by Wandile Sihlobo | May 20, 2023 | Agricultural Trade
Geopolitical risks are back on the SA agricultural agenda. Over the past year the country has felt the effects of Russia’s invasion of Ukraine indirectly through the disruption caused to various commodity supply chains and the consequent surge in prices. This was especially so with grains, vegetable oils, fertiliser, liquid fuels and natural gas.
Now the US accusation that SA supplied military equipment to Russia has raised diplomatic tensions between the two countries, leaving much uncertainty over future political and trade relations.
The matter is likely to be ventilated through diplomatic channels over the coming days and weeks, and it remains unclear where things will settle. But while this unfolds it is worth looking at our economic ties with the rest of the world.
SA benefits far more from trade with the US than with Russia. Therefore, from a purely economic standpoint the obvious approach in an increasingly uncertain world is to nurture relationships with countries with which the country already has strong economic ties.
The US was SA’s second-largest export market in 2022, accounting for 9% of the total, according to data from Trade Map. China was the leading export market, accounting for 10% of our exports. Other important markets include Germany, Japan, the UK, the Netherlands, Mozambique, India, Botswana, Belgium, Namibia and Zimbabwe.
Russia is one of the least important export markets for SA’s exports, accounting for a mere 0.2% in 2022. Over the past five years SA’s total exports to Russia averaged 0.4% of the total per annum.
Economic interests
In the current environment of global geopolitical uncertainty SA should ideally be seeking to deepen relationships with countries that serve the country’s economic interests and, by extension, support domestic employment. Tensions with the US present significant economic red flags for SA.
The first risk is that of negative sentiment rising among critical trading partners against a country allegedly arming an invader, and the loss of credibility regarding SA’s claim to be nonaligned in the Russia-Ukraine conflict.
There are already anecdotal stories about companies delaying investments in SA over fear of rising geopolitical tension and SA’s position on the war. The country’s political leadership should be building on the work of the president’s annual investment conferences in attracting foreign direct investment to drive manufacturing and other sectors and job creation.
Trade is critical from an agricultural perspective. SA exports about half of its agricultural production in value terms, totalling a record $12.8bn in 2022. Maize, wine, grapes, citrus, berries, nuts, apples and pears, sugar, avocados and wool were some of the top exported products last year. Russia is a small market for these, accounting for just 2% of SA’s agricultural exports over the past five years.
The African continent remains an important market for SA produce, accounting for 37% of our agricultural exports in 2022. Asia was the second-largest at 27% of exports, followed by the EU at 19% and the Americas in fourth place, accounting for 7%.
Within the Americas the US is an important agricultural trading partner, accounting for an average of 4% of SA’s annual agricultural exports over the past five years. Fruits, nuts, processed vegetables, wine, dairy products, industrial alcohol, and fruit and vegetable juices are some of the agricultural products SA exports to the US. These products benefit from duty-free access to the US under the African Growth & Opportunity Act (Agoa).
SA is a small, open economy that is highly integrated with the global economy through numerous complex channels. This means the political leadership should primarily position the country in an attractive way for investment, and to gain market access to the world’s fastest-growing economies.
Written for an first appeared on Business Day.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | May 18, 2023 | Agricultural Trade
The extension of the Black Sea Grain Deal for two more months is a positive development and help support the moderation in global grain prices and food inflation.
A brief background for folks that haven’t been following this stuff; the “Black Sea Grain Deal” started in July 2022, facilitated by the United Nations representatives, the Turkish government, and the Russian and Ukrainian governments.
Its goal is to allow grain movement from Ukraine to the world market without military attack by the Russians. This has been a success, as Ukraine has exported over 25 million tonnes of grains and vegetable oils since the deal started.
Notably, global food prices have also moderated considerably over time, partly due to increased shipments of grains and vegetable oils from the Black Sea region to the world market. In April 2023, the FAO Global Food Price Index was at 127 points, down by 9% from July 2022, when the deal was reached, and down 20% y/y.
While the intention was to increase grain exports out of Ukraine, Russia has arguably also benefitted from the grain deal through increasing wheat exports.
