Reform will plant seeds for African trade
Over the past two decades SA’s agricultural output growth and rise in trade surpluses have been inspiring, successes that give me much optimism. In 2020 alone — amid a pandemic — SA exported $10.2bn worth of agricultural products, the second-largest on record. One market that has consistently been important to SA is the rest of Africa, which on average accounts for 40% of our agricultural exports.
These deepening continental trade relations give me confidence that the African Continental Free Trade Area (AfCFTA) should be favourable to SA’s agriculture. The export domination SA has had over the past couple of decades has mostly been concentrated within the Southern African
Development Community (SADC) region, a free-trade area comprising 16 countries.
SA will now progressively have access to the broader continental markets at relatively lower tariffs.
In an article on Econ3x3 I co-authored with agricultural economists Tshepo Morokong and Louw Pienaar in February, we analysed those essential agricultural products the continent mainly imports. These include grains, animal and vegetables fats, sugar, dairy, beverages, prepared food, cotton, fish and meat.
SA is already an exporter of some of these products to the rest of the continent and volumes should increase in the coming years as logistics and administrative procedures become well established. We argue that such a conducive environment will only manifest when African countries “harmonise trading systems and promote intercontinental trade through the elimination of tariffs and other nontariff barriers, which will stimulate the investment needed to aid smooth trading on the continent”.
But the success story needs to be mutually beneficial. SA is also a significant importer of agricultural products. In 2020 the country spent $5.9bn on such imports. The top agricultural products SA typically imports are rice, wheat, palm oil, poultry meat, sunflower oil, beer from malt, soya bean oil and chocolate. Thailand, Brazil, China, Argentina, Indonesia, India, the Netherlands and the US are among the countries supplying these products.
Yet there is significant scope to import some of these products from African countries. An analysis of productivity potential across 44 sub-Saharan African countries showed that nine countries make up 60% of the total potential, with three countries — Ethiopia, Nigeria and Tanzania — accounting for half of it.
Some African countries are trying to aggregate smallholder farmer activity to achieve economies of scale. This includes farmer aggregation through co-operatives, such as the Githunguri Dairy in Kenya, which serves about 40,000 farmers in East Africa, and “outgrower schemes”, such as barley for beer production in Ethiopia.
To benefit from the continental agreement, African countries must increase their productivity at the local level.
The predicament of low crop yields still pertains in many African countries. This is not caused by variations in climate, but by policy challenges and levels of investment.
We are now seeing quite encouraging steps, albeit still limited to the adoption of mechanical technology. A recent article by agricultural economist Tinashe Kapuya in Farmer’s Weekly magazine outlined the Ethiopian government’s efforts to “exempt import levies and charges on specific agriculture inputs, which had an immediate impact on lowering the cost of equipment purchased by agribusinesses and farmers”.
We also see reforms in seed and fertiliser policies in Ghana, which have increased private sector involvement and prospects of investment in higher-yielding varieties.
Such interventions should boost Africa’s agricultural output and ensure the AfCFTA is beneficial for those countries that have products to trade. These potential benefits could drive economic empowerment as the agricultural sector is the mainstay of many economies.