The impact of the floods in Durban, which destroyed infrastructure and interrupted trade activity, is expected to be reflected in the second-quarter trade figures. The first quarter of the year faced constraints similar to past quarters, such as delays at ports and rail and deteriorating road infrastructure. This is true for all exporting sectors of the economy, including the agricultural sector.
In the first quarter, the approach for the agriculture sector was to engage in greater co-ordination with Transnet, agriculture industry groups and transport organisations, which helped improve the flow of information about various challenges and functions at the ports. This was especially true for the port of Cape Town, where there were long delays at the start of the year due to numerous infrastructure constraints and weather-related difficulties.
The primary external event in the first quarter was the invasion of Ukraine by Russia, which disrupted trade with the Black Sea region. For SA, this is an important factor, especially for the horticulture subsector. Russia accounts, on average, for 7% of SA’s citrus exports in value terms. And it accounts for 12% of SA’s export of apples and pears. Hence we feared that the consequences of the war would instantly show in the trade figures.
We now have the trade data for the first quarter of 2022 and, positively, exports are up modestly, by 1% y/y to $2.96bn (R46bn). This is an increase of 6% quarter-on-quarter. The top exportable products were grapes, maize, wine, apples and pears, peaches, cherries and apricots, wool and fruit juices.
I expect some of these products to continue dominating the export list over the rest of the year, with possible additions being citrus, where harvest activity has recently started, as well as nuts and sugar. The factors underpinning this robust export value are the sizeable agricultural output in the 2021/2022 production season, combined with solid global demand, even at higher agricultural commodity prices for maize.
Still, the heavy rains in April in KwaZulu-Natal had notable effects on trade activity, but the decision to rebuild by Transnet and other organisations was speedy. This could result in a decline in trade activity in the second quarter, given the importance of the port of Durban for exports and imports of agricultural products and other goods.
The African continent remained the largest market for SA’s agricultural exports in the first quarter, accounting for 41% in value terms. The EU and Asia each accounted for a 24% share of total exports. The UK is one of the most important agricultural markets for SA and took 9% of overall exports in the first quarter. The balance of 2% constitutes the Americas and other regions of the world.
Russia was a notable export market in the first quarter, accounting for 1% of SA’s total agriculture, food and beverage exports, and the 21st largest export market. I expect this volume to decline notably in second quarter data.
Efficient logistics are vital for imports as SA relies on other countries for crucial food products such as wheat, rice, palm oil, sunflower oil and poultry products. These dominated the food import bill in the first quarter. Some, such as rice and palm oil, cannot be sustainably produced at scale in SA because of the unfavourable climate. As such, in the first quarter of 2022 agricultural imports increased by 17% y/y to $1.86bn (R28.91bn).
An industry and government approach to promoting South African products in export markets is key
Aside from the increase in volumes of imports, higher agricultural commodity prices also contributed to the high import bill. Rice, wheat and palm oil will probably continue leading the agricultural import product list throughout the year.
In sum, SA recorded an agricultural trade surplus of $1.10bn (R17.1bn) in the first quarter of 2022, down by 18% from the corresponding period last year. The narrowing of the trade surplus is a result not only of modest exports, as we noted, but rather of the increase in imports and the higher commodity prices.
Overall, increased collaboration among industry stakeholders and service providers has helped sustain agricultural trade in the past quarter. The same collaborative approach should be maintained in searching for and promoting South African agriculture, food and beverages to new export markets.
SA is an export-orientated country, with roughly half of its produce exported. Therefore, an industry and government approach to promoting South African products in export markets is key. Agriculture and agribusiness role players have already identified countries the government should prioritise for this sector’s export expansion: China, Japan, India, Saudi Arabia and Bangladesh.
These efforts should be well sequenced and complement ongoing attempts to boost domestic production through various interventions outlined in the recently launched Agriculture and Agro-processing Master Plan.
Sihlobo is the chief economist of the Agricultural Business Chamber of SA (Agbiz).
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