Agriculturally, the recently launched African Continental Free Trade Agreement (AfCFTA) is an important development, although a reduction of tariffs alone won’t necessarily encourage trade. Much work is to be done across the continent on the lack of infrastructure, costly and prohibitive border processes, corruption and weak institutions.
Optimism about the pact stems from SA agricultural growth having been export-driven over the past few decades, and the rest of the continent being a key market. Over the past 10 years it has accounted for an average of 44% of SA exports, which equates to $3.9bn, up from an average of less than 30% in the prior decade.
The top 10 markets were Botswana, Namibia, Mozambique, Lesotho, Eswatini, Zambia, Zimbabwe, Angola, Mauritius and Nigeria. A growing middle class and greater spending power have partly been the catalyst for the growth of SA’s exports to Africa. The economic trajectories of these countries are thus important for SA’s agricultural sector as they determine domestic demand.
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Apart from Nigeria, these countries are part of the Southern African Development Community (SADC), and account for 82% of SA’s agricultural exports to the rest of the continent. (The overall SADC region accounts for 88% of SA’s agricultural exports to Africa.)
It is the SADC that has really underpinned SA’s agricultural exports to Africa, and not so much the overall continent. This is because SADC is a tariff-free zone for SA, and existing infrastructure facilitates trade with its neighbouring countries.
The products exported are diverse, ranging from sugar to beverages, spirits, grains (mainly maize, wheat and sorghum), cotton, beef and vegetable oils. With the exception of grains (especially maize), the share of agricultural products to the continent has grown over the past decade. The decline in grain exports is mainly due to the development of domestic grain production in a number of other African countries.
High-protein foods
Horticultural products, beverages and spirits production on the continent remain limited.
The profile of agricultural exports has also been influenced by changing consumer taste, with high-protein foods being preferred.
The role of maize has not been reduced, as it is needed as feed in the livestock and poultry sector, which I believe will grow in the coming years in Africa. Neither has the decline of the African share of SA’s maize exports caused disruption in domestic production since the maize industry has developed export markets to the Far East.
Discussions on agricultural development domestically include the possibility of expanding production in areas of underutilised land. The output from such areas will need to reach export markets, as SA already exports about 49% of its produce in value terms. In the past I have argued for the development of markets in Asia and the Middle East, but Africa remains an important market that should not be ignored.
With SA’s agricultural exports in Africa concentrated in the SADC, the AfCFTA offers hope for potential trade expansion. As set out in these pages in July in an essay co-authored with Michael Ade and Tinashe Kapuya, it is expected to make 90% of trade on the continent duty-free by July 2020. This is due to increase to 97% over the next decade as duties on additional products are phased down.
With such developments, if the continent can deal with the lack of infrastructure and environments nonconducive to business, which make trade across borders particularly costly and nearly prohibitive, Africa could present many opportunities for SA’s agricultural sector.
• Sihlobo (@WandileSihlobo) is head of economic and agribusiness research at the Agricultural Business Chamber.
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