Russia typically exports, on average, about 35 million tonnes of wheat a year. Its largest markets include Türkiye, Egypt, Azerbaijan, Kazakhstan, Nigeria, Bangladesh, Sudan, Latvia, Saudi Arabia, Yemen, Cameroon and Israel. The data for Russia’s exports over the past few months is unclear.
Still, we believe Russia also had more incentive to continue with the “Black Sea Grain Deal” as the country had about 44 million tonnes of wheat for exports in the 2022/23 marketing year, up 34% from the previous year.
The International Grains Council’s preliminary projections for the 2023/24 marketing year suggest that Russia will remain with ample supplies on the back of sound production. Thus exports could be at 42 million tonnes.
For these exports to continue out of Russia with minimal interruption, the “Black Sea Grain Deal”, initially set to assist Ukraine, must remain in place.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | May 11, 2023 | Agricultural Trade
China bought 108 104 tonnes of maize from South Africa in the last week of March and the first few weeks of April 2023. This activity formed part of South Africa’s maize exports in the 2022/23 marketing year.
Importantly, this was not the first time China bought South African maize, but the volumes were always small in the past. For example, China’s maize imports from South Africa averaged 3 780 tonnes per annum over the past ten years.
It was the first time we saw such large volumes in recent memory (they probably just discovered our great quality maize – nicely dried in the Southern African sun). This is primarily because South African maize is currently competitively priced and will continue to be in demand from significant global buyers such as China.
Still, if we consider South Africa’s 2022/23 total maize exports of 3,64 million tonnes, China’s recent purchase of 108 104 tonnes is a relatively small volume. South Africa’s leading export markets for maize include Taiwan, Japan, Vietnam, Mexico, Italy, South Korea, Botswana, Zimbabwe, and various markets within the African continent.
We should also remember that China is a large maize producer, accounting for 22% of global maize production, an average of 277 million tonnes. Still, because of their significant usage, China imports maize from the world market.
Over the past three seasons, China’s maize imports averaged 25 million tonnes a year. The leading suppliers of maize to China included the United States, Ukraine, Bulgaria, Russia and Kazakhstan, and South Africa.
So, I have doubts that South Africa’s recent maize exports to China are some political posture, somewhat attempting to replace the U.S., as some media houses have argued.
One has to appreciate that the U.S. maize exports to China averaged 17 million tonnes yearly in the past two seasons. This far exceeds South Africa’s total maize production of 15,9 million tonnes this year.
In good seasons, South Africa’s maize exports are usually just over 3 million tonnes to a range of markets I mentioned above. Hence, I believe China’s recent maize imports from South Africa were a general market activity, i.e., supply diversification, and we shouldn’t read too much into it.
Of course, as a proudly South African working in agriculture, I am always supportive of expanding our agricultural exports to China and keen on seeing more of our high-quality fruits, grains and beef on the plates of Chinese consumers.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Apr 25, 2023 | Agricultural Trade
South Africa’s livestock industry has faced numerous challenges over the past few years. One of these was the rise in feed prices since 2020, especially for maize and soybeans. The rise in animal feed prices coincided with a worsening in consumers’ financial strain due to the damaging effects of the pandemic. Thus, we saw a decline in the demand for red meat products as consumers opted for relatively cheaper forms of protein.
Moreover, the spread of foot-and-mouth disease (FMD) to six of South Africa’s nine provinces for the first time in history was another challenge for the industry. This brought temporary bans in certain export markets, extending to auctions and livestock movement, mainly cattle, for some time in 2022.
Despite the FMD-related export bans, South African beef producers sent sizable volumes of beef products to markets that did not close the import channel. This is evident in the beef exports for 2022, which amounted to 28 422 tonnes (albeit down 12% from 2021), according to data from Trade Map. This is only mildly below the ten-year average exports.
Fresh beef accounted for 54% of overall exports, while the balance was frozen beef. Within this total figure, a significant decline was recorded in frozen beef exports, which were at 12 945 tonnes in 2022, down 24% year-on-year. Meanwhile, fresh beef exports increased by 2% year-on-year to 15 477 tonnes.
The key markets for South Africa’s fresh beef were Kuwait (with a market share of 22%), Jordan (16%), Mozambique (13%), United Arab Emirates (12%), Qatar (9%), Netherlands (4%), Lesotho (3%), Canada (3%), Zimbabwe (3%), Mauritius (3%), and Eswatini (2%). These markets accounted for 90% of South Africa’s fresh beef exports in 2022.
