South Africa’s agricultural exports amounted to US$10,2 billion in 2020, which is a 3% increase from the previous year. This is the second-largest level after the record exports of US$10,7 billion in 2018. The exports were primarily underpinned by large domestic agricultural output, which was supported by favourable weather conditions. The relatively weaker domestic currency also made South Africa’s agricultural products more competitive in the global market. The top-ten exportable products by value were citrus, grapes, wine, apples and pears, maize, nuts, sugar, wool, and fruit juice.
During the same period, South Africa’s agricultural imports fell by 8% year-on-year to US$5,9 billion. The decline in imports of poultry meat, sugar, spirits, sunflower oil, prepared animal feed, beer made from malt, fish, and coffee were the underlying drivers of the decrease in imports in 2020. This was enough to overshadow the increase in imports of the top-three products South Africa typically imports, namely, rice, wheat, and palm oil. The fall in imports, which corresponded to an increase in exports, subsequently led to a 26% year-on-year increase in South Africa’s agricultural trade surplus to US$4,3 billion. This is illustrated in Exhibit 1.
From a destination point of view, the African continent and Europe remained the largest markets for South Africa’s agricultural exports, absorbing 38% and 27% of total exports in 2020 in value terms, respectively. The top products in these markets were beverages, fruit, grains, sugar, and vegetables. Asia has also remained a crucial market for South Africa’s agricultural exports, accounting for a 25% export share in 2020. Fruit, wool, grains, sugar, and meat were the leading products exported to this region. The Americas and the rest of the world accounted for 6% and 4% shares. This is illustrated in Exhibit 2. Exports to these regions were also dominated by fruit, beverages, vegetables, grains, sugar, and wool.
Co-operation makes a difference
Aside from the favourable weather conditions that resulted in a large harvest, credit for exports also goes to unhindered food value chain operations due to the joint efforts of the government, the private sector, and various research institutions. Notably, the government’s decision to leave the agricultural and broader food sector fully operational since the onset of lockdown provided conducive business conditions. Meanwhile, the continuous interaction between private sector organisations and logistics companies ensured a constant flow of products to the export markets.
South Africa’s agricultural exports could increase further in 2021. The improved favourable conditions have led to an increase in summer crop area plantings and prospects of a larger maize harvest than in 2019/20, which will enable more exports, particularly given the context of strong demand and somewhat low stock levels. South African wine grape production is also set to be somewhat larger than in 2020, thus contributing to a larger wine volume for exports. There is also general optimism about the 2021 harvest in the horticulture sub-sector and other field crops such as sugar, which supports our view of a possible increase in agricultural exports this year.
The South African government and private sector players have embraced a vision of expanding labour-intensive agricultural sub-sectors as part of a broader development strategy. This message is clear from the National Development Plan and various speeches by policymakers over the past couple of years. This is to be an export-driven initiative. Such sub-sectors are mainly horticulture and to a certain extent, field crops. Fortunately, the top valuable agricultural exports were also within these sub-sectors over the past six years, which means that South Africa is on the right path in its agricultural development strategy.
With that said, while 25% worth’s share of South Africa’s agricultural exports goes to Asia, as previously noted, there is still potential to expand participation in that market. With India and China headlining the growth potential in Asia and the Far East, this region is significant enough to warrant more attention, especially given that there is currently no preferential market access for South Africa’s agricultural sector in this region.
South Africa has to compete with the likes of Australia and Chile. They have secured trade agreements that have afforded them a significant competitive advantage that could end up threatening South Africa’s market share and future growth. Therefore, South Africa should continue to engage these countries for greater market access to agricultural products. The Middle East is also an important market to continue developing trade relationships with especially Saudi Arabia. The African Free Continental Trade Area’s activation at the beginning of this year also provides a crucial foundation for the realisation of this potential within the African continent. – Wandile Sihlobo, chief economist, Agbiz
Wandile Sihlobo, chief economist at Agbiz, shares highlights in his update on agricultural commodity markets. Click here for the full report on the agricultural markets for the major commodities. Find previous reports here.