International commerce has been on the core of South Africa’s agricultural progress because the early 2000s. Since 1994, the nation has excelled in opening up new markets, as evidenced by a number of free commerce agreements with important regional and worldwide markets.
The nation exports roughly half of its produce in worth phrases. The high exportable merchandise are excessive worth and labour-intensive horticulture produce, a subsector that expanded considerably over the previous 20 years. Citrus, desk grapes and a spread of deciduous fruits dominate the export checklist.
This means worldwide commerce has turn into essential for sustaining farm profitability and job creation in South African agriculture.
Source: Trade Map, Agbiz Research
Over the previous decade, agriculture and agro-processing exports have averaged 11% of the country’s overall exports, up from 9% in the decade before. This exhibits South Africa’s success in opening export markets, and farmers’ potential to supply top quality merchandise that meet world requirements and wishes.
Even although agriculture’s share of gross home product (GDP), a measure of economic output, has shrunk over time, from slightly below 10% within the Sixties to round 2.5% now, the sector has grown in each output and value terms. Trade has been the core of the sector’s progress.
Still, South Africa’s agricultural sector stays susceptible on two fronts. It is just too reliant on a few markets. And there are inefficiencies within the home logistics chains.
It is in opposition to this background that discuss potential expansion of production must be seen.
First there must be a larger effort to extend entry to present and new markets.
There must also be a sharper give attention to bettering the effectivity of logistics to maneuver produce domestically and to export markets.
Over the previous few months, there have been a number of stories of efficiency challenges in the domestic ports and market access constraints in key export markets such because the EU. These may hinder long run progress of the sector, as new land comes into manufacturing to increase output.
Recent challenges in key agriculture export markets
An instance of South Africa’s vulnerability to a scarcity of diversification was illustrated just lately by two occasions. China quickly banned imports of South African wool and the EU restricted citrus imports.
Read: South African citrus: new EU guidelines are unjust and punitive
This mattered as a result of outdoors the African continent, South Africa’s agricultural exports are closely concentrated in just a few Asian nations and the EU.
Export diversification contributes to a rustic’s economic resilience, particularly within the face of disruptions to world provide chains or if one of many main markets imposes non-tariff limitations to guard its producers from competitors, as it’s more and more the case.
Recent challenges concerning South Africa’s entry to the wool market in China have now been resolved. But the losses from when the ban was in place are clear within the trade data. Wool exports fell by 42% in the second quarter of 2022 in contrast with the corresponding interval in 2021.
For citrus, which continues to expertise protectionist tendencies within the EU after modifications in plant laws, the influence may present extra pointedly within the third quarter of the yr. Still, rather a lot will rely on the engagements between the South African and EU authorities on the new plant safety regulations, which contain stringent new chilly therapy necessities.
In the second quarter of this yr, citrus was nonetheless the highest exportable agricultural product by worth in South Africa, though down by 22% from the second quarter of 2021. The lack of the Black Sea market because the begin of the Ukraine struggle might need additionally contributed to the slowing of exports. Before the struggle, Russia accounted, on common, for 7% of South Africa’s citrus exports in worth phrases. It additionally accounted for 12% of South Africa’s apples and pears exports.
Read: How Russia-Ukraine battle may affect Africa’s meals provides
The different problem is logistics. The state-owned transport facility Transnet confirmed nice agility in rebuilding the port of Durban after the damaging floods in April this yr.
Similar power and focus are essential to enhance the ports and rail functioning. Another instance is the highway community that’s in disrepair throughout quite a few agricultural cities. It may sluggish export exercise if not correctly improved.
Read: Small towns are collapsing across South Africa
What’s driving progress
In the second half of this yr, South Africa’s agricultural exports rose by 5% year on year, reaching US$3.4 billion.
The high exportable merchandise have been citrus, maize, apples, pears, wine, grapes, figs, dates, avocados, nuts, fruit juices, wheat, wool and sugar, amongst others.
We anticipate a few of these merchandise to have continued to dominate the export checklist within the third quarter.
Underpinning this strong export worth are the sizeable agricultural output within the 2021/22 manufacturing season and customarily stable world demand, even at larger commodity costs for maize.
Maize, apples and pears, grapes, and sunflower oil noticed a major uptick from the primary quarter of 2021, and thus overshadowed the decline in citrus exports in the course of the interval underneath evaluate.
There are nonetheless ample agricultural and beverage exports, which ought to assist the exercise within the third and final quarter of the yr.
The African continent remained South Africa’s largest agricultural exports market within the first quarter of this yr, accounting for 35% in value terms. Asia was the second largest area (28%) and the EU held the third place with a 21% share.
The UK is likely one of the most necessary agricultural markets for South Africa and accounted for 7% of general exports within the second quarter. The stability of 9% worth constitutes the Americas and different areas of the world.
The nation’s commerce coverage and exercise are not one-directional. South Africa can be a major importer of agricultural merchandise. It depends on different nations for essential meals merchandise similar to wheat, rice, palm oil, sunflower oil and poultry.
Policy route
South Africa’s agricultural sector is export-oriented. Thus, any enhancements in manufacturing by varied growth plans, such because the Agriculture and Agro-processing Master Plan, must be anchored on increasing export markets.
Japan, China, India, Saudi Arabia, Bangladesh, the Philippines and South Korea are key markets through which South African agribusinesses and farmers are interested in expanding their presence. It’s additionally necessary to keep up a relationship with the present key markets.
All this could occur whereas home efforts to enhance the functioning of the community industries are underneath approach. This would be the solely lifelike path to sustaining the expansion of this sector and, with that, job creation and vibrancy of the agricultural cities.
Wandile Sihlobo, Senior Fellow, Department of Agricultural Economics, Stellenbosch University
This article is republished from The Conversation underneath a Creative Commons licence. Read the original article.