South Africa - Agricultural SectorSouth Africa - Agricultural Sector
A. Agricultural Sector
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; and sugar refining and cocoa, chocolate, and sugar confectionery, among other food products.
South Africa imported $7.8 billion in agricultural and food products in FY2017, which is 8% %higher than the $7.2 billion imported in FY 2016. The major products imported were rice ($429 million), palm oil ($346 million), wheat ($323 million), chicken cuts and offal ($299 million), corn ($208 million), and soybean meal ($189 million). In FY 2017, the United States exported $404 million of agricultural, fish, and forestry products to South Africa, up 24%% from the previous fiscal year, due to an increase in consumer-oriented products exports, which reached a record high of $157 million. Major consumer-oriented products exported by the United States to South Africa included, poultry meat, dairy products, and tree nuts. Other major products imported by South Africa from the United States included planting seeds, wheat, corn, and distilled spirits.
The U.S Department of Agriculture’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 U.S. 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 FAS in Pretoria for further information at the following address:
Foreign Agricultural Service
Tel: +27 (0)12 431 4057;
Fax: +27 (0)12 342 2264
Sub-Sector Best Prospects
GrainsThe 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 a number of 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 4.0 million tons of grain and 1.5 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 to about 10 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 with wheat over the past few years; hence South Africa has become more dependent on imports to meet the local demand of about 3.3 million tons.
|Total Exports||$319 million||$284 million||$512 million|
|Total Imports||$574 million||$884 million||$549 million|
|Imports from the U.S.||$15 million||$98 million||$90 million|
Sub-Sector Best Prospects
WheatSouth 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 2018/19 MY, due to the crop’s decreasing profitability. Post estimates producers will plant about 480,000 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 2015||FY 2016||FY2017|
|Exports||$118 million||$20 million||$33 million|
|Imports||$443 million||$364 million||$323 million|
|Imports from the USA||$11 million||$55 million||$21 million|
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
U.S. Wheat Associates has an office in Cape Town, South Africa. It would be happy to help any company interested in purchasing or exporting U.S. wheat. It can be contacted at InfoCapeTown@uswheat.org
Alcoholic BeveragesSouth Africa consumes more than 4.0 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, still rules the consumer’s purchasing behavior.
|Alcoholic Beverages||FY 2015||FY 2016||FY2017|
|Total Exports||$1,129 million||$1,027 million||$1,049 million|
|Total Imports||$378 million||$316 million||$342 million|
|Imports from the U.S.||$16 million||$14 million||$12 million|
Above figures are from Global Trade Atlas
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 (see http://www.discus.org /).
Sub-Sector Best Prospects
The South African poultry meat industry, with a gross value of almost R40 billion ($3.0 billion), is the country’s largest individual agricultural industry and contributes almost 17%% 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% 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 pushed more people to the middle-income class. Currently, the middle class represent about 70% of the South African population and 55% 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% over the period. The consumption of poultry meat (of which most is broiler meat) increased by more than 80%, from 22 kg per person per year in 2000 to almost 40 kg per person per year in 2015. In 2016, the South African consumer spent approximately R208 billion (US$16 billion) on meat products, which represented almost 35% 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% 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 90% of all poultry meat imports by South Africa, with the balance largely being turkey products. South Africa imported 552 thousand tons of poultry meat in FY2017 at a value of $455 million. Chicken cuts and edible offal represented the largest category of poultry meat imports, namely 52% or 286 thousand tons, at a value of $299 million (66% of the total value of poultry meat imports). The second largest category in volume is mechanically deboned meat with a share of 42% or 231 thousand tons, at a value of $119 million (26% 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 most important trading partner for South Africa in terms of poultry meat, with 53% market share in value followed by the United States with 13% market share.
|Poultry||FY 2015||FY 2016||FY2017|
|Total Exports||$107 million||$92 million||$104 million|
|Total Imports||$386 million||$362 million||$455 million|
|Imports from the U.S.||$2 million||$18 million||$74 million|
Above figures are from Global Trade Atlas
Sub-Sector Best Prospects
Chicken bone-in portionsOverveiw
U.S. 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 five 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 will continue to have duty-free access under African Growth and Opportunity Act (AGOA) to the United States market for a wide range of South African products 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 $18 million in FY 2016. In FY 2017 it increased to 74,000 tons at a historical high value of $73 million. The strong demand for poultry products in South Africa will continue, and with the United States’ ability to compete with the current top suppliers in the South African market, increased poultry meat imports from the United States is expected.
