Since market deregulations in 1996, South Africa’s agricultural growth strategy is premised on continuous access to export markets in Europe and America, while also expanding export footprint to special markets in Asia and the Middle East.
The government and the private sector in South Africa have been very successful in forging new trade relations and promoting the country’s image as a trusted and capable exporter of quality agricultural products. In terms of products composition, the country has a competitive edge in fruits like citrus, table grapes, avocados, apples and pears.
The country also has a competitive advantage in sugar, wool, mohair, maize, nuts and wine products. The country does have the capability to export meat, however, biosecurity issues coupled with inferior genetics amongst black farmers, who are estimated to own 40% of the national cattle herd, have constrained the country’s potential to produce and export animals and animal products.
In 2024, South Africa’s agricultural exports were valued at $13 billion (R240.5bn), where 43% of this was generated from African markets; 30% from Europe; 19% from Asia and 6% from America. While the African continent holds a lion share, however, exports are concentrated into the southern region because 95% of exports were destined to the Southern African Development Community area (SADC) in 2024.
Looking at the overall South Africa agricultural export profile, it can be deduced that 75% of export value is controlled by three agreements, the SADC Free Trade Agreement; US-Agoa and the SADC-European Union Economic Partnership Agreement, including the post-Brexit arrangement. The changing global trade relations and the rising protectionism sentiments are posing a great risk to South Africa’s agricultural growth and sustainability.
South Africa’s agricultural dependency on EU and US markets is enormous. While the country must continue to nature and preserve diplomatic ties and economic cooperations with these countries, however, there is a need to diversify export markets. The increasing frequency of cases such as the EU-SA disagreements on citrus exports which landed in the World Trade Organisation Dispute Mechanism platform coupled with the recent tariffs’ announcements by the US, exposes the vulnerability of the existing export strategy that is concentrated on EU and US markets.
Credit must be given to some industries like wool, soybeans and meat and to a certain extent fruits and wine, which have equally prioritized access to Asia and Middle East markets as part of their diversification strategy. Exports to Asian markets are not administered by any formal trade agreements, thus minimizing their predictability and profitability due to high tariffs and in certain circumstance more stringent non-tariff measures as compared with the US and EU.
Where to for South African agriculture?
Pursuing an export-led growth strategy remains a practical and sensible approach. However, there are two challenges with the current approach. First, is the higher dependency on EU and US markets while overlooking the potential of the African continent. Second, is the exportation of unprocessed agricultural products, thus waiving the benefits of value-addition and creation of agro-processing jobs. Expanded and better coordinated access to African markets can address these challenges. They can help to derisk the country’s agriculture while expanding the sector’s industrialization capacity. In comparison to the EU and US markets, the country’s agricultural exports to the African continent are dominated by processed (e.g. prepared foods, beverages, feeds, agricultural equipment, chemicals, innovations, research and development-R&D) products. This suggests that South African farmers and traders could potential exports not only just processed goods but also investments and innovations to the African markets, a strategy that will align well with the objectives of the African Continental Free Trade Area Agreement (AfCFTA).
AfCFTA is a free trade agreement that is part of the instruments deigned to operationalize the African Agenda 2063. The AfCFTA seeks to create a single market for goods and services across the African continent, thus providing producers access to over 1.3 billion people over the 55 members states of the African Union. The goal of the AfCFTA is to boost intra-Africa trade, particularly trade in value-added products so that industrialization can be upscaled in African states. South Africa is a signatory to the AfCFTA and commenced exports under the AfCFTA on January 31, 2024. Notwithstanding the significance of the US and EU markets, the AfCFTA offers South Africa both an opportunity to generate foreign earnings while also deepening the industrialization in agriculture, which could optimize the contribution of the sector to the country’s development and prosperity.
Dr Sifiso Ntombela is the president of the Agricultural Economics Association of South Africa and a lecturer at the University of Pretoria. He served as the Special advisor to former minister Thoko Didiza in the Department of Agriculture, Land Reform and Rural Development.
*** The views expressed here do not necessarily represent those of Independent Media or IOL.
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