By Carien Kruger, Jasper Raats and Michelle van der Spuy
Responding to the letter from President Donald Trump on the imposition of a 30% trade tariff on imports from South Africa, which will come into effect on 1 August, President Cyril Ramaphosa has said that diplomatic efforts will continue towards a more balanced and mutually beneficial trade relationship with the United States.
“We welcome the commitment by the US government that the 30% tariff is subject to modification at the back of the conclusion of our negotiations with the United States,” reads the statement that the Presidency issued on Monday and shared on social media.
Ramaphosa says the 30% tariff is based on a particular interpretation of the balance of trade between South Africa and the United States. This contested interpretation forms part of the issues under consideration by the two countries’ negotiating teams. Accordingly, South Africa maintains that the 30% reciprocal tariff is not an accurate representation of available trade data.
Impact on Farming Sector Likely to be Significant
Agriculture Minister John Steenhuisen says it is difficult to predict whether the tariff increase will lead to immediate job losses in the farming sector. Only time will tell whether operations on some farms will be forced to shut down, he said on Tuesday following a parliamentary debate on the Department of Agriculture’s budget.
During the session, Steenhuisen noted that although just 4%–6% of South Africa’s agricultural exports are destined for the United States, the impact is likely to be significant due to the concentration of exports in specific industries, namely citrus, table grapes, wine and nuts.
Citrus and Grape Industries at Risk
Dr Boitshoko Ntshabele, CEO of the Citrus Growers’ Association of Southern Africa, says only citrus from the Western and Northern Cape is exported to the US, but some rural towns in these provinces, such as Citrusdal, are heavily dependent on the American market.
“A 30% tariff would wreak havoc on entire communities,” he warns. “Producers in these two provinces may have little choice but to redirect shipments to other countries.”
This diversion could flood alternative markets with high volumes, potentially leading to oversupply and declining prices for all South Africa citrus producers.
Mecia Petersen, CEO of the South African Table Grape Industry (SATI), issued a brief statement to say that the industry is disappointed by the US’s decision but will continue working with government to strengthen South Africa’s trade offer.
‘Keep Cool; Let the Dust Settle’ – Macadamias SA
Producers will feel the impact of a 30% levy, but there is no need to panic just yet, says Alex Whyte, member of the board of the Market Access and Development Committee at Macadamias South Africa (SAMAC) and director of the Green Farms Nut Company.
South Africa is expecting a decent harvest, whereas the global macadamia crop this year is underwhelming. Australia, the world’s second-largest macadamia producer after South Africa, is unlikely to fill the gap in supplying the US market, meaning South Africa may not be easily replaced.
Meanwhile, prospects in China look promising. It appears increasingly likely that, from next year, macadamia imports from South Africa will no longer be subject to import levies in China. This could stimulate demand and allow South African producers – renowned for their high-quality nuts – to compete more favourably against other exporters, including Australia.
US Chicken Farmers Also Stand to Lose
In 2015, the South African broiler chicken industry was required to allow American producers to export 65 000 tonnes of bone-in chicken portions to South Africa free of anti-dumping duties. This concession was made so that South Africa could continue to benefit from the tariff preferences offered under the US African Growth and Opportunity Act (AGOA).
Since then, the quota has increased annually in line with market growth and currently stands at around 70 000 tonnes per year.
Now, with AGOA benefits no longer applicable under the current US import tariff of 10%, the South African Poultry Association has called for the quota to be withdrawn.
The association submitted a formal request to Parks Tau, Minister of Trade, Industry and Competition, urging the removal of the quota. “We are still waiting for feedback,” said Izaak Breitenbach, CEO of the Broiler Organisation of the South African Poultry Association, on Tuesday morning. “All that’s needed is for Minister Tau to instruct National Treasury to cancel the quota.”
Diversification and Market Retention Equally Important
In his statement, President Ramaphosa urged government negotiators and South African businesses to accelerate efforts to diversify export markets in order to strengthen resilience in global supply chains and the domestic economy.
This does not mean that the US market should be abandoned, however.
Finding new markets must go hand in hand with efforts to maintain existing ones, Steenhuisen says. “I don’t want to create the impression that we can simply divert our products elsewhere. It’s not that easy. Everything must be done to defend and preserve our current markets.”
