The country could face agri-business hurdles amid escalating global trade tensions

South Africa's agricultural exports rose to record highs and reached $13.7 billion (R255.5bn) in 2024, marking an increase of 3% from the previous year.

Despite this positive trend, the Agricultural Business Chamber (Agbiz) on Monday cautioned that the nation faces headwinds from escalating trade tensions, particularly between the US and China, a situation that could have ripple effects on South Africa's export market.

The findings reveal a trade surplus of $6.2bn, albeit a slight decline of 2% from the prior year.

This fluctuation in figures comes as economists warn of continued volatility in the rand, primarily driven by developments in the US and fluctuations in the US dollar. Prospects of relative strength in the rand loom as upcoming US tariff applications may be less severe than initially anticipated.

South Africa's agricultural sector is increasingly pressured to diversify its market reliance, particularly with the US, given the tit-for-tat trade war that has erupted with China.

In a provocative retaliation, China has responded to a 25% tariff imposed by the US, charged with neglecting the influx of fentanyl into US territory.

Such geopolitical manoeuvring underlines the urgent need for South Africa to enhance logistical efficiency and maintain, if not expand, its market presence across the European Union (EU), Africa, Asia, the Middle East, and the Americas.

Wandile Sihlobo, Agbiz chief economist, said if South Africa were excluded from the African Growth and Opportunity Act (Agoa), the country would face an average import duty of about 3% at the Most Favored Nations Rate.

This underscores the fact that Agoamainly offers price competitiveness to the products South Africa exports to the US.

"The 3% tariff would advantage other competitors that access the US market duty-free as South Africa currently does under the Agoa. South Africa's agricultural exports to the US - mainly citrus, grapes, wine, and fruit juices - account for 6% which also includes exports to the Americas," Sihlobo said.

"Still, this is not to minimize their value as few specific industries are primarily involved in these agricultural exports to the US. Since the start of Agoa, the percentage share of South Africa's agricultural exports to the US has remained at these levels."

South Africa is on short notice with the US as that country highlights that government has taken aggressive positions towards the US and its allies, including accusing Israel, and not Hamas, of genocide at the International Court of Justice, and reinvigorating its relations with Iran.

According to Investec chief economist Annabel Bishop, markets also perceive a deterioration in the political relationship between SA and the US after the former recently removed aid support from South Africa, and concerns are growing over South Africa Agoa's free trade access into the US.

According to Agbiz, the EU is South Africa's third-largest agricultural market in 2024, with a share of 19%. Citrus, grapes, wines, dates, avocados, pineapples, fruit juices, apples and pears, berries, apricots and cherries, nuts, and wool were amongst the top agricultural products South Africa exported to the EU in 2024.

Sihlobo said the country needed to accelerate initiatives including investments in the port and rail infrastructure and improving roads in farming towns.

"South Africa must work hard to retain the existing markets in the EU, the African continent, Asia, the Middle East, and the Americas. This is even more important in the current climate, where US policymakers are increasingly discussing raising tariffs," Sihlobo said.

He added that the departments of trade, industry and competition, as well as international relations and cooperation, and agriculture, should lead the way for export expansion in the current export markets and the search for new export markets.

Sihlobo said South Africa should expand market access to some key BRICS countries, such as China, India, Saudi Arabia, and Egypt.

"The BRICS grouping should emphasize the need for member countries to lower the import tariffs and address artificial phytosanitary barriers hindering deeper trade within this grouping," he said.

He also noted that other strategic export markets for South Africa's agricultural sector included South Korea, Japan, Vietnam, Taiwan, Mexico, the Philippines and Bangladesh.

"The private sector and the South African government share this ambition for export market expansion. In the current fragmented world, more resources and marketing must be used for this work," he said.

First published byIOL

(RT.com)