Agribusiness Perspective: How can South Africa gain more traction from BRICS?

SA’s agriculture sector’s exports were valued at R151 billion in 2020. Export markets should be expanded to accommodate the growing output volumes. AGRIBUSINESS PERSPECTIVE by Wandile Sihlobo.

In early March, Agbiz held a hybrid session with members at its Pretoria office, with some joining online. The event’s primary focus was to explore how South Africa’s agriculture and agribusiness sectors could gain more traction within BRICS. This theme is premised on the observation that South Africa’s agriculture sector is expanding and is ripe to contest more international markets. In the next few years, the sector could enjoy a growth spurt, especially if support from government policies, including the master plan on agriculture and agro-processing, come into play.

To get a sense of how South Africa’s agriculture sector has expanded in the past decade, consider its gross value added since 2010, which has now expanded by 44%. In volume terms, South Africa’s agricultural production has grown 19% over the same period. Encouragingly, this expansion has occurred across all subsectors of agriculture and agro-processing.

LONG-TERM PROJECTIONS

Notably, the long-term projections from the Bureau for Food and Agricultural Policy also present an optimistic picture of South Africa’s agricultural output growth up to 2030. The key message is that South Africa’s agriculture is growing, and export markets should be diversified and expanded to accommodate this.

Bolstering the proposal for exportmarket expansion is the fact that some agricultural product outputs have already surpassed targets set out in the National Development Plan (NDP) in 2012. These include citrus, macadamias, dairy and pork, among others. Meanwhile, the outputs of soya bean, avocados, apples and table grapes are fast approaching the NDP levels. This added production as well as normal growth in other major crops, fruit, vegetables and livestock need new and growing markets.

New markets that the sector should be focusing on are in BRICS. The industry should hone a BRICS strategy that is complemented by robust bilateral engagements with each of the BRICS countries. South Africa’s agriculture sector is highly export-oriented, with exports accounting for roughly half of the production in value terms, at about US$10,2 billion (R151 billion) in 2020 (up 3% year-on-year).

Notably, in March, the Citrus Growers’ Association of Southern Africa announced that the local citrus industry would probably break all previous export season records with an estimated 158,7 million cartons in 2021. If the estimate is reached, it will represent a third consecutive season of record export volumes, with 130 million cartons exported in 2019, followed by 146 million cartons in 2020. Moreover, the industry estimates indicate that the available citrus for exports could increase by 300 000t over the next three years.

The expected growth in South Africa’s agriculture sector and export markets calls for increased attention to logistical efficiencies at the ports. South Africa has thus far managed to achieve some efficiency gains. The sector has been working closely with government and other stakeholders, such as Transnet, to ensure a smooth flow at ports. There is also ongoing work at Transnet to decongest the Durban port. This multi-stakeholder co-operation was key to enabling higher export volumes during the pandemic.

The most attractive markets in BRICS are China and India, due to their large agricultural import volumes, growing populations, fast-growing economies and changing consumer tastes.

South African policymakers’ engagements with their BRICS counterparts are about lowering tariffs for certain agricultural products and addressing the nontariff barriers. Consider wine trade with China. The likes of Australia and Chile have accessed the Chinese market at zero preferential tariffs.

Meanwhile, South African producers face 14% import tariffs. Hence, competition has been challenging for the wine industry and a range of agricultural products. It is also important that the industry pays closer attention to geopolitical developments in this region. China has sanctioned Australia for criticising some of its policy positions. These sanctions entail trade restrictions. Other countries have been able to take advantage of the gap left by Australia to meet China’s import demand.

I do not anticipate this being a smooth engagement. China and India will most likely want a reciprocal engagement with South Africa, which puts South Africa in a challenging position as the country is also pushing its localisation strategy. Policymakers will need to make the necessary tradeoffs, weighing up both our export ambitions and the localisation strategy. Wandile Sihlobo is chief economist at Agbiz. Email him at wandile@agbiz.co.za.

CHINA AND INDIA WILL MOST LIKELY WANT A RECIPROCAL ENGAGEMENT WITH SOUTH AFRICA