By Thabile Nkunjana and Simphiwe Ngqangweni
Post-apartheid era trade agreements like the Southern African Customs Union (SACU) - European Free Trade Association (EFTA), the Southern African Development Community (SADC), and numerous other multi-and-bilateral trade agreements have contributed to a significant increase in agricultural exports from R22.4 billion in 2004 to R251bn in 2024.
Due to the recent rate of output growth, increased efforts made through the implementation of the Agriculture and Agro-processing Master Plan (AAMP), industry-specific master plans, and various transformative initiatives, the agricultural sector's production is anticipated to increase further as a new generation of farmers enters the commercial space.
This calls for the exploration of new markets, but it is crucial to emphasise that while the country navigates the global space to open more markets, these markets must be as diversified as possible in order to lower the risk associated with trade disputes.
The conflicts between the EU and the citrus sector or the restrictions placed on SA's vegetable imports by its neighbours, who import a large portion of the vegetables exported in these marketplaces, are classic examples.
We have seen on a global scale how a highly concentrated market can hinder a country's trade, which can have a disastrous impact on that country's economy. Australia and China are two common examples.
China responded to remarks made by Australia regarding COVID-19 by levying a 212% duty on Australian wine. For Australian exporters, who were exporting almost 40% of their wine to the Chinese market before the dispute, this effectively shut off China as a market. Australia lost about $756.6 million, or R11.5bn, a year on average from wine exports.
In 2023, SA's citrus exports to the EU-28 accounted for 44% of all citrus exports to the global market, with a value of $813.8m or R15.0bn. Between 2019 and 2023, SA’s citrus exports to the EU-28 averaged R11.3bn and this is how much is at stake due of the ongoing trade conflict between SA-citrus growers and the EU.
This does not take into account potential job losses that could also be a detrimental consequence. This demonstrates how brittle international trading can be, as well as the possible effects it may have on a single industry or several industries, particularly in cases of highly concentrated exports.
For a variety of reasons, commentators frequently point to the Asia-Middle East or BRICS markets as ones that SA should prioritise. This is not to argue that the more established major markets that have been crucial to the agricultural sector's expansion in terms of both production and exports are any less significant.
These markets include those in Africa, USA and Europe. For commercial farmers that have filled these markets and are looking into possible expansion for niche markets within them, these markets are essential to preserving. The suggested markets, such Asia-Middle East, for instance, will be advantageous to the upcoming generation of farmers.
The main point being made by South African agricultural economists is that the country's agricultural exports should be diverse without seeming to minimise anymarkets. This is especially true during periods of high uncertainty brought on bytrade conflicts, as previously indicated, geopolitical difficulties, or so-called "deglobalisation".
Considering all these factors, this article examines the performance of South Africa's agricultural exports over the previous 20 to 30 years, examining growth over time as well as the possibility of growth from other markets, such as Asia-Middle East,BRICS, or Africa, in light of the opportunities presented by the Africa ContinentalFree Trade Area (AfCFTA).
The main point of this article is how important it is to diversify the country's agricultural exports in the current global trade. This also includes factors that couldinfluence how the present markets develop or be crucial to the expansion of SA's agricultural exports into these markets in the future. In terms of both value and percentage share, for the longest time the EU-28 was by far the biggest market for SA's total agricultural exports, but this has changed inrecent years.
SA's agricultural exports to the EU-28 increased by 470% from R10.8bn in 2004 to R61.9bn in 2023. However, during the same period, the EU-28 growth was less than the shocking gains of 1 700% and 1 500% for Africa and Asia-Middle East, respectively.
With a market share of 48% in 2004, the EU-28 was the top destination for SA's agricultural exports, followed by Africa and Asia with shares of 22% and 18%, respectively. In 2004, SA's agricultural exports to Africa were worth R4.9bn, whilethose to the Asia-Middle East were worth R4.0bn.
However, in 2022, the EU-28 was the third-largest market for SA's agricultural exports because of fluctuations in market size, competition globally, and othermarket dynamics including shifting market circumstances due to population increaseor decline or the emergence of the middle class as countries grow.
Africa is currently the top market for SA's agricultural exports as of 2024, making upat least 44% of total exports. The second-largest market was the EU, including UK, with a 29% market share. Asia-Middle East came in the third place with a marketshare of 21%.
Demand for agricultural products, political stability and the medium- to long-term economic success of each market are additional aspects that should be taken into account when examining the market dynamics in all of these market movements.
For example, the ongoing conflict in the Middle East is probably going to have a detrimental effect on the region's economic performance, which could, at least in the short term, have an adverse effect on its trading capacity. Another factor to look at is that the EU is seeing a decrease in its total population, albeit this varies by country and age group.
This could influence exports, especiallywhen demand is considered. Certain products may see a decrease in demand whenthe population declines. Nonetheless, each market's characteristics of economic performance will play a role.
Donald Trump, the most recent US president to be elected, has threatened SA because of its ties to Russia. The US market accounted for 4% of South Africa's total agricultural exports in 2023, which were worth $497.5m or R9.1bn. Although 4% might seem like a little amount, the percentage share of products exported to the US fluctuates significantly.
Concerns have been raised around the decreasing relative significance of the European market for South Africa and the relative growth of other markets such asthe Middle East and Asia. Questions have been asked about what the future exportdevelopment strategy is for the country in the face of these developments.
Fortunately, South Africa has a long-standing and mature collaborative approach between government and the private sector when it comes to these issues. At the centre of these discussions is the need to ensure that all possible risks are managedthrough a carefully considered market diversification approach, which the authors fully support.
Mr Nkunjana is a senior economist under the Trade Research Unit at the National Agricultural Marketing Council, and Dr Ngqangweni is the CEO of the National Agricultural Marketing Council.
*** The views expressed here do not necessarily represent those of Independent Media or IOL.
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