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South African farmers brace for pain as US trade deal unravels

Jan 06, 2016

South African fruit, wine and nut farmers are bracing for hardship as the US looks set to rescind their duty-free access to the world’s largest market at a time when they’re already facing the worst drought in more than two decades and rising input costs.

Poultry Farm

South Africa missed a December 31 deadline to remove barriers on beef and chicken imports from the US, placing it at risk of losing trade preferences for its agricultural goods under the Africa Growth and Opportunities Act, or Agoa. South Africa exported $154m (R2.4bn) worth of farm goods under the program in the first nine months of last year, according to the Trade Law Centre, which is based in Stellenbosch, near Cape Town.

“The US is the crown jewel of our markets,” Piet Smit, a citrus farmer in the southwestern town of Citrusdal, said by telephone on Tuesday. “If we lose the AGOA benefits there will be extra costs that the farmers will have to swallow.”

Adopted in 2000, Agoa eliminates US import levies on more than 7 000 products ranging from textiles to manufactured items from 39 African nations. To remain beneficiaries, countries are required to cut barriers to US trade and investment, operate a market-based economy, protect workers’ rights and implement economic policies to reduce poverty.

Agricultural goods accounted for about 14% of total South African exports under Agoa in the first nine months of last year, according to the Trade Law Centre. The bulk of its shipments were vehicles and car parts.

Deal possible

South Africa has made substantial progress in addressing outstanding issues and a deal may still be reached to avoid a loss of the trade preferences, Trade Minister Rob Davies told reporters in Pretoria on Monday.

If the negotiations collapse, the hardest hit will be farmers in the Western Cape province, which exports 78% of the South African agricultural goods shipped to the US under Agoa. 

“The province’s wine and citrus industries benefit substantially from duty-free access to the US market via Agoa,” Tim Harris, the chief executive officer of trade and investment promotion agency Wesgro, said by email. “We are extremely concerned that these industries will be collateral damage if these benefits are not retained.”

Drought has already curbed farming in South Africa, extending a recession in the industry into the third quarter as output contracted an annualised 12.6%. South Africa is the world’s second-biggest exporter of oranges and the top producer of macadamia nuts.

Wine, citrus

South Africa sold 10.7 million liters of wine to the US last year, or 2.5% of its total wine exports, according to Wines of South Africa, an industry body. The wine industry employs 289 000 people nationally, and job losses are likely if the trade preferences are lost, said Andre Morganthal, the group’s spokesperson.

South Africa is the world’s seventh-biggest wine producer and its largest international customers include the UK, Germany and the Netherlands.

“The US is the last great hope for South African wine exporters,” Etienne Heyns, global sales executive for Graham Beck Wines, said by phone from Franschhoek, near Cape Town. “Should wine be excluded from Agoa benefits it will add about R5 ($0.32) extra to every bottle.”

South Africa’s export volumes of citrus climbed 11% in 2014, the Citrus Growers Association said in its 2015 annual report. About 6% of the country’s soft citrus and 3% of its oranges was shipped to the US that year, the CGA said.

 

Credit: Fin24

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