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 (see http://www.usapeec.org ).
B. Agricultural EquipmentUnit: $ millions
|2016||2017||2018 (estimated)||2019 (projected)|
|Total Market Size||1000||1000||1150||1265|
|Total Local Production||59||59||56||62|
|Imports from the U.S.||200||200||300||320|
|Exchange Rate: 1 USD||14.71||12|
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 the recent ratings downgrade, land reform concerns, volatile exchange rate and ongoing weather worries, among others.
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. Although it is expected that inflation will come down to 5.8% by the second quarter of this year and that the interest rate will stay at the same levels for the rest of the year – which will benefit consumers particularly at the lower end of the spectrum – this relief will be short-lived as the exchange rate continues to weaken in the wake of the downgrade, keeping food prices high and placing pressure on South Africa’s imports as the rand loses value and it becomes more expensive to import agricultural products.
During 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 2017. This year saw drought conditions predominantly take its effects in the Western Cape and Karoo regions of South Africa, which impacted negatively on fruit and livestock production. However, leftover nutrients in the soil from previous seasons, together with favorable rainfall in other parts of the country, resulted in record-high dryland yields for maize and soya bean for farmers based further inland.
There are still notable headwinds moving into 2018 which can affect the farming sector. Weak global growth and local policy uncertainty would impact the economy negatively, and can lead to unintended consequences if further downgrades should follow.
As the agricultural sector is largely export driven, it is hedged against the negative impact of a major credit downgrade, with farmers susceptible to higher borrowing costs and depressed local demand. The expected increase in the crude oil price will also impact negatively on production costs, and global surplus in commodities may lead to lower producer prices across the board.
Agricultural Equipment Market Segmentation:Retail sales of agricultural equipment during April 2018 were as follows:
|2018||2017||% change||2018||2017||% change|
April tractor sales of 459 units were again significantly (15%) up on the 398 units sold in April last year. On a year to-date basis, tractor sales for the first four months of the year are approximately 13% up on what they were this time last year. April combine harvester sales of 29 units were one unit less than the 30 units sold in April last year, but sales for the year-to-date are still approximately 5% down on last year.
The continued good tractor sales indicate that sentiment in the market is still good. The very recent weakening of the rand may have meant that some buyers have brought forward their buying decisions. Although most tractor sales are traditionally into the annual grain cropping areas, it is likely that current sales into perennial horticultural areas are now taking place as these farmers can now realize better prices for their exports. With this recent upturn in tractor sales, industry forecasts have now been revised upwards to a level of up to 6,700 units, or approximately 5% up on 2017 sales.
Sub-Sector Best Prospects
The best prospects for U.S. suppliers, in South Africa and the region, are:
• Combine Harvesters.
• Precision Agriculture Equipment and Technologies.
• Soil Testing Equipment.
• Spare Parts and Service Facilities.
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. 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.
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. 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 capabilities.
Trade BarriersMost 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 ResourcesExhibitions and Conferences
Show: NAMPO Harvest Day Week
Focus: Largest Agriculture Machinery and equipment show in the Southern Hemisphere.
Dates: May 14–17, 2019
Venue: Bothaville, Free State, South Africa
South African Agricultural Machinery Association (SAAMA)
NAMPO Harvest Day
Agricultural Business Chamber (ABC)
South African Department of Agriculture, Forestry and Fisheries
For more information, the U.S. Commercial Service Commercial Specialist for Agriculture in Johannesburg, South Africa, can be contacted via email at the following:
Phone: +27 11 290 3025,
or visit our Website: http://export.gov/southafrica/index.asp.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
South Africa Agribusiness Trade Development and Promotion