In the case of frozen beef exports, the top export markets were Lesotho (16%), China (14%), Nigeria (14%), United Arab Emirates (9%), Mozambique (7%), Kuwait (6%), Egypt (5%), Qatar (4%), United Kingdom (3%), Netherlands (3%), and Jordan (2%). These markets accounted for 82% of South Africa’s frozen beef exports in 2022.
The outbreak of the foot-and-mouth disease also negatively impacted South Africa’s wool exports. China, which accounts for roughly 70% of South Africa’s wool exports in value terms, temporarily suspended South Africa’s wool exports in the second quarter of 2022 and only opened the market in the last week of August 2022.
The suspension happened despite a unique protocol to handle the wool shipments and avoid contamination during a foot-and-mouth disease outbreak in South Africa. South Africa and China agreed on this protocol following the 2019 outbreak, which weighed on exports.
This resulted in a 21% year-on-year decline in the export value of wool in 2022, to US$337 million, according to data from Trade Map. Still, this is significant, accounting for 3% of South Africa’s record agricultural export value of US$12,8 billion in 2022. Meanwhile, beef exports were about 1% of agricultural exports, valued at US$151 million in 2022.
Aside from the trade dynamics, the wool and beef industries are also among the agricultural subsectors with a large share of new-entrant black farmers that also experienced financial pressures over the past couple of years of higher input costs and animal disease outbreaks. The National Agricultural Marketing Council estimates suggest that black farmers account for 18%, 13% and 34% of wool, mohair, and cattle production, respectively.
The outbreaks we faced in the last few years will not be the last. Other industries that face the same challenge are poultry and piggery, which are susceptible to diseases such as African swine fever and avian influenza, which typically come as a heavy financial burden for producers. South Africa’s inability to control the spread of disease in the recent outbreaks signals a failure in the country’s veterinary services and related support services (laboratories and vaccine production).
Therefore, the government and organized agriculture bodies should work together to address the biosecurity challenges. The government should lead the way to keep up with the promise of the Agriculture and Agro-processing Master Plan, which seeks to boost collaboration amongst social partners to improve inclusive growth in agriculture.
Written for and first appeared in Business Day.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Mar 19, 2023 | Agricultural Trade
This year South Africa assumed the role of chair of the BRICS grouping of countries, taking over from China, which chaired in 2022.[1] While South Africa previously chaired the grouping in 2018, each tenure is different and brings a new opportunity to influence the agenda within this economically influential grouping of countries.
The BRICS grouping is not a formal economic or trade bloc; still the business communities from each country typically look for ways to deepen trade and investments with other BRICS partners. South Africa’s BRICS Business Council is one formation that actively engages with other BRICS member states’ business councils or chambers to explore economic opportunities within this same grouping.
This year, the South African BRICS Business Council will also lead the agenda in the same form as the political principals chairing BRICS. The agriculture and agribusiness role players are appropriately represented through the agribusiness working group within the Business Council.
SA agriculture trade interests
The main interests of South African agriculture and agribusiness in the grouping are advancing agricultural exports, specifically to China and India.[2] These are countries that have relatively solid economic growth prospects and large populations, which equates to sustainable markets.
Brazil tends to be a competitor with South Africa in major agricultural commodities due to its location in the southern hemisphere, while Russia is an important market for South African fruit and a major supplier of wheat.
Still, since Russia invaded Ukraine, continuing commerce and creating new opportunities with the country is generally risky. With that said, the posture some businesses have taken has been to follow the national policy on matters concerning the Russia-Ukraine war.
This year is another opportunity for South Africa to push for increased agricultural exports into the BRICS countries. As things stand, the BRICS countries account for a relatively small share of South Africa’s agriculture exports – an average of 8% over the past 10 years in total agricultural exports of US$9,9 billion.[3]
China is the leading market, accounting for an average of 5% of South Africa’s agricultural exports to the world. The top products were wool, citrus, beef, nuts, and grapes.
The second-largest market of South African agribusinesses within BRICS was Russia, accounting for an average 2% over the past decade. Citrus, apples, pears, grapes, and wine were some of the top agricultural products South Africa exported to Russia during this period. India and Brazil were negligible importers of South African agricultural products.
