The Middle East is deepening its economic ties with Africa. The Economist magazine recently ran an article, “The Gulf’s scramble for Africa is reshaping the continent”, which focused on growing geopolitical ties and significant investments in infrastructure projects such as ports in various African countries.
The leading countries are the United Arab Emirates (UAE), Saudi Arabia and Qatar. For countries such as SA, with diverse interests worldwide, the Middle East’s growing interest in Africa requires proactive engagement, particularly for drawing in investments and opening up the market for exporting sectors of the economy.
Investment need
Agriculture is one sector that needs investment and a broadening of export markets. Consider the eastern regions of SA and the former homelands, such are typically on the periphery of agricultural progress because of poor land governance and weak infrastructure, which isolates them from the formal value chains of the food, fibre and beverage sectors. In some areas the transaction costs of moving agricultural produce to the consumption points become too high because of the lack of roads, rail and storage facilities.
In the regions that are historically part of the commercial farming sector the deteriorating network infrastructure is also increasingly a significant cost driver for businesses. These include roads, rail, water, dams, storage facilities and the on-farm infrastructure.
It is in these areas of SA’s agriculture, food, fibre and beverages value chain that one should ask whether it would be worthwhile to assess whether the Middle Eastern countries that are in search of opportunities to invest would not, with the help of local stakeholders, form commercially viable business ventures that respond to the above challenges.
Some investments would form part of joining with SA agribusinesses and farming enterprises that aim to expand their operations and require capital for such activities.
The significant funds in these Middle East countries also have some form of government involvement. The SA government, particularly the departments of trade, industry & competition and agriculture, land reform & rural development, should lead the way in the formulation of a Middle East-SA agricultural investment strategy.
Such a strategy would be helpful in formally starting a conversation with Middle East stakeholders and introducing SA firms and farming businesses.
SA is heading towards general elections in May, and the political leadership may have its eyes on the election, with perhaps limited time for such tedious but important activities. Still, the officials of the departments concerned will remain regardless of potential changes in the political leadership.
This means the directors-general of the departments concerned should consider starting such work and keeping their political leaders apprised of progress. The political leadership could also start prioritising such work even in the uncertain election climate, as this is a vital programme for the country regardless of the leadership.
Export drive
Beyond the investment need and challenges SA’s agriculture faces, the country is export orientated, with exports reaching a record $13.2bn in 2023, according to data from Trade Map. The Middle East region is increasingly important to SA agricultural trade. For example, in 2023 Asia and the Middle East accounted for 28% of SA’s agricultural exports, the second largest region.
Africa remains the leading market, accounting for 38% of SA’s agricultural exports in 2023 in value terms, while the EU comes in third at 19%, the Americas fourth at 6%, and the rest of the world at 9%.
SA primarily exports citrus, apples and pears, beef, fresh berries, grapes, and sheep and goat meat to the Middle East. These industries have potential to grow in SA, and therefore prospects of larger volumes becoming available for export to the Middle East.
If one focuses on the key economies in the Middle East, SA plays a peripheral role in agricultural markets. For example, Saudi Arabia imported $29.5bn of agricultural products in 2022, according to data from Trade Map, and SA accounted for a mere 1% of that, ranking 31st on the agricultural importers list.
Similarly, the UAE imported $23.3bn of agricultural products in 2022, with SA capturing a mere 2% market share as the 16th largest supplier. Qatar imported $3.9bn of agricultural products in 2022, with SA ranked 10th in the list of suppliers with a 2% market share in Qatar’s agricultural imports.
The countries that occupied a larger market share were generally India, Brazil, Australia, the US, Canada, New Zealand, the UK, Denmark, Netherlands, Italy, Spain, Argentina, Russia, France and Turkey. Regarding the products, the Middle East primarily imports meat products, grains, oilseeds and fruit.
SA would clearly benefit from increasing its market share, something that is only possible through targeted promotion and marketing of products, along with government support to nudge the Middle Eastern countries to address any remaining phytosanitary barriers for SA products in these countries.
Policy consideration
While SA faces challenges of drought in the near term, the goal of growing the agricultural sector should remain a priority for all stakeholders. The following should be the next steps in engaging the region:
- The departments of trade, industry & competition and agriculture, land reform & rural development should formulate a Middle-East-SA agricultural investment & trade strategy to create a priority list of products for investment and map up any barriers that should be addressed within the government’s official channels, with timelines. The document would also outline possible investment paths aligned with industries highlighted in the Agriculture & Agro-processing Master Plan, as well as the opportunities presented on land in the former homelands, among other opportunities.
- The agriculture department should appoint attachés in the Middle-East region who would communicate and lobby for SA agricultural products in the area.
- The trade & industry department should engage with international relations officials to actively promote SA’s agriculture and agro-processing sector as an investment destination.
- The private sector and organised agriculture should be involved in all of the above stages.
• Sihlobo, chief economist at the Agricultural Business Chamber of SA and author of “A Country of Two Agricultures”, is senior fellow in Stellenbosch University’s department of agricultural economics.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.