The recently concluded South African Investment Conference showcased a range of investment opportunities in our economy and brought back some optimism for economic prospects in a global environment focused on the Ukraine war, high inflation and rising interest rates.
One sector of the economy that was perhaps less prominent yet still holds potential for growth and jobs is agriculture, perhaps for good reason given that there are still fundamental challenges the sector should resolve to ease business conditions.
Highlighting the sector’s growth possibilities would have lifted sentiment. Still, the reality of fundamental constraints was going to face questions from potential investors. The challenges in this sector range from the prevalence of animal disease outbreaks such as foot-and-mouth disease to significant infrastructure constraints such as poor rural roads, water infrastructure and rail systems. We cannot forget the security concerns such as stock theft, farm attacks and vandalisation of rural infrastructure.
These are the realities that farmers and agribusiness struggle with even though the sector grew by 13.4% year on year in 2020 and 8.3% year on year in 2021. If these challenges were resolved, perhaps there could have been even faster growth and transformation in the sector.
Despite these challenges, there are opportunities to expand agricultural production, mainly in the Eastern Cape, KwaZulu-Natal, Limpopo and Mpumalanga, and a range of agro-processing possibilities across the country.
Another important long-term objective of South African agriculture that should not be neglected amid the current environment of geopolitical strife is the need for the government and industry to widen and deepen export markets.
The products that most urgently need broader export markets are fruit, wine and beef. The products whose supply is most at risk from the Russia-Ukraine war are wheat, maize and vegetable oils.
SA is a net importer of wheat and vegetable oils and thus is not in a quest to widen export markets but instead boost local production. Maize is the opposite and was ranked third in exportable products by value in 2021. The difference between the international trade in maize and fruits is that SA has established markets outside the African continent for maize, mainly in Asia. Therefore, it has not struggled to find export markets whenever there is a surplus, as with the 2021/22 marketing year, with the largest exportable volume since 1994/95, with about 3.9-million tonnes.
In fruit, wine and beef, the growing competition in destinations that SA already has access to in the EU, the US, multiple countries in Asia and the Middle East has prompted the country to seek market access in several other countries.
Moreover, domestic production of citrus, deciduous fruit, avocados, nuts, wine, berries and beef among other products is expected to increase in the coming years.
South African farmers and agribusinesses have long identified key markets to prioritise in addition to the existing markets. They include Japan, Bangladesh, China, India and Saudi Arabia.
India, Saudi Arabia and Japan are among the top 20 importers of agricultural products globally.
Saudi Arabia is one of the countries to which SA’s agricultural sector has minimal access.
In value terms, Saudi Arabia accounted for a mere 1% share in SA’s agricultural exports that averaged $10bn (about R147bn) in the past decade. The countries that have dominated Saudi Arabia’s nearly $20bn worth of agricultural imports are Brazil, India, the US, UAE, Argentina, Egypt, Spain, the Netherlands, Turkey and Poland.
The presence of some of these countries is unavoidable because of their dominance in the global production of the agricultural products that Saudi Arabia mostly imports. They include rice, poultry, milk, cheese, malt, bread and pastries, maize, barley, sugar, live goats, citrus, berries, and palm oil.
Some of these products are already on the list of products SA exports to Saudi Arabia. For instance, SA exports citrus, apples, pears, grapes, berries, cheese and a range of other fruits and products to Saudi Arabia. But these are in small volumes compared to the other countries that export to Saudi Arabia.
Notably, products such as oranges and apples attract zero duties in Saudi Arabia. In such cases, the marketing of South African products by both industry and the government during trade fairs is an important step. Such marketing activities will also assist in the identification of any non-tariff barriers that lead to low volumes of exports, even with zero duties. For products where some duties now apply, both industry and the government can work collaboratively to open the market and promote SA's products.
This past week President Cyril Ramaphosa was in the Middle East. Agricultural businesses should capitalise on such visits to promote South African produce to key markets in that region. While local investment summits are important in stimulating a positive sentiment in the sector, the promotion of South African agricultural produce in foreign markets should be part of the process of supporting this sector. Only when the market has widened will the drive to expand domestic production gain even more urgency.
Critically, geopolitical uncertainty should not detract from the important work of growing the domestic agricultural sector and expanding export opportunities. The increase in production that is expected for various plantations and the need to diversify from the EU market requires SA to engage the world’s leading agricultural importers and promote the products the country produces in surplus such as various fruits, beef and maize. This should be an ongoing effort of both the government and industry.
• Wandile Sihlobo is an agricultural economist and author. His latest book, Finding Common Ground: Land, Equity and Agriculture, was published by Pan Macmillan in 2020.
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