Articles & Insights
Focus on China and Middle East agri trade
With South African president Cyril Ramaphosa’s state visit to China concluded, the next stop should be the Middle East. But before transitioning to the Middle East, let’s briefly examine China’s agricultural trade.
Trade data provides South Africa with some signposts of what to do next: aggressively drive exports to the Chinese market. This market, with over US$200 billion in annual agricultural imports, currently regards South Africa as a small player, holding just 0,4% of the market share. From now on, the focus should remain on nudging China to lower import tariffs on various agricultural products and addressing the phytosanitary barriers for some products. This effort will build on the success of the existing export market possibilities for South African beef, avocados, and wool, among others.
As technical experts from various departments work on implementing the agreements from the recent state visit, the political leadership of the Department of Agriculture, Department of Trade, Industry and Competition, and the Department of International Relations and Cooperation, should also refresh their focus on the Middle East. At the start of the year we highlighted the need for a comprehensive agricultural trade and investment strategy for the Middle East. We believe there remains merit in the idea, and it should be a priority for the government of the national unity.
Worthwhile investments
There is a strong investment case to be made for the eastern regions of South Africa and the former homelands, which could benefit from Middle Eastern and Chinese capital. These areas are typically on the periphery of agricultural progress because of poor land governance and weak infrastructure, isolating them from the formal value chains of the food, fibre, and beverage sectors.
In some areas, the transaction costs of moving agricultural produce to 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 becoming a significant cost driver for businesses. These include roads, rail, water, dams, storage facilities, and on-farm infrastructure.
Beyond China, it is worthwhile assessing whether the Middle Eastern countries are better positioned to form commercially viable business ventures that address the said challenges. Some investments could involve partnerships with South African agribusinesses and farming enterprises that aim to expand their operations and require capital for such activities. The significant funds in these Middle Eastern countries often involve some level of government participation.
Click here to read full article by Agbiz Chief Economist Wandile Sihlobo for the Agbiz Grain Quarterly November 2024 issue.