There is a noteworthy development in the European Union (EU) and South America. These regions are progressing towards finalising the EU and Mercosur (South America) trade deal. And yes, this has been in the works for some time, but it is moving towards finalising. The deal will remove tariffs on around 90% of trade in goods between the two sides, but primarily over up to roughly 12 years. Agricultural exports from Mercosur will be subject to gradually rising quotas.
This agricultural point caught my attention. The EU is one of South Africa’s essential agriculture markets, accounting for nearly 20% of SA’s agriculture exports. Growing competition from South America in the EU market is something we must watch closely following this deal.
However, I am comforted that South Africa’s agricultural exports to the EU are of high value. For example, citrus, fruit juices, wine, dates, figs, pineapples, avocados, mangoes, nuts, apples and pears, berries, cut flowers, and wool are amongst the primary agricultural products South Africa exports to the EU.
Meanwhile, South America, especially Brazil and Argentina, mainly consists of grains, oilseeds, and beef. Still, we must watch these developments.
The issue of generally increased competition, even if not at the initial stages, underscores the point I have made before that South Africa must consistently seek new export markets for its agricultural exports. The new markets are not meant to replace the EU and other existing markets; they should be a means of diversification. South Africa already exports half of its agricultural produce (US$13, 2 billion in 2023) and expects an increase in domestic production in the coming years.
The new produce must reach markets; it won’t all be existing markets. We must expand to the BRICS and other growing markets. My insistence on BRICS countries is not an attempt to minimise South African agriculture’s relationship with other regions such as the EU, African continent, Asia and Middle East, Americas, etc.
These regions are crucial to South Africa’s agriculture, and the country must nurture its relations with them and agricultural trade.
The push for BRICS is in recognition of two things. First, South African agriculture has low trade with BRICS countries. And yes, BRICS is not a trade bloc, but if trade could be deepened, South Africa’s agriculture stands to benefit.
The original BRICS members only account for 8% of South Africa’s agricultural exports. Yet, the BRICS countries are big agricultural importers. The significant issues are higher import tariffs and phytosanitary barriers.
Second, there is growing protectionism in the existing export markets and competition, such as the EU and Mercosur (South America) trade deal.
Regarding protectionism, remember the EU farm protests earlier this year; they were not all about environmental policies; the farmers also complained about imports.
We also see challenges in the EU, such as the friction of citrus trade with South Africa, which is now at the World Trade Organisation.
So, while South Africa needs to maintain these existing trade relationships, it is equally important to diversify to new regions; thus, we are discussing deepening trade with BRICS countries.
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