On the panel were Wandile Sihlobo, South Africa’s Presidential Envoy on Agriculture and Land and chief economist of Agbiz; Ferdi Meyer, managing director of the Bureau for Food and Agricultural Policy (BFAP) and an extraordinary professor in Agricultural Economics at Stellenbosch University; Donald MacKay, founder and director of XA Global Trade Advisors; and Ovizikhungo Sicwetsha, head of transactional banking at Nedbank Mid Corporate. The facilitator was Prof Nick Binedell, professor of strategy at the Gordon Institute of Business Science.
Sihlobo reiterated that South Africa’s agriculture sector must urgently diversify with regard to export markets as the ongoing Middle East conflict threatens to disrupt trade flow.
“The Middle East conflict once again exposes the need for South Africa to increase its focus on export diversification. The uncertainty continues to cloud the markets and the duration of the war, the extent of infrastructure damage, and the timeline for recovery in affected countries remain unclear.”
Sihlobo stressed that exporters must work closely with key government departments, including the Department of Agriculture, Department of Trade, Industry and Competition, and Department of International Relations and Co-operation, to assess risks and prioritise new markets in Asia for instance.
“With regard to where we should focus with regard to exports, I think Asia and the Middle East are new areas, but we need to sustain the markets we have built over the years in other parts of the world. For exporting businesses, we have to start planning for alternative export markets where conditions permit.”
However, he also pointed out that over the past couple of years, capacity within government departments and trade posts overseas hindered the country’s ability to fully capitalise on negotiating for new markets.
The path ahead requires that all parties involved in exports communicate about the risks and jointly prioritise new export markets that would have the capacity to absorb the overflow of produce from South Africa.
According to MacKay, a new era in trade is in the making.
“The United Sates changed everything. An era has passed and we are entering a new era. In the past, the World Trade Organization [WTO] played an important role in protecting smaller economies, and if one looks at the serial offenders within the WTO, the US and China emerge as the two blocks that focused on short-term wins within the system. The rules of the game are changing.”
Looking at demographics that also have an impact on trade across the globe, he pointed out that China’s population is dipping and the Russian population is declining due to the ongoing war. He said these are things to take into consideration when looking at target markets.
“In a world where the population is falling, trade is increasingly important. You are either going to trade; have robots doing things; or deal with migration. Those are the only options you really have. By trading you can keep the economy alive and create jobs.”
By 2050, Africa will be the continent with the largest population, but intercontinental trade is not efficient.
Meyer noted that the agriculture sector has outgrown the local market. “Our farmers capacity to take on challenges and to produce as resulted in excellent production. We have closed the gap and finding export markets with the repositioning of our products is important.”
He added that despite a stated interest in boosting export growth and diversification in national policy frameworks, the country has adopted a more inward-looking approach over the past couple of years.
Meyer also stressed that economic growth remains important. Only growth can create jobs. “We can only do so much te help feed the nation and feed the word; you also need economic buying power to buy the produce.”
Looking at the financial side of the export industry and environment, Sicwetsha noted that the cost of doing business within the African continent remains an issue.
“It would mean a great deal if you can trade in local currencies. If you cannot trade in your own currency on a different market, you have to use the US dollar, which becomes an issue. There is an additional cost incurred in trading in dollars.”
However, he stated that the banks are ready to support producers who are looking at exporting.
With regard to constraining factors that inhibit trade, the panel pointed out that the following aspects cannot be ignored any longer and that these should be address as a matter of urgency so that farmers have an enabling environment to produce not only to meet local demand, but also for exporting and earning foreign exchange:
- Infrastructure such as ports and roads;
- Crime;
- Local government structures and infrastructure;
- Capacity within government;
- Economic growth;
- The unemployment rate;
- Education and training.
According to MacKay, the country urgently needs to focus on creating employment.
“We have a very high unemployment rate, yet very little is being done to create growth. If one looks at how many of the youth do not complete their school education, it is concerning but government is not investing in schools. Government should also focus more on execution and less on policy creation.”
