Agricultural Export Diversification Strategy Will Take Time to Pay Off
We must work to retain the access we have in the U.S. and other regions
I am in Cape Town today for matters related to Statistics South Africa (Stats SA), where I serve as a Member of the Stats SA Council. However, I would like to make a brief intervention on trade matters.
Now that we are nearing July 8, which is the cutoff date for the 10% universal tariff the U.S. administration offered as a 90-day breather from the higher tariffs imposed on Liberation Day, there is some uncertainty about the path forward. South African businesses and the government have engaged, and continue to interact with, U.S. authorities regarding the path forward. However, the path forward remains unclear at this moment, although we would all like to see the continuation of the 10% tariffs rather than the 31% tariffs South Africa faced.
Observing this situation, the idea that some often offer is that we should channel our energies into export diversification to other new regions. The export diversification part is, of course, sound advice. However, we cannot completely abandon the U.S. market; it is vital to South Africa and crucial to us in the agricultural sector.
The export diversification comments typically point to China, suggesting that we should focus more on that area. Indeed, regular readers of this letter will be aware that China has been a primary focus for some time. From an agricultural perspective, China is a significant market, accounting for roughly 11% of global agricultural imports, which totalled US$218 billion in 2023.
However, accessing China is not as easy, despite the country's optimistic statements about lowering import tariffs for goods from various African countries. Until there is clarity about this process and timelines, we continue to face higher tariffs in China and some phytosanitary barriers. These limits South African agricultural penetration into the Chinese market for now. Thus, South Africa remains a negligible player in the Chinese agricultural market, accounting for a mere 0.4% (US$979 million) of China's agricultural imports of US$218 billion in 2023. These exports include a variety of fruits, wine, red meat, nuts, maize, soybeans, and wool.
Another matter that is also important to appreciate is that switching export markets is not as easy as stopping to sell citrus to Garry and selling it now to Bulelani. There is a business relationship development side and marketing that the private sector or export agents must establish, after the tariff issues and the phytosanitary matters are resolved.
There is also an issue of consumer taste and buying power per region, which all influence the demand for the various products that South Africa exports to specific markets.
Therefore, we need to build on an export diversification strategy, but it cannot be viewed as an overnight solution to avoiding the challenges in the U.S. market.
The export diversification strategy requires focus, firstly, from the government, and thereafter, time for the private sector to establish the necessary business relationships and address logistical challenges, especially in agriculture. It is partly for this reason that you may have heard me say that we must work to retain the market access we have in the U.S. for South Africa's agricultural products, while also working to broaden our market access in various countries in the Middle East and Asia.
We cannot view other countries as the replacement of the U.S.; if anything, they can be an addition to our access in the U.S. over time. We also have significant potential for increased horticulture and other products that will require greater access to various export markets.
Importantly, the complexity of opening new export markets is also a matter that policymakers must underscore in their comments when guiding on trade matters at this time of heightened uncertainty in trade policy.
There also needs to be dedicated teams within the trade departments that work tirelessly on matters of export market expansion, so that policy adjustments are backed by actual work underway. Still, much of this takes time and is costly to businesses and other stakeholders. But it is vital and the only path to broadening our exports and strategically derisking our industries in the medium to long term.