SA agricultural exports on a downward trend

RSG Landbou, PPECB

Estimated reading time: 4 minutes

South Africa’s agricultural export activity will likely soften this year from the 2021 record of US$12,4 billion. Lower production of key crops, animal disease spread and changes in phytosanitary regulations in key markets such as the European Union (EU), will all weigh on the export activity this year.

The changes in export volumes and values might not show in the year’s first half but will likely reflect in the second half of the year. South Africa’s agricultural exports for the first five months of this year amounted to US$5,06 billion, up just 2% from the corresponding period in 2021. Over this period, the EU, United Kingdom, Japan, United Arab Emirates and several African countries were still the primary markets.

Citrus, maize, apples and pears, wine, dates, figs, nuts, fruit juices, and wool were among the most dominant exportable products.

Read more about Tru-Cape’s pear exports to China here.

There were concerns that exports would deteriorate in April following the severe floods that damaged infrastructure in KwaZulu-Natal (KZN) and the Port of Durban. Surprisingly, the data paints a positive picture of continued export activity. Admittedly, Transnet and other logistics role-players worked tirelessly to restore the functioning of the Port of Durban after the floods. This export data partially reflects how soon the activity was restored in the major exporting route. The other ports in the country also assisted in facilitating exports during the challenging times in KZN.

The spread of foot-and-mouth disease (FMD) in the livestock industry intensified from the end of April. This outbreak meant that the export of wool, beef and other livestock products would face restrictions in key markets such as China, mainly from May. The discussions between the South African and Chinese authorities are still under way. In the meantime, exports of wool have declined significantly since the announcement of the temporary ban by China. We expect the impact to reflect largely in the third quarter of the year’s trade data.

The same is true for beef exports, although the wool and beef export regulations differ. Wool has a unique protocol with China to handle the exports of wool, even when there is an FMD outbreak in South Africa. However, beef exports have no such protocol and are mainly exposed to such outbreaks, compared to the sheep and goat industries. At the time of writing, the South African wool industry hadn’t received a clear direction about China’s adherence to the agreement reached between the two countries to facilitate wool exports during FMD outbreaks. The South African government is the only avenue to assist in resolving this impasse and should thus deepen its engagements with China.

In the case of citrus, the EU imposed protectionist measures on agriculture in July 2022 by changing its plant safety regulations for citrus without notifying its trading partners within a reasonable time. The new regulation purports to protect the EU from a quarantine organism, false codling moth, by introducing new stringent cold treatment requirements, particularly on citrus imports from Africa, mainly affecting South Africa, Zimbabwe and the Kingdom of Eswatini.

Read more about negotiations regarding European citrus exports here.

South Africa has put rigorous measures in place to control false codling moth, which the EU uses as a pretext to restrict citrus imports from Africa. Hence, we view this as a cover to protect the EU’s citrus-growing countries such as Spain and will increase costs to the South Africa citrus growers. In the last couple of weeks of July into August, citrus growers struggled to gain access to the EU market because of these changes in regulations.

The breakthrough for the shipments stranded in the EU waters came in the second week of August. Still, the challenge of the new regulations remains for export activity in the months ahead. The solution to this challenge requires continuous and intensified engagement by the South African government with the EU authorities.

No risk to domestic food security

Aside from the challenges presented by animal disease and regulatory constraints, lower domestic output of key crops may also dampen export performance. The decline in crop output doesn’t risk domestic food security. However, it reduces the available supplies for the export market. The most notable decline in key exportable crops is maize, down by 10% from the 2020/21 season at an estimated 14,7 million tons. As a result, we expect maize exports to amount to 3 million tons, down from roughly 4 million tons in the previous season. This deterioration in export volumes will show in the third and last quarter of the year.

Read more about the uplifting of chicken tariffs here.

In sum, South Africa’s agricultural sector will remain a net exporter in 2022. Yet the value will not be as robust as in 2021 when the sector reached a record US$12,4 billion. At the time, the increase in volume and value of exports was the key driver of activity. However, internal and external conditions have made for a relatively more challenging 2022. The reduction in production volume, biosecurity challenges and changes in export regulations in some of our key markets are the challenges that confront us this year. – Wandile Sihlobo, Agbiz