The following is the transcript of a podcast by economist Wandile Sihlobo broadcast by Financial Mail, edited by Eamonn Ryan. This is Part 2 of a two-part series.
With a 31% tariff now, while South African agricultural competitors such as Brazil, Chile and Australia will face tariffs of only 10%, the country will surely have a competitiveness problem in the US market. And yes, the tariff is a tax on the US consumer, not South Africa. However, it affects South African products’ penetration rate in these markets.
Diverting products to other friendly markets won’t be easy and will take time. Still, this should be the main preoccupation of the department of agriculture, assisted by the department of trade, industry & competition.
The Middle East and Asia should be the primary focus for South Africa to build access, mainly in Africa, the Middle East (particularly Saudi Arabia, Qatar, and the UAE) and Asia (with a strong emphasis on China and India).
Crucially, tariffs effectively nullify the duty-free access that South African exporters have enjoyed under AGOA for a range of products. This development is particularly ill-timed for sectors like citrus, which is currently heading into its peak export season. The exact tariff levels for specific agricultural products remain unclear, creating considerable uncertainty for producers, particularly in provinces like the Western Cape and parts of the Eastern Cape.
In response, South African authorities have indicated their intention to engage constructively with the US to navigate these trade hurdles. However, alongside these efforts, the focus is increasingly shifting towards a medium to long-term strategy of trade diversification. This includes a concerted effort to explore and expand opportunities in the new markets already mentioned.
While South Africa currently holds a relatively small market share in these regions, the potential for growth is significant, especially for commodities like red meat, fruit and grains. The key challenges hindering greater access to these markets include existing import tariffs and various phytosanitary barriers. Industry stakeholders and government bodies are now urged to formulate concrete plans to negotiate favourable trade deals with countries like China and India, moving beyond preliminary discussions to secure substantial market access for South African agricultural products.
The US tariffs serve as a stark reminder of the vulnerability of relying heavily on single export markets. While the immediate impact will be felt by specific agricultural sectors and regions, the long-term resilience of South Africa’s agricultural sector hinges on its ability to strategically diversify its trade partnerships and capitalise on the growing demand in emerging global markets. The time for decisive action and the formulation of robust trade diversification strategies is now more critical than ever to ensure the sustained growth and prosperity of South African agriculture.