Global Courant
Photo: the conversation
South Africa’s hesitation to deal with Russia jeopardizes agricultural exports and threatens the sector. About half of the country’s R230 billion agricultural output is destined for international markets, with Russia receiving less than 2%. Wandile Sihlobo, chief economist of the South African Agricultural Business Chamber, emphasizes the importance of maintaining trade relations with the European Union (EU) and other major agricultural export markets to avoid losses.
Sihlobo emphasizes that South Africa’s agricultural sector is export-oriented, making it crucial to prioritize maintaining export markets. Africa currently receives 40% of South Africa’s agricultural exports, while Asia and the EU also receive significant shares. Russia, on the other hand, receives less than 2% of South Africa’s agricultural exports, making it a minor player in the sector. Sihlobo emphasizes the importance of the US market for South Africa.
However, the close ties between South Africa and Russia have raised concerns over geopolitical risks. President Vladimir Putin’s actions in Ukraine have drawn harsh criticism not only from opponents, but also from industry leaders. Concerns have been raised that South Africa’s relationship with Russia could jeopardize its membership of the African Growth and Opportunity Act (AGOA), which grants duty-free access to the United States for certain South African products. The South African Reserve Bank (SARB) has also expressed concern about the potential impact of sanctions.
Indeed, Congressional representatives in the United States have called for sanctions against South Africa as a result of its ties to Russia. This situation poses significant risks to the agricultural sector, including potential eviction from AGOA and limited access to funding from US-backed international lenders. Christo van der Rheede, CEO of Agri SA, warns of murky waters in the future for the agricultural sector if South Africa’s foreign relations are not aligned.
Van der Rheede agrees with Sihlobo and emphasizes the crucial importance of South Africa’s EU trading partners. The EU market is considered crucial for developing relationships and supporting export growth. Sihlobo also discusses the Agriculture and Agro-processing Master Plan (AAMP), launched by the government to boost investment and job creation in the sector, at a Think Big Series event hosted by PSG.
Sihlobo emphasizes the critical role of releasing approximately four million hectares of underutilized land in increasing production and improving trade output. The South African government currently owns about four million hectares of land, part of which can be used for agriculture. The Agricultural Research Council has already inspected nearly two million hectares of this land. South Africa can increase exports for export and create employment opportunities by increasing the cultivation of summer cereals, horticulture and livestock.
In summary, the agricultural sector in South Africa is highly dependent on export markets, of which only a small part goes to Russia. To mitigate the risks associated with its association with Russia, the country must prioritize trade relations with the EU and other key agricultural markets. The sector may face challenges such as being kicked out of AGOA and limited access to international funding. Unlocking underutilized land and implementing the AAMP are critical steps in increasing output, improving trade output and creating employment.
