by Wandile Sihlobo | Apr 30, 2020 | Africa Focus
This essay first appeared on Business Day, April 28, 2020
Global food and agricultural supply chains are taking strain from disruptions caused by the Covid-19 pandemic. This is the case whether one looks at meat or grain supply chains.
First, the US, Brazil and Canada, which accounted for nearly a third of global meat and edible offal exports in 2019, have closed some of their meat processing plants over the past few days in response to the spread of Covid-19 among employees. In the US and Canada, the major closures are beef and pork processing plants, while in Brazil the closures are of poultry-related plants. Given these countries’ significant combined contribution to global meat exports of 28%, if the plant closures spread and they remain closed for a prolonged period there could be a global meat shortage and a potential uptick in prices.
Fortunately for SA, from a beef perspective, it is a net exporter. Hence the closures of certain plants in top exporting countries present minimal risks from a food security perspective. However, when it comes to pork SA remains a net importer of mainly ribs from Europe. These imports accounted for roughly 6% of domestic consumption in 2019. Similarly, about 20% of domestic poultry consumption is imported, mainly from Brazil, the US and EU, according to Trade Map data. This essentially means that if the disruptions to meat processors in the US and Brazil persist and spill over to the global market, SA will be affected, particularly when it comes to poultry imports.
Second, wheat continues to be plagued by the spectre of export limitations. In March Russia placed an export quota of 7-million tonnes of wheat in the three months to June to protect its domestic supply during the pandemic before the July harvest of its new crop. This quota has now been reached, and it is unclear if the country will issue a new quota for the remaining months leading to July.
Russia is the world’s leading wheat exporter, accounting for 19% of global wheat exports in the 2019/2020 season. On average, exports account for 45% of Russia’s wheat production of 77-million tonnes. With the International Grains Council forecasting a 9% year-on-year increase in Russia’s wheat production in 2020/2021, I doubt further wheat export restrictions will be announced post-July 2020. Nonetheless, the policy direction Russia takes will have implications for SA, which imports half of its annual wheat consumption, with Russia among the leading suppliers.
Third, looking further afield to the rest of Africa, there are rising concerns over food insecurity in 2020. These stem from unfavourable weather conditions, which has negatively affected agriculture in various countries and spreading locust swarms.
Zimbabwe suffered from drought and floods in 2019, and the production of staple crops fell more than half. Agriculture in Zimbabwe also started the 2020 production season on the back foot due to unfavourable weather. The International Grains Council forecasts the country’s 2019/2020 maize production at 800,000 tonnes, which is less than half of what it needs to satisfy annual consumption of 2-million tonnes. In East Africa, as locusts continue to spread Kenya, Somalia and Uganda could experience crop losses.
It is important that the disruptions to meat supply chains in the US, Brazil and Canada are monitored, but I don’t foresee an immediate threat to SA’s supplies. This is because of the country’s relatively lower dependence on imports of meat. In the case of wheat, Russia is a big enough wheat market to warrant policy attention. On the rest of the continent, the lingering challenge of food insecurity has only been accentuated by the Covid-19 pandemic.
To mitigate societal risk, food insecurity should be on the front burner when the continent mobilises resources from the public purse and multinational and developmental institutions.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Apr 24, 2020 | Africa Focus
The COVID-19 pandemic will exacerbate an already dire situation of food shortage in some African countries. Professor Mzukisi Qobo (Head of Wits School of Governance, University of Witwatersrand), Isaah Mhlanga (Chief Economist at Alexander Forbes) and I have an essay out this morning which discusses this matter. You can access it here.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Feb 25, 2020 | Agricultural Production
The authorities in Kenya, Ethiopia, Somalia and Uganda are struggling to control the spreading desert locust infestation. Recent reports from the Food and Agriculture Organization of the United Nations (FAO) suggest that the situation there remains “extremely alarming”. Over the weekend, the Democratic Republic of Congo was the latest to report an infestation of the desert locust, which seem to have crossed over from Uganda with heavy winds.
This is a threat to food security as these locusts are damaging field crops and grazing fields. The FAO estimates that the locusts have spread over nearly half a million hectares across the aforementioned countries. What’s more, about 11.9 million people, which heavily rely on agriculture, are already experiencing acute food insecurity in Kenya, Ethiopia and Somalia. The locusts will exacerbate this already bad situation.
To zoom into Kenya, the country already has a fragile food system. Kenya experienced drought in 2019 which saw its staple maize harvest falling 15% y/y to 3.4 million tonnes, which is well below the annual maize consumption of 4.7 million tonnes. This saw the country needing maize imports of 1.3 million tonnes in a marketing year that ends in April 2020 in order to meet its annual maize requirements.
I had hoped that 2020 could be a recovery year and Kenya’s maize import needs could be reduced. The spreading desert locust, however, threatens to keep the country a basket case; along with Ethiopia, Somalia and Uganda which currently have millions of people in acute food insecurity.
