Rand depreciation aids agri exports

The depreciation of the rand has increased the competitiveness of South African agri exports into the global market. So says agricultural economist and trade policy analyst Tinashe Kapuya. South Africa’s agricultural exports surpassed the $10 billion mark for the first time in 2017. This was boosted by growth in exports of edible fruit, beverages, spirits, vegetables, grains and other agricultural products. The peaking of exports in 2017 represented a 15% increase from 2016 – a year that was characterised by El Niñoinduced drought.   “In 2017, imports also increased, but by a marginal rate of 5% year-on-year, reaching $6.7 billion. This

was driven by a notable uptick in grain imports, particularly wheat and rice, on the back of reduced domestic production as a result of the Western Cape drought,” explains Kapuya. Imports of rice and wheat – which South Africa cannot grow in large enough quantities to meet domestic demand – have generally grown in line with increases in domestic consumption and population growth. “In the case of rice, South Africa is traditionally a net importer, and we saw imports growing by 10% year-on-year to 1.1 million tonnes in 2017 due to higher demand.”

A closer look at the trade statistics shows that South Africa’s agricultural sector recorded a positive trade balance of $3.3 billion in 2017, which is also a record level in a dataset going back to 2001. “The trade impact of the severe drought in the Western Cape province was minimal in 2017, and also in 2018. Grapes and major vegetable products are set to decline by double digits from the 2016/17 production season, however,” Kapuya cautions. From a destination point of view, Africa and Europe continue to be the

largest markets for South Africa’s agricultural exports, collectively absorbing 67% of the country’s total exports in 2017, measured in value terms. In more detail, Africa remained South Africa's largest market, accounting for 42% of agricultural exports, which is a percentage point increase from a five-year average share. The sector’s export growth to the continent was led by relatively competitive industries such as beverages, cereals, fruit, sugar and vegetables. Trailing Africa was the European Union region, which absorbed 25% of South Africa's agricultural exports in 2017, up 13% from the five-year average share. South Africa’s agricultural export growth to this region was also led by industries

such as beverages, wool, sugar, fruit and animal fats. Asia is also an important market for South Africa’s agricultural exports, demanding a 24% export share in 2017, up by a third from the previous year. Wool, fruit, grains, beverages, vegetables and meat were the leading products exported to this particular region. The Americas and the rest of the world accounted for 5% and 4% shares, respectively. Exports to these regions were also dominated by fruit, beverages, sugar, flowers and ornamental foliage. “Broadly, we see opportunities for growth in the horticultural sector in particular, which is believed to have become a key jobcreating and foreign-currency generator through exports,” Kapuya says.