South Africa – Farming Commercial Guide 2023

South Africa – Farming Commercial Guide 2023

Agricultural Sector

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2023-09-10

Agricultural Equipment                                                                                          

Overview

Units: $thousand

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Data Source: Above figures are unofficial estimates obtained from industry sources.

In comparison to other African nations, South Africa boasts the most advanced, productive, and diverse agricultural economy. The country’s well-established agricultural sector is poised to weather ongoing economic and meteorological uncertainties. Several factors exert influence on this sector, including credit rating downgrades, land reform issues, fluctuating exchange rates, persistent weather concerns, and escalating input expenses.

South Africa currently hosts around 32,000 commercial farmers, with a noteworthy subset of 5,000 to 7,000 responsible for roughly 80 percent of the nation’s agricultural output.

Economic forecasts indicate that the country’s growth will continue to face challenges as consumers tighten their budgets in response to a contracting economy and heightened inflation experienced in the past year. Recognized widely, investment in agriculture stands as a pivotal prerequisite for achieving goals related to enhancing food security, job creation, wealth generation, and, consequently, poverty reduction.

However, as we move into 2022, there remain notable obstacles that may impact the farming sector. These include sluggish global economic growth, domestic input cost pressures, the lingering effects of the Covid-19 pandemic, and policy uncertainties, all of which could adversely affect the economy and lead to unintended consequences.

Given that the agricultural sector relies heavily on exports, it is somewhat shielded from the adverse effects of a significant credit downgrade. Nonetheless, farmers may still contend with elevated borrowing expenses, reduced local demand, and potential challenges related to approvals for importing animals and plants due to foreign health regulations.

Optimal Opportunities Within Specific Sub-Sectors                                                                                 

The most promising opportunities for U.S. suppliers in South Africa and the surrounding region include:

• Tractors
• Combine Harvesters
• Drone Technology
• Balers
• Planters
• Precision Agriculture Equipment and Technologies
• Sprayers
• Irrigation
• Storage
• Soil Testing Equipment
• Spare Parts and Service Facilities

Opportunities                                                                                                            

In spite of the prevailing economic challenges, farmers seem to hold a positive outlook regarding the current state of agriculture. The intermittent rainfall and prevailing dry weather patterns raise concerns while also creating opportunities for no-till planting machinery. Both companies and farmers exhibit significant interest in soil sampling equipment.

Digitalization

The infusion of digital technology into agriculture stands as a remarkable opportunity for Sub-Saharan Africa. The widespread adoption of mobile phones as a primary means of communication, coupled with internet-based solutions, has the potential to substantially enhance access to financing for agricultural inputs across the entire value chain.

The digitization of processes, alongside the efficient utilization of fertilizers and seeds, will play an increasingly pivotal role in unlocking the agricultural potential in Africa. Noteworthy technological trends in agriculture encompass data management, machine learning, artificial intelligence, automation, and applications utilizing drones.

Investment in production research and technology represents a promising avenue for agricultural growth in South Africa and offers a means to mitigate the vulnerability of crops and livestock.

Barriers

There are minimal impediments to introducing new equipment into the South African market. Equipment such as planters, sprayers, and tilling machinery can be imported duty-free, provided that identical products are not locally manufactured. The majority of precision agricultural equipment, including planters, self-propelled sprayers, and combine harvesters, is sourced from South America, Europe, and the

United States, while smaller implements are procured domestically. Renowned U.S. brands like Massey Ferguson, John Deere, New Holland, AGCO, and Case IH enjoy a strong and well-established reputation for quality within this market.

South Africa serves as a strategic launchpad for “regional expansion,” offering promising opportunities for U.S. businesses in neighboring countries such as Zambia, Zimbabwe, Angola, Mozambique, and Botswana. Furthermore, second-hand tractors and equipment are in high demand and well-received within these regional markets.

Trade show

South Africa is the proud host of NAMPO Harvest Day, the largest agricultural equipment exhibition on the African continent. This open-air event occurs annually in May and offers an exceptional platform for U.S. companies to showcase their agricultural equipment and technology.

South Africa – Farming Commercial Guide 2023

Trade Barriers

In all commercial import and export transactions, it is imperative that commodities are accurately categorized and classified under the appropriate tariff heading on custom declarations. This classification code directly determines the applicable duty rate for the given commodity.

