- African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/South Africa: Western Cape an exception amid signs of recovery in agriculture

South Africa: Western Cape an exception amid signs of recovery in agriculture

South Africa: Western Cape an exception amid signs of recovery in agriculture
Photo Credit: The Sowetan
Published date:
Wednesday, 24 May 2017

It is often said the macroeconomic standing of the agricultural sector has diminished, an argument supported by the sector’s declining share of GDP, which fell from 4.2% in 1996 to 2.3% in 2015.

However, what is not captured in this narrative is that the value of the agricultural sector has grown 40%, from R50.5bn to R71.4bn over that period.

This translates to a fairly modest average annual growth rate of 2.1% over the past two decades, which explains why agriculture’s relative share to the economy has been declining.

Agriculture is not becoming insignificant — it is just that other sectors, particularly the services sector, have grown at a faster rate from a lower base.

The sector has just come out of one of the worst droughts in history, following two successive years of progressively drier seasons.

Consequently, the 2015-16 period resulted in the agricultural sector entering a protracted recession, enduring eight successive quarter-on-quarter GDP declines.

The contraction of the sector has been observed through a number of commodities.

Maize production declined 30% year on year in 2015 and 22% more in 2016, to reach 7.8-million tonnes, the lowest output in a decade. Sorghum touched its lowest level on record, while high-value commodities such as peanuts reached their lowest level in seven decades.

‘To reach full arable potential capital is needed for clearing, soil preparation, irrigation facilities and farm infrastructure’

Overall agricultural exports declined 10% year on year in 2015 and 1% in 2016 in real terms. The trade balance for the sector remained positive, as agricultural exports continued to trend above imports.

Due to the weather’s effect, the sector has been in a state of uncertainty, emanating from a lack of clear and consistent policy direction.

The country’s politics has generally contributed to this policy vagueness and inconsistency, including land-reform policy discussions with mentions of expropriation without compensation and land ceilings, all of which add to uncertainty and affect production and investment decisions.

So far in 2017, there have been signs of a strong production recovery across all agricultural commodities in the country excluding the Western Cape, where dry conditions have persisted. The seriousness of the drought conditions is such that the Western Cape government has declared the province a disaster area. More concerning is that the province produces almost half of SA’s winter wheat crop, with the planting period stretching from April to July.

Given the significance of the Western Cape to national winter crop production, conditions in the province suggest winter crop area plantings will fall substantially. The National Crop Estimates Committee indicated in April wheat farmers intend to plant 2.4% less area than the previous season’s 508,365ha.

With recent events of sustained dryness there are reports that early planted wheat in parts of the Swartland has dried off. This could reinforce the declining planting intentions over the course of the season.

The Western Cape produces all SA’s canola and a large proportion of barley, which means the drought is of national significance.

Unlike the winter grains sector, the summer crop paints a much more positive picture. SA is expected to harvest the second-largest maize crop on record, estimated at 14.5-million tonnes, a year-on-year increase of 86%. The soybean crop is expected to increase 66% to 1.2-million tonnes, the highest output yet.

Although a strong recovery is expected, there are concerns that it may be short-lived due to the possibility that the El Niño weather phenomenon could increase dryness towards the end of 2017. International forecasters such as the Australian Bureau of Meteorology and The Earth Institute at Columbia University estimate a 50% chance of an El Niño developing in 2017.

agric 930px


More concerning is that the western cape produces almost half of SA’s winter wheat crop

Amid the uncertainty posed by domestic factors — politics, policy and weather events — the country’s trade policy has presented opportunities and threats to the industry.

The economic partnership agreement between the Southern African Customs Union (Sacu) and the EU has seen SA’s market access being expanded for fresh fruit, sugar, wine and spirits, among other agricultural products. However, as the UK negotiates to leave the EU there is uncertainty over the effect of the Brexit negotiations on SA’s market access to the UK post 2018.

The UK represents a quarter of the value of SA’s fruit and wine exports to the EU. A transitional arrangement between Sacu and the UK could trigger an expansion of SA’s fresh fruit and wine exports to the UK.

The US African Growth and Opportunity Act (AGOA) has caused a continued growth of SA’s exports of macadamia nuts, citrus fruit and wine, among others. Other commodities, such as avocados, litchis and lamb are expected to become eligible for export in the near term.

The Agoa poultry rebate, which came into effect in December 2015, has led to SA importing 56,700 tonnes of bone-in chicken from the US from January 2016 to March 2017. SA imported 47,000 tonnes in the first annual quota from April 2016 to March 2017.

Even though the 65,000 tonne Agoa rebate for US bone-in chicken is subject to an annual adjustment, the quota will not grow for the period April 2017 to March 2018, which should provide some respite for poultry producers after a sharp growth in imports threatened the survival of the industry.

  • Sihlobo is an agricultural economist and Kapuya a trade economist.