While the BRICS countries imported an average of US$764 million of agricultural products from South Africa, a small share in the nearly US$10 billion South Africa exported over the past decade annually, the grouping imported an average of US$196 billion worth of agricultural products from the world market. This data excludes South Africa, which provides some perspective of the overall size of the agricultural market within BRICS.
The average annual figure of US$764 million the BRICS countries imported from South Africa over the past 10 years makes South Africa a small player in agricultural trade in this grouping. China is the largest importer, accounting for 67% of the total BRICS agricultural import of US$196 billion, followed by Russia (16%), India (12%), and Brazil (5%).
These realities imply that within the agribusiness stream of the BRICS Business Council and the broader political grouping, the South African representatives should continue to advocate for lowering import tariffs for agricultural products, specifically in India and China.
This should take shape of commodity-specific protocol, with conducive market conditions. A reciprocity principle may be unfavourable for some South African industries. At the same time, the business community will have to actively promote the “proudly South African” agriculture (and broadly food, fibre, and beverages) products in this grouping of countries.
Regarding the import tariffs with BRICS, consider the case of the wine trade in China. The likes of Australia and Chile access the Chinese market at 0% preferential tariffs. However, South African producers face duties as high as 14%.[4] This is understandable as Australia, New Zealand, Peru, and Chile have bilateral agreements with China. South Africa does not, and thus faces higher duties. Still, the country’s involvement in BRICS, while a political grouping and not a trade bloc, should provide an opportunity to lobby for lower duties on food, fibre, and beverages products, on a commodity-specific protocol.
Such engagements, however, will not be smooth as China and India would most likely want a reciprocal engagement with South Africa. This will put South Africa in a challenging position as the country is also pushing its localization strategy, particularly in the manufacturing space, which will likely interest China and India.
This is also an issue that industry players should consider when engaging with the South African authorities about their export market aspirations to China and India. So, South African policymakers will need to make necessary trade-offs, weighing both our export ambitions and the localization strategy. Trade policies and sector development strategies will need to be calibrated in ways that take advantage of new market opportunities presented by South Africa’s term of chairmanship in BRICS.
In addition to the aspect of deepening trade, other areas South African agribusinesses will most likely explore within BRICS Business Council are fertilizer trade and production, as well as deepening knowledge sharing and investment in agricultural technology and finance. It is still early in the year, and the results of these engagements will be evident towards the end of 2023.
Conclusion
Overall, BRICS involvement presents yet another opportunity for South Africa to promote its growing agricultural products and search for additional markets. Still, South Africa should not neglect its key agricultural markets, such as the African continent, EU, and some regions of Asia, which have, over the years, ensured that the country maintains sizable export value.
Beyond BRICS, South Africa’s priority countries for agricultural exports should be South Korea, Japan, the USA, Vietnam, Taiwan, India, Saudi Arabia, Mexico, the Philippines, and Bangladesh. All have sizeable populations and are large importers of agricultural products, specifically fruits, wine, beef, and grains.
Note: Written for and first appeared on Econ3x3.
[1]Read more at: https://www.bloomberg.com/news/articles/2023-01-09/s-africa-to-use-brics-chair-role-to-advance-africa-interests#xj4y7vzkg
[2] Sihlobo, W. 2023. Farming in South Africa: 6 things that need urgent attention in 2023: Johannesburg: The Conversation. Available: https://theconversation.com/farming-in-south-africa-6-things-that-need-urgent-attention-in-2023-197772
[3] These calculations are based on data from Trade Map. It can be accessed at: https://www.trademap.org/Index.aspx
[4] Trade Map: https://www.trademap.org/Index.aspx
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Mar 4, 2023 | Agricultural Trade
South African agricultural exports were up for the third consecutive year in 2022, reflecting favourable production conditions and higher commodity prices. The export numbers for the full year have not yet been published. I have calculated the annual data for 2022 using quarterly trade export statistics published by Trade Map, a trade statistics portal developed by the International Trade Centre, the United Nations Conference on Trade and Development, and the World Trade Organisation.
