Market access is important, but it’s just a way to get your foot in the door – thereafter, you must be competitive, said Theo Boshoff, executive head of Agbiz. He was speaking at a G20-related discussion session in Cape Town.
By Michelle van der Spuy, Senior Journalist at African Farming and Landbouweekblad
The South African agricultural sector wants to extract increasingly more value from the export market in the future. The implementation of G20 policies to unlock market access is a way to achieve this.
According to Paul Makube, senior agricultural economist at FNB, around 12% of South Africa’s agricultural products are exported while about 87% are consumed locally.
According to him, the horticulture industry currently exports the most products, with 42% of its products destined for the export market. Only 5% of South Africa’s animal products and 3% of the country’s field crops are exported.
Also read: G20 agriculture ministers called to support chief scientists’ recommendations
Competitiveness: The Real Challenge
Boshoff believes market access on its own is not sufficient to ensure success in the export market. In his view, it is better to concentrate on competitiveness in both local and foreign markets.
“Local issues concerning competitiveness include the cost of doing business. Our local soybean industry is considered one of the agricultural sector’s great success stories. However, it’s still cheaper to import soy through the Cape Town harbour from Argentina than to transport it by truck from the interior. If we can get the rail freight system working, it could be very different.
“Regarding foreign markets and exports, there are tariff and non-tariff trade barriers. The Department of Agriculture has already done a lot of good work to ensure technical market access for us in terms of sanitary and phytosanitary agreements and protocols, especially regarding markets in Asia. However, high tariffs are still imposed on our products in many of those countries.”
Although the African continent should be an accessible market for South Africa, thanks to the African Free Trade Agreement, there are non-tariff trade barriers related to infrastructure and logistics.
Also read: Eastern Cape pushes for market access and growth for emerging farmers
Wine Industry: Navigating Unique Challenges
Christo Conradie, South Africa Wine’s manager of stakeholder engagement and policy, who also participated in the discussion, agrees that competitiveness in foreign markets is more important than market access. He says South Africa’s presence in these markets must be sustainable and viable.
According to him, South Africa consumes about 450 million litres of wine locally while exporting around 300 million litres.
The wine industry, however, finds itself on a different playing field than some other agricultural commodities because it contains alcohol. As a result, there’s “a different feeling” about the sector.
“When we talk to the government, we don’t just talk to the Department of Agriculture or Trade, Industry and Competition, we also talk to the Department of Health and Social Development. We’re not just talking about trading it, but also about its abuse. There’s also more legislation involved, and every February the industry is hit by excise tax.”
Building Premium Markets
The export market is important for the local wine industry – America consumes 16% of the world’s wine while France, Italy and Germany each consume between 8% and 10% of it. About 30% of South Africa’s wine, however, is destined for Britain, which accounts for only 6% of the world’s wine consumption.
Conradie said it’s challenging to build viable markets – first to gain access, but then to promote your product to a premium level. “This is the reason why the industry is upset about America. We’ve already done the hard work for this market, but now we’re sitting with a 30% import tariff.”
He says exporting to Africa can also be difficult, especially to East Africa, where countries insist on testing wine to determine whether it meets East Africa Standards (EAS). This, while virtually every bottle of wine that South Africa exports has the Wine of Origin seal, which confirms that all information on the bottle is accurate and verifiable.
Citrus Industry: A Success Story with Ambitious Goals
Gerrit van der Merwe, chairman of the Citrus Growers’ Association of Southern Africa, says not only the local citrus industry, but the entire agricultural sector has already achieved remarkable success. The citrus industry has progressed from humble beginnings to one where it is expected to export almost 200 million boxes of fruit this year. This makes South Africa the largest exporter of citrus in the Southern Hemisphere.
Van der Merwe said the industry aims to increase volume to 260 million boxes by 2032, targeting markets in the East, with a focus on India and China in particular.
According to him, the challenge is not just gaining market access but gaining it on fair terms. “There is an obstacle in India. South Korea’s import tariff on our citrus is 40%. We see a great opportunity in China since its import tariff will be reduced to 0%.”
He highlighted that South African citrus growers don’t just compete with other local and foreign citrus growers, but also with other fruit producers, such as Spanish peach producers in Spain or American grapefruit producers.
“It’s all very intertwined. If, for example, there’s a massive cherry harvest and its price drops in America, our citrus sales decrease.”
South Africa sells large quantities of citrus to two American retailers – The Fresh Market and Whole Foods Market. According to Van der Merwe, The Fresh Market uses two-thirds of the citrus it buys for juicing in its stores.
“This creates a whole new gap for citrus and allows us to take market share away from other beverages. It’s also an indication that consumers are trying to be healthier.”
Another major buyer of South African citrus is McDonald’s, which purchases it in bulk to juice, but this, in turn, excludes companies like Pepsi and Coca-Cola.
“This is why the situation with America’s trade tariffs is so heartbreaking, because that market had just started gaining momentum and was on its way to where our markets in Europe already are.”
