If everything goes to plan, South Africa could reduce its reliance on imports by as much as 20% over the next five years.
This is set to boost domestic production following President Cyril Ramaphosa’s plea that buying local is strategically imperative.
During his recent State of the Nation address, Ramaphosa said he was pleased by the renewed commitment from government, business and organised labour to support local trade.
This is crucial for economic recovery, and to decrease the country’s import activities.
“Fourty-two products that can be sourced locally have been identified. It ranges from edible oils to furniture, fruit concentrates, personal protective equipment, steel products and green economy inputs,” he said.
Should this target be achieved, the country will significantly expand its productive economy and potentially return more than R200 billion to its annual output.
ALSO READ: A trail of crumbs on agriculture’s future
We’ve only just begun
According to Stellenbosch agricultural economist, Lunathi Hlakanyane, Mzansi appears to be slowly steering towards a future of less imported agricultural commodities in the medium to foreseeable term.
“I foresee a further decline of agricultural imports from the current -4% recorded for the 2019 to 2020 season,” Hlakanyane says.
This, he explains, is likely should the Rand remain relatively free of volatility and favourable weather conditions continue to bolster record-breaking output volumes, as seen in the citrus industry.
ALSO READ: Record harvest: Only Spain beats SA’s citrus exports
“Besides land, seed, fertiliser and other critical inputs that feed into agricultural production, the environment is a crucial determinant of agricultural output,” Hlakanyane says.
In 2020, South Africa’s agricultural imports decreased by 8% year-on-year to $5.9 billion (about R86 billion).
Ever-declining imports
According to Wandile Sihlobo, chief economist at Agbiz, there were a number of underlying drivers of the softer imports last year.
These include the decline in imports of poultry meat, sugar, spirits, sunflower oil, prepared animal feed, beer made from malt, fish, and coffee.
“This was enough to overshadow the increase in imports of the top-three products South Africa typically imports, namely, rice, wheat and palm oil,” says Sihlobo.
The decrease in imports, which corresponded with an increase in exports, subsequently led to a 26% year-on-year increase in the country’s agricultural trade surplus to 4.3 billion US dollars.
Agbiz chief executive John Purchase further explains that South Africa has been importing less agricultural products since 2012.
“We are exporting more, and this is reflected in our growing and positive trade balance trend. Through the localisation programme we are now embarking on with government this should continue,” says Purchase.
South African agricultural exports amounted to $10.2 billion (about R149 billion) last year. This is 3% more than in 2019.
According to Agbiz, African continents absorbed 38% of total exports in 2020, while Europe absorbed 27%. Asia, on the other hand, is becoming an increasingly valuable market for Mzansi, accounting for a 25% export share in 2020.
African countries and Europe continue to be largest markets for South Africa’s agricultural exports. The top ten exportable products by value are citrus, grapes, wine, apples and pears, maize, nuts, sugar, wool and fruit juices.
Historic import trends
Meanwhile Hlakanyane believes that if any inferences regarding trends in South Africa’s future agricultural imports are to be made, a deep look into historic trends is a prerequisite.
He says, “We can tell, for example, from recent data that our trade balance has been on an upward trajectory from 2012 to 2013, dipping slightly between 2014 and 2016.”
This was predominantly due to the country’s worst drought period, which hampered domestic production, and the value of exportable commodities.
Hlakanyane does however, believe the country is now making strides towards reducing its reliance on imports.
Since 2017, local production started a moderated recovery and at present, local production has stabilised thanks to favourable weather conditions.
Steps in right direction
A number of strategies have been introduced to curb the destruction of local industries. This includes the poultry industry.
Earlier last year, the industry made an important step in the right direction when the department of trade, industry and competition finally heeded pleas from industry stakeholders to increase import duties from 37% to 82% on both imported bone-in and boneless chicken portions.
An increase to 62% on bone-in chicken portions and 42% on boneless chicken portions were eventually signed off on.
Hlakanyane earlier said that increasing levies on chicken imports may forestall (theoretically, at least) the descension of Mzansi’s poultry industry into further calamity.
However, he cautioned, “This action may raise the price of chicken products sold in the domestic market in the short to medium term.”
Furthermore, thanks to the poultry master plan in which the industry has invested R800 million to upgrade production, South Africa now produces an additional million chickens every week.
The sugar master plan, signed during the lockdown has a commitment from large users of sugar to procure at least 80% of their sugar needs from local growers.
Through the implementation of the plan there was rise in local production and a decline in imported sugar. Ramaphosa said this was creating stability in an industry that employs some 85 000 workers.