The major export crops continued to be maize, wine, grapes, citrus, berries, nuts, apples and pears, sugar, avocados, and wool.
These products have been the drivers of exports over the past couple of decades. In particular, fruit and wine have increasingly become the leading export products. These have driven a rise in the value of agriculture (and agro-processing) exports, which have averaged 11% of South Africa’s overall exports, up from 9% in the decade before.
South Africa now exports roughly half of its agricultural produce in value terms. Citrus, table grapes, wine, and a range of deciduous fruits dominate the export list. Increasingly, we are seeing the encouraging uptick in beef exports.
These robust exports have enabled South Africa to retain its position as a net exporter of agricultural products over time. In 2022, South Africa’s agricultural exports reached US$12.8 billion, up 4% from the previous year.
Imports, nevertheless, remain significant, averaging US$6.6 billion over the past five years. In 2022, the top imported products were rice, palm oil, wheat, poultry and whiskies. These originated primarily from Asia, the European Union, the UK, and the Americas.
Based on my calculations, using Trade Map 2022 data, South Africa’s agricultural imports amounted to US$7.3 billion, up 6% from the previous year. Considering this import value against the export value of US$12.8 billion, South Africa’s agriculture realised a record trade surplus of US$5.5 billion.
In view of this, the focus should now be on expansion of South Africa’s agricultural exports beyond its typical markets in the African continent, EU, and parts of Asia, to new growth frontiers. There is growth in domestic production, and South Africa will require new markets for the expanding harvest.
The priority countries for expanding agricultural exports should be China, South Korea, Japan, the US, Vietnam, Taiwan, India, Saudi Arabia, Mexico, the Philippines, and Bangladesh. All have sizeable populations and large imports of agricultural products.
Who is buying South African?
My calculations using Trademap data show that the African continent remains a leading market, accounting for 37% of South Africa’s agricultural exports in 2022.
These exports are concentrated within the Southern African Development Community region. But my recent research shows that South Africa’s agriculture export opportunities within the African continent will be limited due to structural challenges, preventing the agricultural sector from expanding its exports into untapped markets. This is despite the hope that’s been placed on the African Continental Free Trade Area.
Asia was the second-largest agricultural market, accounting for 27% of exports, followed by the EU, accounting for 19%. The Americas region was the fourth largest, accounting for 7%, and the remaining 10% went to the rest of the world.
Within the rest of the world category, the UK, historically South Africa’s major market for agricultural produce, was one of the leading markets.
The products of exports to these markets were primarily the same, with the African continent and Asia importing over two-thirds of maize harvests. Meanwhile, exports to other regions were mainly fruit and wine.
Asia has seen much faster growth in exports over the past six years, while the African continent and the EU have remained fairly stable.
Challenges
South Africa’s robust export earnings were achieved in the face of various challenges in ports and key export markets.
For example, at the start of 2022, logistical challenges in the port of Cape Town disrupted the exports of table grapes and other deciduous fruits. Thankfully, cooperation between Transnet and organised agriculture helped minimise the constraints, and opened up channels of communication that were critical for managing the flow of exports and attending to pressing problems.
The Durban port, which handles about 60% of the country’s exports and imports, faced fewer challenges than the previous year. As a result, citrus exporters faced a relatively better export season from a logistics perspective. The smoother flow of agricultural exports through Durban was also brought about by increased cooperation between organised agriculture and Transnet.
Credit should go to organised agriculture groupings, the government, Transnet, and various logistical groups that worked tirelessly to ensure a flow of products to export destinations. While there are still many challenges within logistics, Transnet’s willingness to cooperate closely with the agricultural community has helped improve product flow.
South African exports also faced non-tariff barriers in some key export markets, such as China for wool and the EU for citrus.
China temporarily blocked South African wool in response to the outbreak of the foot-and-mouth disease in South Africa.
This was a misstep on China’s part as there is already a framework for dealing with an outbreak of foot-and-mouth disease to ensure the safety of wool exports to China. Notably, the outbreak was on cattle, not sheep, which should have provided further comfort about the safety of wool exports.
China lifted the ban after about four months. However, it had already had a notable financial impact on South African wool farmers and exporting businesses. China accounts for just over 70% of South Africa’s wool exports.
