By Liana Mocke
South Africa needs to tap into the immense potential in new and existing export markets, but it will mean being a friend to everyone, in the East or the West.
This was the overarching message in the first session of the Nation in Conversation series at Nampo Cape in Bredasdorp.
Speakers and the audience discussed the economic implications of the Russian war with Ukraine on South African trade relations, as well as the possibility that South Africa may no longer enjoy the benefits of the US African Growth and Opportunity Act (Agoa).
Being a trading friend to diverse world regions within a complex international political environment will require the government to gain the trust of the international community, said Western Cape premier Alan Winde.
This would mean stopping the practice of saying one thing but doing another, as was the case with the diplomatic and political drama over where South Africa stands in the Russian war with Ukraine.
Spreading trade wings east and west
According to John Hudson, head of agriculture at Nedbank’s business division, South Africa must export more, which means existing markets must be looked after and nurtured while new markets are explored. “It is of paramount importance to do both. We cannot afford to lose export markets.”
Ultimately, this will mean South Africa cannot trade only with its neighbours and fellow Brics members. It will have to focus more on other world regions, including the US – one of the reasons it is vital for South Africa to remain part of Agoa
Wolfe Braude, manager of the Agbiz fruit desk, said Africa remains the largest export market with the greatest opportunity for South African agricultural products. Asia, the European Union (EU) and Britain follow in terms of export volumes, but the US is responsible for a very small percentage.
“However, it is important to remember that there are many opportunities to export more products to America, and that is currently being explored.” Citrus and avocados are among the products with potential for export to the US.
Winde said the Western Cape is trying to strengthen and protect its trade relations not only with the US but with other trading partners, such as China.
“I was in America to try to protect our Agoa benefits. Next week, I will travel to China, because due to extended Covid-19 restrictions we have lost one of the wine industry’s key export markets there. There is a lot of potential to expand the market there,” he said.
He told African Farming that South Africa should also start thinking about what comes after Agoa. “We should actually start building trade relations between South Africa and America. It’s not just about Agoa; there are also other areas we need to start talking about.”
What if the US kicks SA out of Agoa?
Hudson added that if South Africa loses its Agoa benefits, the cost of trading with the US will increase significantly because tariffs that are not payable under Agoa will then apply.
“There is also the broader financial impact, such as the unfavourable sentiment that can follow. It could ultimately mean the government will have to pay more for its debt.”
South Africa already borrows R2.1 billion daily to finance its debt, and this is increasing due to unfavourable sentiment. As a result, less money is available to provide services such as healthcare.
“The one sector in the agricultural industry that could benefit if South Africa loses its Agoa benefits is the local poultry industry,” said analyst Anthony Clarke. Under Agoa, the US exports about 72,000 tons of chicken meat tariff-free to South Africa annually.
However, Clarke said this benefit is relatively small in the bigger picture because of the huge ripple effect on the value chain and job opportunities in various industries, especially the automotive industry, if South Africa loses Agoa benefits.
