South Africa’s agricultural trade data paint an encouraging picture, though the sector continues to struggle with poor roads and inefficiencies in rail and ports.
In the third quarter of this year, the value of the country’s agricultural exports — food, fibre and beverages — amounted to $3,7bn, up 10% year on year. The main factors underpinning this are sizeable agricultural output in the 2021/22 production season and higher commodity prices.
Citrus, maize, nuts, wine, apples, pears, sugar, fruit juices, berries, soybeans and wool were among the most critical products exported in the third quarter.
We had feared the citrus market access challenges South Africa faced in the EU after plant regulation changes would make a significant dent in export values in the third quarter.
Fortunately, the temporary solution that industry and the government advocated helped to ease trade flows and its outcome is evident in these trade data. However, there are ongoing engagements between South Africa and EU authorities for the long term on new citrus plant safety regulations, which involve stringent cold treatment requirements.
The EU argues that these were introduced to protect them from quarantine organism the “false codling moth”.
Ironically, South Africa has rigorous measures to control this, which the EU should recognise so trade can continue. The outcome of the government’s engagements will be critical.
The EU is a sizeable market for South Africa’s citrus industry and the whole agricultural sector. In the third quarter, citrus was still the top exportable agricultural product by value in this country, with roughly the same value as the third quarter in 2021, just more than $1,06bn (about R18.3bn).
Wool is another key product that faced export restrictions in China earlier this year. The bounce-back on exports we observed in third quarter values also signals the resumption of trade with that country. This is an important market for South Africa’s wool, accounting for more than two-thirds of exports.
From a destination point of view, the African continent remained the largest agricultural export market for South Africa in the third quarter, accounting for 32% in value terms.
Asia and the Middle East collectively were the second-largest region, accounting for 31% of the exports, with the EU holding the third position with a 19% share in total exports in value terms.
The UK is one of the most important agricultural markets for South Africa and accounted for 6% of overall agricultural exports in the third quarter. The balance of 12% value constitutes the Americas and other regions.
South Africa’s trade policy and activity are, of course, not one-directional. The country is also a significant importer of agricultural products, relying on other countries for crucial foods such as wheat, rice, palm oil, sunflower oil and poultry.
These products dominated the food import bill in the third quarter. Some, such as rice and palm oil, cannot be sustainably produced at scale in South Africa because of unfavourable climatic conditions.
As such, in the third quarter of 2022, agricultural imports increased by 5% year on year to $1,9bn.
Aside from the increase in volumes of imports, the higher agricultural commodity prices also contributed to the high import bill.
We believe rice, wheat and palm oil will continue to lead the agricultural import product list when data for the remainder of the year are published.
Overall, South Africa recorded an agricultural trade surplus of $1,9bn in the third quarter of 2022, up by 14% from last year’s corresponding period. The robust exports and a modest increase in imports contributed to this strong trade surplus.
As we have indicated, the critical point from a policy perspective is that South Africa’s agricultural sector is export-orientated. Thus, any improvements in production through various development plans, such as the Agriculture and Agro-processing Master Plan, should be anchored on expanding export markets beyond those that exist.
China, South Korea, Japan, the US, Vietnam, Taiwan, India, Saudi Arabia, Mexico, the Philippines and Bangladesh are key markets in which South African agribusinesses and farmers are interested in expanding their presence. These countries have a sizeable population and large imports of agricultural products, specifically fruits, wine, beef and grains. They are already on the radar of South African authorities.
At the same time, South Africa should not neglect continuous constructive engagements with Europe and Africa as we search for new markets.
All this should happen while domestic efforts to improve network industries (road, rail and ports) are underway. In this respect, there are promising discussions between Transnet and the agricultural industry focused on improving efficiencies and exploring co-investment options in some areas at ports.
This will be a long-term endeavour, but its success will be meaningful for the export-orientated South African agricultural sector.
There also needs to be increased security within logistics as we see escalating cases of criminality against the country’s infrastructure. This will be the only realistic path to maintaining this sector’s growth and, with that, job creation and vibrancy of the rural towns.
Written for and first appeared in the Business Times and Sunday Times, 18 December 2022.
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