For its part, the EU imposed protectionist measures on South Africa’s agriculture by changing its regulation on plant safety for citrus without notifying its trading partners in a reasonable time.
The new regulation purports to protect the EU from a quarantine organism, “false codling moth”, by introducing stringent new cold treatment requirements, particularly on citrus imports from Africa, mainly affecting South Africa, Zimbabwe, and Eswatini. This was a contentious issue, especially as South Africa had already put rigorous measures to control the moth, which the EU used as a pretext to restrict citrus imports from Africa.
Focus areas
Given that South Africa’s agriculture is export-orientated, the focus should be on maintaining smooth relations with existing critical export markets while searching for additional new markets.
This is particularly important in the context of growing tensions between the east and the west, specifically between the US and China.
South Africa has to maintain open and friendlier relations with both groupings as the exports of agriculture are evenly spread across these regions.
Written for and first published on The Conversation.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Feb 21, 2023 | Agricultural Trade
Despite various headwinds throughout the year, South Africa’s agriculture exports for 2022 did not decline as much as some feared. Data for the first eleven months of the year show exports at a cumulative US$11,9 billion, up 3% from the same period in 2021.
Moreover, US$11,9 billion is the second largest agriculture exports value on record. When we receive the December exports figure in the coming weeks, it is possible that the 2022 agricultural exports could be just under 2021 levels of US$12,4 billion or even exceed them.
This data is particularly encouraging since 2022 presented various challenges to South Africa’s agriculture. At the start of the year, logistical challenges in the ports of Cape Town disrupted the exports of table grapes and other deciduous fruits.
Thankfully, the cooperation between Transnet and organized agriculture helped to lessen the constraints and opened up channels of communication that were critical for managing the flow of exports and attending to pressing problems.
Meanwhile, the port of Durban faced fewer challenges than the previous year, with citrus exporters facing a relatively better export season from a logistics perspective. This was also brought through increased cooperation between organized agriculture and Transnet. Indeed, there are still many challenges within logistics, but Transnet’s willingness to cooperate closely with the industry has helped.
In key export markets such as China for wool and the EU for citrus, South Africa faced non-tariff barriers. China temporarily blocked South African wool in response to the outbreak of the foot-and-mouth disease in South Africa. But this was a misstep on China’s part as there is already a framework to manage wool exports in periods when there is a foot-and-mouth disease to ensure the safety of the wool exported.
Notably, the outbreak was on cattle, not sheep, which should have provided further comfort about the safety of the wool exports. Positively, after a few months, China lifted the ban, although it had already had a notable financial impact on South African wool farmers and exporting businesses. China is an important market for South African wool, accounting for just over 70% of the wool exports.
Similarly, the EU imposed protectionist measures on SA agriculture by changing its regulations on plant safety for citrus without notifying its trading partners within a reasonable time. The new regulation purports to protect the EU from a quarantine organism, “False Codling Moth”, by introducing stringent new cold treatment requirements, particularly on citrus imports from Africa, mainly impacting South Africa, Zimbabwe, and the Kingdom of Eswatini.
These are the largest suppliers of citrus to the EU region. For example, over the past five years, South Africa has constantly been the leading supplier of citrus to the EU region, accounting for an average of 12% in value terms. This was a contentious issue, mainly as South Africa had already put rigorous measures to control the False Codling Moth, which the EU used as a pretext to restrict citrus imports from Africa. It appeared that the EU used the new regulations to protect citrus-growing countries like Spain, which had to compete with products from Southern Africa.
Also worth noting is that the spread of foot-and-mouth disease in the cattle industry was vast and, for the first time, in six of South Africa’s nine provinces. This resulted in a decline in slaughtering activity in some major feedlots. Subsequently, beef exports were also limited as some key markets had imposed a ban on livestock products from South Africa.
Regarding field crops, the production of key crops, such as maize, was not as robust as the previous year. The maize harvest was 15,5 million tonnes, down by 5% from the prior season. This meant that the export volume would also decline somewhat. But other crops such as soybeans reached a record level of 2,2 million tonnes and thus led to an increase in exports.
At the core, the generally higher commodity prices, specifically grains, and oilseeds, helped boost the export values, compensating for a slight volume decline.
