South Africa’s hesitancy in dealing with Russia is jeopardising agricultural exports, threatening the sector. Approximately half of the country’s R230 billion agricultural output is destined for international markets, with Russia receiving less than 2%. Wandile Sihlobo, the chief economist of the South African Agricultural Business Chamber, emphasises the importance of cultivating trade relations with the European Union (EU) and other key agricultural export markets in order to avoid losses.
Sihlobo emphasises that South Africa’s agricultural sector is export-oriented, making it critical to prioritise maintaining export markets. Africa currently receives 40% of South Africa’s agricultural exports, with Asia and the EU also receiving significant portions. Russia, by contrast, receives less than 2% of South Africa’s agricultural exports, making it a minor player in the sector. Sihlobo emphasises the importance of the US market for South Africa.
However, the close ties between South Africa and Russia have raised concerns due to geopolitical risks. President Vladimir Putin’s actions in Ukraine have drawn harsh criticism not only from adversaries but also from industry leaders. Concerns have been raised that South Africa’s relationship with Russia may jeopardise its membership in the African Growth and Opportunity Act (AGOA), which grants duty-free access to the United States for certain South African products. The South African Reserve Bank (SARB) has also expressed concern about the potential consequences of sanctions.
Indeed, congressional representatives in the United States have called for sanctions against South Africa as a result of its ties to Russia. This situation poses significant risks to the agricultural sector, including possible expulsion from AGOA and limited access to financing from international lenders supported by the US. Christo van der Rheede, CEO of Agri SA, warns of troubled waters ahead for the agricultural sector if South Africa’s foreign relations are not aligned.
Van der Rheede agrees with Sihlobo, emphasising the critical importance of South Africa’s EU trade partners. The EU market is regarded as critical for developing relationships and sustaining export growth. Sihlobo also discusses the Agriculture and Agro-processing Master Plan (AAMP), which was launched by the government to stimulate investment and job creation in the sector, at a Think Big Series event hosted by PSG.
Sihlobo emphasises the critical role of releasing approximately four million hectares of underutilised land in increasing production and improving trade outputs. The South African government currently owns approximately four million hectares of land, some of which can be used for agriculture. The Agricultural Research Council has already audited nearly two million hectares of this land. South Africa can increase output for exports and create job opportunities by increasing the cultivation of summer grains, horticulture, and livestock.
To summarise, South Africa’s agricultural sector is heavily reliant on export markets, with only a minor share going to Russia. To mitigate the risks associated with its association with Russia, the country must prioritise trade relations with the EU and other key agricultural markets. The sector may face challenges such as being kicked out of AGOA and having limited access to international financing. Unlocking underutilised land and implementing the AAMP are critical steps in increasing output, improving trade outputs, and creating job opportunities.
