South Africa - Agricultural Sector South Africa - Agricultural Sector
Agricultural Sectors
Overview
South Africa has a market-oriented agricultural economy that is highly diversified and includes the production of all the major grains (except rice), oilseeds, deciduous and subtropical fruits, sugar, citrus, wine and most vegetables. Livestock production includes cattle, dairy, hogs, sheep, and a well-developed poultry and egg industry. Value-added activities in the sector include slaughtering, processing and preserving of meat; processing and preserving of fruit and vegetables; dairy products; grain mill products; crushing of oilseeds; prepared animal feeds; sugar refining and cocoa, chocolate, and sugar confectionery amongst other food products. The agricultural sector contributed around 10 percent to South Africa’s total export earnings in FY2018 at a value of $11.1 billion. Citrus, wine, table grapes, corn and wool accounted for the largest exports by value. South Africa also exports nuts, sugar, mohair, apples and pears.
South Africa imported $7.7 billion in agricultural and food products in FY2018, which is at the same level as in FY2017. The major products imported were rice ($437 million), wheat ($395 million), chicken cuts and offal ($389 million), palm oil ($305 million), corn ($208 million), whiskies ($181 million) and soybean meal ($173 million).
In FY2018, the United States exported $371 million of agricultural, fish and forestry products to South Africa, down marginally from the previous fiscal year. Major products exported by the United States to South Africa included, poultry meat, planting seeds, feed and fodder, distilled spirits and tree nuts. Other major products imported by South Africa from the United States included wheat, dairy products and sorghum.
USDA’s Foreign Agricultural Service (FAS) in Pretoria prepares more than thirty market intelligence reports for different agricultural commodities in the Southern Africa region. FAS also prepares reports that highlight the opportunities and regulatory processes for United States agricultural exports to South Africa. The Exporter Guide for South Africa is a good starting point for United States agricultural and food companies that view South Africa as a potential market. Please feel free to contact the Foreign Agricultural Service in Pretoria for further information at the following address:
Foreign Agricultural Service
U.S. Embassy
Pretoria
South Africa
Tel: +27 (0)12 431 4057;
Fax: +27 (0)12 342 2264
Email: agpretoria@fas.usda.gov
Sub-Sector Best Prospects
Grains
The grain industry (barley, maize, oats, sorghum and wheat) is one of the largest agricultural industries in South Africa, contributing more than 30% to the total gross value of agricultural production. The industry is comprised of several key stakeholders including input suppliers, farmers, silo owners, traders, millers, bakers, research organizations, financiers, etc. The animal feed industry is an important client and role player in the grain supply chain. Around 6.0 million tons of grain and 1.6 million tons of oil cake (from imported and locally produced sunflower and soybeans) are used by the animal feed manufacturing industry in South Africa.
Corn is the largest locally produced field crop, and the most important source of carbohydrates in the SADC region for animal and human consumption. South Africa is the main corn producer in the SADC region, with an average production of around 12 million tons per annum. Local commercial consumption of corn amounts more than 11 million tons, and surplus corn is usually exported. Wheat is produced mainly in the winter-rainfall areas of the Western Cape and the eastern parts of the Free State with considerable annual fluctuations in production. Average wheat production has been about 1.8 million tons a year. There is, however, a distinct downward trend in the area planted to wheat over the past few years. Thus, South Africa has become more dependent on imports to meet the local demand of about 3.3 million tons.
|
Grains |
FY2016 |
FY2017 |
FY2018 |
|
Total Exports |
$284 million |
$512 million |
$447 million |
|
Total Imports |
$884 million |
$549 million |
$405 million |
|
Imports from the U.S. |
$98 million |
$80 million |
$16 million |
Wheat
South Africa is the only country in the region with significant wheat production. However, in the past 20 years, and especially after the deregulation of the market in 1997, there has been a decreasing trend in the area planted with wheat despite increasing local consumption. Declining profit margins saw local wheat farmers scaling down wheat production and switching to other crops like canola, corn, soybeans or increased livestock production. Furthermore, the trend in wheat production has been sporadic over the past 20 years because of unpredictable weather conditions. Without an advance in technology or policy changes, the decreasing trend in hectares planted with wheat in South Africa will continue.
