 908 015 R 16 870 427

Additional equipment R 251 955 R 1 303 401

Total Capital Expenditure R 2 785 022 R 23 719 443

The RAS requires specialised and technologically based infrastructure and equipment to ensure

optimal production conditions for the trout can be achieved. The stocking density of 100 kg/m³ can

only be achieved when there are optimal production conditions which includes oxygen levels, flow-

rates, temperature and feeding. The model accounts for basic infrastructure requirements such as a

bio-filter systems, oxygen producing system when production exceeds 40 tons per annum, aerators,

and pumps to name a few elements.

8.3.1.2. Operational Expenditure

Table 8-4 below provides a summary of the operational costs required for trout production. The

operational expenditure is shown for the first year of operation.

Table 8-4: Operational Expenditure for a RAS (Year 1)


Variable costs R 753 535 R 18 233 121

Fingerlings R 127 602 R 3 151 774

Feed R 503 933 R 12 447 147

Consumables – water quality R 6000 R 148 200

Fixed Costs R 934 366 R 7 300 065

Total Operational Costs R 1 687 902 R 25 533 187

Feed costs generally account for an estimated 40 to 60% of the total operational expenditure

(depending on the tonnage). Currently in South Africa, fish feed is manufactured by one or two key

commercial feed producers and sold at an average price of R18/kg.

8.3.1.3. RAS System Financial Overview

Table 8-5 below provides an overview of the capital expenditure required, as well as financial

indicators and a high-level overview of the production requirements including land size, estimated

number of fingerlings required in month one (1), and the estimated number of employees required

in the first year of production.

Table 8-5: RAS Financial Overview


Financial Overview

Total Capital Expenditure R 3 930 520.80 R 38 683 580.80

Loan Amount – Working Capital R 1 145 498.00 R 14 964 137.40

Loan Amount - Infrastructure R 2 785 022.80 R 23 719 443.40

Profitability Index (PI) 1.05 14.47

Internal Rate Return (IRR) 8% 74%

Net Present Value over 10 years R 4 108 733.97 R 559 733 787.27

Payback Period (years) 20 20

Year until profitable 6 2

Production Overview

Minimum Farm Size Required 1.2 hectares 5.2 hectares


48


Number of fingerlings required (Month 1) 3 038 75 042

Number of employees (Year 1) 4 35

The minimum profitable tonnage was identified at 40 tons per annum when selling the fish at R

59/kg. This RAS requires an estimated capital expenditure of R 3 930 520 to meet the minimum

profitable tonnage, while the optimal production level of 988 tons per annum would require a

capital investment of R 38 683 580 for a start-up producer.

8.3.2. Pond Culture

Based on the assumptions presented in Table 8-2, the following results were obtained from the

generic economic model. The tables below provide an overview of rainbow trout in a pond system.

While pond culture is used for rainbow trout production, as previously discussed, pond culture does

pose some challenges for trout production such as the poor water conditions, and the lack of moving

water/current can impact on the growth rates of the trout.



establish a pond culture system for trout production.

Table 8-6: Capital Costs for Pond culture


Infrastructure (Buildings & Storage Dam) R 1 262 366 R 4 508 254

Purchase Land R 863 120 R 7 291 179

Pond culture system R 1 107 970 R 12 278 280






Table 8-7: Operational Expenditure for Pond culture (Year 1)



Fingerlings R 149 993 R 3 084 783

Feed R 592 121 R 12 182 582

Consumables – water quality R 7 050 R 145 050

Fixed Costs R 1 047 008 R 6 819 847


As previously mentioned, feed costs are a major factor to consider when looking at the profitability

of pond culture. Producers should carefully plan and implement feeding programmes to ensure

optimal consumption and minimal waste of the feed. Feed suppliers should also be encouraged to

assist farmers by considering bulk order discounts.

8.3.2.3. Pond Culture Financial Overview

Table 8-8 below provides an overview of the capital expenditure required, as well as financial



49



Table 8-8: Pond Culture Financial Overview


Financial Overview



Loam Amount - Infrastructure R 3 595 756.02 R 25 496 028.93






Production Overview





59/kg. It is estimated that the total capital expenditure will be R 4 891 815 to establish the system

and cover the working capital until the first sales take place in month nine (9). For the optimal

production level of 967 tons per annum would require a capital investment of R 39 900 386 for a

start-up producer. The need for a large land portion plays a role in the high capital expenditure

required to establish a pond culture system due to its extensive nature, and the costs of establishing

earthen ponds.