The classification process is an integral part of the global Harmonized Commodity and Coding System, established under the World Customs Organization’s (WCO) Harmonized System Convention.

Furthermore, it’s important to note that the importation of all second-hand goods is subject to import control regulations, necessitating the acquisition of an import permit for such goods.

Resources                                                                                                                                  

South African Agricultural Machinery Association (SAAMA)

South African Department of Agriculture, Land Reform and Rural Development (DALRRD)

Exhibitions and Conferences

Show:                   NAMPO Harvest Day

Focus:                   Largest Agriculture Machinery and equipment show in the Southern Hemisphere.

Venue:                  Bothaville, Free State Province

Agricultural Commodities

Overview

South Africa stands out as one of the most advanced and diverse economies on the African continent. With nearly 60 million inhabitants, it holds considerable appeal as a business destination due to its expanding market and a relatively accommodating business environment. Furthermore, South Africa serves as a gateway to other countries in the southern African region.

The country boasts a market-oriented agricultural economy characterized by significant diversity. This diversity encompasses the production of various key crops, including all major grains (with the exception of rice), oilseeds, deciduous and subtropical fruits, sugar, citrus fruits, wine, and a wide array of vegetables. Livestock production is also prominent, encompassing cattle, dairy products, hogs, sheep, and a well-established poultry and egg industry.

The agricultural sector extends into value-added activities, such as meat slaughtering, meat and vegetable processing and preservation, dairy product manufacturing, grain milling, oilseed crushing, animal feed production, sugar refining, as well as the production of cocoa, chocolate, sugar confectionery, and various other food products.

During the fiscal year 2021, South Africa’s agricultural sector played a substantial role, contributing roughly 10 percent to the country’s total export earnings, with a total value of $12.0 billion. Particularly noteworthy were the valuable exports, including citrus fruits, wine, table grapes, corn, apples, pears, and wool. South Africa’s export portfolio also encompassed other products, such as wool, nuts, sugar, mohair, and pears, among various others.

Conversely, in FY2021, South Africa recorded imports of agricultural and food products totaling $7.2 billion, marking a 14 percent increase compared to FY2020. This uptick was primarily attributed to the normalization of economic activities following the COVID-19 lockdowns.

The leading imported products included rice ($520 million), palm oil ($474 million), wheat ($451 million), poultry ($350 million), soybean meal ($213 million), cane sugar ($200 million), and whiskies ($148 million).

In FY2021, the United States achieved agricultural exports to South Africa valued at $318 million, marking a slight increase compared to the previous fiscal year. The key products exported by the United States to South Africa included poultry meat, dairy products, planting seeds, distilled spirits, animal feed, and tree nuts. Additionally, South Africa imported other essential commodities from the United States, such as soybeans and wheat.

The USDA’s Foreign Agricultural Service (FAS) office in Pretoria plays a crucial role in providing valuable market intelligence for various agricultural commodities within the Southern Africa region. FAS also produces reports that outline the opportunities and regulatory procedures for United States agricultural exports to South Africa.

For American agricultural and food companies considering South Africa as a potential market, the Exporter Guide for South Africa serves as an excellent starting point. Should you require further information, please do not hesitate to reach out to the Foreign Agricultural Service in Pretoria at the following address:

Foreign Agricultural Service

U.S. Embassy

Pretoria

South Africa

Tel: +27 12 431-4057.

Email: agpretoria@fas.uda.gov

Sub-sector Best Prospects                                

Grains

The grain industry, encompassing barley, maize, oats, sorghum, and wheat, stands as a cornerstone of South Africa’s agriculture, contributing more than 30 percent to the total gross value of agricultural production. This sector involves numerous key players, including input providers, farmers, silo proprietors, traders, millers, bakers, research institutions, financiers, and others.

The animal feed industry plays a crucial role within the grain supply chain, consuming approximately 6.0 million tons of grain and 1.6 million tons of oil cake (derived from locally produced sunflower and soybeans, as well as imports) annually in South Africa. In FY2021, United States soybean exports to South Africa reached an all-time high of $25 million.

