Written for and first appeared on Business Day.
SA’s agricultural export activity is likely to soften this year from the 2021 record of $12.4bn. Lower production of key crops, the spread of animal disease and changes in phytosanitary regulations in key markets such as the EU will all weigh on export activity this year.
The changes in export volumes and values might not show in the first half, but are likely to reflect in the second half. SA’s agricultural exports for the first five months of this year amounted to $5.06bn, up just 2% from the corresponding period in 2021. Over this period the EU, UK, Japan, UAE and several African countries were still our primary markets. Citrus, maize, apples, pears, wine, nuts and wool were the dominant exportable products.
I worried that exports would deteriorate in April after the severe floods that damaged infrastructure in KwaZulu-Natal and the port of Durban. Surprisingly, the data paints a positive picture of continued export activity, which reflects well on Transnet and other logistics role players’ tireless efforts to restore the functioning of the port after the floods.
The spread of foot-and-mouth disease in the livestock industry intensified from the end of April. This outbreak meant exporting wool, beef and other livestock products faced restrictions in key markets such as China, mainly from May.
Discussions between the SA and Chinese authorities on this issue are still underway. In the meantime, wool exports have declined since the announcement of the temporary ban by China. The fallout is likely to be reflected in the third quarter of the year’s trade data. The same is true for beef exports, though wool and beef export regulations differ.
Wool has a unique protocol that allows China to handle wool exports even when SA has a foot-and-mouth disease outbreak. However, beef exports have no such protocol and are therefore extremely exposed during such outbreaks, compared with the sheep and goat industries.
At the time of writing the SA wool industry had not received clear direction about China’s adherence to the agreement between the two countries to facilitate wool exports during the outbreak. The SA government is the only avenue to assist in resolving this impasse and should thus deepen its engagements with China.
In the case of citrus, the EU imposed protectionist measures on agriculture in July by changing its plant safety regulations for citrus without notifying its trading partners within a reasonable time. The new regulation purports to protect the EU from a quarantine organism, the false codling moth, by introducing stringent new cold treatment requirements, particularly on citrus imports from Africa. This mainly affects SA, Zimbabwe and Eswatini.
SA has put rigorous measures in place to control the false codling moth, which the EU uses as a pretext to restrict citrus imports from Africa and to protect Spain. In the past couple of weeks of July and into August SA citrus growers struggled to access the EU market because of these regulation changes.
The breakthrough for the shipments stranded in the EU waters came in the second week of August. Still, the challenge of the new regulations remains for export activity in the months ahead. The solution to this requires continuous and intensified engagement by the SA government with the EU authorities.
Aside from the challenges of animal disease and regulatory constraints, lower domestic output of key crops may also dampen exports. The decline in crop output does not risk domestic food security but it does reduce the available supplies for the export market.
The most notable decline in key exportable crops is maize, down 10% from the 2020/2021 season at about 14.7-million tonnes. As a result, I expect maize exports to amount to about 3-million tonnes this season, from roughly 4-million tonnes last year. This deterioration in will show in the figures for the second half of the year.
Overall, the constraints that require government intervention to support our exports, such as wool and citrus, should be prioritised.
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