South Africa has three months to secure favourable trading terms with Donald Trump or it could be game over in terms of agricultural exports to the US, says Wandile Sihlobo, chief economist of the Agricultural Business Chamber.
“If after 90 days tariffs for us are not at the very least on par with our competitors in the US market — Australia, Brazil and Chile — we'll be pretty much out of the game as far as fruit exports to the US go.”
On April 2 Trump slapped a devastating 30% “reciprocal tariff” on exports from South Africa while its main competitors in the US market got 10%. A pause has reduced South Africa's tariff to 10% for a 90-day period, after which it could well be restored to 30%.
“When we faced higher tariffs relative to our competitors in the US who were at 10% we were staring down the barrel in terms of our exports to the US. If we're all at 10% we're at least on par.”
The Trump tariffs primarily affect 4% of South Africa's overall agricultural exports, or half-a-billion dollars out of exports worth $13.7bn (R258bn).
Sihlobo concedes this may not seem like much in the larger scheme of things.
“The challenge is that this is concentrated in citrus, nuts, grapes and wine. So for growers in the Western Cape, Mpumalanga, Limpopo and Eastern Cape it's a big issue.”
High tariffs will be devastating for rural economies and jobs in those provinces, which are heavily dependent on the export of these products to the US.
“We have this week started loading the first shipment of fruit to the US. If within this 90-day window we're able to export a significant volume it will help ease the pressure somewhat while we think about how to rebuild the US relationship so that we continue to enjoy favourable tariffs.”
Sihlobo says he's encouraged by the appointment of former deputy finance minister and current chair of MTN Mcebisi Jonas as President Cyril Ramaphosa's special envoy to Washington.
“He's someone who comes from business. And MTN's in a number of countries, so that kind of multinational experience may acquit him for this role. And politically, I think he's senior enough. Hopefully, he'll be able to navigate his way and clarify some of the misunderstandings the US administration has about South Africa and get a free-trade agreement.”
Whether Mcebisi Jonas succeeds or not, Sihlobo hopes Trump's tariff blitz will inject an overdue sense of urgency in South Africa around trade diversification
He hopes the fact that Jonas is on record as calling Trump a “racist”, “homophobe” and “narcissistic right-winger” during an address to the Ahmed Kathrada Foundation in 2020 won't stand in the way.
“I don't know what his reception will be, but obviously I hope they'll be open to seeing him given that he is a representative of the country and he did not make those remarks as a representative of the country. His statement this week was very clear that he is looking forward to co-operation with the US in building better relations for South Africa, and I hope very much his engagements with them are in that spirit.”
Whether Jonas succeeds or not, Sihlobo hopes Trump's tariff blitz will inject an overdue sense of urgency in South Africa around trade diversification.
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“Unfortunately trade diversification is not something that happens quickly. It could take us two or even three years to build the necessary relationships and supply chains.”
Has South Africa been caught napping?
“No, we were not caught napping. You have to appreciate that our agri sector has more than doubled in value and volume since 1994. Thanks to this we now export roughly half of what we produce in value terms.”
Forty-four percent of the country's agricultural produce goes to Africa, he says. The EU takes 19%, the UK 7%, Asia 21%, America 6% — including 4% to the US and much of the rest to Canada.
“So we are already diversified. But we should have worked harder for better trade agreements with markets like China, India, Saudi Arabia, where we still face tariffs.”
South African wine exports into Brics partner China face a 14% tariff, while Australian wine faces zero tariff. South Africa's citrus exports to India, also a Brics partner, face a 30% tariff. In many markets where South Africa faces tariffs, competitors face none.
“So we should have been working harder on that. We were not necessarily napping, but we do now have to accelerate.”
Growing in markets such as China, India, Vietnam, Saudi Arabia, United Arab Emirates and Qatar, which is now essential he says, will take a lot of serious research.
“It will also take a mindset shift in government.”
The departments of trade, industry & competition, international relations & co-operation, and agriculture, will have to work much more closely with business.
We're going to have to be aligned to this new era of trade-offs. We've been in a state of inertia about opening up new markets and we have to come out of it
Wandile Sihlobo, chief economist of the Agricultural Business Chamber
“They're already doing this but they need now to have a sense of urgency in opening up these markets. This is not only an agri story, it's a story you hear when you talk to manufacturers and other sectors of the economy.”
At a political level there are signs that this message is beginning to land, he says. Ministers say they're prioritising it, “but they now need to accelerate ... We're going to have to be aligned to this new era of trade-offs. We've been in a state of inertia about opening up new markets and we have to come out of it.”
If we don't? “We can only consume about 30% of what we produce, the rest has to be exported. The rural economy depends on it, so we have to get our act together in a big way, we have to succeed, we need new markets.”
The EU market is saturated so there's little chance of new markets there.
“Regarding the EU, our job will be to maintain what we already have in that market. We're unlikely to grow our access there, but it's vital that we do whatever we can to maintain good relations with the EU and remain in good standing with the EU because they're the anchor of our agricultural products.”
As well as growing markets in the Gulf and Asia, South Africa should be doing far more trade on far more favourable terms with its Brics partners.
“A major benefit of any international partnership should be trade. Otherwise why have a partnership?”