Among locally cultivated field crops, corn reigns supreme and serves as the primary source of carbohydrates for both animal and human consumption within the Southern African Development Community (SADC) region. South Africa emerges as the leading corn producer in the SADC region, boasting an average annual production of approximately 15 million tons over the past five years. Local corn consumption surpasses 12 million tons annually, with the surplus typically finding its way into export markets. Wheat production predominantly occurs in the winter-rainfall regions of the Western Cape and the eastern parts of the Free State, exhibiting notable annual production fluctuations.

Over the past half-decade, average wheat production has hovered around 1.8 million tons per year, whereas local demand consistently exceeds 3.5 million tons annually. Consequently, South Africa relies on wheat imports to meet its domestic demand.

Over the last two decades, particularly following the deregulation of agricultural markets in 1997, the area cultivated with wheat has witnessed a steady decline, despite growing local consumption. Diminishing profit margins prompted local wheat farmers to reduce wheat cultivation and transition to other crops such as canola, corn, soybeans, and increased livestock production. Additionally, the sporadic nature of wheat production over the past 20 years can be attributed to unpredictable weather conditions. Unless there are technological advancements or policy alterations, this downward trend in wheat cultivation in South Africa is expected to persist.

South Africa boasts the highest wheat consumption in Southern Africa, with wheat being the second most significant grain commodity consumed, trailing only behind corn. Annual per capita corn consumption, typically in meal form, leads at 95 kg per person, followed by wheat at 56 kg per person, and then rice at 15 kg per person. The nation consumes around 2.4 billion loaves of bread per year, equating to approximately 40 loaves per person annually. In the marketing year 2022/23, local wheat demand is estimated at 3.7 million tons, with wheat imports projected to reach 1.7 million tons.

      Source: Trade Data Monitor

Web Resources on Grains

U.S. Wheat Associates has an office in Cape Town, South Africa.

InfoCPT@uswheat.org

Cape Town – U.S. Wheat Associates (uswheat.org)

U.S. Grain Council has representation in Pretoria, South Africa

Koster0@absamail.co.za

Middle East/Africa/Europe (Tunisia) – U.S. GRAINS COUNCIL

Alcoholic Beverages         

South Africa annually consumes over 4.5 billion liters of alcoholic beverages and serves as a significant exporter, particularly in the realm of wine. However, it also has a substantial appetite for imported alcoholic beverages, notably whiskies. Recent trends reveal a shift among consumers towards embracing novel and inventive distilled spirits, with a growing presence in previously underprivileged areas. South African tastes and preferences are evolving, with the average consumer seeking a broader array of alcoholic products on store shelves.

Consequently, the market has seen the emergence of a diverse range of newly imported offerings. This openness to innovation, coupled with a burgeoning middle class, has fostered a favorable environment for the sale and promotion of distilled spirits from the United States. Nevertheless, consumer purchasing behavior is primarily guided by price sensitivity rather than unwavering brand loyalty.  

Source: Trade Data Monitor

Resources 

The Distilled Spirits Council of the United States can help U.S. distillers with market information and advice on how to export to South Africa (https://www.distilledspirits.org/

Other Sub-sector Best Prospects        

Poultry

Overview

Between 2000 and 2010, South Africa experienced a period of consistent economic growth and rising average incomes, leading to a significant surge in consumer demand for protein-rich diets and convenient food options. This shift drove a remarkable increase in meat consumption levels during this timeframe. Per capita meat consumption, on average, grew by over 4 percent annually, with chicken meat consumption per capita registering an even more substantial increase of over 7 percent per year. South Africans, buoyed by growing disposable incomes, displayed a strong affinity for meat in their purchasing habits.

However, since 2010, South Africa’s economic growth has slowed down, impacting the rate of growth in meat consumption. The per capita meat consumption growth rate decelerated to approximately 1 percent per year. Currently, South Africa annually consumes around 4.0 million tons of poultry, beef, lamb, and pork. In 2020, South African consumers expended approximately R250 billion (US $17 billion) on meat products, constituting 35 percent of their total food expenditure.

Poultry meat dominates the South African meat landscape, accounting for over 60 percent of the total meat consumption, with an average per capita intake of 40 kg per year. Due to its affordability and widespread availability, poultry meat has become the primary protein source in the diets of the majority of South Africans, especially in low-income households, which represent the majority of consumers.