Hence, FAS/Pretoria forecasts that the declining trend in hectares planted with wheat will continue in the 2019/20 marketing year, due to the crop’s decreasing profitability. FAS/Pretoria estimates producers will plant about 500,000 hectares of wheat which could, on average yields, realize a wheat crop of about 1.7 million tons. Annual wheat consumption in South Africa is about 3.3 million tons, or about 55 kg per capita, which means South Africa will have to import at least 1.8 million tons of wheat to meet local demand. South Africa’s wheat consumption is the highest in sub-Saharan Africa and is expected to increase annually with population growth and increased urbanization to South Africa's major cities.
|
Wheat |
FY 2016 |
FY2017 |
FY2018 |
|
Exports |
$20 million |
$33 million |
$17 million |
|
Imports |
$364 million |
$323 million |
$395 million |
|
Imports from the USA |
$55 million |
$21 million |
$7 million |
Opportunities
Contact U.S. Wheat Associates Cape Town office for current opportunities in the South African market for U.S. wheat at http://www.uswheat.org.
Web Resources
U.S. Wheat Associates has an office in Cape Town, South Africa. They can help any company interested in purchasing or exporting U.S. wheat. They can be contacted at InfoCapeTown@uswheat.org
Alcoholic Beverages
South Africa consumes more than 4.5 billion liters of alcoholic beverages per annum and is also an important exporter of alcoholic beverages, especially wine. However, South Africa also imports a significant number of alcoholic beverages, especially whiskies. Recent trends indicate that consumers are turning to new and innovative distilled spirits, including a greater prominence in previously disadvantaged areas. South Africans’ tastes and preferences are becoming more sophisticated and the average consumer is increasingly expecting a wider range of alcoholic products on retail shelves. As a result, an extensive range of new imported products has become available in the market. Openness to new products and an increasing middle class help to create a positive climate for the sale and promotion of United States distilled spirits. However, price sensitivity, rather than brand loyalty dictates consumer purchasing behavior.
|
Alcoholic Beverages |
FY 2016 |
FY2017 |
FY2018 |
|
Total Exports |
$910 million |
$982 million |
$1,102 million |
|
Total Imports |
$351 million |
$379 million |
$497 million |
|
Imports from the U.S. |
$14 million |
$13 million |
$18 million |
Note: All figures in US$ Million
Above Figures are from Global Trade Atlas
Resources
The Distilled Spirits Council of the United States can help U.S. distillers with market information and advice on how to export to South Africa (http://www.discus.org/).
Sub-sector Best Prospects
Overview: Poultry
The South African poultry meat industry, with a gross value of almost R40 billion (US$3.0 billion), is the country’s largest individual agricultural industry and is contributing almost 17 percent to the total gross value of agricultural products. Broiler production makes up most of the poultry industry. However, South Africa only produces about 1.5 percent of the total broiler meat in the world and needs imports to augment local production and fulfill local demand.
Over the past two decades, steady economic growth and increased average income in South Africa advanced more people to the middle-income class. Currently, the middle class represent about 70 percent of the South African population and 55 percent of total income earnings. With the growth in disposable income, more South Africans are choosing protein-filled diets. For example, in 1995, the average person ate a total of 40kg of meat a year; while 20 years later the average South African is eating 67kg of meat a year – an increase of almost 70 percent over the period. The consumption of poultry meat (of which most is broiler meat) increased by more than 80 percent, from 22 kg per person per year in 2000 to almost 40 kg per person per year in 2015. In 2017, the South African consumer spent approximately R217 billion (US$16 billion) on meat products, which represented almost 35 percent of total expenditure on food. South Africa consumes about 3.6 million tons of poultry, beef, lamb and pork meat per annum, with poultry meat consumption representing more than 60 percent of total meat consumption. As poultry meat is relatively inexpensive and ubiquitous, it has grown to be the most important protein source in the diet of the majority of South Africans.
Broiler meat accounts for more than 90 percent of all poultry meat imports by South Africa, with the balance largely being turkey products. South Africa imported 579 thousand tons of poultry meat in FY2018 at a value of $512 million. Chicken cuts and edible offal (internal organs) represented the largest category of poultry meat imports, namely 64% or 370 thousand tons, at a value of $389 million (75% of the total value of poultry meat imports). The second largest category in volume is mechanically deboned meat with a share of 31% or 179 thousand tons, at a value of $82 million (16% of the total value of poultry meat imports). These two poultry meat product segments represent 95% of total poultry meat imports in quantity by South Africa. Brazil is the leading trading partner for South Africa in terms of poultry meat, with 57% market share in value followed by the United States with 16% market share.
