South African agriculture could face increased competition in the European Union market as the EU moves closer to finalising a trade agreement with the Mercosur bloc, according to Wandile Sihlobo, South Africa's Presidential Envoy on Agriculture and Land and chief economist of the Agricultural Business Chamber of South Africa.
The agreement with Mercosur, the Southern Common Market, would remove tariffs on around 90 per cent of trade in goods between the two regions over a period of up to 12 years. Agricultural exports from Mercosur countries would enter the EU under gradually increasing quotas.
The bloc includes Argentina, Brazil, Paraguay, Uruguay, and Bolivia. Venezuela was suspended from the bloc in 2016.
Sihlobo noted that the EU accounts for nearly 20 per cent of South Africa's agricultural exports. "Growing competition from South America in the EU market is something we must watch closely following this deal."
South Africa's agricultural exports to the EU mainly consist of higher-value products, including citrus, fruit juices, wine, dates, figs, pineapples, avocados, mangoes, nuts, apples and pears, berries, cut flowers, and wool.
By comparison, exports from Mercosur countries such as Brazil and Argentina are focused largely on grains, oilseeds, and beef. However, Sihlobo said broader competition could still increase over time.
"The issue of generally increased competition, even if not at the initial stages, underscores the point I have made before that South Africa must consistently seek new export markets for its agricultural exports," he said.
South Africa exports around half of its agricultural production, valued at US$13 billion in 2023, and domestic output is expected to increase further in the coming years.
Sihlobo said diversification should complement, rather than replace, existing trade relationships. "The new markets are not meant to replace the EU and other existing markets; they should be a means of diversification."
He identified Brics countries as a priority for future trade growth. "The original Brics members only account for 8% of South Africa's agricultural exports. Yet, the Brics countries are big agricultural importers."
According to Sihlobo, higher import tariffs and phytosanitary requirements remain barriers to expanding trade with Brics markets. He also pointed to growing protectionism in traditional markets, including EU farm protests and the ongoing citrus dispute between South Africa and the EU at the World Trade Organization.
Source: Freight News
