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Growth envisaged by SA in agricultural trade will be export-led

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Wandile Sihlobo is chief economist of the Agricultural Business Chamber of South Africa (Agbiz) and author of ‘FINDING COMMON GROUND: Land, Equity and Agriculture’.

Increased agricultural trade by the Russia-Africa Summit is positive for South Africa’s agricultural sector. The current engagements with Russia should seek to improve South Africa’s position by promoting more exports in that market.

The first Russia-Africa summit held last week concluded with an announcement that urged all participants to increase co-operation in security, science, environmental protection, trade and economic matters.

On the last point, the declaration highlights that participants should “make efforts to substantially expand the trade between the Russian Federation and the African states and diversify it, including by increasing the share of agricultural products in import and export operations”.

Russia is an important player in global agricultural markets, ranked as the 13th largest importer, valued at $28.8-billion annually, on average, over the past five years. The countries that have benefited from Russia’s agricultural import needs are Belarus, China, Germany, Brazil, Ecuador, Italy, Turkey, Paraguay, Indonesia and France, among others. The African countries are down on the list of key agricultural exporters to Russia. In fact, while Russia’s agricultural trade balance is negative, the country has a trade surplus with the African continent. In 2018, Russia had an agricultural trade surplus of $2.8-billion with the African continent, according to data from Trade Map.

Over the past five years, wheat has been the dominant product in Russia’s agricultural exports to Africa. It accounted for an average 79% of all exports to the continent over the past five years. The other products that Africa imports from Russia are sunflower oil, soybean oil, barley, maize, and linseed. Also, this is not widespread across the continent. Nearly half of Russia’s agricultural exports into Africa go to Egypt, and it is mainly wheat. Sudan, Nigeria, Algeria and Kenya are other key markets, which collectively, added to Egypt, accounted for about 73% value of Russia’s agricultural exports to Africa.

In South Africa, the picture is different. South Africa enjoys an agricultural trade surplus with Russia. The products that South Africa exports to Russia include citrus, apples, pears, wine, grapes, apricots, cherries, peaches and fruit juices. These are among the products that Russia generally imports from the world (Russia’s top 10 agricultural imports are citrus, bananas, wine, soybean, cheese, beef, palm oil, apples, pears and tobacco).

In 2018, Russia was South Africa’s 16th largest agricultural market. The call for increased agricultural trade between Africa and Russia sets a good basis for South Africa to explore the means of increasing its share within the Russian agricultural market. In reciprocity, Russia is already a notable supplier of wheat to South Africa and could increase its share if it were to compete comparatively with wheat suppliers such as Ukraine and Lithuania, among others.

Overall, the announcement of increased agricultural trade by the Russia-Africa Summit is positive for South Africa’s agricultural sector. The growth that South Africa envisages in this particular sector will be export-led; therefore, any talks that encourage trade should be viewed positively.

In 2018, South Africa’s agricultural sector exported nearly half of its production in value terms, which means the sector is export-orientated. South Africa’s agricultural sector already participates within Russia’s market, although ranked as the 29th country supplying agricultural products to Russia in 2018.

The current engagements with Russia should seek to improve South Africa’s position by promoting more exports in that market. If Russia were to insist on reciprocity within the agricultural sector, wheat would be their targeted space. In that sector, South Africa imports roughly half of its annual consumption. An increase in Russia’s wheat would displace other suppliers rather than adding pressure to the local market in the near term. DM

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