Regarding products and destinations, the export mix is not as different from the previous year. For example, citrus, maize, apples, pears, wine, grapes, figs, dates, avocados, nuts, fruit juices, wheat, wool, and sugar were still among the top exportable products in 2022.
From a destination point of view, the African continent remained the largest agricultural export market for South Africa, followed by Asia as the second largest market, and the EU held the third position. Notably, the United Kingdom remains one of the most important agricultural markets for South Africa, and there was also a flow of exports to the Americas region.
Ultimately, while we are yet to have full-year data, the available figures for the first eleven months show that South Africa’s agricultural exports far surpassed some expectations. The reasonably higher commodity prices were at the core of this solid export activity.
For 2023, government and organized agriculture should intensify the drive to expand export markets while maintaining the above existing ones should remain a priority. This entails the continuous engagement of the above markets by the South African authorities and mending relationships with regions like the EU where there has been friction with citrus exports.
For expansion, the priority countries should be China, South Korea, Japan, the USA, Vietnam, Taiwan, India, Saudi Arabia, Mexico, the Philippines, and Bangladesh. All have sizeable populations and large imports of agricultural products, specifically fruits, wine, beef, and grains. The DTIC, DALRRD, and DIRCO should keep these countries on their priority list for South Africa’s agriculture and agribusiness export focus.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Feb 12, 2023 | Agricultural Trade
In 2023 SA assumed the role of chair of the Brics bloc of countries, taking over from China, which chaired it last year. While SA has chaired the grouping in 2018, each tenure is different and brings a new opportunity to influence the agenda inside this economically influential grouping of countries.
Not a formal economic or trade bloc, the business communities from each country typically seek ways to deepen trade and investment with other Brics partners. The SA Brics Business Council has various working groups that engage with other member states to this end. This year the council will also lead the agenda, in line with its political principals chairing Brics.
The main interest of SA agriculture and agribusiness in the grouping is to advance agricultural exports, specifically to China and India. These are countries that have relatively solid economic growth prospects and large populations (and therefore markets), though Brazil tends to compete with SA in big agricultural commodities.
Russia is an important market for SA fruit and a big supplier of wheat to SA, though since Russia invaded Ukraine advancing commerce with the country has become risky. Yet, some businesses have opted to follow the national policy on matters concerning the Russia-Ukraine war.
The Brics countries account for a small share of SA’s agriculture exports — an average of 8% over the past 10 years, of total annual agricultural exports of $9.9bn. China is the leading market, accounting for an average of 5% of SA’s agricultural exports to the world. The top products exported to China were wool, citrus, beef, nuts and grapes. The second-largest market for SA agribusinesses within Brics was Russia, accounting for an average of 2% over the past decade. India and Brazil were negligible importers of SA agricultural products.
Small player
While the Brics countries imported an annual average of $764m of agricultural products from SA, a small share of the nearly $10bn SA exported annually over the past decade, the grouping imported an average of $196bn worth of agricultural products from the world market. This data excludes SA to provide a view of the size of the agricultural market we could be part of within Brics.
The $764m the Brics countries imported from SA over the past decade makes us a small player in the grouping’s agricultural trade. China is the largest importer, accounting for 67% of the total Brics agriculture import of $196bn, followed by Russia (16%), India (12%), and Brazil (5%). This implies that within the agribusiness stream of the Brics Business Council and the broader political grouping, the SA representatives should continue to advocate lower import tariffs on agricultural products, specifically from India and China.
The business community will have to actively promote the “proudly SA” agriculture (and broadly food, fibre and beverages) products in this grouping of countries.
Regarding the import tariffs within Brics, consider the case of the wine trade with China. The likes of Australia and Chile access the Chinese market at 0% preferential tariffs, while SA producers face duties as high as 14%. This is understandable as Australia, New Zealand, Peru and Chile have a bilateral agreement with China. SA does not have such agreements and thus faces higher duties. Still, our involvement in Brics, though it is a political grouping and not a trade bloc per se, should provide an opportunity to lobby for lower duties on food, fibre and beverage products.
Such engagements will not all be smooth sailing, as China and India would most likely want a reciprocal agreement with SA. This will put us in a challenging position as the government is simultaneously pushing its “localisation” strategy.
Written for and first appeared in Business Day.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
