Zimbabwe has always maintained a vague policy view on genetically modified crops (GM). In seasons of abundance, the country would place a ban on importation of GM crops, which would mean that South Africa, the only GM crop producer in Africa where roughly 80% of the maize is GM, wouldn’t be in a position to export maize to Zimbabwe.
In times of scarcity, however, one would see maize leaving South African silos into Zimbabwe without a clear view on the GM policy (it is possible that some exports were non-GM maize). The general view was that when the maize lands in Zimbabwe, it would be carefully quarantined and transported straight to the millers to be processed into maize meal
But the most notable shift from this vague policy happened recently. Bloomberg, a news organization, reports that;
“Zimbabwe has quietly lifted a ban on imports of genetically modified corn for the first time in 12 years as the southern African nation begins to take action to avert what could be its worst famine.”
This will help ease import processes of maize from South Africa, and other major maize producers, into Zimbabwe. As I’ve recently noted, in the week of January 24, 2020, South Africa had thus far exported 79 283 tonnes of maize to Zimbabwe within the 2019/20 marketing year.
The need for maize imports in Zimbabwe was caused by a poor domestic harvest, which fell by 53% year-on-year in 2018/19 production season to 800 000 tonnes, according to data from the U.S. Department of Agriculture. Zimbabwe consumes about 1.8 – 2.0 million tonnes of maize a year, so this fall in production meant that the country would need to import at least a million tonnes of maize to cover the shortfall.
The import activity didn’t accelerate until earlier this year, at least from a South African market. There were small imports from Tanzania last year but that didn’t make a dent as witnessed from incidences of food shortages in the country. A more detailed view of this matter is here.
Also, I’ve discussed the benefits of growing GM crops here. This is something that Zimbabwean authorities should think about if they are to transform the country’s agricultural sector in the coming years. The Economist magazine also recently ran a detailed piece on this matter here.
This chart of maize yields also paints a much clearer picture of the yield benefits of GM crops. Here is South Africa compared to the Sub-Saharan region.
Exhibit 1: The South African maize yields have largely benefited from the use of GM seeds.
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If you are an agribusiness or farmer in SA, it is almost impossible not to think about the possibility of expanding the footprint of your product to a big and growing market such as China. After all, the success of SA’s agricultural sector is, in part, linked to trade. SA exports nearly half its agricultural products a year in value terms, mainly throughout Africa and the EU.
More recently, Asia and the Far East (particularly China) have become a key growth frontier that presents SA with new opportunities to expand its agricultural exports. Overall, Asia has accounted for a quarter of SA’s agricultural exports, with indications that SA can potentially increase its market presence substantially in the future.
China is particularly interesting because of the size of its population and economy. The country is significant enough to warrant more attention, especially given that there is currently no preferential market access for SA’s agricultural sector there. SA is having to compete with the likes of Australia and Chile, who have secured trade agreements that have afforded them a significant competitive advantage.
How big a player in China is agricultural trade, and what is SA’s share there?
China’s agricultural imports increased from $70.7bn in 2009 to $129.7bn in 2018, and SA is low on the list of the supplying countries, at number 32. SA’s agricultural exports accounted for a mere 0.5% in China’s agricultural imports in 2018, according to data from Trade Map.
The key agricultural products that China imports include soybeans, cotton, malt, beef, palm oil, wool, wine, strawberries, pork, citrus and barley. SA’s presence within the Chinese market is mainly wool, citrus, nuts, sugar, wine, beef and grapes. But within these products, SA’s share remains negligible, with the exception of wool.
What constrains SA from growing its share within the Chinese agriculture market?
What has constrained SA’s growth in the Chinese market over the past few years is not only that the products in demand are not produced in SA, but rather trade barriers. In part, this is because of the way China facilitates agricultural trade agreements — mainly focusing on one product line at a time — which ultimately slows trade.
A strategic approach to increase SA’s agricultural exports to China
If China is to be an area of focus for SA’s export-led growth in agriculture, then a new way of engagement will be essential to softening the current barriers to trade. Most important, both SA and China are members of Brics — a platform that should help improve economic activity across its member countries.
SA should also encourage foreign direct investment in agriculture, specifically for potentially new production areas such as the Eastern Cape, KwaZulu-Natal and Limpopo, which still have large tracts of under-utilised land. Having Chinese nationals as partners to agricultural development might be one of the ways of easing trade and a way of doing business with the country.
A number of instruments can be devised, but one thing for certain is that China should be key to SA’s agricultural sector as a place for export-led growth. The growing population and income provide a good base for the demand of higher value agricultural products, which SA intends to focus on in its development agenda.
Written for and first appeared on Business Day on January 16, 2020
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Essay by Wandile Sihlobo and Tinashe Kapuya
The news cycle has been mainly centred around Brexit this past week as talks between the United Kingdom and European Union culminated into a Brexit-deal.
Heading into the weekend, the House of Commons was expected to vote on the Brexit- deal from Prime Minister Boris Johnson. However, the House of Commons voted to seek an extension of the 31 October 2019 deadline for Brexit. The extension is meant to effectively prevent a possible no-deal situation by end of this month in the event that there is no agreement on the Prime Minister Johnson’s deal. The deal is now expected to be discussed early this week in the House of Commons, while the request for extension is being considered by the European Union (EU) Parliament.
As these developments are unfolding without a clear and predictable outcome, the question is what are the implications of various possible outcomes for South Africa and the region’s agriculture sector. An important recent development has been the conclusion of an economic partnership agreement (EPA) between the United Kingdom (UK), the Southern African Customs Union (SACU) and Mozambique in September 2019 (i.e. SACU-Mozambique-UK Economic Partnership Agreement). The purpose of this agreement is to ensure the continuity of the uninterrupted flow of goods and services between the two territories. In essence, the agreement maintains the same arrangements that exist with the UK while still being part of the EU.