South Africa’s chicken meat market possesses distinctive features that set it apart from many other countries. The first distinguishing characteristic is the prevalent preference for bone-in (brown meat) chicken cuts over breast meat (white meat). Bone-in chicken cuts account for nearly 60 percent of the total chicken meat demand, primarily distributed as “individually quick frozen” pieces in the form of economical 2kg and 5kg mixed packs. The second hallmark is the practice of brining, whereby nearly all locally produced frozen chicken is treated with brine to preserve and enhance meat quality. In 2016, the South African Department of Agriculture introduced a regulation capping the brine content at a maximum of 15 percent of the sold mass.

Prior to 2016, brining levels as high as 43 percent were observed, resulting in increased water content per package of frozen chicken meat. The third notable feature is the relatively modest demand for fresh (non-frozen) chicken meat, accounting for less than 10 percent of the total chicken meat consumption in South Africa. These characteristics mirror the prevalence of a consumer base with lower incomes, as fresh chicken meat typically commands a premium price compared to frozen and brined bone-in chicken pieces.

Broiler meat constitutes over 95 percent of all poultry meat imports into South Africa, with turkey products making up the remaining portion. In FY2020, South Africa imported 485,542 tons of poultry meat valued at $314 million. Chicken cuts and edible offal comprised the largest category of poultry meat imports, constituting 48 percent or 231,874 tons, with a total value of $177 million, accounting for 56 percent of the total value of poultry meat imports.

second most substantial category in terms of volume was meat and edible offal from chickens, representing 4 percent or 228,152 tons, with a value of $104 million, constituting 33 percent of the total value of poultry meat imports. These two segments of poultry meat products collectively represented 90 percent of South Africa’s total poultry meat imports in terms of quantity. Brazil holds the leading position as a trading partner for South Africa in the poultry meat sector, with a 56 percent market share in terms of value, followed by the United States with a 16 percent market share.

     Source: Trade Data Monitor

Chicken bone-in portions

Overview

The export of bone-in broiler meat from the United States to South Africa has faced persistent challenges due to the imposition of an anti-dumping duty established in 2000. In 2012, this anti-dumping duty was extended for an additional five years, with a fixed rate of R9.40 per kilogram. However, a significant development occurred in June 2015 when representatives from the United States and South African poultry industries reached an agreement on a tariff rate quota permitting 65,000 tons of United States bone-in chicken meat to enter South Africa without incurring the anti-dumping duty.

It’s important to note that these imports of bone-in chicken meat are still subject to a most favored nation (MFN) duty, which saw an increase from 37 to 62 percent in March 2020.

In January 2016, the U.S. and South African governments concluded negotiations regarding the final health certificates. Subsequently, the first shipment of United States bone-in broiler meat arrived in South Africa in March. This marked the commencement of continued exports, resulting in the United States exporting approximately 20,000 tons of poultry meat to South Africa, with a total value of nearly US$18 million in FY2016. This volume experienced a significant upswing in FY2017, reaching 74,000 tons, with a historical high value of US$73 million. Despite this favorable growth, South Africa extended the anti-dumping duty for another five-year term in 2017.

The positive trend in poultry exports persisted in FY2018, as the United States exported 95,000 tons of poultry products to South Africa, achieving a record value of $83 million. In 2019, following administrative guidelines, the South African Department of Agriculture increased the tariff rate quota to 68,590 tons for the 2019/20 quota year, spanning from April to March. In FY2019, the United States exported 85,000 tons of poultry products to South Africa, valued at $76 million.

Despite the challenges posed by the COVID-19 pandemic, the United States maintained its export momentum, shipping 79,472 tons of poultry meat to South Africa in FY2021. It’s worth noting that a substantial majority (95 percent) of United States poultry exports to South Africa consist of bone-in broiler meat.

Resources on Poultry

The U.S.A. Poultry and Egg Export Council can help U.S. poultry exporters with market information and advice on how to export to South Africa (https://www.usapeec.org/).

For more information, the U.S. Commercial Service Commercial Specialist for Agriculture in Johannesburg, South Africa, can be contacted via email at:

Kirsten.Bell@trade.gov

Phone: +27 31 305 7600

or visit our website:  https://www.trade.gov/south-africa/

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South Africa – Farming Commercial Guide 2023