|
Poultry |
FY 2016 |
FY2017 |
FY2018 |
|
Total Exports |
$92 million |
$104 million |
$94 million |
|
Total Imports |
$362 million |
$455 million |
$512 million |
|
Imports from the U.S. |
$18 million |
$74 million |
$103 million |
Note: All figures in US$ Million
Above Figures are from Global Trade Atlas
Sub-sector Best Prospects
Overview: Chicken bone-in portions
United States bone-in broiler meat exports to South Africa have been affected by an anti-dumping duty that was put in place in 2000. In 2012, the anti-dumping duty was extended for another 5 years and was set at R9.40 per kilogram. However, in June 2015, representatives from the United States and South African governments and poultry industries met in Paris and agreed on a tariff rate quota of 65,000 tons of United States bone-in broiler meat to enter South Africa without the anti-dumping duty. This meant that South Africa would continue to have duty-free access to the United States market under the African Growth and Opportunity Act (AGOA) for the next decade. In January 2016, negotiations of the final health certificates were concluded, and the first shipment of United States bone-in broiler meat landed in South Africa in March. Exports continued and as a result the United States exported about 20,000 tons poultry meat to South Africa at a value of almost US$ 18 million in FY2016. In FY2017 it increased to 74,000 tons at a historical high value of US$73 million. This positive trend continued in FY2018 with the United States exporting 95,000 tons of poultry products to South Africa at a record value of $103 million.
The U.S.A. Poultry and Egg Export Council can help U.S. poultry exporters with market information and advice on how to export to South Africa (http://www.usapeec.org).
Agricultural Equipment
Overview
Unit: $ millions
|
|
2017 |
2018 |
2019 |
2020 |
|
Total Market Size |
1000 |
1150 |
1265 |
1280 |
|
Total Local Production |
59 |
56 |
62 |
65 |
|
Total Exports |
5.80 |
5.00 |
6.00 |
7.00 |
|
Total Imports |
870 |
960 |
980 |
985 |
|
Imports from the U.S. |
200 |
300 |
320 |
330 |
|
Exchange Rate: 1 USD |
|
|
|
|
Total Market Size = (Total Local Production + Total Imports) – (Total Exports)
Data Sources: Above figures are unofficial estimates obtained from industry sources
Compared to the rest of Africa, South Africa has by far the most modern, productive and diverse agricultural economy. South Africa has a well-developed agricultural sector, which will stand the country in good stead in the face of continuing uncertainty both economically and in terms of the weather. There are many factors impacting on the industry – including credit ratings downgrade, land reform concerns, volatile exchange rate and ongoing weather worries, among others. There are about 32,000 commercial farmers in South Africa, of which between 5,000 and 7,000 produce approximately 80% of agricultural output.
Forecasts show that the country’s economic growth will remain under pressure, as consumers continue to tighten their belts because of an increase in interest rates and inflation over the last year. Investment in agriculture is widely recognized as a key precondition in achieving goals related to improving food security, creating jobs, creating wealth, and thereby reducing poverty.
In 2016, South Africa faced one of the worst droughts to hit the region in 30 years. Looking back, the drought in South Africa’s summer and winter rainfall regions, as well as a weakening rand, had a significant impact on the gross production value of agriculture for 2018. There are still notable headwinds moving into 2019 that can affect the farming sector. Weak global growth, domestic in-put costs and policy uncertainty could impact the economy negatively and lead to unintended consequences.
As the agricultural sector is largely export driven, it is hedged against the negative impact of a major credit downgrade, but farmers are susceptible to higher borrowing costs, depressed local demand and foreign animal and plant health import approvals.
Retail sales of large agricultural equipment during the significant month of March 2019 were:
|
|
2019 |
2018 |
% change |
2019 |
2017 |
% change |
|
Tractors |
600 |
726 |
-17.4 |
1 514 |
1 876 |
-19.3 |
|
Combine Harvesters |
23 |
25 |
-8.0 |
42 |
54 |
-22.2 |
Source: South African Agricultural Machinery Association (SAAMA)
March tractor sales of 600 units were significantly (17%) down on the 726 units sold in March last year. Year-to date sales for the first three months of 2019 are also significantly (almost 19%) down on last year. On a rolling 12-month basis tractor sales are 5% down on last year. March combine harvester sales of 23 units were two units down on the 25 units sold in March last year. Year-to-date sales are significantly (22%) down on last year. On a rolling 12-month basis combine harvester sales are marginally (3%) down on last year.