Read related news articles

South Africa walks a tightrope on US relations

South Africa has been conducting a high-wire act in its relations with the United States (US). It is maintaining friendships with Washington’s enemies like Russia, Iran and China while trying to avoid disrupting its economic relations with America. Tensions came closer than ever to breaking point this month as the US House of Representatives’ Committee on Foreign Affairs passed the US-South Africa Bilateral Relations...

28 March 2024

Remarks by Deputy Treasury Secretary Adeyemo on the US-South Africa economic relationship

As Prepared for Delivery in Johannesburg, South Africa Thank you for the warm welcome. I want to express my gratitude to Consul General Spera and the American Chamber of Commerce for hosting me. I am honored to be joined today by South African Entrepreneurs that are building companies to unlock the economic potential of their country.  I owe my own presence here today to the inspiration I drew from South Africa. In the middle of the...

13 March 2024

South African president Ramaphosa meets with US congressional delegation

South African President Cyril Ramaphosa today, 21 February 2024, received for a visit from a bipartisan congressional delegation from the United States of America, in Tuynhuys, Cape Town. The delegation is visiting South Africa at the invitation of the Aspen Institute. The President and the US congressional delegation discussed the importance of the relationship between South Africa and the US, which manifests in strong economic,...

21 February 2024

US congress receives Bill to review South Africa relations

A bill has been submitted to the United States congress calling for a full review of the country’s bilateral relationship with South Africa following the International Court of Justice ruling that found it plausible that Israel has committed acts of genocide against Gaza. The bipartisan bill which was introduced by US Republican congressman John James and Democratic Party congressman Jared Moskowitz this week could threaten South...

09 February 2024

Fitch research unit expects better AGOA deal for South Africa

Fitch’s research arm, BMI, believes SA has done enough to get improved trade terms under the African Growth & Opportunity Act (Agoa), which it expects to be extended and modified before its expiry in September 2025. But it warns that the deal might be stillborn if Donald Trump is elected US president. The research think-tank said in a note it assigns a 65% probability that Agoa will not only be renewed but modified to the benefit of...

09 January 2024

South Africa: BLSA CEO calls for more companies to leverage AGOA opportunities

Many more South African companies could benefit from the African Growth and Opportunity Act (AGOA), which gives eligible countries access to US markets free of tariff barriers, business organisation BusinessLeadership South Africa (BLSA) CEO Busi Mavuso writes in her weekly newsletter. Apart from mainstream formal sector businesses, there are opportunities to enable more entrepreneurs, including women-led...

20 November 2023

US ambassador: AGOA is an opportunity to deepen ties between the US and South Africa

President Joe Biden last December at the US-Africa Leaders Summit affirmed that the US will elevate its relationship with Africa. The future is Africa. One example is its youthful population: the median age on the continent is 19. By 2050, one in four people in the world will be in Africa. The US wants them to be healthy and wealthy. What happens in Africa will affect the rest of the globe — and we want to work together to ensure it is...

09 November 2023

US Senator Chris Coons proposes AGOA extension by 16 years, immediate review of SA’s AGOA eligibility

Powerful US Democratic Party Senator Chris Coons is circulating a discussion draft of a Bill to renew the African Growth and Opportunity Act (Agoa) for 16 years that would also require an immediate “out-of-cycle” review of South Africa’s eligibility for Agoa. That could lead to South Africa being removed next year from the programme, which has provided considerable benefits to SA exporters to the US of cars, fruits and wine, in...

07 November 2023

AGOA benefits extend beyond trade [incl. VIDEO of Friday's opening session]

Economies in Sub-Saharan countries stand to benefit far more from the African Growth and Opportunity Act (AGOA) than notable trade statistics, says President Cyril Ramaphosa. “AGOA enhances the diversification of African economies, enabling them to export value-added products. By enabling African countries to have preferential access to the US market, this opportunity incentivises African countries to develop and export value-added goods...

06 November 2023

South Africa pins its hopes on an early 2024 US Congress renewal of AGOA

South Africa’s government is hoping that the process to renew the African Growth and Opportunity Act (Agoa) by the US Congress will be concluded by early 2024, ensuring that more than 20 African countries continue to have duty-free access to the world’s largest economy.   This is the first time that the South African government has given a timeline for when it hopes the US Congress might extend Agoa, which has been renewed twice...

05 November 2023

SA trade minister Patel expresses confidence at media briefing about South Africa’s continued inclusion in AGOA

Ahead of South Africa hosting the US-AfricaTrade and Economic Cooperation Forum – also called the AGOA Forum – from November 2 to 4, Trade, Industry and Competition Minister Ebrahim Patel on October 26 briefed the media on the state of readiness for the forum, expressing confidence that the South African government’s relations with the US were strong. Various South African stakeholders have been motivating for...

26 October 2023

You are here: Home/News/Article/South Africa: Western Cape an exception amid signs of recovery in agriculture