South Africa’s agricultural exports are the lifeblood of the economy, but they also have weaknesses

International trade has been central to South Africa’s agricultural development since the early 2000s. Since 1994, the country has excelled at tapping into new markets, as evidenced by several free trade agreements with important regional and international markets.

The country exports about half of its production by value. The top exportable product is high-value, labor-intensive horticultural produce, and this subsector has expanded significantly over the past two decades. Citrus fruits, table grapes and various deciduous fruits dominate the export list.

This means that international trade has become essential to South Africa’s agriculture to keep it profitable and create jobs.

Over the past decade, exports of agricultural and agro-processed products averaged 11% of the country’s total exports, up from 9% in the previous decade. This demonstrates South Africa’s success in developing export markets and the ability of its farmers to produce quality products that meet global standards and needs.

Agriculture’s share of gross domestic product (GDP), a measure of economic output, has been shrinking year by year from just under 10% in the 1960s to about 2.5% today, but the agricultural sector is growing in both output and value. doing. Trade has been central to the growth of this sector.

Yet South Africa’s agricultural sector remains vulnerable on two fronts. Too reliant on one market. In addition, there are inefficiencies in domestic logistics chains.

Against this background, talk of possible expansion of production should be seen. First, efforts must be made to increase access to existing and new markets. Also, more emphasis should be placed on improving the efficiency of logistics for moving produce to domestic and export markets.

Over the past few months, there have been several reports of efficiency issues at domestic ports and market access constraints in key export markets such as the EU. These may hamper the long-term growth of the sector as new land is produced to expand production.

Recent Challenges in Major Agricultural Export Markets

An example of South Africa’s vulnerability to lack of diversification is illustrated by two recent events. China temporarily banned South African wool imports and the EU restricted citrus imports.

This was important as, outside of the African continent, South Africa’s agricultural exports are heavily concentrated in several Asian countries and the EU.

Export diversification contributes to a country’s economic resilience, especially in the face of global supply chain disruptions or when one of the major markets imposes non-tariff barriers to protect producers from competition. To do.

Recent challenges to South Africa’s access to the Chinese wool market have now been resolved. However, the losses since the ban was implemented are evident in the trading data. Wool exports in the second quarter of 2022 fell by 42% compared to the corresponding period in 2021.

For citrus, the continued protectionist trend in the EU after changes in plant regulations could be more pronounced in the third quarter of this year. Still, much depends on engagement between South Africa and her EU authorities on new plant safety regulations, including stringent new cold processing requirements.

In the second quarter of this year, citrus fruits remained South Africa’s top exportable agricultural commodity, despite a 22% decline from the second quarter of 2021. Losses in the Black Sea market have also contributed to a slowdown in exports since the start of the Ukrainian war. Before the war, Russia accounted for an average of 7% of South Africa’s citrus exports. It also accounts for her 12% of South Africa’s apple and pear exports.

Another challenge is logistics. Transnet, a state-owned transport facility, has been very agile in rebuilding the port of Durban after the devastating floods in April this year.

Improving the functioning of ports and railways requires similar energy and focus. Another example is the dilapidated road network that spans many agricultural cities. Without proper remediation, export activity may slow down.

what is driving growth

In the second half of the year, South Africa’s agricultural exports increased by 5% year-on-year to reach US$3.4 billion. The top exportable products were citrus fruits, corn, apples, pears, wine, grapes, figs, dates, avocados, nuts, fruit juices, wheat, wool and sugar. Some of these products are expected to continue to dominate the export list in the third quarter.

This strong export value is underpinned by strong agricultural output in the 2021/22 growing season and generally strong global demand despite rising commodity prices for corn.

Corn, apples and pears, grapes, and sunflower oil increased significantly from the first quarter of 2021, thus masking declines in citrus exports over the period covered.

Agricultural and beverage exports are still strong and should support activity in the third and final quarter of the year.

The African continent remains South Africa’s largest agricultural export market in the first quarter of the year, accounting for 35% by value. Asia was her second largest region (28%) and the EU took her third position with her 21% share.

The UK is one of South Africa’s most important agricultural markets, accounting for 7% of total exports in the second quarter. The remainder of the 9% value comprises the Americas and the rest of the world.

National trade policies and activities are not a one-way street. South Africa is also an important importer of agricultural products. We depend on other countries for important food products such as wheat, rice, palm oil, sunflower oil and poultry.

Policy direction

South Africa’s agricultural sector is export oriented. Improvements in production through various development plans such as the Agriculture and Agro-processing Master Plan should therefore be based on expanding export markets.

Japan, China, India, Saudi Arabia, Bangladesh, Philippines and South Korea are key markets where South African agribusinesses and farmers are interested in expanding their presence. Maintaining relationships with existing key markets is also important.

All this should be done while domestic efforts are underway to improve the functioning of the network industry. This is the only realistic way to sustain growth in this sector, thereby creating jobs and keeping the provincial towns vibrant.

This article is republished from The Conversation under a Creative Commons license. Please read the original article.