Western Europe’s population is in decline and the region is still struggling to recover from the recent economic downturn. This is not good news for South African agriculture, as these countries are our principal export markets. Alternatives are therefore constantly being sought. One such market opportunity is Russia.
Since the fall of the Union of Soviet Socialist Republics (USSR), the collapse of communism and rise of the Russian Federation in 1991, this country is no longer regarded as an enemy of capitalism.
In August 2012, a further economic shift took place when Russia became a member of the World Trade Organisation (WTO).
According to a recent study by senior economist Gert van Rensburg and his team at the Department of Agriculture, Forestry and Fisheries’ Directorate for International Trade, this membership now makes long-term trade possible. “We should, however, tread cautiously, because teething problems are still being experienced,” he says.
But it is a risk that could have high-yielding rewards. Russia is the world’s largest country by land mass. Russia also has the largest consumer market in central and Eastern Europe and last year had an annual economic growth rate of 3,4%.
Trade between SA and Russia
Two years earlier, oranges and other fruit made up 43,5% of Russia’s imports from South Africa, almost similar to the two previous years. In 2012, Russia was the 15th biggest importer of South African products. The total value of agricultural, forestry and fishery products exported to Russia in that year amounted to R1,2 billion.
In 2012 the total value of agricultural/forestry/fishery products which South Africa imported from Russia was R17 million. There was a sharp increase in imports in 2011, due to the importation of R233 million in wheat.
South Africa has a competitive advantage over many other exporters as Russia regards it as a developing country. This means that South Africa receives a preferential tariff rate of 75% of the applied tariff rate most-favoured nation (MFN), which Russia levies in accordance with WTO rules.
According to the DAFF report, there is also a possibility that Russia could look at South Africa in an even more favourable light in the future. Both countries are on record as saying they want to strengthen bilateral co-operation, improve the protection of territories from regulated pests, facilitate international trade in plants and plant products, and exchange information.
This article was originally published in the 24 January 2014 issue of Farmer’s Weekly.