The Middle East is deepening its economic ties with Africa. This past weekend, The Economist magazine ran an article titled “The Gulf’s scramble for Africa is reshaping the continent“, which focused on growing geopolitical ties and significant investments in infrastructure projects such as ports in various African countries.
The leading countries are the United Arab Emirates (UAE), Saudi Arabia and Qatar. For countries like South Africa, with diverse interests worldwide, the Middle East’s growing interest in Africa requires proactive engagement, particularly for drawing in investments and opening up the market for exporting sectors of the economy.
Investment need
Agriculture is one sector that needs investment and a broadening of export markets. Consider the eastern regions of South Africa and the former homelands; these areas typically are on the periphery of agricultural progress because of poor land governance and weak infrastructure, which renders them effectively isolated from the formal value chains of the food, fibre, and beverage sectors. In some areas, the transaction costs of moving agricultural produce to the consumption points become too high because of the lack of roads, rail and storage facilities.
In the regions historically part of the commercial farming sector, the deteriorating network infrastructure is also increasingly a significant cost driver for businesses. These include roads, rail, water, dams, storage facilities and the on-farm infrastructure.
It is in these areas of South Africa’s agriculture, food, fibre and beverages value chain that one should ask whether it would be worthwhile to assess if the Middle-East countries that are in search of opportunities to invest would not, with the help of local stakeholders, form commercially viable business ventures that respond to the above challenges. Some investments would form part of joining with South African agribusinesses and farming enterprises that aim to expand their operations and require capital for such activities.
The significant funds in these Middle Eastern countries also have some form of government involvement. The South African government, particularly the Department of Trade, Industry and Competition (DTIC) and the Department of Agriculture, Land Reform and Rural Development (DALRRD), should lead the way in the formulation of a “Middle East-South Africa Agricultural Investment Strategy”.
Such a strategy would be helpful in formally starting a conversation with the Middle-East stakeholders and introducing South African firms and farming businesses.
South Africa is heading towards general elections in May, and the political leadership may have its eyes on the election, with perhaps limited time for such tedious but important activities. Still, the officials of the departments will remain regardless of potential changes in the political leadership.
This means the Directors General of the DTIC and DALRRD should consider starting such work and keeping their political leaders apprised of progress. Also, the current political leadership could start prioritizing such work even in the uncertain election climate, as this is a vital programme for the country regardless of the leadership.
Export drive
Beyond the investment need and the challenges South Africa’s agriculture faces, the country is export-oriented, with exports reaching a record US$13,2 billion in 2023, according to data from Trade Map. The Middle East region is increasingly important in the South African agricultural trade. For example, in 2023, Asia and the Middle East accounted for 28% of South Africa’s agricultural exports, the second largest region.
The African continent remains the leading market, accounting for 38% of South Africa’s agricultural exports in 2023 in value terms, while the EU comes in third at 19%, the Americas fourth at 6%, and the rest of the world at 9%.
South Africa primarily exports citrus, apples and pears, beef, fresh berries, grapes, and sheep and goat meat to the Middle East. These industries have a potential for growth in South Africa and, therefore, prospects of large volumes for exports to the Middle East.
Still, if one focuses on the key economies in the Middle East, South Africa plays a peripheral role in agricultural markets. For example, Saudi Arabia imported US$29,5 billion of agricultural products in 2022, according to data from Trade Map. South Africa was a minor exporter, accounting for a mere 1% of the Saudi Arabian imports, and ranked 31st in the agricultural importers list.
Similarly, the UAE imported US$23,3 billion of agricultural products in 2022, with South Africa capturing a mere 2% market share as the 16th largest supplier. Qatar, which imported US$3,9 billion of agricultural products in 2022, with South Africa playing a small role, ranked 10th in the list of suppliers and with a 2% market share in Qatar’s agricultural imports.
The countries that occupied a larger market share in these Middle Eastern countries were generally India, Brazil, Australia, the United States, Canada, New Zealand, United Kingdom, Denmark, Netherlands, Italy, Spain, Argentina, Russia, France, and Turkey. Regarding the products, the Middle East primarily imports various meat products, grains, oilseeds, and fruits, amongst other products.
This means South Africa would benefit from increasing its market share; something that is only possible through targeted promotion and marketing of products, along with government support to nudge the Middle Eastern countries to address any remaining phytosanitary barriers for South African products in these countries.
Policy consideration
While South Africa faces challenges of drought in the near term, the goal of growing the agricultural sector should remain a priority for all stakeholders. The following should be the next steps in engaging the region:
- The DTIC and DALRRD should formulate a Middle-East-South Africa Agricultural Investment and Trade Strategy. This Strategy would help rank the priority list of products for investments and map up any barriers that should be addressed within the government’s official channels, with timelines. The document would also outline possible investment paths aligned with industries highlighted in the Agriculture and Agro-processing Master Plan, as well as the opportunities presented on PLAS land and in the former homelands, amongst other opportunities.
- The DALRRD should appoint attachés in the Middle-East region who would communicate and lobby for South African agricultural products in the area.
- The DITC should engage with International Relations officials to actively promote South Africa’s agriculture and agro-processing sector as an investment destination.
- The private sector and organized agriculture should be involved in all the above stages.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
