South Africa’s food price inflation softened to 5,6% y/y in January 2021, from 6,2% y/y in the previous month. The deceleration was in most product prices in the food basket except for bread and cereals, which accelerated from the levels seen in December 2020. Nevertheless, this was overshadowed by the slowing price inflation in meat; fish; milk, eggs and cheese; fruit; and vegetables.
The new African Free Continental Trade Area phases out 90% of tariffs on all goods traded between African Union member states over a 5-to-10-year period. This seeks to boost intra-African trade and investment in regional value chains. The current 41% share of SA agricultural exports that goes to Africa is concentrated in SADC. The opening of other markets presents an opportunity for further expansion in goods such as oranges, apples and wine.
South Africa’s agricultural exports amounted to US$10,2 billion in 2020, which is a 3% increase from the previous year. This is the second-largest level after the record exports of US$10,7 billion in 2018. The top ten exportable products by value were citrus, grapes, wine, apples and pears, maize, nuts, sugar, wool and fruit juices.
The agricultural message within the State of the Nation Address was a mixed bag; an acknowledgement of the farming potential to create jobs and foster growth, yet a hazy view on land policy and support programmes for land reform beneficiaries. There may also be an over-reliance on the master plans; time will tell if it will genuinely deliver on its promise.
The current increases in agricultural commodity prices is a global issue, but an expected sizable South Africa’s maize harvest could help ease price pressures in the coming months.