NEWS
THE WAY FORWARD IN TERMS OF AGRI-EXPORTS INTO AFRICA
The African Continental Free Trade Area ( AfCFTA ) is set to provide further opportunities for the expansion of South Africa ’ s agricultural exports into the African continent .
Wandile Sihlobo Chief Economist of the Agricultural Business Chamber of South Africa ( Agbiz )
This comes against the backdrop of Africa being the largest market for SA ’ s agricultural sector - accounting for an average 43 % ( or US $ 4,1 billion ) a year of all agriculture exports over the past decade .
Having said this , Wandile Sihlobo , Agricultural Economist and Head of Agribusiness Research at the Agricultural Business Chamber ( Agbiz ), asks the question : how much more potential can be unlocked in the African market , considering that the benefits of the AfCFTA are not as much as previously thought , due to structural limitations that will prevent the agricultural sector from expanding its exports into untapped markets ?
Firstly , most of the country ’ s agricultural exports into the African continent ( 89 %) are concentrated within the Southern Africa Customs Union ( SACU ) and the Southern African Development Community ( SADC ) Free Trade Area ( FTA ). However , the product scope of exports into SACU and SADC is quite diverse and includes maize , processed food products , apples and pears , sugar , animal feed products , prepared or bottled water , fruit juices and wine are some of the key products exported to this region .
With 90 cents out of every rand in agricultural exports earned within SACU / SADC under an expanded diverse set of products , it is important to diversify export markets beyond the region .
The most reasonable assumption is for
South Africa to target West , East and North Africa .
COMPETING AGAINST WELL-ESTAB- LISHED EU SUPPLY CHAINS
Secondly , and given the above , Africa north of the Sahara , more specifically the Maghreb region ( i . e ., Algeria , Libya , Mauritania , Morocco and Tunisia ) is much closer to Europe , and thus its trade activity is more interlinked with the EU rather than sub-Saharan Africa .
In addition , South Africa competes with this region for a number of products the country intends to increase its exports with , primarily the high-value horticultural products . Penetrating and establishing a market presence in North Africa may prove challenging due to direct competition with well-established EU supply chains and competitive local produce . As such , South Africa ' s realistic opportunity within the African continent is more in East and West Africa .
EAST AND WEST AFRICA AS FUTURE MARKETS ?
Thirdly , with South Africa ' s opportunity set being clearly more defined in East and West Africa , leveraging the AfCFTA ' s tariff-free movement of goods would potentially boost the country ' s agricultural exports to these regions .
Analysts are , however , hesitant that the nearterm would yield many benefits for South Africa due to at least three reasons :
• East and West African regions are known for having a range of Non-Tariff Barriers ( NTBs ) which could remain a hindrance in boosting trade , regardless of lower tariffs brought by the AfCFTA .
• High levels of corruption in the inland borders , which increase the cost of doing business , have proven to be a major issue of consideration for business in South Africa .
• Fragmented value chains due to poor connectivity and infrastructure are also a major contributor to transport costs , which tend to increase significantly as goods are transported inland .
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SENWES SCENARIO | SOMER � SUMMER 2021