8.3.3. Cage Culture

Cage culture as a production method is vastly different from other production systems in terms of

the of the operational and capital expenditure costs specifically when looking at electricity and water

costs, as well as the need for the producer to purchase land since these systems are water based and

therefore require minimal land.


The table below provides a summary of the infrastructure and built environment costs required to

establish a cage culture system for trout production.

Table 8-9: Capital Expenditure for Cage Culture



Land Required R 256 068 R 701 100

Cage culture system R 536 741 R 10 981 915




The table below provides a summary of the operational costs required for trout production. The



50

Table 8-10: Operational Expenditure for Cage culture (Year 1)



Fingerlings R 121 222 R 2 944 420

Feed R 478 736 R 11 628 256

Water Quality Consumables R 5 700 R 138 450

Fixed Costs R 904 117 R 6 120 568


8.3.3.3. Cage Culture Financial Overview

The table below provides an overview of the capital expenditure required, as well as financial




Table 8-11: Cage Culture Financial Overview


Financial Overview









Production Overview

Minimum Farm Size Required 1.1 hectare 2.8 hectares




59/kg. Cage culture is not as capital intensive as the other four systems, with an estimated R 3 425

642 required to meet the minimum profitable tonnage, while the optimal production level of 795

tons per annum would require a capital investment of R 29 785 325 for a start-up producer. The

costs associated with establishing and operating a cage culture operation are far lower than any of

the other systems, which is linked to less infrastructure requirements, much lower day-to-day

operational costs as well as a reduced demand for land, electricity, and additional expenses such as

heating and pumps.

8.3.4. Flow-through Systems

Flow-through systems differ from RAS or pond system as they require continuous, fast-flowing water

through the system. With this in mind, the model assumes that continuous pumping will be required

from a suitable water source, with additional measures such as heating equipment and tunnels

excluded from the costing as trout require cool, fast flowing water. Consideration should be made

for a settlement pond or wetland area to prevent environmental risks and degradation and reduce

the risk of fish from the aquaculture operation entering natural water bodies.


51



establish a flow-through system for trout production.

Table 8-12: Capital Costs for a Flow-through System



Purchase Land R 255 575 R 316 228

Flow-through system R 488 036 R 6 165 107






Table 8-13: Operational Expenditure for a Flow-through (Year 1)



Fingerlings R 133 486 R 3 057 152

Feed R 521 605 R 11 946 031


Fixed Costs R 953 034 R 7 404 635


As previously mentioned, feed costs are a major factor to consider. Producers should carefully plan

and implement feeding programmes to ensure optimal consumption and minimal waste of the feed.

Electrical consumption and costs can be a challenge when using flow-through systems, thus these

systems are often situated adjacent to fast flowing bodies of water (i.e. rivers) to reduce pumping

costs and ensure a constant supply of water is available.

8.3.4.3. Flow-through System Financial Overview





Table 8-14: Flow-through Financial Overview


Financial Overview



Loam Amount – Infrastructure R 2 264 63.18 R 11 836 948.01






Production Overview


52


Minimum Farm Size Required 1 hectare 1.3 hectares




59/kg. It is estimated that R 3 421 068 is required to meet the capital expenditure requirements for

the minimum profitable tonnage, while the optimal production scale system for 939 tons per annum

would require a capital investment of R 26 431 689 for a start-up producer.

8.3.5. Raceway System

Raceway systems are assumed to operate in a similar manner to the RAS, with concrete tanks

accommodated under tunnels to assist with heating and reducing electricity costs. A key challenge

with raceways, as with the flow-through system, is identifying and accessing a suitable source of

water that will be able to meet production needs. Without a reliable water source, extra

consideration for water storage should be made, especially if proposing to implement a raceway

system in dry regions or regions experiencing water shortages.


The table below provides a summary of the infrastructure and built environment costs required to

establish a raceway system for trout production.

