I know some people have strongly argued that we must deepen our trade with the African continent to lessen the higher exposure to some risky regions. The African continent does present opportunities for the various sectors of our economy, but for agriculture, I am not as optimistic, at least in the near term.
You see, the continent is already an important market, accounting for roughly half of our agricultural exports of US$13.7 billion in 2024. But if one looks closely at the data, one realises that approximately 90 cents in every dollar of these exports are to the neighbouring Southern Africa region. These are mainly in the Southern Africa Customs Union (SACU) and the Southern African Development Community (SADC) Free Trade Area (FTA). We will likely remain heavily dominant in these regions for some time, but the growth is limited. We have to play a more maintenance approach rather than hoping for further expansion in the area.
The product scope of agricultural exports into SACU and SADC is quite diverse. It includes maize, processed food products, apples and pears, sugar, animal feed products, prepared or bottled water, fruit juices, and wine.
The question is, just how much more can South Africa export beyond SACU/SADC?
The most reasonable assumption is for South Africa to target West, East, and North Africa. But such an expansion has limits.
For a start, Africa north of the Saharan, more specifically the Maghreb region (i.e., Algeria, Libya, Mauritania, Morocco and Tunisia), is much closer to Europe, and its trade activity is more closely linked to the EU rather than sub-Saharan Africa.
In addition, South Africa competes with this region in several products where it aims to increase its exports, primarily the high-value horticulture products. Establishing a market presence in North Africa may prove challenging due to direct competition with well-established EU supply chains and competitive local produce.
South Africa’s realistic opportunity within the African continent is more likely in East and West Africa. Leveraging the African Continental Free Trade Area (AfCFTA)’s tariff-free movement of goods would potentially boost the country’s agricultural exports to these regions. But, at least in the near term, trade with these regions may not yield many benefits for South Africa.
There are at least three reasons why not: East and West African regions have a range of Non-Tariff Barriers, which could hinder boosting trade regardless of lower tariffs brought by the AfCFTA; secondly, high levels of corruption, which increase the costs of doing business, have proven to be a significant business concern; and thirdly, fragmented value chains owing to poor connectivity and infrastructure are also a major contributor to transport costs, which tend to increase significantly as goods are transported inland.
This narrow scope of expanding agricultural exports in the African continent typically leads to frustration amongst business leaders, who continue to see improvement in production domestically, but are limited in avenues for sales. The major economies in the east and west of the continent, Nigeria and Kenya, remain tiny markets for South Africa’s agricultural exports, each accounting for a mere 2% a year.
Still, Nigeria spends over US$6 billion on agricultural imports a year. The key beneficiaries of the Nigerian agriculture market are Brazil, the US, China, Russia, Canada, New Zealand, and Germany. This is through imports of wheat, dairy products, sugar, processed food, palm oil, and maize, among other products.
Meanwhile, Kenya is a relatively small market with just over US$2 billion worth of agriculture and food imports a year. The key suppliers are Indonesia, Malaysia, Argentina, Russia, Pakistan, Uganda, Tanzania, India, and Egypt. Kenya’s key agriculture and food imports are palm oil, wheat, rice, sugar, processed food, maize, dairy products, pasta, and sorghum, among others.
The composition of food and agricultural imports into these two countries is also indicative that South Africa’s scope to export high-value horticulture, meat, and wine products is limited. These countries import primarily staple food products, and as such, they are markets that would be worth pursuing for grain farmers. Still, non-tariff barriers remain a stumbling block, even for grains, as Kenya prohibits the importation and cultivation of genetically modified maize, which South Africa produces.
It is partly these reasons that I have consistently pointed out that, for the near term, we must focus on Asia, the Middle East, and the BRICS countries. The African continent remains valuable, but we must focus on maintaining these markets rather than hoping for further expansion in agricultural exports.
Note: This comment draws from my piece with Dr Tinashe Kapuya, which is accessible here.
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