The current situation regarding crop prospects, particularly in the west of the country, is precarious. Most of the crops in the east of the country were planted on time and most of these crops should yield normally. In the west, however most crops were planted very late and still need rain to see them through. In addition, there is the threat of early frost which could cause considerable damage to these late-planted crops.
Indications for 2019 are that sales of large agricultural equipment will be at a level between 5 and 10% below the 6-700 units sold last year.
Sub-Sector Best Prospects
The best prospects for U.S. suppliers, in South Africa and the region, are:
• Tractors
• Combine Harvesters
• Balers
• Planters
• Precision Agriculture Equipment and Technologies
• Sprayers
• Irrigation
• Storage
• Soil Testing Equipment
• Spare Parts and Service Facilities
Opportunities
Despite the current economic downturn, farmers appear to be upbeat about current agriculture conditions. Sporadic rains and prevalent dry weather conditions are a concern issue and present opportunities for no till planting equipment. Companies and farmers have indicated a strong interest in soil sampling equipment.
The integration of digital technology into agriculture presents a major opportunity for sub-Saharan Africa. The emergence of the mobile phone as a popular communication tool, coupled with internet-based solutions, could significantly boost access to financing for agricultural inputs across the value chain. Digitalization, as well as the effective use of fertilizer and seeds, will become increasingly important in unlocking agriculture prospects in Africa. Trending technologies in agriculture include data management, machine learning, artificial intelligence, automation and drone-based applications.
Production research and technology, which South Africa needs to invest in, is an area of opportunity for growth in agriculture and in alleviating the vulnerability of crops and livestock.
There are very few barriers to bringing new equipment to the South African market. Equipment like planters, sprayers, and tilling equipment enter duty free, provided the exact same product is not manufactured in this market. Most of the precision agriculture equipment such as planters, self-propelled sprayers, and combine harvesters are imported from South America, Europe, and the United States; smaller implements are purchased locally. Known U.S. brands such as Massey Ferguson, John Deere, New Holland, AGCO, and Case IH are well-entrenched and well-known for their quality in this market.
South Africa is the platform for “regional expansion,” with excellent opportunities for U.S. business in neighboring countries such as Zambia, Angola, Mozambique, and Botswana. Second-hand tractors and equipment are also well-received in these regional markets.
From a climate change side, the discussion has slightly progressed towards questions of whether there are any technological solutions out there that can assist the industry to adapt to the changing climate, over and above the required adjustment in farming practices.
South Africa also hosts the largest agricultural equipment show on the continent called NAMPO Harvest Day. This show takes place in May each year and provides an excellent opportunity for U.S. firms to exhibit their equipment and technology.
Trade Barriers
A lack of direction on land reform is one the issues that farmers are watching closely.
The debate on “land expropriation without compensation” has created considerable policy uncertainty and farmers and potential investors are concerned about the protection of private property rights, thus negatively impacting investor confidence.
Most goods can be imported into South Africa without a permit. All import and export commercial transactions require commodities on custom declarations to be classified according to an appropriate tariff heading. The tariff classification code is directly linked to the rate of duty payable on that commodity. Classification operates as part of the international Harmonized Commodity and Coding System, under the World Customs Organization (WCO) Harmonized System Convention.
Tariffs and duty rates are constantly revised and are subject to change without notice.
Importation of all second-hand goods is subject to import control and an import permit is required.
Web Resources
Exhibitions and Conferences
Show: NAMPO Harvest Day
Focus: Largest Agriculture Machinery and equipment show in the Southern Hemisphere.
Dates: May 12–15, 2020
Venue: Bothaville, Free State, South Africa
South African Agricultural Machinery Association (SAAMA)
Website: http://www.saama.co.za/
NAMPO Harvest Day
Website: http://www.nampo.co.za
Agri SA
Website: http://www.agrisa.co.za/
Agricultural Business Chamber (ABC)
Website: http://www.agbiz.co.za
South African Department of Agriculture, Land Reform and Rural Development (DALRRD)
Website: http://www.drdlr.gov.za/
For more information, the U.S. Commercial Service Commercial Specialist for Agriculture in Johannesburg, South Africa, can be contacted via email at the following:
Mohammed.Essay@trade.gov
Phone: +27 11 290 3025
or visit our Website: http://export.gov/southafrica/index.asp.