Table 8-15: Capital Costs for a Raceway System



Purchase Land R 294 995 R 605 897

Raceway system R 945 054 R 7 618 04




The table below provides a summary of the operational costs required for trout production. The


Table 8-16: Operational Expenditure for a Raceway (Year 1)



Fingerlings R 146 509 R 3 050 641

Feed R 572 494 R 11 920 587


Fixed Costs R 1 029 523 R 7 010 238


As previously mentioned, feed costs are a major factor to consider when looking at the profitability

of a raceway operation. Producers should carefully plan and implement feeding programmes to

ensure optimal consumption and minimal waste of the feed. Feed suppliers should also be

encouraged to assist farmers by considering bulk order discounts.


53

8.3.5.3. Raceway System Financial Overview





Table 8-17: Raceway Financial Overview


Financial Overview









Production Overview





59/kg. It is estimated that R 4 061 637 is required to establish the raceway system and cover

operational expenses when producing 45 tons per annum. The optimal production level of 937 tons

per annum would require a capital investment of R 27 729 502 for a start-up producer. The costs

associated with establishing and operating a raceway system are namely operational costs and

concrete tanks required.

8.4. Financial Analysis Summary

Based on the financial analysis conducted for each of the five (5) production system above, it is

evident that each system offers advantages and disadvantages for producers. The table below

provides a high-level summary of the capital expenditure required for the minimum profitable

tonnage, and the estimated return on investment.

Table 8-17: Summary: Production Systems Financial Overview

RAS Pond Cage

Flow-

Through Raceways

Min Profitable scale 40 47 38 41 45

Average Selling Price R 59/kg R 59/kg R 59/kg R 59/kg R 59/kg

Capital Expenditure R 3 930 520 R 4 891 815 R 3 425 642 R 3 421 068 R 4 061 637

IRR 8% 9% 7% 9% 8%

From a financial aspect, it is clear that cage culture and flow-through systems require the lowest

capital expenditure to establish at both the minimum profitable tonnage. While cage culture offer

producers reduced operating expenses, the system comes with several challenges, namely

identifying and securing a suitable body of water (cold, clean, and fresh), as well as maintaining the

cage culture system to ensure the sustainability of the selected water body and surrounding natural

environment.


54

Pond and Raceways are the two most capital-intensive systems to establish, which is linked to the

grow-out containment construction, specifically for the construction/development of earthen ponds.

While flow-through systems are one of the least capital-intensive systems to establish, the high

operational expenses from pumping and need for access to a reliable and constant water source

may pose some challenges for producers.

8.5. Rainbow Trout Cost Benefit Analysis

Table 8-18 below shows a high-level cost benefit analysis for rainbow trout, based on the

profitability index (PI) which is used as the cost benefit ratio. The analysis considers the five (5)

production systems, at both one and ten tonnes respectively in the Western Cape province. The

cost-benefit analysis was considered using the equity finance option.

Table 8-18: Rainbow Trout Cost Benefit Analysis

RAS Pond Cage

Flow-

Through Raceways

Minimum Profitable Tonnage

Market price (R/kg) R 59/kg R 59/kg R 59/kg R 59/kg R 59/kg

Tons produced/annum 40 47 38 41 45

Profitability Index (PI) 1.05 1.13 1.02 1.17 1.05

Internal Rate of Return (IRR) 8% 9% 7% 9% 8%

Employees required (Year 1) 4 4 4 4 4

Optimal Tonnage

Market price (R/kg) R 59/kg R 59/kg R 59/kg R 59/kg R 59/kg

Tons produced/annum 988 967 923 939 937

Employees required (Year 1) 35 29 24 33 33

From the table above, it can be seen that all of the five (5) production systems are profitable and

feasible for rainbow trout production in the Western Cape. However, although each of the systems

is profitable, each one offers unique challenges and advantages for producers which should be

carefully considered when selecting a production system.

Out of the five (5) systems above, it can be seen that cage culture, flow-through and RAS are the

most profitable systems. From the results presented above, the raceway systems and RAS prove to

be the least profitable of the five (5) systems, which can be attributed to the high operational costs

as well as capital expenditure required for the system. Pond culture can be successfully used for

trout production; however, the slower growth rates and the lower stocking density should be noted.