Overall, the spread of these locusts is evidence that the local authorities are struggling to control them. This then calls for international interventions – a view the FAO has also expressed here. This is indeed a locust crisis.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Feb 19, 2020 | Agricultural Production
In his 2020 State of the Nation Address, President Cyril Ramaphosa noted that “this year we will open up and regulate the commercial use of hemp products, providing opportunities for small-scale farmers; and formulate policy on the use of cannabis products for medicinal purposes, to build this industry in line with global trends. The regulatory steps will soon be announced by the relevant ministers.” This is already part of the sectoral master plans that are being developed, specifically the Department of Agriculture, Land Reform and Rural Development, as well as at the Department of Trade, Industry and Competition.
South Africa is not the only African country that is suddenly taking interest in cannabis. A number of Africa countries have in the recent past reformed their cannabis regulations – moving away from it being a prohibited drug to a source of income as an exportable commodity. This is motivated by the promise of riches, with many policymakers viewing the burgeoning cannabis industry as offering prospects for boosting rural economic growth and job creation. This seems to be particularly the case for South Africa, although it is still unclear how much revenue the country can derive from this plant.
Such countries include Lesotho, which was the first African country to issue licences for the cultivation of medical cannabis in 2017. This saw international investment being directed into the country in 2018. Zimbabwe issued its first cannabis licence in March 2019. Zambia is the latest country to legalise medical cannabis, announcing in December 2019 that medical cannabis for export would be permitted in the country. However, the government has stressed that cannabis will remain prohibited for domestic use. Uganda has also taken positive steps towards legalisation of medical cannabis, having issued commercial licences to two operators, and looking to potentially legalise medical cannabis cultivation in 2020.
Other countries, like Eswatini, have also put in place a draft bill regulating cannabis. Similarly, to Zimbabwe, cannabis production in Eswatini is restricted to medicinal purposes and scientific research. Malawi has also moved glacially in putting in place its own licensing regime. Export markets and foreign exchange earnings are the key drivers for cannabis regulatory reforms in this country.
In short, many African countries are gradually considering legalising the cultivation of cannabis for medical and scientific purposes. Those countries where reforms are in motion are using the Canadian code as a guide for developing their licensing regimes. For many of them, the major motivating factors are boosting exports to earn hard currency, reducing unemployment, rural development and increasing agricultural productivity. Broadening their tax base is another important consideration, which in the South African case has been noted by the Finance Minister, Mr Tito Mboweni.
I won’t dwell much on my ideas about how South Africa should explore the virtues of cannabis as I have also covered the subject in one of the chapters in my upcoming book — Finding Common Ground: Land, Equity and Agriculture — which will be published by Pan Macmillan in April 2020 (It will be available nationwide. You can pre-order it here).
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Feb 14, 2020 | Agricultural Trade
It is February 14, which is Valentine’s Day. This means that chocolate will be on the cards across the world as a romantic gesture. Therefore, annual chocolate sales could partially inform us a bit about the ‘romantic’ status of each country.
Before I prove my hypothesis, let’s get a bit of background on who are the producers of chocolate. But, first, let’s talk about cocoa production – the central ingredient of chocolate. Africa is the leading producer of cocoa, particularly the Ivory Coast, Ghana, Cameroon and Nigeria. Trailing Africa is South America and Southeast Asia, as illustrated in Exhibit 1 below.
Exhibit 1: Global Cocoa crop estimates
Source: Bloomberg
Now that we know the cocoa producers, one would generally assume that these countries will also be the leading producers of chocolate – wrong! The United States, Italy, Japan, Switzerland, the United Kingdom and Argentina are the leading producers of chocolate (see the table below). While Africa is a leading producer of cocoa, there isn’t a single cocoa producer featured amongst the top chocolate producers.
Table 1: Chocolate producers
Luckily, romance is in the air and all hope is not lost for Africa. I will use the trade data as a form of assessing the key buyers of chocolate in Africa, and these will then qualify as the “most romantic” countries in the continent. In the data analysis, I use Trade Map statistics, imports by value, as shown in Exhibit 2 below.
Exhibit 2: Africa’s chocolate importers
Source: Trade Map, Agbiz Research
Surprise, Surprise!!! South Africa, followed by Morocco, Algeria, Libya, Egypt and Angola are the top five most romantic countries in the African continent. Given the realities illustrated in this data, I, therefore, conclude that South Africans demonstrated a sweet taste making South Africa the “most romantic” country in the continent.
*Don’t take this blogpost too seriously – have a bit of chocolate and savour this romantic moment! You too can be romantic, even if you are closer to the tail-end of the ranking! (Exhibit 2).
