Why a South Africa-Middle East Agricultural Trade and Investment Strategy is Critical

We must diversify our agricultural export markets.

Given the fragmented trade and South Africa’s quest to diversify its exports, we must explore a range of regions. The Middle East is one such interesting region, and it is deepening its economic ties with Africa.

In March 2024, The Economist magazine published an article titled "The Gulf's scramble for Africa is reshaping the continent." The article 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 like South Africa, which has diverse interests worldwide, the Middle East's growing interest in Africa requires proactive engagement, mainly to attract investments and open 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 South Africa and the former homelands.

These areas typically are on the periphery of agricultural progress because of poor land governance and weak infrastructure, which effectively isolate 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 due to the lack of roads, rail, and storage facilities.

In the regions, part of the established commercial farming sector, the deteriorating network infrastructure—including roads, rail, water, dams, storage facilities, and on-farm infrastructure—is also increasingly a significant cost driver for businesses.

It is in these areas of South Africa's agriculture, food, fibre, and beverages value chain that one should ask whether it would be worthwhile to assess whether Middle-East countries seeking investment opportunities would not form commercially viable business ventures that respond to the above challenges with the help of local stakeholders.

Some investments would involve partnering with South African agribusinesses and farming enterprises that aim to expand their operations and require capital for such activities.

Significant funds in these Middle Eastern countries also involve the government in some way. The South African government, particularly the Department of Trade, Industry and Competition (DTIC) and the Department of International Relations and Cooperation (DIRCO), should lead the formulation of a "Middle East-South Africa Agricultural Investment Strategy.”

Such a strategy would help formally start a conversation with Middle Eastern stakeholders and introduce South African firms and farming businesses.

Export drive

Beyond the investment need and the challenges South Africa's agriculture faces, the country is export-oriented, with exports reaching a record US$13,2 billion in 2023, according to data from Trade Map.

The Middle East region is increasingly important in the South African agricultural trade. For example, in 2023, Asia and the Middle East accounted for 28% of South Africa's agricultural exports, the second largest region.

South Africa primarily exports citrus, apples and pears, beef, fresh berries, grapes, and sheep and goat meat to the Middle East. These industries have a potential for growth in South Africa and, therefore, prospects of large volumes for exports to the Middle East.

Still, if one focuses on the key economies in the Middle East, South Africa plays a peripheral role in agricultural markets. For example, Saudi Arabia imported US$29,5 billion of agricultural products in 2022, according to data from Trade Map.

South Africa was a minor exporter, accounting for a mere 1% of Saudi Arabian imports. It ranked 31st in the agricultural importers list.

Similarly, the UAE imported US$23,3 billion of agricultural products in 2022, with South Africa capturing a mere 2% market share as the 16^th largest supplier.

Qatar, which imported US$3,9 billion of agricultural products in 2022, with South Africa playing a small role, ranked 10^th in the list of suppliers and with a 2% market share in Qatar's agricultural imports.

India, Brazil, Australia, the United States, Canada, New Zealand, the United Kingdom, Denmark, the Netherlands, Italy, Spain, Argentina, Russia, and France. generally held the largest market shares in these Middle Eastern countries

Regarding the products, the Middle East primarily imports various meat products, grains, oilseeds, and fruits, amongst other products.

This means South Africa would benefit from increasing its market share, which is only possible through targeted product promotion and marketing. Government support would also help nudge Middle Eastern countries to address any remaining phytosanitary barriers for South African products in these countries.

Ultimately, the DTIC and DIRCO should formulate a Middle-East-South Africa Agricultural Investment and Trade Strategy with the Department of Agriculture. This Strategy would help rank the priority list of investment products and map out 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 and Agro-processing Master Plan, as well as the opportunities presented on PLAS land and in the former homelands, amongst other opportunities.