While cage culture offers the lowest return on investment, the minimum profitable tonnage is much

lower than the other four (4) systems. At 40 tons, cage culture offers an IRR of 13%, thus making it

the most profitable system.

Each system offers a number of employment opportunities, specifically at the higher tonnages,

where more specialised and skilled employees can be used as the operation will be able to cover

their salaries. At the lower tonnages, it is recommended that labour costs are kept to a minimum to

ensure the operation is profitable, thus all systems offer four (4)) jobs in year one of operation. The

most labour-intensive systems at the higher tonnages, as seen in the table above, include RAS, flow-

through and raceway systems which are more intensive culture systems, while cage culture requires


55

the lowest number of permanent employees in year one (1). Although cage culture requires the

lowest number of permanent employees, temporary or seasonal employees may be required when

sorting/grading or harvesting depending on the scale of operation.

8.6. Rainbow Trout Best Case Scenario

Through the generic economic models, it is possible to determine “Best Case Scenarios” for each of

the four recommended production systems at a provincial level. To do this, the following categories

and criteria were used to assess the economic models.

I. Selling weight: Presently two marketable sizes of rainbow trout have been identified in

South Africa, namely plate sized fish (300 grams), and more commonly one (1) kilogram

sized fish. For the ‘best-case’ scenarios, a 1.2 kg trout is selected in the generic economic

model.

II. Minimum Tonnage required for each production cycle: The minimum tonnage was

identified determining the amount that a trout producer needs to produce in order to be

profitable. Profitability was measured by looking at the Profitability Index (PI), which should

be one (1) or more.

III. Price: The farm gate price received for rainbow trout has a major impact on the profitability

and sustainability of the aquaculture operation. The minimum recommended selling price

differs for each production system and is affected by the annual production volume

selected.

IV. Finance Type: The generic economic model provides three financing options for producers,

however for this analysis the debt/equity finance option was selected with a 20% debt ratio.

This assumes that a producer contributes 20% of their assets and receives funding for the

remaining 80%.

When making use of the generic economic model for rainbow trout it should be noted that the

figures and analysis discussed below are based at a provincial level and were obtained with the

general assumptions used in the economic model. While at a provincial level a system and tonnage

may show a positive or negative return on investment or profitability index, this may differ at a site-

specific level depending on the site temperatures and conditions, water quality and temperature,

access to markets and access to input supplies, which all have a significant impact on the profitability

and viability of an aquaculture operation.

As previously mentioned all five (5) production systems have proven to be profitable for rainbow

trout when using the general assumptions in the generic economic model. The table below provides

an overview for the ‘best-case scenarios’ for each of the production systems based on a farm gate

price of R 59/kg and the minimum profitable tonnage required when making use of the average

selling price.

Table 8-19: Best Case Scenario Summary

RAS Pond Cage Flow-through Raceway

EC R 59/kg R 59/kg R 59/kg R 59/kg R 59/kg


56


40 tons 47 tons 38 tons 41 tons 45 tons

Climate

Suitability

Only select

regions in the EC -

escarpment/Drak

ensberg

Only select

regions in the EC -

escarpment/Drak

ensberg

Only select

regions in the EC -

escarpment/Drak

ensberg

Only select

regions in the EC -

escarpment/Drak

ensberg

Only select

regions in the EC -

escarpment/Drak

ensberg

KZN R 59/kg

40 tons

R 59/kg

47 tons

R 59/kg

38 tons

R 59/kg

41 tons

R 59/kg

45 tons

Climate

Suitability

Only select

regions in KZN –

escarpment/Drak

ensberg

Only select

regions in KZN –

escarpment/Drak

ensberg

Only select

regions in KZN –

escarpment/Drak

ensberg

Only select

regions in KZN –

escarpment/Drak

ensberg

Only select

regions in KZN –

escarpment/Drak

ensberg

GP R 59/kg

40 tons

R 59/kg

47 tons

R 59/kg

38 tons

R 59/kg

41 tons

R 59/kg

45 tons

Climate

Suitability

Water

cooling/heating

required

depending on

season

Water

cooling/heating

required

depending on

season

Site & Dam

specific. Water

and air

temperatures may

be too warm.

Site specific.

Water and air

temperatures may

be too warm

Site specific.