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Jan 28, 2020 | Africa Focus
We rarely talk about Africa’s wheat production due to its size relative to other regions of the world. Africa produces only 3% of the world’s wheat, compared to the European Union region which produces 20% of the world’s wheat and Back Sea region which produces 17%. These low levels of wheat production in the continent are partly the result of unfavourable climatic conditions in most countries.
The 2019/20 wheat production conditions are hard to ignore, albeit the continent having lower production levels. Africa has experienced an increase in wheat production for two consecutive seasons, however, the wheat production could fall by 10% y/y in the 2019/20 season which would result in 26 million tonnes being produced.
The countries underpinning this expected decline in harvest are South Africa, Libya and Morocco. In all these countries the crop has been impacted by drier weather conditions during the crop growth stages which, in turn, weighed on yields potential.
Fortunately, other regions of the world had fairly good seasons and therefore boosted global wheat production. The International Grains Council forecasts the 2019/20 global wheat harvest at 761 million tonnes, up by 3% y/y. This has also kept global prices at softer levels. In the week of January 24, 2020, global wheat prices were down 3% y/y, trading around US$236 per tonne.
African consumers will subsequently be able to source wheat supplies from other parts of the world to fulfil the current shortfall, thereby increasing the amount of wheat the continent imports in the 2019/20 season by possibly 4% y/y to 51 million tonnes. The leading importers will be Algeria, Egypt, Libya, Morocco, Tunisia, Ethiopia, Kenya, Nigeria, South Africa and Sudan.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Dec 13, 2019 | Food Security
As the year ends, I want to take a moment and reflect on South Africa’s standing on the global food security ladder.
As I have mentioned in the previous posts, food security is achieved when three objectives are met: (1) food is available; (2) food is accessible; and (3) food quality ensures appropriate nutritional uptake for all citizens at all times.
In 2019, South Africa ranked 48th most food-secure country out of 113 countries measured in The Economist Global Food Security Index, which is a few inches up from the previous year.
This was relatively good, compared to BRICS countries – Brazil, Russia, India and China. For example, although South Africa’ average income – as ranked in gross national income per capita of 2018 – was 25 spots behind Russia, 23 behind China and 19 behind Brazil, the country’s food security status was quite comparable to other BRICS countries – Brazil, Russia, India, and China. In the Food Security Index, South Africa has ranked 13 spots behind China, nine spots behind Brazil, six spots behind Russia, and 24 spots ahead of India.
What is worth reiterating is the fact that despite South Africa’s relatively lower average income compared to BRICS partners, the country still manages to punch above its weight in terms of food security. This is a testament to the country’s competitive agricultural sector, and its ability to supply food at a relatively lower cost and socio-economic initiatives.
Although the Food Security Index indicates South Africa is food secure, there are pockets of food insecurity within the country when you consider a household-level perspective. This speaks to the general inequality in the country, where some households are food secure, and a sizeable portion of other low-income households are not, primarily due to affordability. This scenario is more prevalent in Limpopo, KwaZulu-Natal and the Eastern Cape, according to Stats SA.
While there are a number of interventions that can assist in supporting households’ access to nutritious food, one form of intervention that can boost rural households’ income and therefore nutritious food, is job creation in the agricultural sector. There is anecdotal evidence in parts of the Eastern Cape that in areas where government and the private sector have collaborated in agricultural development, some level of success in terms of job creation could be achieved.
With agriculture having gained prominence as one of the sectors that could bring about rural economic development and job creation in South Africa, the government’s approach to realising this vision should be regionally focused. Meaning, the aforementioned provinces should be the key priority in resource allocation, as the frontiers of agricultural expansion. Such an approach not only makes sense in terms of reducing poverty but also in exploiting the potential of underutilised land, as well as targeting resources effectively.
Limpopo, KwaZulu-Natal and the Eastern Cape combined arguably have about 1.6 million to 1.8 million hectares of underutilised land which could be sustainably farmed for increased food security and livelihoods over the long term. This is according to a 2015 study by McKinsey Global Institute.
Admittedly, the current land governance system – communal land – has been cited as one of the hindrances in agricultural development in these provinces, as it hamstrings investment. Naturally, solving such matters can take a long time and land reform policy is still being debated across the country.
The near-term practical approach that could make a difference is structuring an innovative agricultural finance instrument – such as blended finance – which pulls in the capital and human capital from both private and public sectors.
In parts of the Eastern Cape, some agribusinesses are currently engaged in such arrangements with the provincial government and in areas where projects have been implemented, there has been some level of success. What is needed is designing programmes that are self-sustaining and viable where communities take ownership.
These are some of the approaches that are needed to boost household incomes and rural livelihoods in a manner that ensures nutritious foods are available in the near term and in the future. Meanwhile, broad developmental policies need to be put into operation.
*This essay included sections my Business Day column, which was published on 16 October 2019.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