While a lot has been written about Brexit over the past three years, there are two points which have either been overlooked in the discussions in as far as agriculture is concerned, in light of the SACU-Mozambique-UK EPA.
The first is the provisions that the SACU-Mozambique-UK EPA offers, more specifically, in relation to safeguards, as well as import and export quotas of specific products. For South Africa, the benefits of this trade arrangement will be new quotas on agricultural products such as wine, which will add to the ones that already exist with the EU. This is important because the UK is a major market for South African wine.
More generally, the UK is the second biggest destination for South Africa’s agricultural products in the EU, and the world at large. The UK accounts for 8% of the value of South Africa’s agricultural exports to the world, the latter which is estimated at US$10.6 billion in 2018, according to Trade Map data.
The second point is that, for citrus — a leading agricultural export for South Africa – the sub-sector will expectedly no longer be bound by costly and unnecessary emergency measures for citrus black spot (CBS). This is mainly because the UK carries limited risk as there are no commercial orchards in the country. Therefore, South Africa’s market access in the UK will be enhanced. Within the EU, Spain –the world’s leading exporter of citrus — had consistently lobbied for restrictions of South Africa’s citrus due to CBS, against scientific evidence which suggested the contrary. This effectively put South Africa’s citrus industry at a competitive disadvantage, even in low-risk CBS markets such as the UK, which have no orchards.
Regardless of the outcome of the Brexit negotiation process, South Africa’s agricultural sector is now in a far much better space due to the aforementioned SACU-Mozambique-UK Economic Partnership Agreement, which ensures continuity in trade. Credit to South Africa’s Department of Trade, Industry and Competition for having the foresight and the urgency to negotiate the agreement, and conclude it before the Brexit deadline.
Looking ahead, it will be important to now consider how to strengthen regional agricultural value chains between the EU, UK, SACU and Mozambique. The ongoing deliberations around Brexit, as well as future trade relations between the UK and the EU, will remain an important part of the architecture of global agricultural value chains. For instance, the continuity of South Africa’s bulk wine exports to the EU, which are further packaged within the EU territory for re-exports to the UK will largely depend on the outcome of the Brexit talks.
Hence, Brexit will still have implications for South Africa’s agricultural sector, despite the conclusion of the SACU-Mozambique-UK Economic Partnership Agreement.
*Sihlobo and Kapuya are agricultural economists.
Featured Photograph: finglobal.com. The essay first appeared on Daily Maverick on 21 October 2019.
The South African agricultural sector, and specifically the expansion in the sector over the recent past, is heavily reliant on exports. In fact, South Africa exports roughly 49% of its agricultural products in value terms. Hence, the newly launched African Continental Free Trade Agreement (AfCFTA) would potentially open additional avenues for South African products to destinations where the country hasn’t largely participated in over the recent past. This would practically mean, an increase in the share of South Africa’s agricultural exports to the continent, rather than mainly focusing on growing other well-established markets.
Moreover, the AfCFTA is expected to make 90% of trade within the continent duty-free by July 2020, and this is set to increase to 97% over the next decade as more duties on an additional number of products are phased down. While some African countries will be deprived of revenue currently derived from trade tariffs, the expectation is that the benefits will exceed the costs, as countries will eventually benefit from trade creation, production diversification, job creation, industrialisation with increased corporate income tax revenue as a corollary, and higher personal income tax revenue.
However, the African continent is beset by other systemic problems such as poor quality or lack of infrastructure, unconducive business environments that make trade across borders particularly costly and nearly prohibitive, corruption and weak institutions which render legal recourse and dispute settlements redundant, among others.
With the AfCFTA providing a potential opportunity to unlock further growth in trade, this will not be possible unless and until the abovementioned issues are sufficiently addressed. The precedent of African countries collaborating politically and economically set by the AfCFTA should translate to deep and fundamental reforms that unlock the existing barriers to intra-regional trade.
The make-or-break of the AfCFTA will come when trade under the agreement officially kicks off in July of 2020. Although the African Export-Import Bank has reserved $100 billion to help member countries alleviate trade adjustment costs and facilitate the creation of a common payment system, concerns still remain. Previous experiences from the Regional Economic Communities such as SADC show that tariff phase-down have been matched with, and exceeded by non-tariffs barriers (NTB), such as the excessive documentation needed for cross-border trade transactions, administrative bottlenecks and stipulated trade quotas aimed at curbing the quantity of traded goods.
The extent of these NTBs effectively reversed the potential gains of the SADC Free Trade Area. In the AfCFTA scenario, policymakers have indicated that NTBs will also be given equipollent attention as its contemporaneous existence could threaten the growth of intra-African trade and impede the effective operationalisation of the AfCFTA.
Overall, this relationship would not be one way. South Africa remains an importer of poultry meat (edible offal of fowls), rice, wheat, sugar, palm oil, soybeans, beer, fish, sunflower oil, soybean oilcake, and tobacco, amongst other agricultural commodities. Ideally, the African countries can also have room to participate in the South African market by supplying these products.
But most African countries do not have the capacity to export significant volumes of the aforementioned agricultural products, at least not to the extent of satisfying South Africa’s import requirement. The onus, however, lies on the Member States and their respective industries to realise that there is demand in South Africa, and start investing in production and providing an enabling environment for such industries to thrive.
With thanks to Tinashe Kapuya, PhD.
Written for and first published by the Agricultural Business Chamber of South Africa (Agbiz)
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