Water and air

temperatures may

be too warm

WC R 59/kg

40 tons

R 59/kg

47 tons

R 59/kg

38 tons

R 59/kg

41 tons

R 59/kg

45 tons

Climate

Suitability

Water

cooling/heating

required

depending on

season

Water

cooling/heating

required

depending on

season

Site & Dam

Specific. Is

currently used

successfully.

Water

cooling/heating

required

depending on

season

Water

cooling/heating

required

depending on

season

NC R 59/kg

73 tons

R 59/kg

71 tons

R 59/kg

65 tons

R 59/kg

69 tons

R 59/kg

72 tons

Climate

Suitability

Only certain

regions in NC may

be suitable. Water

cooling required

during summer

months

Only certain

regions in NC may

be suitable. Water

cooling required

during summer

months

Site & Dam

specific. Water

and air

temperatures may

be too warm.

Only certain

regions in NC may

be suitable. Water

cooling required

during summer

months

Only certain

regions in NC may

be suitable. Water

cooling required

during summer

months

MP R 59/kg

45 tons

R 59/kg

60 tons

R 59/kg

55 tons

R 59/kg

59 tons

R 59/kg

61 tons

Climate

Suitability

Only certain

regions in MP may

be suitable. Water

cooling required

during summer

months

Only certain

regions in MP may

be suitable. Water

cooling required

during summer

months

Site & Dam

specific. Water

and air

temperatures may

be too warm.

Only certain

regions in MP may

be suitable. Water

cooling required

during summer

months

Only certain

regions in MP may

be suitable. Water

cooling required

during summer

months

FS R 59/kg

45 tons

R 59/kg

60 tons

R 59/kg

55 tons

R 59/kg

59 tons

R 59/kg

61 tons

Climate

Suitability

Only certain

regions in FS may

be suitable. Water

cooling/heating

required

depending on

season

Only certain

regions in FS may

be suitable. Water

cooling/heating

required

depending on

season

Site & Dam

specific. Water

and air

temperatures may

be too warm in

Summer

Only certain

regions in FS may

be suitable. Water

cooling/heating

required

depending on

season

Only certain

regions in FS may

be suitable. Water

cooling/heating

required

depending on

season

LP R 59/kg

45 tons

R 59/kg

60 tons

R 59/kg

55 tons

R 59/kg

59 tons

R 59/kg

61 tons


57


Climate

Suitability

Water cooling

required

Water cooling

required

Site & Dam

specific. Water

and air

temperatures may

be too warm.

Site specific.

Water and air

temperatures may

be too warm

Site specific.

Water and air

temperatures may

be too warm

NW R 59/kg

45 tons

R 59/kg

60 tons

R 59/kg

55 tons

R 59/kg

59 tons

R 59/kg

61 tons

NW

Water

cooling/heating

required

depending on

season

Water

cooling/heating

required

depending on

season

Site & Dam

specific. Water

and air

temperatures may

be too warm.

Site specific.

Water and air

temperatures may

be too warm

Site specific.

Water and air

temperatures may

be too warm

From the table above, it is evident that provinces such as the Eastern Cape, Western Cape, Kwa-Zulu

Natal, and Gauteng offer the most profitable trout producing conditions, however, it should be

noted that trout production is limited to select areas within these provinces. These areas offer the

necessary climatic and water conditions required for trout production as previously discussed. While

the Gauteng is expected to be profitable, the climatic conditions are not optimal for trout

production, specifically in the summer months, thus, additional heating and/cooling equipment may

be required which could result in higher operating expenditure. Site specific design and

infrastructure needs must be considered. Mpumalanga is known for rainbow trout production,

however, when considering the distance to markets and access to inputs, aspects such as transport

costs should be considered.

The Northern Cape province proves to be the least suitable province for rainbow trout production,

which is attributed to the distance from major city centres (and markets), and the high temperatures

which affects the operational expenditure.


58

9. Conclusion and Recommendations

9.1. Conclusion

Rainbow trout is a well-known and widely used fish in aquaculture operations, both locally and

internationally. Water and environmental conditions, specifically the need for high quality, clear

water, and cool temperatures, is essential for successful production of trout in South Africa;

however, these factors also limit the number of sites suitable for the production of rainbow trout. In

South Africa, trout production is very seasonal, and limited to the cooler, winter months, which

affects the production and supply of trout, as it is not produced year-round.

