South Africa’s agricultural trade relationships with the United States look uncertain at the moment. This follows the US’s accusation that SA has supplied military equipment to Russia.
Agricultural experts say anecdotal stories about specific companies delaying investments in fear of rising geopolitical tension and South Africa’s position in the war, have already started rising. But there is still time to remedy this situation.
According to Wandile Sihlobo, the chief economist of the Agricultural Business Chamber of South Africa (Agbiz), South Africa benefits immensely more from trade with the United States than Russia.
“Therefore, from a purely economic standpoint, the reasonable step to take in a world of uncertainty is naturing relationships with countries with which a country has strong economic ties,” he said.
As diplomatic tensions between the two countries rise, South Africa should ideally deepen its relationship with the US, advise experts. Especially considering that they serve SA’s economic interests. According to Sihlobo, this can be done by extension to support employment domestically.
Impact on agriculture
According to Christo van der Rheede, the executive director of Agri SA, if the allegations are true, it will have serious consequences for South Africa.
“Our agricultural sector is dependent on technology from the USA. American suppliers in South Africa provide the following: tractors, combine harvesters, drone technology, balers, planters, precision agriculture equipment and technologies, irrigation equipment, storage facilities, soil testing equipment, parts and service,” he said.
Companies such as John Deere, Corteva, Pioneer, Monsanto, Land O’ Lakes, CHS, Pepsico, Walmart and many others sell all kinds of technology and make purchases from South African farmers on a large scale, Van der Rheede pointed out.
There is no doubt among agricultural economists that the tensions with the United States could present a significant economic downside for South Africa.
From an agricultural perspective, trade is as important. “The US, also an important agricultural trading partner, accounting for an average of 4% of South Africa’s agricultural exports over the past five years,” Sihlobo said.
Agoa has been good to Africa
Fruits, nuts, processed vegetables, wine, dairy products, industrial alcohol, and fruit and vegetable juices are some of the agricultural products that South Africa exports to the United States.
These products benefit from duty-free access to the United States under the African Growth and Opportunity Act (Agoa), Sihlobo pointed out.
This is due for renewal in 2024. Other industries, such as automobiles, benefit more than the agricultural sector through Agoa market access.
Van der Rheede explained that Agoa provided eligible sub-Saharan African countries duty-free access to the US market for more than 1 800 products, in addition to the more than 5 000 products eligible for duty-free access under the Generalised System of Preferences programme.
Increase in US exports
“Exports to the US have increased tremendously over the years. By more than 100%. About 600 American businesses operate in South Africa, and many of them use South Africa as a regional headquarters,” Van der Rheede said.
The United States and South Africa boast one of the largest trade relations in the world, with bilateral investment and trade amounting to $1.6 trillion annually. In 2019, South Africa was the United States’ 35th largest supplier of imported goods.
“Overall, South Africa is a small open economy highly integrated with the global economy through many complex channels.
“This means that the political leadership should position the country in an attractive way for investments and gaining market access to the world’s growing economies,” Sihlobo said.
‘Let the government do its work’
According to Business Unity South Africa (Busa), the immediate market reaction to the allegations made by the United States of America ambassador to South Africa related to South Africa supplying arms to Russia was the dramatic fall of the Rand against the dollar which indicates how seriously the markets consider these allegations.
“The USA is our second-biggest trading partner after China. It is extremely important for us to maintain good relations with the USA, as it is in our interests to maintain good relationships with China and other major trading partners,” Busa said.
“We appeal to President Ramaphosa to provide urgent clarity and certainty on these allegations. We note the announcement by the Presidency that a judicial commission of inquiry will be appointed to investigate these allegations, but believe our country needs clear answers now, not in a few months.”
Meanwhile, Lucky Motsamai, chief executive officer at Free State Black Business Chamber, said that when the government responds to the matter, it must make it clear that South Africa will not be bullied to pick a side in this “neo-cold war” between the USA and Russia.
“SA’s position has been clear as that of a peaceful bipartisan diplomatic approach, we are (and should remain) fully committed to Brics and the broader economic agenda of developing countries.
“Let us allow our government to do its work in the international arena, let business focus on building South Africa we want through the transformation of the economic value chains that benefits all citizens and not just the fortunate few,” he said.
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