By Eamonn Ryan, referencing a Moneyweb podcast
South Africa exports about half of its agricultural production, with the European Union (EU) being its second-largest agricultural export market, absorbing nearly 30% of exports. This is Part 1 of a two-part series.
However, with increasing protectionism and isolationism in traditional markets like the EU, diversifying export destinations is crucial.
Agriculture plays a vital role in South Africa’s economy. However, our farmers face unique challenges in an increasingly competitive and subsidised global agricultural market. These challenges are compounded by protectionist and isolationist policies likely to become even more prominent as Donald Trump begins his second presidential term in the US. This may make it difficult for farmers from nations like South Africa to compete on an equal footing – unless the inefficiency of our logistics infrastructure drastically improves.
This creates an opportunity for the cold chain to improve efficiencies.
In a recent podcast hosted by Moneyweb, agricultural economist and chief economist at the Agricultural Business Chamber, Wandile Sihlobo, discussed these challenges, the impact of global agricultural subsidies and the steps South Africa can take to remain competitive in the global market.
Sihlobo noted that many developed countries, particularly in the EU, have called for even more subsidies, citing competition from emerging markets, including South Africa. This protectionist sentiment exacerbates the challenges for South African producers who are trying to access global markets.
Many countries have long used subsidies to protect their agricultural sectors, but in South Africa direct producer support is unaffordable, placing our farmers at a disadvantage. The EU and the US are among the largest subsidisers in global agriculture, with the EU’s Common Agricultural Policy (CAP) playing a central role in supporting farmers in Europe.
A lack of direct farmer support means South African farmers face higher production costs compared to their subsidised counterparts, which in turn affects their ability to compete internationally.