The current research and development underway to test and pilot various production systems in

South Africa could go a long way in ensuring the long-term success and growth of the industry, since

it will allow for alternative methods of production to be implemented, which in turn will allow for

increased production. There however exists some concern over the proposed change of the

legislation in terms of the NEMBA classification of rainbow trout as a Category two (2) invasive

species, as this will mean that additional permits will be required for aquaculture operations

producing rainbow trout. Although this is already the case with other freshwater species, permit

applications and authorisations can be a lengthy and costly process for producers, which may affect

production, specifically for the small-scale farmers.

Although the trout industry has for a while been established in South Africa, it is still considered to

underdeveloped from an international perspective. Very few large-scale operations exist in South

Africa and the majority of the farms currently operate on a small scale. The local market is stable and

responsive, however, further marketing and engagement to increase the demand is required. Export

markets that should be considered including markets in Japan, Russia, and the USA. It is essential

that the South African trout industry is able to differentiate itself from the other key competitors

(e.g. Japan) by developing and implementing quality standards, unique packaging, branding, and

value addition offerings. Challenges regarding export permits and certification of farms should be

addressed as soon as possible to assist and support the expansion of the trout market. Lastly, the

production and volume of trout eggs for export is increasing however, more effective marketing is

required to assist with the growth of the industry.

Based on financial analysis and best-case scenario analysis, it can be seen that cage, flow-through

and pond culture are the most profitable systems for rainbow trout production, with raceways being

the least profitable system based on the average selling price required for an operation to be

profitable. it is clearly illustrated that provinces such as the Eastern Cape, Western Cape, Kwa-Zulu

Natal, and Gauteng offer the most profitable trout producing conditions, however, it should be

noted that trout production is limited to select areas within these provinces. These areas offer the

necessary climatic and water conditions required for trout production as previously discussed. The

Northern Cape province proves to be the least suitable province for rainbow trout production, which

is primarily linked to the climatic conditions experienced in the province.


59

9.2. Recommendations

Based on the study conducted, the following recommendations have been made:

I. Strategic guidelines for rainbow trout production should be developed to assist new

entrants to the industry. These guidelines should cover:

a. South African specific production guidelines and information,

b. Post-production marketing regulations and standards,

c. Transportation of rainbow trout, and

d. Production system information.

II. Research and development into alternative production systems and system design,

specifically looking at sea run rainbow trout,

III. Research and analysis on the production and pricing of trout feed in South Africa. Producers,

government, and suppliers should enter into discussion to ensure prices are competitive and

affordable for producers,

IV. Due to seasonality of trout, and limited availability of fingerlings, specifically new entrants

could be addressed by the development of trout hatcheries using a RAS. This could assist

new entrants and increase production,

V. Improved co-ordination and communication between trout producers, stakeholders and

government would assist with the development and growth of the industry,

VI. Develop as well as implement testing and regulatory standards to ensure that South Africa

can supply the EU and USA market,

VII. Adopt/amend the DAFF finfish monitoring programme for freshwater fish in South Africa,

VIII. Permit and regulatory processes should be clarified, specifically the proposed amendment of

the AIS category of trout,

IX. The permit and regulatory process should be streamlined to ensure producers can apply for

permits effectively, without experiencing lengthy delays and red tape,

X. Determine the need for clustering of small-scale producers to assist with economies of scale,

as well as the potential to develop agro-processing facilities where clusters of producers are

located,

XI. The rainbow trout generic economic model should be updated annually to ensure that the

assumptions and costings are accurate. The updates will ensure the long-term use and

sustainability of the generic economic model, and

XII. Investigate alternative approaches to developing the trout industry in South Africa, such as:

a. Integrated farming, and

b. Aquaculture-tourism farm – educational facilities mixed with stores and recreational

facilities.

The Aquaculture Development Bill (currently in Parliament) should alleviate a number of challenges

with red tape and delays experienced in the aquaculture industry, as well as assist with addressing a

number of production, support, and marketing issues. These recommendations should be reviewed

should the Aquaculture Development Bill be passed to ensure they are addressed and implemented

where applicable.


60

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