A fragile international economy, slow economic growth rate, the high cost of doing business in South Africa and political uncertainties will be some of the factors influencing the trading environment for agribusinesses in the coming year.
This was according to the Agricultural Business Chamber’s economic intelligence manager, Lindie Stroebel, who recently published a report on the outlook and expectations for local agribusinesses for 2012.
Stroebel said that with the EU’s economic growth at 1% or lower, the eurozone could be considered to be in “mild recession”, and its recovery was likely to be slow and protracted. This was expected to affect South Africa’s agricultural exports to the EU, traditionally its most important agricultural export destination.
Roy Fine, the new development director at Afrifresh, a large-scale producer and exporter of citrus and table grapes, confirmed that the situation in the EU had diminished buying power – “more so for the expensive imported products, while it has had less influence on volume movers such as citrus”.
Angelo Peterson, group general manager of corporate services at fresh produce exporter Capespan, agreed that the economic situation in the EU was definitely affecting purchasing power in that market, putting pressure on fresh produce exports from South Africa.
“We expect 2012 to be a tough year for fruit exports and we will just have to find ways to be more competitive in terms of price, the quality of our produce and the customer service that we provide,” he said, cautioning that the high cost of doing business in South Africa was making it difficult to keep prices at a competitive level.
Stroebel concurred, saying the cost of doing business in this country was currently the most significant challenge for agribusinesses.
“Administered prices and the cost of using national infrastructure, such as toll fees and port tariffs, are simply proportionally too high. The cost of labour is increasingly obstructing business growth, but higher wages are not necessarily the concern. The problem is that wages totally outweigh productivity levels,” she explained.
Fine said that the most notable costs were for petroleum products, which affected shipping rates and the price of fertiliser, among others. On a more positive note, Stroebel added that emerging markets such as developing Asia and sub-Saharan Africa posed good export opportunities.
“South Africa’s positioning as the new member of BRICS (Brazil, Russia, India, China and SA) can assist in further enhancing the trade possibilities with, especially, China and India. This can also have significant opportunities for SA’s agriculture export industries,” she said.