International trade is at the heart of SA’s agricultural success.
For this reason any disruptive legislative and logistical constraints to exports constrain the sector’s growth and are cause for concern. Equally, the differences in the interpretation of export-related legislation by industry leaders versus regulators could have adverse effects on the sector or dent sentiment.
It is therefore critical that the meaning and intent of regulation and policy be clearly articulated and communicated in a way that is commonly understood.
A case in point was the weekend newspapers that misinterpreted the export legislation relating to the EU market, causing unnecessary panic in the sector. The regulations outlined the procedure for exports from the Southern African Customs Union (Sacu) and Mozambique to the EU and the UK to take advantage of preferential tariff rate quotas for certain agricultural and agro-processed products contained in an annexure to the agreement. However, they were reported as though they were new stringent BEE regulations for exports.
The reality is that these requirements are not new and mirror the previous years’ requirements. There is no new BEE threshold or level that an applicant must reach to be awarded an export permit.
The critical nature of trade in SA’s agricultural sector is evident from the fact that the sector has more than doubled since 1994, in both value and volume terms. Admittedly, trade wasn’t the only catalyst for growth. The improvement in seed varieties, genetics and farming techniques has played a key role in improving farm productivity.
However, equally important is the expansion of the export markets that enabled and sustained the growth of the SA farming sector, ensuring that output derived from productivity gains has a wider reach to a range of export markets.
As highlighted in the past, in 2022 SA’s agricultural exports reached a record $12.8bn, up 4% from the previous year. This considerable success in a year of logistical challenges is commendable. The relatively higher commodity prices and large harvest were at the heart of the success.
BEE requirements for exports will have disastrous consequences for family farms
Maize, wine, grapes, citrus, berries, nuts, apples and pears, sugar, avocados and wool were some of the top exportable products in 2022, spread across various key markets. Africa remained a leading market, accounting for 37% of SA’s agricultural exports in 2022. Asia was the second largest, accounting for 27% of exports, followed by the EU at 19%. The Americas was the fourth-largest region, accounting for 7%, and the remaining 10% went to the rest of the world. The UK was one of the leading markets within the “rest of the world” category.
Considering the share and composition of the exports to the EU market, it is unsurprising that farmers and agribusinesses in the horticulture and wine industry were most surprised by the talk of changes in export regulations to the EU. However, in our interpretation there are no material changes, but rather a misinterpretation of the regulations by various sections of the media.
Appreciating the importance of trade as a catalyst of growth in agriculture, SA’s strategic focus should be on broadening the export markets even further in the coming years. The markets ideal for expansion, which both the government and private sector favour, are China, South Korea, Japan, the US, Vietnam, Taiwan, India, Saudi Arabia, Mexico, the Philippines and Bangladesh.
Crucially, the broadening of the export markets should happen while simultaneously focusing on maintaining smooth relations with these critical export markets such as the EU, the US and the African continent. Furthermore, the drive to export markets should be in a form of SA Inc and not to the exclusion of any stakeholder.
Provided there is room for expansion of agricultural production in the underutilised land now on government books and the former homelands, the export drive will become even more vital to accommodate further growth of SA’s agricultural sector in the coming years.
