Stellenbosch University expert states AfCFTA not a silver bullet to increase SA’s agricultural exports in Africa

Does the African Continental Free Trade Area (AfCFTA) present an opportunity for South Africa (SA) to further expand its agricultural exports into the continent, or is it just a pipe dream?

This is the question Desmond Annandale explored in his recent Master’s degree in Agricultural Economics at Stellenbosch University (SU).

Annandale, who is a research assistant in SU’s Department of Agricultural Economics, says that although agribusiness trade in Africa is expected to grow by up to 30% by 2050, the continent’s share in receiving SA’s agricultural exports has been decreasing. It is, therefore, important to identify the countries and products that offer the best opportunities for us to increase our agricultural exports.

Annandale applied several key trade indices to assess the nature of SA’s trade with countries in each of the continent’s eight Regional Economic Communities (RECs) – the Southern African Development Community (SADC), the Arab Maghreb Union, the Common Market for Eastern and Southern Africa, the Economic Community of West African States (ECOWAS), the Community of Sahel Saharan States (CEN-SAD), the Economic Community of Central African States, the Intergovernmental Authority on Development and the East African Community.

Annandale says the indices measure the level of trade among countries in each REC; show the nature of trade of a particular product within a country in terms of exports and imports; display the orientation of SA’s exports to the different RECs; allow for the identification of countries to which we export most of our agricultural products; and helps to determine what our market share for agricultural products is in countries in the different RECs.

He also used data from, among others, the International Trade Centre, the World Bank and the World Economic Forum to develop a Composite Country Priority Index (CCPI) to identify and rank countries according to their attractiveness as an export market for SA’s agricultural products. He compared these rankings to the value of the agricultural exports into each market. Annandale says this allowed him to identify those markets that our agricultural sector prioritises too much (exposing SA to the risk of over-dependence on a specific market) and those that it prioritises less.

“The results show that (i) South African exports of processed and unprocessed agricultural products into different countries are not prioritised in the same manner, (ii) different regions pose different opportunities for trade expansion, and (iii) export volumes to some countries are far greater than what is suggested by the CCPI.

“We export mostly lower valued agricultural products such as maize, groats of maize and seed maize, wheat and wheat flour (despite SA importing wheat in excess of local production), cane sugar in solid form, and semi-milled or wholly-milled rice to African countries with higher valued agricultural exports such as wine, citrus, and other fruits ending up mostly in overseas markets, such as the EU and UK.

“We export selected agricultural products mostly to SADC countries and certain unprocessed agricultural products mainly to the ECOWAS and CEN-SAD countries.”

Diversify

Annandale says a comparison of the CCPI results to SA’s actual trade figures with other African countries shows that we have an ‘over-exposure’ in certain markets for exports of processed and/or unprocessed agricultural products. This may be due to an unstable political environment, poor logistics and/or adverse market conditions in a specific country.

“Given the rapidly expanding African markets, in terms of both GDP and population, as well as the increased trade integration envisioned under the AfCFTA (in the form of reduced tariffs and non-tariff barriers), we should diversify our agricultural exports into new previously ‘closed off’ economies.

“In countries where the trade ranking correlated with the results of the CCPI, we should maintain our current market share and look to expand or diversify the types of agricultural products that we export.”

Annandale calls for more market research to determine whether it would be feasible to increase our exports to countries where we are ‘under-exposed’.

According to him, there is a high level of trade introversion (the level at which countries in a REC or regional grouping trade among themselves) for processed agricultural products in all RECs, which suggests that SA could experience difficulties in exploiting market opportunities despite tariff reductions, but the opposite is true for unprocessed agricultural products, except for perhaps East Africa. Overall, unprocessed agricultural products show the highest potential for market expansion.

Annandale says if tariff reductions envisioned under the AfCFTA materialise, SA’s competitiveness in African markets that it has no prior trade agreement with could improve. But it would also be important to address costly and timely transit times due to delays at border posts, customs procedures, and cumbersome paperwork requirements.

He concludes that although the AfCFTA does offer opportunities for the expansion of SA’s exports into the continent, it is not a silver bullet to expand them significantly, at least not in the short to medium term.